<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended MAY 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-18815
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OUTLOOK GROUP CORP.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1278569
----------------------- -----------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1180 AMERICAN DRIVE, NEENAH, WISCONSIN 54956
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 722-2333
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
- ----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of August 21, 1998, 4,667,132 shares of Common Stock were outstanding, and
the aggregate market value of the Common Stock (based upon the $4.125 last sale
price on the NASDAQ Stock Market) held by non-affiliates (excludes a total of
1,209,832 shares reported as beneficially owned by directors, executive officers
and greater-than 10% shareholders -- does not constitute an admission as to
affiliate status) was approximately $14.3 million.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K INTO WHICH
DOCUMENT PORTIONS OF DOCUMENTS ARE INCORPORATED
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Proxy Statement for 1998 Annual Part III
Meeting of Shareholders
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
Outlook Group Corp. (the "Company") is a printing and packaging
("Graphic Services") company offering a variety of related services including
specialty printing, converting and packaging, mailing and distribution. The
Company seeks to be a single source solution for its customers' graphic services
needs. Founded as a Wisconsin corporation in 1977, the Company initially
concentrated on bulk mailing and commercial printing projects. Over the years,
the Company's business has expanded to include related services.
As a result of its performance during recent fiscal years, the Company
has considered, and continues to consider, a variety of options for
restructuring its business and operations in order to position the Company for
strengthened future performance. The Company has divested itself of the
operations of its Outlook Foods, Inc. subsidiary ("Foods"), its publishing
operations and its former Barrier Films Corporation subsidiary ("Barrier"), as
it determined that those operations did not complement its other continuing
market lines. The Company also sold its Oshkosh, Wisconsin and Wichita, Kansas
facilities, which were no longer needed, to redeploy capital resources. As part
of its ongoing consideration of strategic alternatives, the Company is
continuing to consider divestiture strategies to the extent that the Company
believes such actions would enhance its ability to achieve successful
operations. In addition, the Company will also consider appropriate acquisitions
to strengthen continuing operations. There can be no assurances, however, that
the Company will be able to successfully implement such strategies or complete
those transactions.
The following table sets forth the approximate amount and percentage of
net sales from continuing operations contributed by its sole continuing segment
(Graphics Services) during the last three fiscal years, as well as net sales
from discontinued operations (Foods Processing):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------
1998 1997 1996
---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Graphic Services Segment............. $66,951 100% $72,054 100% $79,305 100%
====== ==== ====== ==== ====== ====
Discontinued Operations:
Food Processing Segment............ 15,460 16,804 32,051
------ ------ ------
Total......................... $82,411 $88,858 $111,356
====== ====== =======
</TABLE>
RECENT DEVELOPMENTS
The Company announced in June 1998 that its discussions with another
entity relating to the possible acquisition of the Company had terminated. The
Company had announced execution of a letter of intent with that entity in August
1997.
In May 1998, the Company sold substantially all assets of Foods,
including Foods' Oconomowoc, Wisconsin manufacturing facility, to Lake Country
Foods, Inc. and Lake Country Properties, LLC (together, "Lake Country"). The
Company had announced its intention to divest Foods in September 1996; since
that time, the Company has accounted for its food processing operations as a
discontinued operation.
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<PAGE> 3
GRAPHIC SERVICES
The Company now conducts all of its operations in its the Graphic
Services segment. Further information as to these operations is given below.
The Company offers a broad array of specialty printing and related
services, including pre-press work, sheeting, printing and finishing. The
Company provides full-color printing and color enhancement, application of
specialized coatings, simultaneous two-sided printing, enhanced drying and
computerized control. The Company focuses on specialty printing projects such as
picture cards, recipe cards, folding cartons, food coupons and labels, vinyl
cards, specialty laminations, continuous forms and promotional materials rather
than traditional commercial printing of books, magazines and catalogs. The
specialty printing operations enhance the Company's ability to cross-sell its
other graphic services.
Primarily through its Outlook Graphics division ("Outlook Graphics"),
the Company's pre-press staff prepares projects for printing to customer
specifications. These services include preparatory camera or computerized
plate-making, layout, typesetting and other related services. Although Outlook
Graphics does not generally perform design services, it assists designers in
translating a concept into a printed product.
Outlook Graphics' presses generally use off-set printing processes and
can print on a wide range of media from newsprint and coated paper to heavy
board, including paperboard packaging. Outlook Graphics currently utilizes
sheet-fed full-color presses of various sizes, the most sophisticated of which
are capable of six-color printing. Certain presses have interchangeable printing
plates which allow the Company significant flexibility in meeting customer
needs. In 1993, Outlook Graphics' acquired sheeting capacity, whereby it can cut
paper for printing to particular job size requirements, providing an additional
service to offer customers.
The Company's Outlook Label Systems, Inc. subsidiary ("Outlook Group")
complements the Company's other specialty printing operations by using different
technologies and offering manufacturing capabilities not otherwise available
from the Company, enhancing the Company's ability to cross-sell services.
Outlook Label manufactures items such as coupons, pressure sensitive specialty
labels, printed vinyl cards (such as temporary credit cards and identification
cards), continuous forms, cartons, and sweepstakes and specialty game pieces.
Outlook Label's narrow web presses generally utilize continuous-feed rolls of
paper and flexo- or letter-press processes. Its most sophisticated machinery
permits one-pass, 14-color printing and lamination of various substrates using
an in-line process.
The Company's Outlook Packaging, Inc. subsidiary ("Outlook Packaging")
engages in flexographic printing and laminating of flexible packaging films. In
these processes, Outlook Packaging takes flexible packaging materials (which are
purchased from others) and prints, laminates and/or slits the material to
customer specifications. Customer orders may include some or all of Outlook
Packaging's services. Outlook Packaging specializes in printing packaging
materials for the food industry and is expanding in the industrial and consumer
packaging markets. Outlook Packaging prints and laminates materials for items
such as pouches, bags, vacuum packages, packets, security devices and card and
food overwraps, and provides them to customers in convenient rolls of film.
The establishment of Outlook Packaging, including the acquisition of
assets of Sunrise Packaging, Inc. ("Sunrise") in 1993, was part of the Company's
diversification strategy, and was intended to complement the Company's other
specialty printing operations by allowing the Company to offer additional
technologies, capabilities and customer services. In November 1997, the Company
acquired certain operations of General Converting, another flexible packaging
company, which Outlook Packaging was able to continue in its existing Oak Creek
facilities, to enhance utilization.
Outlook Graphics also provides finishing services for printed items
(whether or not printed by the Company) such as precision trimming, folding,
alucing, die-cutting, binding, shrink-wrapping, collating and packaging products
for mailing and distribution. Outlook Graphics also has developed paperboard
packaging capabilities to serve its customers' needs and enhance the Company's
single source solution approach. Paperboard
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<PAGE> 4
packaging consists of utilizing paperboard stock to print and convert folding
cartons, blister cards, pocket folders and other point of purchase materials.
The Company's converting and packaging services grew rapidly through
fiscal 1992, primarily due to the substantial increase in business relating to
sports picture card converting; however, sales of these services began to
decline in fiscal 1994, and no longer represent a significant part of the
Company's business. The Company still maintains specialized equipment for
cutting, trimming, sorting, collating and packaging cards, some of which was
designed or modified to accommodate customer needs; the Company has sold certain
surplus equipment as a result of the reduction in its collectible card business
and may sell additional surplus equipment in the future.
The Company packages other types of items. Recent examples have
included promotional CD Roms for mailing, wrapping toys and other promotional
items for insertion in cereal boxes, overwrapping multiple packages for sale as
a single unit, and packaging items for vending machines. Custom designed feeding
and in-line overwrapping systems increase the efficiency of its packaging
operations. Outlook Graphics also maintains an environmentally controlled work
area to perform food contact packaging and to provide other packaging services
for which cleanliness and specific quality standards are required.
Other services provided by the Company include direct mailing and
distribution. Direct mailing involves inserting, literature overwrapping,
labeling, personalizing, sorting and shipping printed items for bulk mailing.
The Company's zip code sorting allows it to minimize customer postal charges by,
in many instances, delivering items by common carrier to a post office near the
destination. The Company is also "Alternative Procedures" qualified by the US
Postal Service, which provides it the ability to accelerate the cycle for moving
material from production to the end user. Direct mailings in fiscal 1998
included catalogs, coupon packages and promotional materials such as CD Roms for
Internet service providers.
The distribution services provided by the Company consist of storing
and distributing items upon customer order. In most cases, distribution items
are materials such as forms and booklets that are printed by the Company, often
under standing orders from its customers to replenish supplies. Custom designed
data systems produce reports to assist the Company's customers in managing their
fulfillment programs. In fiscal 1998, the Company has deemphasized distribution
operations which do not involve materials printed or packaged by the Company. In
November 1997, the Company sold the Oshkosh, Wisconsin facility at which it
previously conducted its fulfillment operations. The Company continues to
provide fulfillment services, although certain of those services may be provided
in cooperation with Great Northern Corporation, the purchaser.
Through its former Barrier subsidiary, from 1995 to 1997, the Company
manufactured flexible plastic film for the Company's other operations and for
outside customers. Barrier was sold in May 1997, as the Company determined its
operations were not consistent with the Company's long-term direction. The
Company has entered into an agreement with the purchasers of Barrier whereby
they may supply certain of the Company's requirements for co-extruded film in
the future.
DISCONTINUED OPERATIONS/FOOD PROCESSING SEGMENT
In September 1996, the Company announced plans to divest its food
processing segment, and began to account for those operations as a discontinued
operation. In May 1998, the Company entered into an agreement to sell the assets
of its Foods subsidiary to Lake Country, and simultaneously closed the
transaction.
The food processing operations were formed in 1992 as a result of the
acquisition of certain assets from Nestle Beverage Company ("Nestle"). This line
of business consisted of dry-blended food processing and packaging, in which
Foods mixed and blended various raw materials, generally in accordance with
customers' formulas. The resulting products (generally dry mixes or powders)
were then packaged. Sales to Nestle represented approximately 48% of this
operation's net sales in fiscal 1998, as compared to 67% and 94% in fiscal 1997
and 1996, respectively.
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<PAGE> 5
CUSTOMERS AND MARKETING
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. The identity of those customers also may
change.
During fiscal 1998, sales (primarily in the discontinued operations of
the food processing segment) to Nestle accounted for 9% of the Company's total
net sales for the period. Sales to Nestle were 13% and 26% of the Company's
total net sales in fiscal 1997 and 1996, respectively. During fiscal 1998, sales
(all graphic services) to Kraft Foods, Inc. (and affiliates) ("Kraft") accounted
for approximately 10% of the Company's total net sales from continuing
operations for the period; sales to Kraft were 14% and 13% of the Company's
total net sales from continuing operations in fiscal 1997 and 1996,
respectively.
In connection with the Company's December 1992 acquisition of certain
Nestle assets, Foods and Nestle entered into operational agreements including
five-year agreements under which Foods packaged malted milk products for Nestle.
The Company's contracts to blend malted milk were extended for one year in
December 1997, and were assumed by Lake Country as part of the Foods sale
transaction.
Sales to Kraft represent sales to several Kraft divisions and
subsidiaries. The Company performs various services on behalf of Kraft, such as
production of labels and contract packaging. As with most of its customers, the
Company's sales to Kraft are pursuant to cancelable purchase orders.
The Company expects that it will continue to experience significant
sales concentration 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 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.
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 significant period to period changes. Because of
the project-oriented nature of the Company's business, the short-term character
of a substantial portion of its projects and the nature of the orders for the
Company's services, the Company does not believe that backlog is material or
meaningful to its business.
