<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 November 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)
(920) 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.
4,657,132 shares of common stock, $.01 par value, were
outstanding at November 28, 1997.
<PAGE> 2
OUTLOOK GROUP CORP. AND SUBSIDIARIES
-------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION:
- -------------------------------
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 2
As of November 28, 1997 and May 31, 1997 (Unaudited)
Condensed Consolidated Statements of Operations 3
For the three months and six months ended November 28, 1997
and November 29, 1996 (Unaudited)
Condensed Consolidated Statements of Cash Flows 4
For the six months ended November 28, 1997 and
November 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
Item 3. Quantitative and Qualitative Disclosures about Market Risk 6
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 9
(a) Exhibits
(b) Reports on Form 8-K
</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 consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's 1997 Form
10-K. The May 31, 1997 Condensed Consolidated Balance Sheet Data
was derived from audited financial statements, but does not include all
disclosures required by the Generally Accepted Accounting Principles.
- 1 -
<PAGE> 4
OUTLOOK GROUP CORP. AND SUBSIDIARIES
---------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
AS Of NOVEMBER 28, 1997 AND MAY 31, 1997
(UNAUDITED)
--------------------------------------
(in thousands)
<TABLE>
<CAPTION>
NOVEMBER 28, MAY 31,
1997 1997
------------ -------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
Accounts receivable,less allowance for doubtful
accounts of $1,251 and $1,124 respectively . . . . . . . . . . . . . . . . . . 12,646 12,640
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,997 9,857
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 708
Income taxes refundable . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 725
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,108 2,120
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 25,162 26,050
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841 1,051
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,748 15,128
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,498 43,759
--------- ---------
56,087 59,938
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . (24,939) (23,326)
--------- ---------
Net Property,Plant & Equipment. . . . . . . . . . . . . . . . . . . . . . . . 31,148 36,612
--------- ---------
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,998 4,958
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,308 $ 67,620
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,163 $ 4,916
Current maturities of long term debt. . . . . . . . . . . . . . . . . . . . . 1,509 1,758
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,307 4,081
Cash overdraft liability . . . . . . . . . . . . . . . . . . . . . . . . . . 1,677 1,605
Accrued liabilities:
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,504 1,482
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 840
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 13,111 14,682
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,248 16,156
DEFERRED GAIN-FULFILLMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 --
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,311 3,311
SHAREHOLDERS' EQUITY:
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 51
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,443 18,415
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,986 19,454
Treasury Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,442) (4,449)
--------- ---------
Total shareholders' equity 34,038 33,471
--------- ---------
Total liabilities and shareholders' equity. . . . . . . . . . . . . . . . . . $ 62,308 $ 67,620
========= =========
</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 Six-Month Period Ended
Nov. 28, Nov. 29, Nov. 28, Nov. 29,
1997 1996 1997 1996
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . $ 18,089 $ 17,684 $ 33,400 $ 37,543
Cost of sales . . . . . . 14,290 15,381 26,684 32,397
--------- --------- ---------- ---------
Gross profit 3,799 2,303 6,716 5,146
Selling, general and
administrative
expenses . . . . . . . . 3,028 2,356 5,200 4,731
--------- --------- ---------- ---------
