<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 February 28, 1997
-----------------
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 March
31, 1997.
<PAGE> 2
OUTLOOK GROUP CORP. AND SUBSIDIARIES
-------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION:
- --------------------------------------------------
<C> <S> <C>
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 2
As of February 28, 1997 and May 31, 1996 (Unaudited)
Condensed Consolidated Statements of Operations 3
For the three months and nine months ended
February 28, 1997 and February 29, 1996 (Unaudited)
Condensed Consolidated Statements of Cash Flows 4
For the nine months ended February 28, 1997 and
February 29, 1996 (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 10
</TABLE>
<PAGE> 3
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 should 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 February 28, 1997 AND MAY 31, 1996
(UNAUDITED)
--------------------------------------
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS FEBRUARY 28, MAY 31,
------ 1997 1996
------------ --------
<S> <C> <C>
CURRENT ASSETS:
Cash ................................... $ 37 $ 298
Accounts receivable, less allowance
of $677 and $896 respectively ........ 15,302 14,785
Inventories ............................ 11,293 12,127
Deferred income taxes .................. 1,181 1,181
Prepaid expenses and other ............. 3,006 1,935
Income taxes refundable ................ 1,104 1,964
--------- -------
Total current assets .................... 31,923 32,290
PROPERTY, PLANT AND EQUIPMENT:
Land ................................... 1,051 1,051
Buildings .............................. 15,212 15,196
Machinery and equipment ................ 47,357 46,191
Machinery and equipment deposits ....... 236 227
--------- -------
63,856 62,665
Less accumulated depreciation .......... 22,851 19,882
--------- -------
41,005 42,783
--------- -------
OTHER .................................... 2,335 2,780
--------- -------
Total assets ............................ $ 75,263 $77,853
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt ..... $ 1,829 $ 1,532
Accounts payable ...................... 7,507 4,147
Accrued liabilities:
Salaries and wages ................... 1,837 1,737
Other .............................. 932 1,174
--------- -------
Total current liabilities ............... 12,105 8,590
LONG-TERM DEBT ........................... 26,162 30,859
DEFERRED INCOME TAXES .................... 3,791 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 ..................... 19,188 20,924
--------- -------
37,654 39,390
Less 450,000 of treasury stock, at cost 4,449 4,449
--------- -------
Total shareholders' equity ........... 33,205 34,941
--------- -------
Total liabilities and shareholders' equity $ 75,263 $ 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>
Three-Month Period Ended Nine-Month Period Ended
Feb. 28, *Feb. 29, Feb. 28, *Feb. 29,
1997 1996 1997 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales .............. $ 17,658 $ 20,181 $ 55,201 $ 60,825
Cost of sales .......... 15,345 18,869 47,742 55,394
------------ ----------- ---------- -----------
Gross profit ........... 2,313 1,312 7,459 5,431
Selling, general and
administrative
expenses .............. 2,298 2,758 7,029 8,025
------------ ----------- ---------- -----------
Operating profit(loss) 15 (1,446) 430 (2,594)
Other income (expense):
Interest expense ...... (712) (708) (2,160) (2,010)
Interest and other
income ............... 252 400 628 1,581
------------ ----------- ---------- -----------
Total other income
(expense) .............. (460) (308) (1,532) (429)
------------ ----------- ---------- -----------
Loss from continuing
operations before income
taxes .................. (445) (1,754) (1,102) (3,023)
Provision for income
taxes (benefits) ....... (156) (681) (341) (1,170)
------------ ----------- ---------- -----------
Loss from continuing
operations ............. (289) (1,073) (761) (1,853)
Discontinued Operations:
Earnings (loss) from
discontinued operations
before income taxes .... (76) (156) (1,478) 408
Provision for income
taxes (benefits) ....... (24) (60) (501) 159
------------ ----------- ---------- -----------
Earnings (loss) from
discontinued operations (52) (96) (977) 249
------------ ----------- ---------- -----------
Net earnings (loss) .... $ (341) $ (1,169) $ (1,738) $ (1,604)
============ =========== ========== ===========
Net earnings (loss)
per share
- continuing .......... $ (.06) $ (.23) $ (.16) $ (.39)
- discontinued ........ (.01) (.02) (.21) .05
------------ ----------- ---------- -----------
- Total ............... $ (.07) $ (.25) $ (.37) $ (.34)
============ =========== ========== ===========
Weighted average
number of shares
outstanding ............ 4,649,382 4,649,382 4,649,382 4,666,049
============ =========== =========== ===========
</TABLE>
* Results have been restated to classify the company's Outlook Foods, Inc.