The Company markets its services nationally through certain of its
executive officers and its centralized sales group which at July 31, 1998
included 42 sales and service employees and 12 manufacturer's representatives.
The sales group is intended to centralize and coordinate sales and marketing
activities among the Company's various operations. The Company generally does
not enter into employment contracts with its officers (other than its COO) and
employee sales personnel, although it has agreements with its outside
representatives.
RAW MATERIALS
In the graphic services segment, raw materials necessary to the Company
include paper stocks, inks and plastic films, all of which are readily available
from numerous suppliers. The cost of raw materials represented approximately 47%
of the Company's cost of goods sold in continuing operations during fiscal 1998,
as compared to 48% in fiscal 1997. The Company has not experienced difficulties
in obtaining materials for the graphic services segment in the past and does not
consider itself dependent on any particular supplier for raw materials, or for
the Company's equipment needs.
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<PAGE> 6
COMPETITION
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. The Company believes that
relatively few competitors offer the wide range of services provided by the
Company. 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 Company does not believe foreign
competition is significant at this time.
YEAR 2000 COMPLIANCE
The Company has taken, and is continuing to take, actions intended to
assure that its computer systems and other equipment are capable of functioning
in, and processing for periods for, the Year 2000 and beyond. The Company has
implemented a program intended to address, on a timely basis, "Year 2000
Compliance" (the need for computer applications and other systems used by the
Company to function in and after the Year 2000 and to recognize and properly
perform date sensitive functions involving dates after December 31, 1999).
Based on the current status of the Company's compliance efforts, the
costs associated with identified Year 2000 compliance issues are not expected to
have a material effect on the results of operations or for actual condition of
the Company. The Company has developed implementation plans with its software
vendors to upgrade to software versions that are Year 2000 compliant. In
addition, the Company has reviewed, or is in the process of reviewing, equipment
which includes computerized controls or imbedded processors, to help assure that
they will function properly in the Year 2000 and beyond. The Company has not, to
date, identified deficiencies which it believes cannot be corrected or which
will have a material effect, either financially or operationally, on the
Company. To the extent it believes appropriate, the Company has had such
discussions as believed appropriate with suppliers of this equipment, confirmed
Year 2000 compliance with key suppliers and customers.
At this time, the Company does not expect that the reasonably
foreseeable consequences of Year 2000 Compliance to have material effects on the
Company's business, operations or financial condition. However, Year 2000
compliance has many elements and potential consequences, some of which may not
be foreseeable. Therefore, there can be no assurance that unforeseen
circumstances will not arise, or that the Company will not in the future
identify equipment or systems which are not Year 2000 compliant.
ENVIRONMENTAL MATTERS
The Company and the industry 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. The Company's
past expenditures relating to environmental compliance have not had a material
effect on the Company. Growth in the Company's production capacity with a
resultant increase in discharges and emissions could require significant capital
expenditures for environmental control facilities in the future.
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<PAGE> 7
EMPLOYEES
At July 31, 1998, the Company had 558 employees, substantially all of
whom were employed on a full-time basis. The Company contracts for and/or hires
temporary and intermittent employees to increase the number of personnel in
certain operations as project commitments require; however, only four of the
employees at July 31, 1998 were intermittent. The Company considers its
relationship with its employees to be good. Wages and employee benefits in
continuing operations represented approximately 28% and 29% of the Company's
cost of goods sold in continuing operations during fiscal 1998 and 1997,
respectively.
ITEM 2. PROPERTIES.
The Company's offices and main production and distribution facilities
are located in the Town of Menasha, Wisconsin in a facility owned by the
Company. The 345,000 square foot facility (of which approximately 25,000 square
feet are used for offices) was built in stages from 1980 to 1992. The Company
also owns approximately five acres of land adjacent to this facility to provide
for future expansion, if needed.
The Company owns an 83,000 square foot facility in Neenah, Wisconsin in
which Outlook Label's office and production facilities are located. This
facility provides capacity for future expansion of Outlook Label as well as for
other operations of the Company, if needed.
The Company owns an 81,000 square foot facility in Oak Creek, Wisconsin
in which Outlook Packaging's office and production facilities are located. The
building was constructed in 1990, and was purchased by the Company in 1993. The
Company also owns approximately four acres of land adjacent to this facility.
The Company leases an approximately 75,000 square foot facility in
Neenah, Wisconsin which is currently used for certain mailing operations and
warehouse space. The lease for this facility expires on March 30, 2002. The
Company must provide six months notice of its intention to vacate or the lease
continues on a year-to-year basis. The Company also leases an approximately
37,500 square foot facility in Neenah, Wisconsin for its sheeting operations and
other warehouse space. The Company occupied the facility in 1993. The lease is
for a ten year term, with one five year option to renew.
In addition to land and buildings, the Company maintains significant
complex and specialized equipment to perform its various graphic services. The
equipment includes presses, machinery dedicated to converting and packaging, and
other machinery described above in Item 1. Certain of the equipment is leased by
the Company; see Note G of Notes to Consolidated Financial Statements elsewhere
in this report for a description of equipment lease transactions. The Company is
dependent upon the functioning of such machinery and equipment, 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 its utilization, maintenance
requirements, and technological or mechanical obsolescence. Because of the
substantial capital requirements for graphic services equipment in particular,
larger companies with greater capital resources may have an advantage in
financing state-of-the-art equipment.
The Company believes that all of its facilities are in good condition
and suited for their present purpose. The Company believes that the property and
equipment currently utilized by it is sufficient for its currently anticipated
needs but that expansion of the Company's business or offering new services
could require the Company to obtain additional equipment or facilities.
In fiscal 1998, the Company sold, in separate transactions, its former
facilities in Oconomowoc, Wisconsin (Foods), Oshkosh, Wisconsin (fulfillment)
and Wichita, Kansas (Outlook Packaging), which were no longer needed by the
Company. As a result of the diminution of certain lines of business
(particularly relating to collectible cards), the Company has sold certain
surplus equipment in recent years, and will consider further sales in the
future. The Company also regularly evaluates its facility needs, and would sell,
or terminate leases to, other facilities if appropriate.
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<PAGE> 8
Substantially all of the Company's assets are pledged as collateral
under certain financing agreements. See Note C of Notes to Consolidated
Financial Statements, which is incorporated herein by reference, for a
description of financing secured by mortgages on the properties and equipment
owned by the Company and its subsidiaries.
ITEM 3. LEGAL PROCEEDINGS.
In the opinion of management, the Company is not a party to any legal
proceedings other than routine litigation which is not material to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain information as to each of the executive officers of the Company
is set forth in the following table. Officers are elected annually by the Board
of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Richard C. Fischer................ 59 Chairman of the Board and interim Chief Executive
Officer; Director
Joseph J. Baksha.................. 46 President and Chief Operating Officer
Jeffry H. Collier................. 45 Executive Vice President; Vice President and General
Manager of Graphics Group; Director
Paul M. Drewek.................... 52 Interim Chief Financial Officer
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</TABLE>
Richard C. Fischer has served as Chairman of the Board and interim
Chief Executive Officer of the Company since December 1997; he has been a
director of the Company since 1995. Mr. Fischer has been an investment banker
with Fischer and Associates LLC since 1995, and previously served as an
investment banker with Robert W. Baird & Co., Incorporated.
Joseph J. Baksha has served as President and Chief Operating Officer
since December 1996, after having served as Vice President of the Company and
President of Outlook Packaging since June 1996. Previously, Mr. Baksha served as
Executive Vice President and Chief Operating Officer of Washburn International
(a manufacturer and distributor of musical instruments) from 1994 to 1996, and
previously as Executive Vice President and Chief Operating Officer of Alusuisse
Flexible Packaging (a flexible packaging company).
Jeffry H. Collier has served as Executive Vice President of the Company
since 1994, President of the Outlook Graphics division since 1996 and a Vice
President of the Company since 1990. Previously, Mr. Collier was employed by the
Company as its plant manager and General Manager of Outlook Label.
Paul M. Drewek became the Company's interim Chief Financial Officer in
May 1998. Mr. Drewek has also acted as principal of Drewek & Associates
(accounting and management consulting) since 1997. Previously, Mr. Drewek served
as Chief Financial Officer of Allied Computer Group Companies, Inc. (a computer
systems integrator and consulting company) from 1995 to 1997, and prior thereto
as Vice President - Finance and
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<PAGE> 9
Administration and Treasurer-CFO of Joiner Associates Incorporated (a consulting
and publishing company specializing in total quality management). Mr. Drewek
also is deemed the Company's principal accounting officer.
* * * * *
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussions in this report on Form 10-K, and in the documents
incorporated herein by reference, and oral presentations made by or on behalf of
the Company contain or may contain various forward-looking statements
(particularly those referring to expectations as to possible strategic
alternatives, future business and/or operations, in the future tense, or using
terms such as "believe", "anticipate," "expect" or "intend") 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 and other factors. The factors that could cause or contribute to such
differences include, but are not limited to, those further described in Items 1
and 2 above in this report and in the "Management's Discussion and Analysis"
(particularly in "Results of Operations--Fiscal 1998 Compared to Fiscal 1997")
in Item 7 hereof.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is quoted on The NASDAQ Stock Market. The
following table sets forth high and low sales prices as reported on NASDAQ by
quarter for the indicated fiscal years.
FISCAL 1998 High Low
----------- ---- ---
First quarter $8.00 $4.31
Second quarter 7.75 4.50
Third quarter 7.44 5.75
Fourth quarter 6.25 5.50
FISCAL 1997 High Low
----------- ---- ---
First quarter $5.75 $4.00
Second quarter 6.50 4.00
Third quarter 6.00 4.00
Fourth quarter 6.25 3.88
The Company has not paid any cash dividends since its inception. The
Company presently intends to employ its earnings in the continue development and
expansion of is business and does not expect to pay any cash dividends in the
foreseeable future. For a description of contractual dividend restrictions, see
Note C of Notes to the consolidated financial statements and the discussion in
Management's Discussion and Analysis.
As of August 21, 1998, the Company had approximately 520 registered
shareholders of record.
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<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data of the Company have been derived from the
Company's audited consolidated financial statements and should be read in
conjunction with the consolidated financial statements, related notes and
Management's Discussion and Analysis contained in this report. Information for
years prior to 1998 has been restated to reflect the Company's subsidiary,
Outlook Foods, Inc., as a discontinued operation; see Note M to the consolidated
financial statements.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
(in thousands, except share and per share amounts) 1998 1997(1) 1996 1995(1) 1994(2)
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EARNINGS STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net Sales $ 66,951 $ 72,054 $ 79,305 $ 91,620 $ 74,020
Cost of goods sold 54,545 61,168 74,683 77,046 62,222
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Gross profit 12,406 10,886 4,622 14,574 11,798
Selling, general and administrative expenses 10,454 9,904 13,347 13,303 9,087
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Operating profit (loss) 1,952 982 (8,725) 1,271 2,711
Other income (expense):
Interest expense (1,968) (2,778) (2,506) (1,930) (687)
Other income 1,409 746 1,609 959 991
Gain on sale of subsidiary -- 556 -- -- --
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Earnings (loss) from continuing operations
before income taxes 1,393 (494) (9,622) 300 3,015
Income tax expense (benefit) 640 58 (3,659) 118 1,002
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Earnings (loss) from continuing operations 753 (552) (5,963) 182 2,013
Discontinued Operations:
Earnings (loss) from discontinued
operations before income taxes (916) (1,492) 658 1,829 4,547
Income tax expense (benefit) 4 (574) 253 726 1,772
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Earnings (loss) from discontinued operations (920) (918) 405 1,103 2,775
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Net earnings (loss) $ (167) $ (1,470) $ (5,558) $ 1,285 $ 4,788
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Net earnings (loss) per common share - Basic
Continuing operations $ .16 $ (.12) $ (1.28) $ .04 $ .40
Discontinued operations (.20) (.20) .09 .22 .55
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Total $ (.04) $ (.32) $ (1.19) $ .26 $ .95
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Net earnings (loss) per common share - Diluted
Continuing operations $ .16 $ (.12) $ (1.26) $ .04 $ .39
Discontinued operations (.20) (.20) $ .09 .22 .54
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Total $ (.04) $ (.32) $ (1.17) $ .26 $ .93
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Weighted average number of common shares
outstanding - Basic 4,662,460 4,649,382 4,661,882 4,884,607 5,039,799
- Diluted 4,692,522 4,700,551 4,715,887 4,986,491 5,117,996
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BALANCE SHEET DATA (AT FISCAL YEAR END):
Working capital $ 14,185 $ 11,368 $ 23,700 $ 24,260 $ 23,109
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Total assets 53,457 67,620 77,853 83,373 70,582
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt, less current maturities 7,061 16,156 30,859 24,991 14,762
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 33,383 33,471 34,941 41,386 42,574
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the results of operations of the Company's subsidiary, Barrier
Films Corp. ("Barrier"), from February 11, 1995 until May 15, 1997.