Operating profit(loss) 771 (53) 1,516 415
Other income (expense):
Interest expense . . . . (567) (735) (1,057) (1,448)
Buy out related expense (104) -- (144) --
Interest and other
income. . . . . . . . . 422 223 536 376
--------- --------- ---------- ---------
Total other income
(expense) (249) (512) (665) (1,072)
--------- --------- ---------- ---------
Earnings (loss) from
continuing operations
before income taxes 522 (565) 851 (657)
Provision for income
taxes (benefits). . . . . 193 (172) 329 (185)
--------- --------- ---------- ---------
Earnings (loss) from
continuing operations 329 (393) 522 (472)
Discontinued Operations:
Earnings (loss) from
discontinued operations
before income taxes . . . (94) (857) 18 (1,402)
Provision for income
taxes (benefits). . . . . (36) (291) 7 (477)
--------- --------- ---------- ---------
Earnings (loss) from
discontinued operations . . (58) (566) 11 (925)
--------- --------- ---------- ---------
Net earnings (loss) . . . . $ 271 $ (959) $ 533 $ (1,397)
========= ========= ========== =========
Net earnings (loss)
per share
- continuing . . . . . . . $ .07 $ (.08) $ .11 $ (.10)
- discontinued . . . . . . (.01) (.13) .00 (.20)
--------- --------- ---------- ---------
- Total . . . . . . . . . $ .06 $ (.21) $ .11 $ (.30)
========= ========= ========== =========
Weighted average
number of shares
outstanding . . . . . . . . 4,656,338 4,649,382 4,654,487 4,649,382
========= ========= ========== =========
</TABLE>
- 3 -
(see accompanying notes)
<PAGE> 6
OUTLOOK GROUP CORP. AND SUBSIDIARIES
-------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Six-Month Period Ended
November 28, November 29,
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . $ 533 $ (1,397)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 2,594 2,886
Gain on sale of assets. . . . . . . . . . . . . . . . . . . (456) --
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . (6) (882)
Inventories . . . . . . . . . . . . . . . . . . . . . . . (140) (1,065)
Prepaid expenses
and other current assets. . . . . . . . . . . . . . . . 1,012 (115)
Accounts payable . . . . . . . . . . . . . . . . . . . . (774) 2,051
Accrued liabilities . . . . . . . . . . . . . . . . . . . 133 783
Deferred gain on sale of Oshkosh facility . . . . . . . . 600 --
Income taxes . . . . . . . . . . . . . . . . . . . . . . 22 1,129
-------- ---------
Net cash provided by operating activities . . . . . . . . 3,518 3,390
Cash flows from investing activities:
Proceeds from sale of fixed assets . . . . . . . . . . . . . 3,666 665
Acquisition of property, plant and equipment . . . . . . . . (313) (3,735)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,068) (394)
-------- ---------
Net cash provided by (used in)investing
activities . . . . . . . . . . . . . . . . . . . . . . 2,285 (3,464)
Cash flows from financing activities:
Net decrease in short term
borrowings . . . . . . . . . . . . . . . . . . . . . . . . (753) (920)
Net proceeds from long-term borrowing . . . . . . . . . . . . -- 4,870
Net payments on long-term borrowings . . . . . . . . . . . . (5,157) (4,174)
Increase in cash overdraft. . . . . . . . . . . . . . . . . . 72 --
Sale of common stock per stock option plan. . . . . . . . . . 35 --
-------- ---------
Net cash used by financing activities . . . . . . . . . . (5,803) (224)
Net increase (decrease) in cash . . . . . . . . . . . . . . . . -- (298)
Cash at beginning of period . . . . . . . . . . . . . . . . . . -- 298
-------- ---------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . $ -- $ --
========= =========
</TABLE>
(see accompanying notes) - 4 -
<PAGE> 7
OUTLOOK GROUP CORP. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 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 (in thousands):
<TABLE>
<CAPTION>
November 28, 1997 May 31, 1997
----------------- ------------
<S> <C> <C>
Raw materials $ 4,856 $ 4,523
Work in process 1,446 1,666
Finished goods 3,695 3,668
-------- ---------
$ 9,997 $ 9,857
======== =========
</TABLE>
3. Income Taxes:
------------
The effective income tax rate used to calculate the income tax expense
(benefit) for the six-month periods ended November 28, 1997 and November
29, 1996, is based on the anticipated income tax rate for the entire
fiscal year.
4. Debt:
----
As of November 28, 1997 the Company had drawn $4.2 million of the $10.3
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, fiscal year-end remains May 31.