subsidiary as a discontinued operation.
-3-
<PAGE> 6
OUTLOOK GROUP CORP. AND SUBSIDIARIES
-------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Nine-Month Period Ended
Feb. 28 Feb. 29
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $ (1,738) $ (1,604)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . 4,388 4,138
Gain on sale of operating unit . . . . . . . . -- (334)
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . (517) (4,512)
Inventories . . . . . . . . . . . . . . . . . 834 (950)
Prepaid expenses
and other current assets . . . . . . . . . (1,071) (1,651)
Accounts payable . . . . . . . . . . . . . . 3,360 (839)
Accrued liabilities . . . . . . . . . . . . . (142) (267)
Deferred taxes . . . . . . . . . . . . . . . 328 --
Income taxes . . . . . . . . . . . . . . . . 860 129
---------- -----------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . 6,302 (5,890)
Cash flows from investing activities:
Proceeds from sale of fixed assets. . . . . . . 1,710 1,335
Acquisition of property, plant and equipment. . (4,140) (4,610)
(Increase) decrease in equipment acquisition
trust fund . . . . . . . . . . . . . . . -- 401
Other . . . . . . . . . . . . . . . . . . . . . 267 453
---------- -----------
Net cash used in investing activities . . . . (2,163) (2,421)
Cash flows from financing activities:
Proceeds from sale of operating unit. . . . . . -- 100
Net increase(decrease) in revolving credit
arrangement borrowings . . . . . . . . . . . (3,873) 10,600
Net proceeds from long-term borrowing . . . . . 4,870 --
Net payments on long-term borrowings. . . . . . (5,397) (1,528)
Acquisition of treasury stock . . . . . . . . . -- (887)
---------- -----------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . (4,400) 8,285
---------- -----------
Net increase (decrease) in cash . . . . . . . . . (261) (26)
Cash at beginning of period . . . . . . . . . . . 298 82
---------- -----------
Cash at end of period . . . . . . . . . . . $ 37 $ 56
========== ===========
</TABLE>
(see accompanying notes)
-4-
<PAGE> 7
OUTLOOK GROUP CORP. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FEBRUARY 28, 1997
-----------------
1. Net Earnings (Loss) Per Common Share:
-------------------------------------
Net earnings (loss) 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>
February 28, 1997 May 31, 1996
----------------- ------------
<S> <C> <C>
Raw materials $ 6,420 $ 7,543
Work in process 1,281 1,658
Finished goods 3,592 2,926
---------- ----------
$ 11,293 $ 12,127
========== ==========
</TABLE>
3. Income Taxes:
-------------
The effective income tax rate used to calculate the income tax benefit
for the three-month periods ended February 28, 1997 and February 29,
1996, is based on the anticipated income tax rate for the entire fiscal
year.
4. Debt:
-----
As of February 28, 1997 the Company had drawn $9.1 million of the $13.1
million available for working capital under terms of the revolving credit
agreement.
5. Accounting Periods:
-------------------
The Company has elected to adopt 13 week quarters beginning in fiscal
1997; however, it is anticipated that the fiscal year-end will remain May
31.