(2) Includes the results of operations of the Company's subsidiary, Outlook
Packaging, Inc. ("Outlook Packaging"), from October 18, 1993.
-9-
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following section presents a discussion and analysis of the Company's
results and operations during the past three fiscal years, and its financial
condition at fiscal year end. Statements that are not historical facts (such
as statements in future tense or using terms such as "believe" "expect" or
"anticipate") are 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 under "General Factors" in "Results of Operations -
Fiscal 1998 Compared to Fiscal 1997".
In September 1996, the Company announced that it intended to divest its food
processing operations. As a consequence, beginning in November 1996,
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. The food
processing operation was sold in May 1998.
RESULTS OF OPERATIONS
The following table shows, for the fiscal years indicated, certain items from
the Company's consolidated statements of operations expressed as a percentage
of net sales.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, Percentage of Net Sales
- --------------------------------------------------------------------------------
1998 1997 1996
------ ------ -------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 81.5 84.9 94.2
----- ----- -----
Gross profit 18.5 15.1 5.8
Selling, general and
administrative expenses 15.6 13.7 16.8
----- ----- -----
Operating profit (loss) 2.9 1.4 (11.0)
Other income (expense):
Interest expense (2.9) (3.9) (3.2)
Other income 2.1 1.0 2.0
Gain on sale of subsidiary -- .8 --
----- ----- -----
Earnings (loss) from continuing operations
Before income taxes 2.1 (.7) (12.1)
Income tax expense (benefit) 1.0 .1 (4.6)
----- ----- -----
Earnings (loss) from continuing operations 1.1 (.8) (7.5)
----- ----- -----
Discontinued operations:
Earnings (loss) from discontinued
Operations before income taxes (1.4) (2.1) .8
Income tax expense (benefit) -- (.8) .3
----- ----- -----
Earnings (loss) from discontinued operations (1.4) (1.3) .5
----- ----- -----
Net earnings (loss) (0.3)% (2.0)% (7.0)%
----- ----- -----
</TABLE>
-10-
<PAGE> 12
FISCAL 1998 COMPARED TO FISCAL 1997
Outlook Group net sales from continuing operations were $67.0 million for
fiscal 1998, a decrease of $5.1 million or 7% from fiscal 1997 sales of $72.1
million. The major factor for this decline is the loss of sales from its
Barrier Films Corp. ("Barrier") subsidiary. Barrier, sold in May 1997, had net
sales of $6.6 million in fiscal 1997. The Company was able to offset the lost
revenue from this subsidiary by focusing its efforts on new markets for its core
production competencies as well as acquiring a book of business from General
Converting in its packaging operations, which accounted for $1.6 million of
sales in fiscal 1998. The Company also experienced a $2.0 million gain in its
sales of paperboard cartons. Sales decreases of approximately $3.0 million
occurred in direct mail and specialty printing services. Company sales related
to sports and other collectible picture cards remained insignificant.
Gross profit as a percentage of net sales improved to 18.5% in fiscal 1998 from
15.1% in fiscal 1997. Gross profit increased $1.5 million over 1997 to $12.4.
million. This improvement resulted from more efficient utilization of material
and personnel reductions. Reduced material costs resulted from continuing
programs developed to more effectively utilize material and reduce scrap. In
addition, sales with relatively less material costs increased as a percentage
of sales. Surplus equipment that had previously been utilized primarily for
the sports and collectible picture card market were put to alternative use or
were sold. Inventory write offs were approximately $500,000 in both fiscal
1998 and fiscal 1997. Management has developed a program to further reduce
inventory to desired levels and does not currently believe that additional
material costs will be incurred on the disposition. However, actual results
will be determined by the ability to attract buyers or use materials in the
normal course of business.
Selling, general and administrative expenses increased $550,000 in fiscal 1998
and represent 15.6% of net sales as compared to 13.7% in the prior year.
Increases are attributable to increased expenses related to an expanded sales
force and increases in professional service expenses related to divestitures,
acquisitions, and sale of operating assets. This included approximately
$200,000 of expenses related in the proposed sale of the Company.
Interest expense as a percent of net sales decreased to 2.9% in fiscal 1998
versus 3.9% in fiscal 1997. Interest expense decreased $810,000 from 1997 due
to the decrease in total debt. Because a significant portion of the debt was
not repaid until the May 1998 sale of Outlook Foods, the reduction of interest
paid in fiscal 1998 was not as great relative to the total reduction of debt.
Other income increased to $1.4 million or 2.1% of sales in fiscal 1998 as
compared to 1.0% of sales in fiscal 1997. Of this amount, approximately $1.2
million represents gains on the sale of fixed assets, including the land,
building and equipment related to fulfillment operations located in Oshkosh,
Wisconsin. Continuing fulfillment operations have been moved to the Company's
Neenah facility.
Fiscal 1998 pretax earnings from continuing operations of $1.4 million
represent a $1.9 million improvement in pretax earnings from continuing
operations compared to fiscal 1997. Pretax income from continuing operations
was 2.1% of net sales in fiscal 1998 as compared to a pretax loss from
continuing operations of 0.7% in fiscal 1997. The Company recorded a tax
provision of $640,000, or 1.0% of net sales, that also included an adjustment
to the deferred tax liability accounts.
Outlook Foods, accounted for as a discontinued operation, was sold as of May 1,
1998. The Company had announced its intention to divest Foods in September
1996; since that
-11-
<PAGE> 13
time, the Company has accounted for its food processing operations as a
discontinued operation. A loss of approximately $860,000 was realized as a
result of this transaction. Up to May 1, the foods operations generated $15.5
million of sales and $60,000 of pretax loss. Discontinued operations resulted
in an approximately $900,000 net loss in both fiscal 1998 and fiscal 1997.
In summary, fiscal 1998 yielded a net loss of $0.04 per share, comprised of
earnings from continuing operations of $0.16 per share, and a net loss from
discontinued operations of $0.20 per share. Fiscal 1997 yielded a net loss of
$0.32 per share, comprised of a net loss from continuing operations of $0.12
per share, and a net loss from discontinued operations of $0.20 per share.
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. During
fiscal 1998, sales (primarily in the discontinued food processing operations)
to Nestle Beverage Company and its affiliates ("Nestle") accounted for 9% of
the Company's total net sales for the period. Sales to Nestle were 13% and 26%
of the Company's total net sales in fiscal 1997 and 1996, respectively. During
fiscal 1998, sales (all graphic services) to Kraft Foods, Inc. (and affiliates)
("Kraft") accounted for approximately 10% of the Company's total net sales from
continuing operations for the period; sales to Kraft were 14% and 13% of the
Company's total net sales from continuing operations in fiscal 1997 and 1996,
respectively.
Changes in the Company's project mix and timing of projects make predictability
of the Company's future results very difficult. Additional changes in the
Company's project mix and customer base could affect future sales volume and
profitability.
The Company expects that it will continue to experience significant sales
concentration given the relatively large size of projects undertaken for
certain customers. Futhermore, 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 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.
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, and
manufacture its products. Therefore, the Company is dependent upon the
functioning of such machinery, and its ability to acquire and maintain
appropriate equipment.
-12-
<PAGE> 14
FISCAL 1997 COMPARED TO FISCAL 1996
Outlook Group net sales from continuing operations were $72.1 million for
fiscal 1997, a decrease of $7.3 million or 9% from fiscal 1996 sales of $79.3
million. The major factor for this decline was the loss of sales to the sports
and collectible picture card market, which decreased $10.0 million compared to
the previous year. In total, sales to this market declined to 1.7% of
continuing operation's net sales in fiscal 1997 versus 15.5% in fiscal 1996 and
36% in fiscal 1995. The company was able to offset part of the loss of this
revenue resulting from its efforts to focus on new markets for its core
competencies. Gains were posted primarily in the company's mailing and
fulfillment centers. In addition, in May 1997, the company sold its Barrier
subsidiary. Barrier's net sales in fiscal 1997 were $6.6 million, as compared
to $5.3 million in fiscal 1996, and are included in the company's sales from
continuing operations during the year.
Gross profit as a percentage of net sales improved to 15.1% in fiscal 1997 from
5.8% in fiscal 1996. Gross profit of $10.9 million improved $6.3 million over
1996. Of the improvement, approximately $5.0 million resulted from more
efficient utilization of material, personnel reductions, the closing of a
redundant production facility and two underutilized warehouses, and other
overhead reductions. Reduced material costs resulted from programs developed at
the Company's subsidiaries to more effectively utilize material and reduce
scrap. Personnel reductions were made throughout the Company, but primarily at
the Company's Neenah operation which is where the largest decline in sales
occurred. Certain surplus equipment that had previously been utilized
primarily for the sports and collectible picture card market was sold. Lease
agreements were renegotiated resulting in significant savings to the Company.
Inventory write offs were reduced to $500,000 in fiscal 1997, which was a $1.3
million improvement from $1.8 million in fiscal 1996.
Selling, general and administrative expenses decreased to 13.7% of net sales
for fiscal 1997 compared to 16.8% in the prior year, or $3.4 million. Of this
amount, $2.5 million results from reduction of the provision for doubtful
accounts to $500,000 from the unusually high provision in fiscal 1996.
Approximately $900,000 of additional savings was generated by personnel
reductions.
Interest expense as a percent of net sales increased to 3.9% in fiscal 1997
versus 3.1% in fiscal 1996. Although total debt at fiscal 1997 year end was
lower than fiscal 1996 year end, interest expense increased $300,000 primarily
due to a higher cost of funds.
Other income decreased $900,000 to 1.0% of net sales versus 2.0% in the prior
year. Fiscal 1997 other income reflects sales of non-strategic equipment, most
of which was previously
-13-
<PAGE> 15
utilized for the production of sports and collectible picture cards. In
addition, fiscal 1997 includes a $600,000 gain realized on the sale of the
Barrier subsidiary, which was partially financed by the Company.
The above factors resulted in a $9.1 million improvement in pretax earnings
from continuing operations compared to fiscal 1996. Losses from continuing
operations were reduced to 0.7% of sales in fiscal 1997 from 12.1% in fiscal
1996. As a result, the Company recorded an income tax expense equal to only
0.1% of net sales. The tax provision for fiscal 1997 includes a valuation
allowance to reserve for the possible limitation of the Company realizing
various state tax benefits.
The food processing operations accounted for as a discontinued operation,
posted net sales of $16.8 million, a decrease of $15.2 million, or 48% under
prior year levels. In total, 67% of fiscal 1997 sales in this segment were to
Nestle, as compared to 94% in fiscal 1996. As previously disclosed and further
described below under "General Factors", the Company's contract to blend
sauces and gravies for Nestle expired in fiscal 1996.