- 5 -
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following section presents a discussion and analysis of the Company's
results and operations during the second quarters, and first six months, of
fiscal 1998 and 1997, and its financial condition at quarter end of November
28, 1997. Statements that are not historical facts (such as statements in the
future tense or using terms such as "believe", "expect" or "anticipate") may be
forward-looking statements that involve risks and uncertainties. The Company's
actual future results could materially differ from those discussed. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in the following sections, particularly immediately below
and under "General Factors."
In September 1996, the Company announced that it intended to divest its food
processing operations. As a consequence, beginning in the second quarter of
fiscal 1997, the Company began accounting for the food processing segment as a
discontinued operation. Information prior to that time has been restated to
reflect this change in accounting, unless specifically indicated otherwise.
On August 29, 1997, the Company announced the execution of separate letters of
intent providing for the acquisitions of the Company and for the sale of assets
of its food processing segment. Both transactions remain subject to continuing
due diligence reviews, execution of definitive agreements (which have not yet
occurred) and other customary conditions. Therefore, consummation of either of
the transactions cannot be assured. The Company does not intend to make any
further announcements concerning the status of negotiations as to definitive
agreements until they have been reached, which cannot be assured, or
negotiations have terminated. In a previously announced transaction, on
November 24, 1997 the Company sold the real estate and equipment at its
Oshkosh, Wisconsin fulfillment facility (the "Oshkosh Facility"). The sale
transaction was reflected in the second quarter of fiscal 1998 including a
deferral of a portion of the gain. In addition, as of November 25, 1997, the
Company purchased certain operating assets of General Converting, a flexible
packaging company. The Company intends to operate the acquired business from
the Company's existing facilities. Because the acquisition is being accounted
for using the purchase method of accounting, the results of the acquired
operations will only be reflected from the date of the acquisition and
therefore have not had a material impact on the reported periods. Additional
annual sales from this acquisition are expected to approximate $3.0 million
(although there can be no assurance of this happening).
Quarter to quarter comparisons are also affected by the Company's May 1997 sale
of the stock of its former subsidiary, Barrier Films Corporation ("Barrier").
While operations and results of Barrier were included in the first two quarters
of fiscal 1997, the operations were divested prior to the commencement of the
first quarter of fiscal 1998.
-6-
<PAGE> 9
RESULTS OF OPERATIONS
In the second quarter of fiscal 1998, net sales were $18.1 million as compared
to $17.7 million for the same period in the prior year. For the first six
months of fiscal 1998, sales of $33.4 million were down from sales of $37.5
million through six months of fiscal 1997. Comparative sales by principal lines
of business are shown below:
Net Sales in Millions
<TABLE>
<CAPTION>
Fiscal Second Quarter Fiscal Year To Date
--------------------- -------------------
1998 1997 % Change 1998 1997 % Change
---- ---- -------- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C>
Graphic Services
Specialty Printing $15.5 $ 12.9 20.2% $28.4 $ 26.4 7.6 %
Converting & Packaging 1.4 1.2 16.7% 2.5 3.1 (19.4)%
Other 1.2 3.6 (66.7)% 2.5 8.0 (68.8)%
----- ------ ------ ----- ------ -----
Total $18.1 $17.7 2.3 % $33.4 $ 37.5 (10.9)%
</TABLE>
Sales for the company's "Specialty Printing" line increased over the prior
year's sales for both the second quarter and year-to-date. "Specialty Printing"
includes folding cartons, commercial printing, distribution and flexible
packaging. Converting and packaging sales increased in the second quarter of
fiscal 1998 by $200,000 compared to the prior year but year-to-date remain
$600,000 behind last year. Converting and packaging includes services related to
sports and picture card converting, paperboard packaging, and packaging of other
promotional and specialty items. The biggest principal line decline in sales for
both the second quarter and year-to-date occurred in the company's "Other" line
of business which includes direct mailing, fulfillment and films manufacturing.