-5-
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results Of Operations
---------------------
Results of Operations
---------------------
Results of operations have been restated to reflect the reclassification of
Outlook Foods, Inc. ("Foods"), a wholly owned subsidiary in Oconomowoc,
Wisconsin, as a discontinued segment. Foods was previously reported and
referred to as the food processing segment of Outlook Group. The
reclassification stems from a previously announced September 1996 Board of
Directors decision to divest Foods.
The Board of Directors has also decided to divest Barrier Films Corporation
("Barrier"), a Reno, Nevada based wholly owned subsidiary of Outlook Group
Corp. However, due to various factors, Barrier does not meet the criteria to
be reported as a discontinued operation. Therefore, Barrier remains reported
as part of continuing operations. The other three entities comprising
continuing operations are Outlook Group Corp., the parent company, d/b/a
Outlook Graphics ("Graphics"), Outlook Label Systems, Inc. ("Label"), and
Outlook Packaging, Inc. ("Packaging"). All three are Wisconsin based. Label
and Packaging are also wholly owned subsidiaries of Outlook Group.
CONTINUING OPERATIONS
- ---------------------
In the third quarter of fiscal 1997, net sales were $17.7 million as compared
to $20.2 million for the same period in the prior year. For the first nine
months of fiscal 1997, sales of $55.2 million were down from sales of $60.8
million through the first nine months of fiscal 1996. Comparative net sales by
principal lines of business are shown below:
<TABLE>
<CAPTION>
Net Sales In Millions
---------------------
Fiscal Third Quarter Fiscal Year To Date
-------------------- -------------------
1997 1996 % Change 1997 1996 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Graphic Services
Specialty Printing $12.1 $13.2 (8.3)% $38.4 $43.7 (12.1)%
Converting & Pkg. 1.8 3.5 (48.6)% 5.0 8.5 (41.2)%
Other 3.8 3.5 8.6% 11.8 8.6 37.2 %
----- ----- -------- ----- ----- --------
TOTAL $17.7 $20.2 (12.4)% $55.2 $60.8 (9.2)%
</TABLE>
Both the third quarter and year-to-date sales declines reflect the Company's
reduction of trading card business at its Graphics division. Trading card
business now reflects less than 5% of total company 1997 year to date net sales
as compared to 11% in fiscal 1996, 27% in fiscal 1995 and a high of 58% in
fiscal 1992. The reduction results from continuing weakness in the trading
card markets generally, changes in the Company's relationship with Fleer Corp.,
the Company's strategy to reduce dependence on trading card business and other
factors. Sales of labels and flexible packaging products were also soft in the
third quarter. Sales growth is occurring in folding cartons, commercial
printing, direct mail, fulfillment and distribution, as the management focuses
on those "core" areas of continuing operations.
Gross profits improved by $1.0 million in the quarter and $2.0 million
year-to-date as improved controls and efficiencies in all operations, primarily
due to reduction in work force, more than offset the impact of reduced sales.
Selling, general and administrative expenses were reduced by 17% for the
quarter and 12% year-to-date reflecting continued efforts to reduce overhead
while improving operational efficiencies.
As a result of the above, although the Company combined to incur net losses,
improvements of $1.5 million and $3.0 million were achieved at the operating
profit (loss) line for the quarter and year-to-date respectively.
Interest expense exhibited little change in the quarter as reduced borrowings
offset rate increases. Year-to-date interest increased as rates were
negatively impacted by increased interest rates resulting from covenant
defaults prior to the November 1996 refinancing.
Interest and other income was below prior year results which included
significant gains on sales of equipment and the publishing division in fiscal
1996.
-6-
<PAGE> 9
Income tax expense (benefit) is being accrued at 39% at profitable operations
and 34% at loss operations, yielding effective tax rates of 35.1% for the third
quarter and 30.9% on a year-to-date basis.
The resulting loss from continuing operations of $289,000 for the quarter
equals $0.06 per share, an improvement of $0.17 per share from the third
quarter 1996 loss of $0.23. The year-to-date net loss of $761,000 or $0.16 per
share is also an improvement of $0.23 per share from prior year-to-date losses
which totaled $0.39. Management believes that Barrier's sales have been
affected by the Company's announced divestiture plans.