The $900,000 loss from discontinued operations is $1.3 million below fiscal
1996's performance of earnings of $405,000. The loss is primarily due to the
Food processing segment's loss in net sales described above.
In summary, fiscal 1997 yielded a net loss of $0.32 per share, comprised of
$0.12 per share loss from continuing operations and $0.20 per share loss from
discontinued operations. Fiscal 1996 generated a net loss of $1.19 per
share-basic, comprised of net loss $1.28 per share from continuing operations
and a gain of $0.09 per share from discontinued operations.
Liquidity and Capital Resources
As shown on the Consolidated Statements of Cash Flows, fiscal 1998 cash
provided from operating activities as $9.2 million as compared to $6.9 million
in fiscal 1997. The Company's cash position was further enhanced by an
additional $9.3 million being generated by investing activities. The cash
generated from these sources was used to pay down the Company's debt by a net
$15.6 million.
In addition to cash generated as a result of improved operations, the Company's
operating cash benefited by a $1.2 million reduction in inventory and a $3.3
million increase in Accounts Payable and Accrued Liabilities, of which
approximately $1.6 million related to receivables collected by the Company on
behalf of the buyer of Outlook Foods and other post-closing purchase price
adjustments. During fiscal 1998 the Company provided $1.2 million for
additional reserves and write-downs of receivables and inventory as compared to
$1.1 million in fiscal 1997. The Company continues to monitor its inventory
requirements and the credit worthiness of its customers. Management continues
its program to reduce inventory to desired levels. At May 31, 1998, 19% of the
accounts receivable balance pertain to two customers, both of which maintain
current balances. No customers account for 10% of more of the Company's
accounts receivable balance.
-14-
<PAGE> 16
Cash from investing activities recognizes the benefit from the sale of
the Foods subsidiary and also proceeds from the sales of assets, including
facilities (land, building and equipment) located in Oshkosh, Wisconsin and
Wichita, Kansas. Cash from investing activities is reduced by expenditures for
additional property, plant and equipment and the purchase of business from
General Converting.
Net cash used in financing activities was $15.6 million with represents the
Company's net reduction of debt. The Company was able to reduce its debt as a
result of cash available from various asset sales, the sale of the Foods
subsidiary, and improved management of operations and working capital.
The Company maintains a credit facility with a bank, but has no outstanding
balances on term loans or the revolver. The facility provides for a maximum
revolving credit commitment of $25.0 million less $5.6 million to be used for
standby letters of credit. Interest on the debt outstanding during the year
varied with the Company's selection to have the debt be based upon margins over
the bank determined preference or a LIBOR rate. The Company's actual rate
is dependent upon the Company's performance against a specific ration as
measured against a predetermined performance chart. As a result of its improved
cash position, the Company is currently reviewing its line of credit facility,
and may take action to revise or replace the facility to reduce expenses,
although there can be no assurance that the Company can or will do so.
The Company anticipates capital expenditures of approximately $2.75 million in
fiscal 1999, excluding any acquisition opportunities which may become available
to the Company. The Company intends to finance these expenditures through funds
obtained from operations plus its credit facilities and possible leasing
opportunities.
The Company regularly reassesses how its various operations complement the
Company as a whole and considers strategic decisions to acquire new operations
or expand, terminate or sell certain existing operations. These reviews
resulted in the transactions discussed above during fiscal 1997 and 1998, and
may result in additional transactions during fiscal 1999 and beyond.
RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards FAS 130 "Comprehensive Income" and FAS 131
"Disclosures about Segments of an Enterprise and Related Information." During
1998, the FASB issued Statements of Financial Accounting Standards FAS 132
"Employers' Disclosure about Pensions and Other Postretirement Benefits" and
FAS 133 "Accounting for Derivative Instruments and Hedging Activities." FAS
130, 131 and 132 are effective for the Company's 1999 fiscal year and FAS 133 is
effective for the Company's 2000 fiscal year. A brief description of each
standard and the potential effect on the Company's financial statements
follows:
FAS 130 establishes standard for reporting and display of comprehensive income
and its components in the financial statements. FAS 130 requires financial
statement disclosures for prior periods to be restated. The Company is in the
process of determining its preferred disclose format.
FAS 131 establishes new standards for the way that public companies report
information about operating segments in annual financial statements. FAS 131
also established standards for related disclosures about products and services,
geographic areas, and major customers and
-15-
<PAGE> 17
requires financial statement disclosure for prior periods to be restated. The
Company has not yet completed its assessments of how the requirements of this
Statement will impact its existing segment disclosures.
FAS 132 establishes standards for disclosing information about pensions and
other postretirement benefits in the financial statements and requires
disclosure for prior periods to be restated. The Company is evaluating the
extent to which its disclosures may be affected by this Statement.
FAS 133 establishes standards for accounting for derivatives and hedging
activities. At this time, the Company does not have any derivatives or hedging
activities which would be affected by FAS 133.
OTHER
In general, the Company believes that the effects of inflation on the
Company have not been material in recent years.
-16-
<PAGE> 18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not required of the Company at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements (including the notes thereto and the
accountants' report thereon) required by this item are set forth on pages F-1
and following of this Report, and are incorporated herein by reference. See
also "Index to Financial Statements and Financial Statement Schedules" following
Item 14 herein. Supplementary data is not required to be presented, as the
Company does not meet the criteria for mandatory filing.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information in response to this item is incorporated herein by
reference to "Election of Directors" and to "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement to be filed pursuant to
Regulation 14A for its Annual Meeting of Shareholders to be held on or about
October 15, 1998 ("1998 Annual Meeting Proxy Statement") and "Executive Officers
of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to "Election of Directors -- Directors' Fees"
and "Executive Compensation" in the 1998 Annual Meeting Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information in response to this item is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners and Management" in
the 1998 Annual Meeting Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information in response to this item is incorporated by reference to
"Certain Transactions" in the 1998 Annual Meeting Proxy Statement.
-17-
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) DOCUMENTS FILED:
1 and 2. Financial Statements and Financial Statement
Schedules. See the following "Index to Financial
Statements and Financial Statement Schedules," which
is incorporated herein by reference.
3. Exhibits. See Exhibit Index included as last part
of this report, which is incorporated herein by
reference.
(b) REPORTS ON FORM 8-K:
A report on Form 8-K dated May 5, 1998, relating to the sale
of the Foods operations, was filed by the Company during the
last quarter of the period covered by this report. The report
on Form 8-K included unaudited pro forma financial statements
of the Company (balance sheet as of February 27, 1998, and
statements of operations for the nine months ended February
27, 1998 and for the year ended May 31, 1997) giving effect to
the sale of Foods' assets.
-18-
<PAGE> 20
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Company and
subsidiaries are included in this Form 10-K Annual Report:
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
Consolidated Balance Sheets as of May 31, 1998 and 1997........................ F-1
Consolidated Statements of Operations for the years ended May 31, 1998, 1997
and 1996 ............................................................. F-2
Consolidated Statements of Shareholders' Equity for the years ended
May 31, 1998, 1997 and 1996........................................... F-3
Consolidated Statements of Cash Flows for the years ended May 31, 1998,
1997 and 1996......................................................... F-4
Notes to Consolidated Financial Statements..................................... F-5
Report of Independent Certified Public Accountants............................. F-15
</TABLE>
The following financial statement schedule of the Company, and the
accountants' report thereon, appear on the indicated pages in this Form 10-K
Annual Report:
<TABLE>
<CAPTION>
PAGE NUMBER IN 10-K
-------------------
<S> <C>
Report of Independent Certified Public Accountants on
Financial Statement Schedule.......................................... F-16
Schedule II -- Valuation and Qualifying Accounts............................... F-17
</TABLE>
-19-
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
---------------------
1998 1997
--------- --------
(IN THOUSANDS EXCEPT
SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 2,825 $ --
Accounts receivable, less allowance for doubtful accounts
of $1,575 and $1,024, respectively..................... 11,427 12,740
Notes receivable -- current portion....................... 1,726 1,246
Inventories............................................... 5,707 9,857
Deferred income taxes..................................... 406 708
Income taxes refundable................................... 901 725
Other..................................................... 433 874
-------- -------
Total current assets................................... 23,425 26,150
Notes receivable -- long term, less allowance for doubtful
accounts of $477 and $100, respectively................... 3,042 3,216
Property, plant and equipment
Land...................................................... 589 1,051
Buildings and improvements................................ 11,132 15,128
Machinery and equipment................................... 36,739 43,759
-------- -------
48,460 59,938
Less accumulated depreciation............................. (23,293) (23,326)
-------- -------
25,167 36,612
Other assets................................................ 1,823 1,642
-------- -------
Total assets........................................... $ 53,457 $67,620
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt...................... $ 1,658 $ 6,674
Accounts payable.......................................... 4,703 4,081
Cash overdraft liability.................................. -- 1,605
Accrued liabilities
Salaries and wages..................................... 1,472 1,482
Other.................................................. 1,407 840
-------- -------
Total current liabilities............................ 9,240 14,682
Long-term debt, less current maturities..................... 7,061 16,156
Deferred income taxes....................................... 3,773 3,311
Shareholders' equity
Cumulative preferred stock, $.01 par value -- authorized
1,000,000 shares; none issued.......................... -- --
Common stock, $.01 par value -- authorized 15,000,000
shares; 5,117,132 and 5,099,382, respectively shares
issued and outstanding................................. 51 51
Additional paid-in capital................................ 18,494 18,415
Retained earnings......................................... 19,287 19,454
-------- -------
37,832 37,920
Less 450,000 shares of treasury stock at cost, both
years.................................................. 4,449 4,449
-------- -------
Total shareholders' equity................................ 33,383 33,471
-------- -------
Total liabilities and shareholders' equity................ $ 53,457 $67,620
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE> 22
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales............................................ $ 66,951 $ 72,054 $ 79,305
Cost of goods sold................................... 54,545 61,168 74,683
---------- ---------- ----------
Gross profit......................................... 12,406 10,886 4,622
Selling, general and administrative expenses......... 10,454 9,904 13,347
---------- ---------- ----------
Operating profit (loss).............................. 1,952 982 (8,725)
Other income (expense):
Interest expense................................... (1,968) (2,778) (2,506)
Other income....................................... 1,409 746 1,609
Gain on sale of subsidiary......................... -- 556 --
---------- ---------- ----------
Earnings (loss) from continuing operations before
income taxes....................................... 1,393 (494) (9,622)
Income tax expense (benefit)......................... 640 58 (3,659)
---------- ---------- ----------
Earnings (loss) from continuing operations........... 753 (552) (5,963)
Discontinued Operations:
Earnings (loss) from discontinued operations before
income taxes.................................... (57) (1,492) 658
Gain (loss) in sale of discontinued operations
before income taxes............................. (859) -- --
Income tax expense (benefit)....................... 4 (574) 253
---------- ---------- ----------
Earnings (loss) from discontinued operations......... (920) (918) 405
---------- ---------- ----------
Net earnings (loss).................................. $ (167) $ (1,470) $ (5,558)
========== ========== ==========
Net earnings (loss) per share -- Basic:
Continuing......................................... $ 0.16 $ (0.12) $ (1.28)
Discontinued....................................... (0.20) (0.20) .09
---------- ---------- ----------
Total.............................................. $ (0.04) $ (0.32) $ (1.19)
========== ========== ==========
Net earnings (loss) per share -- Diluted:
Continuing......................................... $ 0.16 $ (0.12) $ (1.26)