$3.4 million of this year-to-date change resulted from the sale of Barrier prior
to the beginning of the current fiscal year. The company also experienced
declining revenue from its fulfillment business. In November 1997, the Company
sold the Oshkosh Facility at which fulfillment operations have been conducted in
order to reallocate resources from an underutilized facility. The company
continues to conduct fulfillment operations, and currently leases back a portion
of the Oshkosh Facility. Management continues to focus its sales efforts at
market opportunities utilizing its "core" operational competencies and
developing special niches for improved overall profitability.
Gross profit improved in the quarter and year-to-date. Year-to-date gross
profit margins improved from 14% of sales in fiscal 1997 to 20% in fiscal 1998.
Margins improved in each of the operations due to improved controls and
efficiencies as well as cost reductions especially for payroll related
expenses, rent expense and depreciation.
Selling, general and administrative expenses increased for the quarter and
year-to-date reflecting increases in the company's reserves for bad debts and
additional professional fees incurred in supporting the company's sale and
purchase of various assets and other ongoing activities.
As a result of the above, the company improved operating profit on a quarter to
quarter comparative basis from a loss of $53,000 to a profit of $771,000 and on
a year-to-date comparative basis from $415,000 to $1.5 million.
Interest expense was reduced for the current quarter and year-to-date compared
to the prior year. Year-to-date interest savings of $391,000 compared to fiscal
1997 mostly resulted from a $12.0 million reduction in bank debt during the
periods.
Buy out related expense in fiscal 1998 represents the year to date costs
relating to the proposed acquisition of the Company.
Other income includes recognition of $165,000 of the gain on the sale of the
Oshkosh Facility and other asset sales.
Income tax expense (benefit) is being accrued for the year at the rate of 38.5%
although quarter to quarter fluctuations may occur.
-7-
<PAGE> 10
As a result of these factors, quarterly earnings from continuing operations
increased to $329,000 or $0.07 per share, compared to a loss of $393,000 or
$0.08 per share for the same period last year. Earnings from continuing
operations were $522,000 or $0.11 per share for the first half of fiscal 1998,
compared to a loss of $472,000 or $0.10 per share for the prior year comparable
period.
The food processing segment, now accounted for as a discontinued operation,
posted year-to-date sales of $8.3 million for fiscal 1998, an increase of
$760,000 over the same period for the prior year. In addition, year-to-date net
income from this division improved $936,000 (from a loss in fiscal 1997 of
$925,000 to a profit of $11,000). Year-to-date earnings per share from
discontinued operations improved to break-even in fiscal 1998 from a loss of
$0.20 in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
As shown in the Condensed Consolidated Statements of Cash Flows, the ending
cash balance did not change from the beginning of this six month period to the
end although cash overdrafts increased by $72,000.
Operating activities provided $3.5 million of increased cash during the first
six months. Cash from profitable operations and depreciation generated $2.7
million of this amount. Further cash was generated from the receipt of payments
on outstanding notes. These improvements were partially offset by a $641,000
reduction in the company's trade payables and accrued liabilities
Cash flow from investing activities provided further cash primarily from the
sale of the Oshkosh fulfillment center. The Oshkosh Facility was sold for $3.6
million in cash generating a current gain of $165,000 and an additional
deferred gain of $600,000. These proceeds were partially offset by further
investment in plant and equipment and the acquisition of General Converting's
assets. In the transaction, the Company paid approximately $1.2 million in
cash for specified assets (including certain current assets) of General
Converting.
Cash generated from operating activities and investing activities was utilized
to reduce the Company's outstanding debts including the revolving line of
credit, $753,000, and term debt, $5.2 million. As of the quarter end, the
company was in compliance with all of its loan covenants. The company considers
its credit facilities adequate for its current needs.
GENERAL FACTORS
Because of the project-oriented nature of the Company's business, the Company's
largest customers have historically tended to vary from year to year depending
on the number and size of the projects completed for these customers, and the
Company is dependent upon its ability to retain, and obtain new, customers.
Outlook Foods, which the Company is seeking to divest, continues to manufacture
malted milk products for Nestle under a contract which has been extended to
December 1998. In addition, Nestle purchases other products on a
non-contractual basis. However, there can be no assurances and the announced
divestiture of Outlook Foods could adversely affect the operations of the food
segment.