Continuing operations, excluding Barrier which is to be divested, operated
nearly at a breakeven level in the third quarter of fiscal 1997.
DISCONTINUING OPERATIONS
- ------------------------
Foods operated at a loss for the quarter as sales were below prior year levels,
primarily because of the previously disclosed termination of the Nestle gravies
and sauces contract in summer 1996, as well as the negative effects of the
Company's announcement of its plans to divest Foods on other customer
relationship.
In total, the pre-tax loss from discontinued operations for the quarter was
$76,000, which compares favorably with a pre-tax loss of $155,000 in the third
quarter of fiscal 1996 when sales volumes were nearly twice the level of this
quarter. Year-to-date pre-tax losses in fiscal 1997 now total $1.5 million
versus a $0.4 million pre-tax profit for prior year-to-date.
Net of provisions for tax expense (benefits) the fiscal 1997 loss for
discontinued operations was $52,000 or $0.01 per share for the quarter versus a
loss of $96,000 or $0.02 per share in prior year. Fiscal 1997 year-to-date
figures are a net loss of $0.21 per share versus prior year-to-date net income
of $249,000 or $0.05 per share.
CONSOLIDATED
- ------------
The consolidated total of the above yielded a net loss of $341,000 or $0.07 per
share for the third quarter of fiscal 1997 versus a loss of $1,169,000 or $0.25
for prior year period.
The year-to-date net loss for 1997 totaled $1,738,000 or $0.37 per share as
compared to a net loss of $1,604,000 or $0.34 per share for prior year-to-date.
Liquidity and Capital Resources
As shown in the Consolidated Statements of Cash Flows, cash decreased from
$298,000 to $37,000 in the first nine months of fiscal 1997.
Operating activities provided $6,302,000 during the first nine months. Cash
increased due to depreciation and amortization, increases in accounts payable
and accrued liabilities, plus proceeds of an income tax refund related to
fiscal 1996. Operating activities utilizing cash were the net loss for the
period plus increases in accounts receivable and prepaid expense.
Investing activities for the year-to-date utilized $2,163,000 of cash. Capital
expenditures of $4.1 million included $2.3 million for purchases of existing
equipment which was previously leased under the operating leases.
Financing activities utilized a net total of $4,400,000 during the first nine
months. A new long term debt note of $4,870,000 replaced other long term debt
of $4,174,000 in the first nine months. In addition, long term debt was reduced
by over $1.0 million from principal repayments. Meanwhile, the balance under
the Company's revolving credit agreements declined by $3.9 million.
In November, 1996 the Company completed a refinancing package. Management
believes this new borrowing arrangement provides Outlook with the capacity and
flexibility for the future, although the Company is required to comply with
various financial covenants. As a result of recent financial performance
(particularly relating to Foods and Barrier, which the Company believes is due
in significant part to its announced divestiture plans)
-7-
<PAGE> 10
the Company was in violation of certain covenants (tangible net worth and fixed
charge coverage) in its new credit facilities at February 28, 1997. The company
is working with its lenders to address the situation and has obtained waivers.
While the agreements contain capital expenditure limitations, management has
negotiated additional operating lease capacity which it believes will cover
expected necessary capital expenditures over the limitations included in the
refinance package.
In the quarter the Company refinanced certain outstanding leases. Before
refinancing total remaining payments were $9.5 million, payable through March
1997. After refinancing, total remaining payments are $12.7 million, payable
through March 2002. The refinancing was effected to reduce monthly lease
payments, thus having a positive effect on cash flow and income.