Discontinued....................................... (0.20) (0.20) .09
---------- ---------- ----------
Total.............................................. $ (0.04) $ (0.32) $ (1.17)
========== ========== ==========
Weighted average number of common shares outstanding
Basic........................................... 4,662,460 4,649,382 4,661,862
========== ========== ==========
Diluted......................................... 4,692,522 4,700,551 4,715,887
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 23
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
------------------------------------------------------------------------
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------ PAID-IN RETAINED -----------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
--------- ------ ---------- -------- ------- ------- -------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1995........ 5,099,382 $51 $18,415 $26,482 350,000 $(3,562) $41,386
Acquisition of treasury
stock..................... -- -- -- -- 100,000 (887) (887)
Net loss for 1996............ -- -- -- (5,558) -- -- (5,558)
--------- --- ------- ------- ------- ------- -------
Balance at May 31, 1996........ 5,099,382 51 18,415 20,924 450,000 (4,449) 34,941
Net loss for 1997............ -- -- -- (1,470) -- -- (1,470)
--------- --- ------- ------- ------- ------- -------
Balance at May 31, 1997........ 5,099,382 51 18,415 19,454 450,000 (4,449) 33,471
Exercise of employee stock
options................... 17,750 -- 79 -- -- -- 79
Net loss for 1998............ -- -- -- (167) -- -- (167)
--------- --- ------- ------- ------- ------- -------
Balance at May 31, 1998........ 5,117,132 $51 $18,494 $19,287 450,000 $(4,449) $33,383
========= === ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 24
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
------------------------------
1998 1997 1996
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)...................................... $ (167) $(1,470) $(5,558)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization......................... 4,850 5,952 5,655
Provision for doubtful accounts....................... 929 639 3,030
Gain on sale of assets................................ (1,339) (407) (948)
(Gain) Loss on sale of subsidiaries................... 859 (556) --
Gain on sale of facility.............................. (583) -- --
Deferred income taxes................................. 754 321 (1,626)
Changes in assets and liabilities, net of effects of
acquisitions and disposals of businesses:
Accounts receivable................................. (764) 991 (346)
Inventories......................................... 1,227 1,048 2,807
Income taxes refundable............................. (176) 1,239 (1,964)
Accounts payable.................................... 2,010 575 (2,810)
Accrued liabilities................................. 1,296 (420) (328)
Other............................................... 261 (966) 194
-------- ------- -------
Net cash provided by (used in) operating
activities..................................... 9,157 6,946 (1,894)
-------- ------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment............. (1,157) (4,275) (4,942)
Decrease in equipment acquisition trust fund............. -- -- 401
Proceeds from sale of assets............................. 2,348 2,604 1,755
Purchase of business..................................... (1,155) -- --
Proceeds from sale of subsidiaries....................... 5,618 2,888 --
Proceeds from sale of facility........................... 3,650 -- --
Other.................................................... -- -- (89)
-------- ------- -------
Net cash provided by(used in)investing
activities..................................... 9,304 1,217 (2,875)
-------- ------- -------
Cash flows from financing activities:
Increase (decrease) in revolving credit borrowings....... (3,416) (7,084) 7,400
Increase (decrease) in cash overdraft.................... (1,605) 1,605 --
Proceeds from long-term borrowings....................... -- 4,870 --
Payments on long-term borrowings......................... (10,694) (7,347) (1,528)
Acquisition of treasury stock............................ -- -- (887)
Exercise of stock options................................ 79 -- --
Debt financing costs..................................... -- (505) --
-------- ------- -------
Net cash(used in)provided by financing
activities..................................... (15,636) (8,461) 4,985
-------- ------- -------
Net increase (decrease) in cash............................ 2,825 (298) 216
Cash and cash equivalents at beginning of year............. -- 298 82
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 2,825 $ -- $ 298
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF ACCOUNTING POLICIES
A summary of Outlook Group Corp. and its wholly owned subsidiaries
("Company") significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include all the accounts of Outlook
Group Corp. and its wholly-owned subsidiaries: Outlook Label Systems, Inc.
("Outlook Label"); Outlook Foods, Inc. ("Outlook Foods") -- see Note M; Outlook
Packaging, Inc. ("Packaging"); and Barrier Films Corporation ("Barrier") through
its disposal in May 1997 -- see Notes I and J.
All intercompany accounts and transactions have been eliminated in the
preparation of the consolidated financial statements.
Revenue Recognition
Revenue is recognized when services have been completed and the product has
been shipped.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, demand deposits and short-term investments with maturities of
three months or less at time of purchase.
Accounts and Notes Receivable
As of May 31, 1998 and 1997, 20% and 28%, respectively, of the accounts
receivable balance relates to two customers.
At May 31, 1998, the Company has recorded an allowance for doubtful
accounts of $1,575,000. The Company has estimated this amount based on
information currently available. Due to uncertainties inherent in the estimation
process it is reasonably possible that this estimate will change in the near
term.
Notes receivable at May 31, 1998 and 1997 were $4,768,000 and $4,462,000,
respectively. The amounts recorded are net of reserves for potential
uncollectibility of $477,000 and $100,000 at May 31, 1998 and 1997,
respectively. The carrying value of these notes approximates fair value as they
are interest bearing at rates which approximate market.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
F-5
<PAGE> 26
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is recorded
using the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 10-40 years
Machinery and equipment..................................... 5-10 years
</TABLE>
Depreciation expense was $4,784,000, $5,598,000 and $5,280,000 for the
years ended May 31, 1998, 1997 and 1996, respectively. Significant additions or
improvements extending the useful lives of assets are capitalized. Repairs and
maintenance are charged to earnings as incurred. Upon retirement or disposal of
assets, the applicable costs and accumulated depreciation are eliminated from
the accounts and the resulting gain or loss is included in income.
The Company adopted Statement of Financial Accounting Standards No. 121
("FAS 122"), Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of. Applying the criteria established by FAS 121, the
Company determined that certain assets were impaired and recorded a reserve of
$100,000 in 1998.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 ("FAS 123"),
"Accounting for Stock-Based Compensation," encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the exercise price. See Note F.
INCOME TAXES
Income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109 ("FAS 109"). Under FAS 109, deferred tax assets,
net of any applicable valuation allowance, and liabilities are established for
the future tax effects of temporary differences between the bases of assets and
liabilities for financial and income tax reporting purposes, as measured by
applying current tax laws.
EARNINGS PER SHARE
The company adopted Statement of Financial Accounting Standards No. 128
("FAS 128"), "Earnings Per Share," in 1998. FAS 128 established new standards
for computing and presenting earnings per share. The earnings per share
computations for prior periods have been restated to conform with the provisions
of FAS 128.
Basic earnings per share is computed by dividing net earnings by the
weighted average shares outstanding during each period. Diluted earnings per
share is computed similar to basic earnings per share except that the weighted
average shares outstanding is increased to include the number of additional
shares that would have been outstanding if stock options were exercised and the
proceeds from such exercise were used to acquire shares of common stock at the
average market price during the period.
F-6
<PAGE> 27
The following is a reconciliation of the average shares outstanding used to
compute basic and diluted earnings per share. There is no earnings per share
impact for the assumed conversions of the stock options in each of the years.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Basic EPS............................................... 4,662,460 4,649,382 4,661,882
Effect of Dilutive Securities --
Stock Options......................................... 30,062 51,169 54,005
--------- --------- ---------
Diluted EPS............................................. 4,692,522 4,700,551 4,715,887
========= ========= =========
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' financial
statements to conform to the current year's presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards FAS 130 "Comprehensive Income" and
FAS 131 "Disclosures about Segments of an Enterprise and Related Information."
During 1998, the FASB issued Statements of Financial Accounting Standards FAS
132 "Employers' Disclosure about Pensions and Other Postretirement Benefits" and
FAS 133 "Accounting for Derivative Instruments and Hedging Activities." FAS 130,
131 and 132 are effective for the Company's 1999 fiscal year and FAS 133 is
effective for the Company's 2000 fiscal year. A brief description of each
standard and the potential effect on the Company's financial statements follows:
FAS 130 establishes standards for reporting and display of comprehensive
income and its components in the financial statements. FAS 130 requires
financial statement disclosures for the prior periods to be restated. The
Company is in the process of determining its preferred disclosure format.
FAS 131 establishes new standards for the way that public companies report
information about operating segments in annual financial statements. FAS 131
also establishes standards for related disclosures about products and services,
geographic areas, and major customers and requires financial statement
disclosure for prior periods to be restated. The Company has not yet completed
its assessment of how the requirements of the Statement will impact its
disclosures.
FAS 132 establishes standards for disclosing information about pensions and
other postretirement benefits in the financial statements and requires
disclosure for prior periods to be restated. The Company is evaluating the
extent to which its disclosures may be affected by this Statement.
FAS 133 establishes standards for accounting for derivatives and hedging
activities. At this time, the Company does not have any derivatives or hedging
activities which would be affected by FAS 133.
NOTE B -- INVENTORIES
Inventories consist of the following at May 31:
<TABLE>
<CAPTION>
1998 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................... $2,202 $4,523
Work-in-process............................................. 1,160 1,666
Finished goods.............................................. 2,345 3,668
------ ------
$5,707 $9,857
====== ======
</TABLE>
F-7
<PAGE> 28
NOTE C -- LONG-TERM DEBT
Long-term debt consists of the following at May 31:
<TABLE>
<CAPTION>
1998 1997
------ -------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit arrangement (described below).............. $ -- $ 4,917
Term note payable, due in quarterly principal installments
ranging from $183,334 to $433,834 from September 16, 1997
through June 16, 2004, plus interest at a weighted average
interest rate (8.25% at May 31, 1998)..................... 3,519 10,587
Industrial development bond, due in annual principal
installments ranging from $100,000 to $1,600,000 from
August 1, 1999 through August 1, 2004, plus interest at a
floating rate determined by a remarketing agent (3.75% at
May 31, 1998)............................................. 4,000 4,000
Term notes payable, due in monthly installments through
November 1, 1999 (described below)........................ -- 1,726
Industrial development bond, due in annual principal
installments of $400,000 through September 1, 2000, plus
interest at a floating rate determined by a remarketing
agent (3.75% at May 31, 1998)............................. 1,200 1,600
------ -------
8,719 22,830
Less current maturities..................................... 1,658 6,674
------ -------
$7,061 $16,156
====== =======
</TABLE>
On November 5, 1996 the Company entered into a Loan and Security Agreement
(the "Agreement") with a bank, which provided revised credit facilities. Under
the Agreement, the lender provided for a term loan to the Company in the
aggregate amount of $4,870,000 and a revolving credit commitment (the
"Revolver") which provides for maximum borrowings of $25,000,000, including an
irrevocable standby letter of credit in the aggregate amount of $5,600,000.
Borrowings under the Revolver and term notes bear interest, at the Company's
option, at a bank determined reference rate or a LIBOR based rate. In May 1998
all term and revolver debt with the bank was repaid.
Substantially all of the Company's assets have been pledged as collateral
on the various debt agreements. The creditors party to the term notes and
revolving credit arrangements have a priority security interest over the
remaining creditors. The term notes, revolving credit agreements, and industrial
development bond obligations are subject to the terms of certain agreements
which contain provisions setting forth, among other things, fixed charges
restrictions, net worth and debt-to-equity requirements, and restrictions on
property and equipment additions, loans, investments, other borrowings, and
acquisitions and redemptions of the Company's stock or the issuance of stock
except for cash. Additionally, the Company may not pay cash dividends without
the prior consent of certain of its lenders The carrying amounts of the
Company's long-term debt approximates its fair value based on rates currently
available to the Company for long-term borrowings with similar terms and
remaining maturities.