-8-
<PAGE> 11
Changes in the Company's project mix and timing of projects make predictability
of the Company's future results very difficult. Other than under Nestle's
agreement, 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 uses complex and specialized equipment to provide its services.
Therefore, the Company is dependent upon the functioning of such machinery, and
its ability to acquire and maintain appropriate equipment.
As do other companies, the Company has significant accounts receivable or other
amounts due from its customers. From time to time, certain of these accounts
receivable or other amounts due 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 amounts due
to the Company would affect future profitability.
In addition, the Company's business requires it to maintain substantial
inventories. From time to time, changes in customer projects or Company
services can render certain inventories obsolete, and from time to time the
Company has taken substantial write-offs of obsolete inventories. The need to
take such write-offs in the future may affect future profitability and depends
upon changing customer requirements and other factors beyond the Company's
control. In addition, in the case of Foods, the treatment of inventory,
accounts receivable, and other assets will depend upon the ultimate agreement
between the Company and the buyer of the Foods operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not yet applicable to the Company.
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Incorporated by reference from the Exhibit List which is included as the
last page of this report.
(b) Reports on Form 8-K.
None filed during the quarter.
-9-
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTLOOK GROUP CORP.
---------------------
(Registrant)
Dated: January 12, 1997 /s/ Richard C. Fischer
-------------------------
Richard C. Fischer, Chairman and Interim
Chief Executive Officer
/s/ Thomas C. Aschenbrenner
--------------------------------
Thomas C. Aschenbrenner, Secretary and
Chief Financial Officer
<PAGE> 13
OUTLOOK GROUP CORP.
EXHIBIT INDEX
to FORM 10-Q
for the quarter ended November 28, 1997
<TABLE>
<CAPTION>
Exhibit Filed
Number Description Herewith
-------------------------------------------------------
<S> <C> <C>
10.1 Resignation and Release Agreement Between
David L. Erdmann and the Company X
11 Computation of Per Share Earnings X
27 Financial Data Schedule X
</TABLE>
<PAGE> 1
EXHIBIT 10.1
11/28/97 10-Q
RESIGNATION AND RELEASE AGREEMENT
WHEREAS, David L. Erdmann (hereinafter "Mr. Erdmann") has worked for
Outlook Group Corp. (hereinafter referred to as the "Company"), most recently
as its Chairman of the Board and Chief Executive Officer; and
WHEREAS, Mr. Erdmann and the Company mutually agree that it is in the
best interest of both parties for Mr. Erdmann to resign his employment as of
the date of this Agreement; and
WHEREAS, Mr. Erdmann and the Company are parties to an Employment
Agreement dated June 1, 1997 (the "Employment Agreement") and wish to
terminate and supersede the Employment Agreement through this Resignation and
Release Agreement, except as specifically noted herein; and
WHEREAS, it is the desire of the parties in the interest of avoiding
further proceedings with respect to their employment relationship to compromise
and finally, fully and completely terminate that relationship in its entirety;
NOW, THEREFORE, in consideration of the provisions of this Agreement,
Mr. Erdmann and the Company do mutually agree and do hereby compromise and
finally, fully and completely settle all of these matters as follows:
1. Mr. Erdmann acknowledges that if he voluntarily resigns under
the Employment Agreement he is entitled to no severance benefits, that the
Company has certain rights under the Employment Agreement which it is willing
to forego and/or modify, that the Company is willing to allow Mr. Erdmann to
pursue the purchase of a portion of the Company's business as described in
paragraph 2(D) below, and that there is therefore adequate consideration for
the mutual promises under this Agreement.