ADDITIONAL CAUTIONARY STATEMENTS
The statements included in this Management's Discussions and Analysis
which are not statements of historical fact (including statements using terms
such as "believe," "expect" and anticipate" and similar terms) may be
forward-looking statements subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in the forward-looking
statements. In addition to the matters 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:
The Company has recently announced that it intends to divest itself of the
food processing operations of its subsidiary, Outlook Foods, Inc. ("Foods") and
its subsidiary's Barrier Films Corporation ("Barrier") film extrusion
operations. Although the Company has announced a letter of intent relating to
the divestiture of Barrier, the Company has not yet entered into any
definitive agreements with respect to those dispositions, and there can be no
assurance that such dispositions can be made upon terms acceptable to the
Company. Also, the announcement may continue to affect the relationship with
Foods and Barrier's customers and suppliers pending the proposed divestitures.
The Company recently entered into new credit financing arrangements with a
new lender and amended its term financing arrangements with a prior lender. As a
result of financial performance (particularly relating to Foods and Barrier,
which the Company believes is due in significant part to its announced
divestiture plans), the Company is in violation of certain covenants (tangible
net worth and fixed charge coverage in its new credit facilities). The Company
has provided supporting information to its lenders and has obtained waivers;
however there can be no assurance that, if necessary, the Company will be able
to obtain appropriate waivers in the future. Reaching appropriate arrangements
with the lenders to address covenant violations, and continuation of the
Company's financing arrangements, will be important to the Company to maintain
its liquidity and capital resources on an ongoing basis.
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 graphic services segment) to Fleer Corp. accounted
for approximately 7% of the Company's total net sales 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. As a result of its announced intention to divest
its food processing operations, the termination of one contact with Nestle, and
the decline in the collectible card services, the Company expects fiscal 1997
sales to Nestle and Fleer to be reduced from fiscal 1996.
-8-
<PAGE> 11
In connection with the Company's December 1992 acquisition of certain
Nestle assets, 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 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 sales to
Nestle in fiscal 1997. Also, the Company's announced intention to divest
itself of Foods is likely to affect its relationship with Nestle because 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 very 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 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. 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 produces several proprietary products. In its food processing
segment, during fiscal 1996, the Company has introduced food products such as
Fresh Aroma bread mix and Outlook Hot Cocoa mix. Also, Barrier has 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 may
continue to affect the 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 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 resource than the Company to smaller local
companies. Numerous competitors also exist for other services. While there
are fewer competitors offering converting and packaging services, competition
is very strong. Numerous competitors also perform services in the food
processing segment.
-9-
<PAGE> 12
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 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 Chairman, David
Erdmann, and its President, Joseph Baksha. Although the Company has employment
agreements with Mr. Erdmann and Mr. Baksha, the loss of their 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.
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.
-10-
<PAGE> 13
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)
<TABLE>
<S> <C>
Dated: April 10, 1997 /s/ David L. Erdmann
-----------------------------------------
David L. Erdmann, Chief Executive Officer
and Acting Chief Financial Officer
</TABLE>
-11-
<PAGE> 14
OUTLOOK GROUP CORP.
EXHIBIT INDEX
to
Report on Form 10-Q for Quarter Ended February 28, 1997
-------------------------------------------------------
<TABLE>
<S> <C> <C>
Exhibit Filed
No. Description Herewith
------- ----------------------- -----------
27 Financial Data Schedule X
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> NOV-30-1996
<PERIOD-END> FEB-29-1996
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 15302
<ALLOWANCES> 677
<INVENTORY> 11293
<CURRENT-ASSETS> 31923
<PP&E> 63856
<DEPRECIATION> 22851
<TOTAL-ASSETS> 75263
<CURRENT-LIABILITIES> 12105
<BONDS> 26162
0
0
<COMMON> 51
<OTHER-SE> 33154
<TOTAL-LIABILITY-AND-EQUITY> 75263
<SALES> 17658
<TOTAL-REVENUES> 17658
<CGS> 15345
<TOTAL-COSTS> 15345
<OTHER-EXPENSES> 2298
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 712
<INCOME-PRETAX> (445)
<INCOME-TAX> (156)
<INCOME-CONTINUING> (289)
<DISCONTINUED> (52)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (341)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