At May 31, 1998, future maturities of long-term debt were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1999........................................................ $1,658
2000........................................................ 2,308
2001........................................................ 1,953
2002........................................................ 800
2003........................................................ 800
Thereafter.................................................. 1,200
------
Total..................................................... $8,719
======
</TABLE>
F-8
<PAGE> 29
NOTE D -- EMPLOYEE BENEFIT PLANS
The Company offers a 401(k) savings plan for all employees that meet
certain eligibility requirements. Employee contributions to the plan are made
through payroll deductions. In addition, the Company matches 40-50% of the first
6% of each employee's contribution. Employer matching contributions under the
401(k) plan for the years ended May 31, 1998, 1997 and 1996 were $259,000,
$238,000 and $308,000, respectively.
The Company is not obligated to provide any postretirement medical or life
insurance benefits or any postemployment benefits to its employees.
NOTE E -- INCOME TAXES
The provision (benefit) for income taxes from continuing operations consist
of the following:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable (receivable):
Federal................................................... $ 201 $(539) $(1,957)
State..................................................... 138 (31) (1)
----- ----- -------
339 (570) (1,958)
----- ----- -------
Deferred:
Federal................................................... 499 371 (1,133)
State..................................................... (198) 257 (568)
----- ----- -------
301 628 (1,701)
----- ----- -------
$ 640 $ 58 $(3,659)
----- ----- -------
</TABLE>
The reconciliation of income tax from continuing operations computed at the
statutory federal income tax rate to the Company's effective income tax rate,
expressed as a percentage of pre-tax earnings (loss), is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -------
<S> <C> <C> <C>
Statutory federal income tax rate........................... 34.0% (34.0)% (34.0)%
State income taxes, net..................................... 6.6 3.6 (4.1)
Increase (decrease) in valuation allowance.................. (14.9) 41.9 --
Provision for estimated additional income tax............... 20.2 -- --
Other....................................................... -- 0.2 .1
----- ----- -------
45.9% 11.7% (38.0)%
----- ----- -------
</TABLE>
F-9
<PAGE> 30
The components of the net deferred income tax liability as of May 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Employee benefits......................................... $ 247 $ 204
Inventory................................................. 263 221
Accounts receivable....................................... 790 432
Tax carryforwards......................................... 1,274 2,299
Other..................................................... 193 63
------ ------
2,767 3,219
Less valuation allowance.................................... 0 (207)
------ ------
2,767 3,012
------ ------
Deferred tax liabilities:
Property, plant and equipment............................. 4,962 5,236
Barrier installment sale.................................. 218 --
Other..................................................... 854 379
------ ------
6,134 5,615
------ ------
Net deferred income tax liability........................... $3,367 $2,603
------ ------
</TABLE>
As of May 31, 1998 the Company has $728,000 of alternative minimum tax
credit carryforwards which are available to reduce future regular federal income
tax liabilities. The Company has certain loss and tax credit carryforwards for
state income tax purposes which, net of related federal income taxes,
approximate $546,000. Those state carryforwards expire in varying amounts
through 2012.
During 1998 the Company reversed a valuation allowance previously recorded
against certain state carryforwards. The Company reassessed its ability to
recover these in the future.
NOTE F -- STOCK OPTIONS
In 1990, the shareholders approved the 1990 Stock Option Plan (the "1990
Plan") which provides for the granting of stock options as an incentive to
officers and certain key salaried employees. The 1990 Plan provides for the
issuance of up to 200,000 shares of common stock at an exercise price which may
not be less than the market price of the common stock on the date of the grant.
Options granted prior to 1996 became exercisable six months after the date of
grant. Options granted during 1996 and 1997 become exercisable one year after
the date of grant. In addition, during fiscal 1997, the company granted its
non-employee directors stock options for a total of 18,000 shares apart from the
1990 Plan. No options were granted in 1998.
Transactions under the 1990 Plan, and non-1990 Plan option grants to
non-employee directors, during the years ended May 31, 1998, 1997, and 1996, are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
year............................. 150,750 $5.16 87,500 $5.02 70,250 $11.16
Granted............................ -- -- 82,750 $5.00 77,500 $ 4.44
Exercised.......................... (17,750) 4.44 -- -- -- --
Expired............................ -- -- (19,500) $4.45 (60,250) $11.38
------- ----- ------- ----- ------- ------
Options outstanding, end of year... 133,000 $6.01 150,750 $5.16 87,500 $ 5.02
======= ===== ======= ===== ======= ======
</TABLE>
F-10
<PAGE> 31
The outstanding stock options at May 31, 1998 have a range of exercise
prices between $4.38 and $5.75 per share, a weighted average contractual life of
approximately 6.1 years, and a maximum term of 10 years from the date of grant.
At May 31, 1998, 119,000 options are exercisable at a weighted average exercise
price of $6.01. The weighted average fair value at date of grant for options
granted during 1997 and 1996 was $1.48 and $1.19, respectively. The fair value
of options, at date of grant, for options granted in 1997 and 1996, was
estimated using the Black-Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Expected life (years)....................................... 2 2
Risk-free interest rate..................................... 6.08% 5.91%
Expected volatility......................................... 62.4% 52.6%
Expected dividend yield..................................... -- --
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, under which
no compensation cost has been recognized in the statement of operations. Had
compensation cost been determined under an alternative method suggested by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the pro forma effect on the 1998, 1997 and 1996 net earnings
(loss) would have been $(29,000), $(78,000), and $(74,000), respectively. The
pro forma effect on the 1998, 1997, and 1996 earnings (loss) per share would
have been $(.01) ($(.01) diluted), $(.02) ($(.02) diluted), and $(.02) ($(.02)
diluted), respectively.
NOTE G -- COMMITMENTS AND CONTINGENCIES
The Company has a number of operating lease agreements primarily involving
manufacturing equipment and warehouse space. These leases are noncancelable and
expire on various dates through 2003.
The following is a schedule, by fiscal year, of the rental payments due
under noncancelable operating leases, as of May 31, 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999........................................................ $ 2,235
2000........................................................ 2,103
2001........................................................ 2,260
2002........................................................ 3,055
Thereafter.................................................. 2,204
-------
Total....................................................... $11,857
</TABLE>
Rent expense for the years ended May 31, 1998, 1997 and 1996, was
$2,517,000, $2,838,000 and $4,219,000 respectively.
NOTE H -- BUSINESS SEGMENTS AND MAJOR CUSTOMERS
The Company conducts its operations primarily in one industry segment --
graphic services. This segment offers an array of related services including
specialty printing, converting and packaging, and distribution.
During the years ended May 31, 1998, 1997 and 1996, the Company had sales
to certain customers that accounted for more than 10% of the Company's net sales
from continuing operations, as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Kraft Foods, Inc............................................ 10% 14% 13%
</TABLE>
NOTE I -- SUPPLEMENTAL CASH FLOW INFORMATION
In 1998, the Company sold its wholly owned subsidiary, Outlook Foods, and
accepted a $1,500,000 note in partial consideration for the sale.
F-11
<PAGE> 32
In fiscal 1997, the Company sold its wholly owned subsidiary, Barrier, and
accepted a note and deferred consideration recorded at $2,469,000 in partial
consideration for the sale.
In fiscal 1996, the Company sold certain assets related to its publishing
division and accepted a note for $1,000,000 in partial consideration for the
sale.
Cash paid during the year:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest.................................................... $1,805 $2,571 $2,493
Income taxes................................................ $ 505 $ 76 $ 150
</TABLE>
NOTE J -- ACQUISITIONS AND DISPOSITIONS
In November, 1997, the Company acquired certain assets of General
Converting, a division of R-P Packaging, Inc. for $1,155,000. The purchase price
paid for the General Converting assets is subject to a post closing adjustment
based on the results of revenues generated from these assets for the twelve
month period ended November 30, 1998. The Company has not recorded a liability
at May 31, 1998 relating to this adjustment. The acquisition was accounted for
using the purchase method of accounting. The cost of the acquisition has been
allocated on the basis of the estimated fair values of the assets acquired. The
excess of the cost over the estimated fair values of the assets acquired is
$635,000, and is being amortized over a 25 year life.
The Company sold Barrier on May 9, 1997. Net proceeds from the sale
included $2,888,000 cash and a note receivable and deferred consideration of
$2,469,000. The gain on the sale was $556,000 before income tax effect. Net
sales and operating losses related to Barrier through the date of sale included
in the Company's consolidated statements of operations were $6,662,000 and
$(902,000) respectively, for the year ended May 31, 1997.
NOTE K -- RELATED PARTY TRANSACTIONS
At May 31, 1998, 1997 and 1996, the company held an 18% equity interest in
one of its customers. This equity interest is reported under the cost method,
with no carrying value reflected in the balance sheet. During the years ended
May 31, 1998, 1997, and 1996, sales to this customer were approximately
$135,000, $0, and $2,765,000, respectively. During 1996, the Company wrote off
$2,500,000 of accounts receivable from this customer, based on management's
estimate of potential losses on recovery. Balances due from this customer were
$730,000 and $810,000 at May 31, 1998 and 1997, respectively. The Company earned
fees for consultation services of $145,000 during the year ended May 31, 1996.
Interest income of $153,000 on accounts receivable was recognized during the
years ended May 31, 1996. The Company did not earn any fees from consultation
services or recognize any interest income relating to this customer for the year
ended May 31, 1998 and 1997. The entire debt of $730,000 was paid to the Company
in July 1998.
NOTE L -- FOURTH QUARTER RESULTS
Fourth quarter write offs related to receivables and inventories increased
the fiscal 1998 fourth quarter loss before income tax benefit by approximately
$210,000.
NOTE M -- DISCONTINUED OPERATIONS
During the second quarter of fiscal 1997, the Company adopted a formal plan
to dispose of Outlook Foods, located in Oconomowoc, Wisconsin. Outlook Foods is
a food processing operation, involved primarily in dry-blended food processing
and packaging. On May 1, 1998, Foods was sold to Lake Country Foods. Lake
Country Foods is owned by the former Chairman and CEO, and a greater than 5%
shareholder of the Company. The purchase price was $7,118,000, subject to
certain post-closing adjustments, of which $5,618,000 was paid in cash and
$1,500,000 was provided by a note receivable. The loss on the disposal was
$860,000. During 1998 Outlook Foods incurred an operating loss of $60,000
through the date of disposal. Net
F-12
<PAGE> 33
sales generated from Outlook Foods were $15,460,000, $16,804,000, and
$32,051,000 for the years ended May 31, 1998, 1997 and 1996, respectively. Sales
to Nestle Beverage Company accounted for 48%, 67%, and 94% of Outlook Foods' net
sales for the years ended May 31, 1998, 1997 and 1996, respectively.
The components of net assets of Outlook Foods included in the consolidated
balance sheet at May 31, 1997 are as follows:
<TABLE>
<CAPTION>
1997
--------------
(IN THOUSANDS)
<S> <C>
Accounts receivable, net.................................... $2,579
Inventories................................................. 2,903
Deferred income taxes....................................... 175
Other....................................................... 75
------
Total current assets...................................... 5,732
Property, plant, and equipment, net......................... 4,052
Other assets................................................ 43
------
Total assets.............................................. 9,827
------
Accounts payable............................................ 1,134
Accrued liabilities......................................... 656
------
Total current liabilities................................. 1,790
Deferred income taxes....................................... 167
------
Total liabilities......................................... 1,957
------
Net assets................................................ $7,870
------
</TABLE>
F-13
<PAGE> 34
STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated financial statements and accompanying information were
prepared by and are the responsibility of management. The statements were
prepared in conformity with generally accepted accounting principles and, as
such, include amounts that are based on management's best estimates and
judgments.