2. Upon the execution of this Agreement and its return to the
Company in final form, the Company will agree to perform the following acts
and/or provide Mr. Erdmann with the following payments and benefits:
A) The Company will pay severance payments to Mr. Erdmann,
pursuant to the Company's normal payroll schedule, equal to his bi-
weekly salary (less required withholding), and will continue to
provide him with employee health, life and disability insurance
benefits (to the extent allowable under existing policies) on the same
basis as if he were an active employee, for a period of one (1) year
from the date of this Agreement. In the event there is a change of
control of the Company within that one
1
<PAGE> 2
(1) year period, Mr. Erdmann shall receive an additional one (1) year
of bi-weekly severance payments and insurance benefits.
B) None of these severance payments shall be taken into account
as compensation under any Company welfare, pension, profit sharing
plan or similar program that bases benefits in whole or in part on
compensation received from the Company. Any insurance benefit
provided hereunder to Mr. Erdmann shall cease if and when Mr. Erdmann
becomes eligible for coverage as to that benefit, regardless of level,
through a subsequent employer.
C) Mr. Erdmann will be treated as an employee whose employment
has ended due to resignation as of the date of this Agreement for
purposes of any stock options he may have. Nothing herein shall be
deemed a limitation to the exercise of options available and existing
as of the date of this Agreement in accordance with their terms.
D) Mr. Erdmann shall be allowed to pursue the purchase of the
Company's Outlook Foods, Inc. subsidiary, or its assets and
operations, on the same basis as any potential purchaser. In the
event such purchase is consummated, it shall not be deemed a violation
of paragraph 8 of the Employment Agreement for Mr. Erdmann to operate
that business.
E) Mr. Erdmann may pursue business opportunities in connection
with offset heat-set web printing, including the organization,
establishment and operation of such a business. The Company further
acknowledges and agrees that the organization, establish an operation
of such a business shall not, in and of itself, be deemed a violation
of paragraph 8 of the Employment Agreement.
F) Mr. Erdmann will be allowed to purchase for cash, within 30
days of the date of this Agreement, at book value, the automobile
which the Company is currently providing to him.
3. Mr. Erdmann acknowledges that he has resigned his employment
with the Company or any subsidiary of the Company as of the date of this
Agreement and has resigned all director positions or other offices he may hold
with the Company or any subsidiary of the Company, with no right of
reemployment or reappointment to such positions.
4. Mr. Erdmann agrees and promises that none of the provisions of
this Agreement shall be published, displayed, discussed, disclosed, or revealed
in any way to anyone (other than Mr. Erdmann's immediate family, attorney and
tax advisor, who shall similarly agree not to make any such further disclosure)
by him under any circumstances other than those required by law. The Company
and Mr. Erdmann shall prepare a "joint" news release in connection with the
resignation.
2
<PAGE> 3
5.
A) Except for the covenants contained in this Agreement, to the extent
permitted by law, Mr. Erdmann agrees never to sue, in any way complain of, or
grieve against the Company, its parent corporations, or its or their affiliates
or subsidiaries, or its or their past, current or future officers, directors,
agents, and employees, and their predecessors, successors or assigns
(hereinafter collectively referred to as the "Releasees") and he releases them
from any and all claims, liabilities and obligations which he may now or in the
future have against the Releasees in connection with or arising from the
employment agreement, his employment, or occurring prior to the date of this
Agreement, whether known or unknown. Mr. Erdmann releases the Releasees of and
from any and all such claims whether brought by or on behalf of Mr. Erdmann,
including, without limitation by enumeration, claims for back pay, front pay,
personal injury, compensatory and punitive damages, injunctive and declaratory
relief, attorneys' fees, and for future damages allegedly arising from the
alleged continuation of the effects of any past action, omission or event.
This Release includes any and all suits, charges, liability and damages, in law
or in equity (including, without limitation by enumeration, any complaints,
claims and suits under the United States and Wisconsin Constitutions; 42 U.S.C.
Sections 1981, 1981a, 1983, 1985, 1986 and 1988; Title VII of the Civil
Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq.; the Americans
With Disabilities Act, 42 U.S.C. Section 12101 et seq.; the Age Discrimination
in Employment Act of 1967, as amended, 29 U.S.C. Section 621 et seq.; the
Federal Family and Medical Leave Act, 29 U.S.C. Section 2601 et seq.; the
Employment Retirement Income Security Act of 1974, as amended, 29 U.S.C.