The internal control systems are designed to provide reliable financial
information for the preparation of financial statements, to safeguard assets
against loss or unauthorized use and to ensure that transactions are executed
consistent with company policies and procedures. Management believes that
existing internal accounting control systems are achieving their objectives and
that they provide reasonable assurance concerning the accuracy of the financial
statements.
Oversight of management's financial reporting and internal accounting
control responsibilities is exercised by the Board of Directors, through an
Audit Committee which consists solely of outside directors. The committee meets
periodically with financial management to ensure that it is meeting its
responsibilities and to discuss matters concerning auditing, internal accounting
control and financial reporting. The independent accountants have free access to
meet with the Audit Committee without management's presence.
<TABLE>
<S> <C>
Richard C. Fischer Paul M. Drewek
Chairman and Interim Interim Chief Financial Officer
Chief Executive Officer
</TABLE>
F-14
<PAGE> 35
REPORT OF INDPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Outlook Group Corp. and Subsidiaries
Neenah, Wisconsin
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
Outlook Group Corp. and subsidiaries at May 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended May 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
July 20, 1998
F-15
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders
Outlook Group Corp. and Subsidiaries
Neenah, Wisconsin
Our audits of the consolidated financial statements referred to in our
report dated July 20, 1998 (which report and consolidated financial statements
are included in this Form 10-K) also included an audit of the financial
statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
July 20, 1998
F-16
<PAGE> 37
OUTLOOK GROUP CORP. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED TO
BEGINNING COSTS AND BALANCE
OF YEAR EXPENSES DEDUCTIONS END OF YEAR
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED MAY 31, 1998
Allowance for doubtful accounts................. $1,124 $1,109 $ 558 $1,575
YEAR ENDED MAY 31, 1997
Allowance for doubtful accounts................. 896 639 411 1,124
YEAR ENDED MAY 31, 1996
Allowance for doubtful accounts................. 725 3,030 2,859 896
</TABLE>
F-17
<PAGE> 38
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
By /s/ Richard C. Fischer August 31, 1998
-------------------------------------
Richard C. Fischer, Chairman
-----------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard C. Fischer, Joseph J. Baksha and
Paul M. Drewek, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
-----------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES INDICATED, AS OF AUGUST 31, 1998.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE SIGNATURE AND TITLE
------------------- -------------------
<S> <C> <C>
/s/ Richard C. Fischer /s/ James L. Dillon
----------------------------------------------- -------------------------------
Richard C. Fischer, Chairman, interim Chief James L. Dillon, Director
Executive Officer and Director
/s/ Paul M. Drewek /s/ Pat Richter
----------------------------------------------- -------------------------------
Paul M. Drewek Pat Richter, Director
interim Chief Financial Officer
(and interim principal accounting officer)
/s/ Harold J. Bergman /s/ Charles E. Thompson
----------------------------------------------- -------------------------------
Harold J. Bergman, Director Charles E. Thompson, Director
/s/ Jeffry H. Collier /s/ A. John Wiley, Jr.
----------------------------------------------- -------------------------------
Jeffry H. Collier, Director A. John Wiley, Jr., Director
</TABLE>
-13-
<PAGE> 39
OUTLOOK GROUP CORP.
(THE "COMPANY")
EXHIBIT INDEX
TO
ANNUAL REPORT ON FORM 10-K FOR FISCAL 1998
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ----------- ------- ------------------- --------
<S> <C> <C> <C>
3(i) Restated Articles of Incorporation of the Exhibit 3(i) to the Company's
Company (effective August 3, 1990), as Annual Report on
amended through November 1, 1994 Form 10-K for the fiscal year
ended May 31, 1995 ("1995 10-K")
3(ii) Restated Bylaws of the Company (as
adopted on August 19, 1998) X
4.1 Articles III, IV and VI of the Restated Contained in Exhibit 3.1
Articles of Incorporation of the Company hereto
4.2(a) Amended and Restated Note Purchase Exhibit 4.1 to the Company's
Agreement dated November 5, 1996 Quarterly Report
between the Company and State of on Form 10-Q for the quarter
Wisconsin Investment Board* ended November 29, 1996 ("11/96
4.2(b) Waiver and Amendment thereto dated Exhibit 4.2 (b) to the
August 21, 1997 Company's Annual Report
on Form 10-K for the
fiscal year ended May 31, 1997
("1997 10-K")
4.3(a) Loan and Security Agreement dated Exhibit 4.2 to 11/96 10-Q
November 5, 1996 among the Company and
its subsidiaries and Bank America Business
Credit, Inc.*
4.3(b) Waiver and Amendment thereto dated Exhibit 4.3(b) to 1997
August 20, 1997 10-K
4.4(a) Reimbursement Agreement dated August 1, Exhibit 4.4(a) to the
1994 between Outlook Packaging, Inc. Company's Annual Report
("Packaging") and Firstar Bank, relating to on Form 10-K for the
$4,000,000 City of Oak Creek Industrial fiscal year ended May 31,
Revenue Bonds* 1994 ("1194 10-K")
</TABLE>
EI-1
<PAGE> 40
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ---------- ------- ------------------- --------
<S> <C> <C> <C>
4.4(b) Related Corporate Guarantee Agreement Exhibit 4.4(b) to the 1994 10-K
dated August 1, 1994 by the Company*
4.5 Loan Agreement dated as of September 1, Exhibit 4.6 to the
1990 by and between City of Neenah, Company's Registration
Wisconsin and Olympic Label Systems, Inc. Statement on Form S-1
(n/k/a Outlook Label Systems, Inc.) (No. 33-36641), as
("Outlook Label"), relating to $4,000,000 amended by Amendment
Industrial Development Revenue Bonds No. 1 thereto ("S-1")
10.1 1990 Stock Option Plan** Exhibit 10.1 to S-1
10.2 Management Incentive Plan** Exhibit 10.2(a) to 1994
10-K
10.3(a) Employment Agreement dated as of June 1, Exhibit 10.10 to 1997
1997 between the Company and Joseph J. 10-K
Baksha**
10.3(b) Term Note dated July 22, 1998 of Mr. X
Baksha to the Company, as contemplated by
the Employment Agreement**
10.4(a) Lease Agreement dated November 7, 1990 Exhibit 10.10(b) to S-1
between the Company and a joint venture
relating to the lease of City of Neenah
property*
10.4(b) Lease Amendment #1 thereto dated March Exhibit 10.7(b)(ii) to the
31, 1992 Company's Annual Report
on Form 10-K for the
fiscal year ended May 31,
1992 ("1992 10-K")
10.5 401(k) Savings Plan (as amended and Exhibit 10.11 to S-1
restated effective as of January 1, 1989)
including the Defined Contribution Regional
Prototype Plan and Trust Document and the
Adoption Agreement thereto**
10.6 Master Lease Agreement dated March 13, Exhibit 10.6 to 1997 10-K
1997 between the Company and General
Electric Corporation*
10.7 Letter of Credit Agreements No. One and Exhibit 10.7 to 1997 10-K
No. Two dated March 13, 1997 between
Outlook Group Corp. and General Electric
Corporation
</TABLE>
EI-2
<PAGE> 41
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ---------- ------- -------------------- --------
<S> <C> <C> <C>
10.8(a) Purchase and Sale Agreement dated as of Exhibit 10.15 to 1995
July 14, 1995 between the Company and 10-K
Willow Creek Press, LLC ("Willow
Creek")*
10.8(b) Replacement Promissory Note of Willow Exhibit 10.15(b) to 1996
Creek dated May 31, 1996 10-K
10.8(c) Amendment dated November 1, 1996 Exhibit 10.13(c) to
Amendment No. 1 to 1997
10-K
10.8(d) Letter of Willow Creek dated June 4, 1998 X
regarding prepayment of the Note (accepted
orally by the Company)
10.9(a) Stock Purchase Agreement dated May 12, Exhibit 10.14(a) to 1997
1997 between the Company and Barrier 10-K
Films Ltd.--New York ("Barrier-NY")
10.9(b) Rebate and Supply Agreement dated Exhibit 10.14(b) to 1997
May 12, 1997 among the Company, Barrier- 10-K
NY, Barrier and World Class Films Corp.
10.10(a) Employment Agreement dated June 1, 1997 Exhibit 10.3(b) to the
between David L. Erdmann and the 1997 10-K
Company (superseded)**
10.10(b) Resignation and Release Agreement dated Exhibit 10.1 to the
December 17, 1997 between David L. Company's Quarterly
Erdmann and the Company. Report on Form 10-Q for
the quarter ended
November 28, 1997
10.11 Form of the Company's Non-Qualified Exhibit 10.15 to
Stock Option Agreement (for non-employee Amendment No. 1 to 1997
directors) 10-K
10.12 Purchase and Sale Agreement dated as of Exhibit 2.1 to the
April 30, 1998 among Outlook Foods, Inc., Company's Current
the Company, Lake Country Foods, Inc. and Report on Form 8-K dated
Lake Country Properties, LLC* May 5, 1998
21.1 List of subsidiaries of the Company X
23.1 Consent of PricewaterhouseCoopers LLP X
24.1 Powers of Attorney Signature Page
</TABLE>
EI-3
<PAGE> 42
<TABLE>
<CAPTION>
Incorporated Herein
by Reference to Filed
Exhibit No. Exhibit this Report Herewith
- ----------- ------- ------------------- --------------
<S> <C> <C> <C>
27 Financial Data Schedule X
</TABLE>
_________________
* Excluding exhibits and/or schedules which are identified in the document.
The Company agrees to furnish supplementally a copy of any omitted exhibit
or schedule to the Commission upon request.
** Designates compensatory plans and agreements for executive officers.
EI-4
<PAGE> 1
EXHIBIT 3(ii)
RESTATED BYLAWS
OF
OUTLOOK GROUP CORP.