Section 1001 et seq.; Executive Order 11246; the Wisconsin Fair Employment
Act, Wis. Stat. Section 111.31 et seq.; the Wisconsin Family and Medical Leave
Act, Wis. Stat. Section 103.10; and any other law, ordinance or regulation
prohibiting discrimination in employment or otherwise regulating the employment
relationship). This Release includes any and all matters in connection with or
based wholly or partially upon, without limitation by enumeration, acts of age
or other discrimination, retaliation, suspension, discharge, promotion,
transfer, harassment, libel, slander, interference with prospective business
relationships, invasion of privacy, failure to interview, hire or appoint,
terms and conditions of employment, breach of employment contract, wrongful
discharge or constructive discharge allegedly committed against Mr. Erdmann by
the Releasees, or in any way arising directly or indirectly out of Mr.
Erdmann's employment with and resignation from the Company, up to and including
the date Mr. Erdmann signs this Agreement, whether such claims are known or
unknown at the time Mr. Erdmann signs this Agreement.
B) The Company hereby agrees that Mr. Erdmann shall continue to be
indemnified to whatever extent he is currently entitled to be indemnified, by
law or otherwise, in connection with his prior duties. The indemnity shall not
extend to any matter as to which indemnification is not permitted under Wis.
Stats. Section 180.0858(2).
3
<PAGE> 4
6. Mr. Erdmann agrees not to make disparaging remarks about any
of the Releasees, or their products or practices (including, but not limited
to, personnel practices) provided, however, that he may give non-malicious and
truthful testimony about these matters if properly subpoenaed to do so. Except
as provided herein, nothing herein shall be deemed a limitation on the exercise
of Mr. Erdmann's rights or independent judgment as a shareholder of the
Company.
7. Mr. Erdmann agrees not to participate in, counsel, assist or
cooperate with any investigation of or litigation against any of the Releasees,
involving alleged discrimination against Mr. Erdmann or against any other
person or persons, whether that investigation or litigation is conducted by any
federal, state or local agency or any individual or otherwise, except that he
may testify in such investigation or litigation to the extent required by law.
8. Mr. Erdmann and the Company each acknowledge that:
A. each has read the foregoing document, understands its
contents and agrees to its terms and conditions freely and voluntarily;
B. each has had an opportunity, with their attorney, to
negotiate various changes to this Agreement;
C. each has made an independent investigation of the
facts and does not rely on any statements or representations by the other, its
agents or representatives, in entering into this Agreement;
D. each has been advised to and has consulted with legal
counsel before signing this Agreement;
E. each has had twenty-one (21) days from the date of
receipt of this Agreement within which to consider it;
F. each understands and agrees that this Agreement
includes a final general release and that, as stated in paragraph 5 of this
Agreement, each can make no further claims against any of the Releasees for any
matters having connection with the events covered therein; and
G. Mr. Erdmann may, within seven (7) calendar days
following the date he executes this Agreement and returns it to the Company,
cancel and terminate this Agreement by giving written notice of his intent to
terminate to the Company and by returning to the Company any amounts specified
in paragraph 2 of this Agreement, to the extent he has already received such
payments, and this Agreement shall not become effective or enforceable until
this seven-day period has expired. TIME IS OF THE ESSENCE WITH REGARD TO THIS
SUBPARAGRAPH.
4
<PAGE> 5
9. Each party understands and agrees that any breach by either of
them of any of the foregoing covenants shall entitle the non- breaching party
to bring an action for failure to comply with the terms of this Agreement and,
further, should the non-breaching party prevail in such action, it or he shall
be entitled to recover its or his actual attorneys' fees and costs as part of
such action. In addition, the parties agree that the remedy at law for breach
of this Agreement shall be inadequate and that the prevailing party shall be
entitled to injunctive relief and any other remedy or relief ordered by a
court.
10. Mr. Erdmann and the Company each acknowledge that this
Agreement is a joint product and shall not be construed against either party on
the grounds of sole authorship.
11. Each party hereby authorizes and ratifies all that such
party's attorneys may have done or may do in the effectuation of this
Agreement.
12. Neither the Company's signing of this Agreement nor any
actions taken by the Company in compliance with the terms of this Agreement
constitute an admission by the Company that it has unlawfully discriminated
against or wrongfully discharged Mr. Erdmann, breached the Employment
Agreement, or that it has violated any federal, state or local law, Executive
Order or regulation.
13. If any part of this Agreement is held to be illegal,
unenforceable or void, then the balance of the Agreement shall nonetheless
remain in full force and effect, except as provided below in this paragraph.
Each party understands that the other would not have entered into this
Agreement if paragraph 5 above were not enforceable as to all of his or its
current and potential claims. In the event paragraphs 5(A) or 5(B) are not
valid or enforceable, the party benefitting from that paragraph shall have the
option to terminate this Agreement; provided, however, that such termination
shall not affect the resignations referred to in Section 3. If the Company
exercises such right, it shall be entitled to the return of all sums provided
to Mr. Erdmann under paragraph 2 of this Agreement.
14. This Agreement constitutes the complete understanding between
the Company and Mr. Erdmann. No other promises or agreements shall be binding
unless signed by these parties, and the Employment Agreement is hereby
superseded and terminated, with the specific exception of paragraphs 8, 9 and
10, which shall remain in full force and effect except as modified or waived in
this Agreement.
/s/ David L. Erdmann December 13, 1997
- ------------------------ Date
David L. Erdmann
Outlook Group Corp.
By: /s/ James W. Buhl December 17, 1997
--------------------- Date
Its Authorized Representative
5
<PAGE> 1
OUTLOOK GROUP CORP.
-------------------
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
-----------------------------------------------------
<TABLE>
<CAPTION>
Three-Month Period Ended Six-Month Period Ended
November 28, November 29, November 28, November 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary:
Weighted average
shares outstanding 4,656,338 4,649,382 4,654,487 4,649,382
Equivalent shares--
dilutive stock options
based on Treasury stock
method using average
market price . . . . -- -- -- --
--------- --------- --------- ----------
4,656,338 4,649,382 4,654,487 4,649,382
========= ========= ========= ==========
Net earnings(loss)from continuing
operations . . . . . $ 329,000 $ (393,000) $ 522,000 $ (472,000)
Net earnings (loss)
from discontinued
operations . . . . . (58,000) (566,000) 11,000 (925,000)
--------- --------- --------- ----------
Net earnings (loss) $ 271,000 $ (959,000) $ 533,000 $(1,397,000)
========= ========= ========= ==========
Net earnings (loss) per share:
- continuing $ 0.07 $ (0.08) $ 0.11 $ (0.10)
- discontinued (0.01) (0.13) 0.00 (0.20)
--------- --------- --------- ----------
Total: $ 0.06 $ (0.21) $ 0.11 $ (0.30)
========= ========= ========= ===========
</TABLE>
There is no significant difference between primary and fully diluted earnings
per common share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-28-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 12,646
<ALLOWANCES> 1,251
<INVENTORY> 9,997
<CURRENT-ASSETS> 25,162
<PP&E> 56,087
<DEPRECIATION> 24,939
<TOTAL-ASSETS> 62,308
<CURRENT-LIABILITIES> 13,111
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 33,987
<TOTAL-LIABILITY-AND-EQUITY> 62,308
<SALES> 33,400
<TOTAL-REVENUES> 33,400
<CGS> 26,684
<TOTAL-COSTS> 31,884
<OTHER-EXPENSES> 665
<LOSS-PROVISION> 355
<INTEREST-EXPENSE> 1,057
<INCOME-PRETAX> 851
<INCOME-TAX> 329
<INCOME-CONTINUING> 522
<DISCONTINUED> 11
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 533
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