(a Wisconsin corporation)
As amended and restated by
the Board of Directors
on August 19, 1998.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
VARIABLE REFERENCES............................................................................ iv
ARTICLE I. OFFICES .................................................................... 1
1.01. Principal and Business Offices................................................ 1
1.02. Registered Office............................................................. 1
ARTICLE II. SHAREHOLDERS...................................................................... 1
2.01. Annual Meeting................................................................ 1
2.02. Special Meeting............................................................... 1
2.03. Place of Meeting.............................................................. 1
2.04. Notice of Meeting............................................................. 2
2.05. Fixing of Record Date......................................................... 2
2.06. Voting Records................................................................ 2
2.07. Quorum .................................................................... 3
2.08. Conduct of Meetings........................................................... 3
2.09. Proxies .................................................................... 3
2.10. Voting of Shares.............................................................. 4
2.11. Voting of Shares by Certain Holders........................................... 4
ARTICLE III. BOARD OF DIRECTORS............................................................... 5
3.01. General Powers and Number..................................................... 5
3.02. Tenure and Qualifications..................................................... 6
3.03. Regular Meetings.............................................................. 6
3.04. Special Meetings.............................................................. 6
3.05. Notice; Waiver................................................................ 7
3.06. Quorum .................................................................... 7
3.07. Manner of Acting.............................................................. 7
3.08. Conduct of Meetings........................................................... 7
3.09. Vacancies .................................................................... 8
3.10. Compensation.................................................................. 8
3.11. Presumption of Assent......................................................... 8
3.12. Committees.................................................................... 8
3.13. Meetings By Telephone or Other
Communication Technology............................................ 9
ARTICLE IV. OFFICERS.......................................................................... 9
4.01. Number .................................................................... 9
4.02. Election and Term of Office................................................... 10
4.03. Removal .................................................................... 10
4.04. Vacancies .................................................................... 10
4.05. Chairman of the Board......................................................... 10
4.06. President .................................................................... 10
-ii-
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
4.07. Executive Vice President...................................................... 11
4.08. Vice Presidents............................................................... 11
4.09. Secretary .................................................................... 12
4.10. Treasurer .................................................................... 12
4.11. Assistant Secretaries and
Assistant Treasurers................................................ 12
4.12. Other Assistants and Acting Officers.......................................... 13
4.13. Salaries .................................................................... 13
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS.............................................. 13
5.01. Contracts .................................................................... 13
5.02. Loans .................................................................... 14
5.03. Checks, Drafts, etc........................................................... 14
5.04. Deposits .................................................................... 14
5.05. Voting of Securities Owned
by This Corporation................................................. 14
ARTICLE VI. CERTIFICATES FOR SHARES AND
THEIR TRANSFER........................................................... 15
6.01. Certificates for Shares....................................................... 15
6.02. Facsimile Signatures and Seal................................................. 15
6.03. Signature by Former Officers.................................................. 15
6.04. Transfer of Shares............................................................ 15
6.05. Restrictions on Transfer...................................................... 16
6.06. Lost, Destroyed or Stolen Certificates........................................ 16
6.07. Consideration for Shares...................................................... 16
6.08. Stock Regulations............................................................. 16
ARTICLE VII. WAIVER OF NOTICE................................................................. 16
ARTICLE VIII. UNANIMOUS CONSENT WITHOUT A MEETING............................................. 17
ARTICLE IX. INDEMNIFICATION................................................................... 17
9.01. Indemnification for Successful Defense........................................ 17
9.02. Other Indemnification......................................................... 17
9.03. Written Request............................................................... 18
9.04. Nonduplication................................................................ 18
9.05. Determination of Right to Indemnification..................................... 18
9.06. Advance Expenses.............................................................. 20
9.07. Nonexclusivity................................................................ 20
9.08. Court-Ordered Indemnification................................................. 21
9.09. Indemnification of Employees or Agents........................................ 21
9.10. Insurance .................................................................... 22
9.11. Liberal Construction.......................................................... 22
9.12. Definitions Applicable to This Article........................................ 22
ARTICLE X. SEAL .................................................................... 23
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XI. AMENDMENTS........................................................................ 24
11.01. By Shareholders............................................................... 24
11.02. By Directors.................................................................. 24
11.03. Implied Amendments............................................................ 24
ARTICLE XII. FISCAL YEAR...................................................................... 24
</TABLE>
-iv-
<PAGE> 5
VARIABLE REFERENCES
0.01. Date of annual shareholders' meeting (See
Section 2.01): second Thursday of October.
*
0.02. Minimum required notice of shareholders' meeting where
longer period not required by law (See Section 2.04): not less than ten (10)
days.
*
0.03. Authorized number of directors (See Section 3.01): not
less than 7 nor more than 11, as determined from time to time by the Board of
Directors
*
0.04. Required notice of directors' meetings (See Section
3.05): (a) not less than 48 hours if by mail, and (b) not less than twenty-four
(24) hours if by telegram or personal delivery.
*
0.05. The fiscal year of the corporation shall end on:
May 31. (See Article XII).
*
- -------------------
* These spaces are reserved for official notation of future
amendments to these sections.
-v-
<PAGE> 6
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may have
such principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office. The registered office of the corporation
required by the Wisconsin Business Corporation Law to be maintained in the State
of Wisconsin may be, but need not be, identical with the principal office in the
State of Wisconsin, and the address of the registered office may be changed from
time to time by the Board of Directors or by the registered agent. The business
office of the registered agent of the corporation shall be identical to such
registered office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders
shall be held at the date and hour in each year set forth in Section 0.01, or at
such other time and date not more than 30 days before or 125 days after said
date as may be fixed by or under the authority of the Board of Directors, for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual meeting shall be
a legal holiday in the State of Wisconsin, such meeting shall be held on the
next succeeding business day. If the election of directors shall not be held on
a day designated herein, or fixed as herein provided, for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a meeting of the shareholders as soon
thereafter as conveniently may be.
2.02. Special Meeting. Special meetings of the share holders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or the Board of Direc tors.
2.03. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Wis consin, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of
1
<PAGE> 7
Wisconsin, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall
be the principal business office of the corporation in the State of Wisconsin
or such other suitable place in the county of such principal office as may
be designated by the person calling such meeting, but any meeting may be
adjourned to reconvene at any place designated by vote of a majority of the
shares represented thereat.
2.04. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than the
number of days set forth in Section 0.02 (unless a longer period is required by
law or the articles of incorporation) nor more than sixty days before the date
of the meeting, either personally or by mail, by or at the direction of the
Chairman, the President, or the Secretary, or other officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock record books of the corporation, with postage thereon prepaid.
2.05. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days and, in case of a meeting of shareholders, not less than
ten days prior to the date on which the particular action, requiring such deter
mination of shareholders, is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
close of business on the date on which notice of the meeting is mailed or on the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section.
2.06. Voting Records. The officer or agent having charge of the
stock transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or
2
<PAGE> 8
any adjournment thereof, with the address of and the number of shares held
by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meet ing for the purposes of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
share holders entitled to examine such record or transfer books or to vote at
any meeting of shareholders. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at such meeting.
2.07. Quorum. Except as otherwise provided in the articles of
incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on the subject matter shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by law or the articles of incorpo ration. Though less than a quorum of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed.
2.08. Conduct of Meetings. The Chairman of the Board, if there be
one and he is present, and in his absence, the President, and in his absence,
the Executive Vice President, if there be one and he is present, and in his
absence, a Vice President in the order provided under Section 4.08, and in their
absence, any person chosen by the shareholders present shall call the meeting of
the shareholders to order and shall act as chair man of the meeting, and the
Secretary of the corporation shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09. Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the corporation before or at the time of the
meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any
time before it is voted, either by written notice filed with the Secretary or
the acting secretary of the meeting or by oral notice given by the shareholder
to the presiding officer during the meeting. The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation. No proxy
- 3 -
<PAGE> 9
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. The Board of Directors shall have the power
and authority to make rules estab lishing presumptions as to the validity
and sufficiency of proxies.
2.10. Voting of Shares. Each outstanding share shall be entitled
to one vote upon each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares of any class or
classes are enlarged, limited or denied by the articles of incorporation.
2.11. Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the
president of such corporation or any other officer appointed by such
president. A proxy executed by any principal officer of such other
corporation or assistant thereto shall be conclusive evidence of the
signer's author ity to act, in the absence of express notice to this
corporation, given in writing to the Secretary of this corporation, of
the designation of some other person by the board of directors or the
bylaws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy,
receiver, or assignee for creditors may be voted by him either in
person or by proxy, without a transfer of such shares into his name,
provided that there is filed with the Secretary before or at the time
of meeting proper evidence of his incumbency and the number of shares
held. Shares standing in the name of a fiduciary may be voted by him,
either in person or by proxy. A proxy exe cuted by a fiduciary, shall
be conclusive evidence of the signer's authority to act, in the
absence of express notice to this corporation, given in writing to the
Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the
fiduciary relationship.
(c) Pledgees. A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred
into the name of the pledgee, and there after the pledgee shall be
entitled to vote the shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares, nor
shares held by another corporation if a majority
- 4 -
<PAGE> 10
of the shares entitled to vote for the election of directors of such
other corporation is held by this corporation, shall be voted at any
meeting or counted in determining the total number of outstanding
shares entitled to vote, but shares of its own issue held by this
corporation in a fiduciary capac ity, or held by such other
corporation in a fiduciary capac ity, may be voted and shall be
counted in determining the total number of outstanding shares entitled
to vote.
(e) Minors. Shares held by a minor may be voted by such minor in
person or by proxy and no such vote shall be subject to disaffirmance
or avoidance, unless prior to such vote the Secretary of the
corporation has received written notice or has actual knowledge that
such shareholder is a minor.
(f) Incompetents and Spendthrifts. Shares held by an incompetent
or spendthrift may be voted by such incompetent or spendthrift in
person or by proxy and no such vote shall be subject to disaffirmance
or avoidance, unless prior to such vote the Secretary of the
corporation has actual knowl edge that such shareholder has been
adjudicated an incompe tent or spendthrift or actual knowledge of
filing of judi cial proceedings for appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of two or more
individuals who are named in the registration as joint tenants may be
voted in person or by proxy signed by any one or more of such
individuals if either (i) no other such individual or his legal
representative is present and claims the right to participate in the
voting of such shares or prior to the vote filed with the Secretary of
the corporation a contrary written voting authorization or direction
or written denial of authority of the individual present or signing
the proxy proposed to be voted or (ii) all such other individuals are
deceased and the Secretary of the corporation has no actual knowledge
that the survivor has been adjudicated not to be the successor to the
interests of those deceased.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. The business and affairs of the
corporation shall be managed by its Board of Directors. The number of directors
of the corporation shall be as provided in Section 0.03. The directors shall be
divided into three classes as nearly equal in number as possible, with the
- 5 -
<PAGE> 11
term of the directors of the first class to expire at the first annual meeting
of shareholders after their election, that of the second class to expire
at the second annual meeting after their election, and that of the third
class to expire at the third annual meeting after their election. At each annual
meeting, the number of directors equal to the number of the class whose term
expires at the time of such meeting shall be elected to hold office until the
third succeeding annual meeting. The number of directors may be increased or
decreased from time to time by amendment to this Section adopted by the
shareholders or the Board of Directors, provided that the number of directors of
the respective classes shall be as nearly equal as possible, and no decrease in
the number of directors shall have the effect of shortening the term of an
incumbent director.
3.02. Tenure and Qualifications. Each director shall hold office
until the annual meeting of shareholders at which the term of office of
directors of his class expires and until his successor shall have been elected,
or until his prior death, resignation or removal. A director may be removed from
office by affirmative vote of a majority of the outstanding shares entitled to
vote for the election of such director, taken at a meeting of shareholders
called for that purpose. A director may resign at any time by filing his written
resignation with the Secretary of the corporation. Directors need not be
residents of the State of Wisconsin or shareholders of the corporation.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after
the annual meeting of shareholders, and each adjourned session thereof. The
place of such regular meet ing shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Direc tors may provide, by
resolution, the time and place, either within or without the State of Wisconsin,
for the holding of additional regular meetings without other notice than such
resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman, the President,
Secretary or any two directors. The President or Secretary calling any special
meeting of the Board of Directors may fix any place, either within or without
the State of Wisconsin, as the place for holding any special meeting of the
Board of Directors called by them and if no other place is fixed the place of
meeting shall be the principal business office of the corporation in the State
of Wisconsin.
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3.05. Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03) shall be
given by written notice delivered person ally or mailed or given by telegram to
each director at his busi ness address or at such other address as such director
shall have designated in writing filed with the Secretary, in each case not less
than that number of hours prior thereto as set forth in Section 0.04. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company. Whenever any notice whatever is required to be given to
any director of the corporation under the articles of incorporation or bylaws or
any provision of law, a waiver thereof in writing, signed at any time, whether
before or after the time of meeting, by the director entitled to such notice,
shall be deemed equivalent to the giving of such notice. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and objects thereat to the transaction
of any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
3.06. Quorum. Except as otherwise provided by law or by the
articles of incorporation or these bylaws, a majority of the number of directors
as provided in Section 0.03 shall con stitute a quorum for the transaction of
business at any meeting of the Board of Directors, but a majority of the
directors present (though less than such quorum) may adjourn the meeting from
time to time without further notice.
3.07. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by law or by the
articles of incorpor ation or these bylaws.
3.08. Conduct of Meetings. The Chairman of the Board, if there be
one and he is present, and in his absence, the President, and in his absence,
the Executive Vice President, if there be one and he is present, or in his
absence, a Vice President in the order provided under Section 4.08, and in their
absence, any director chosen by the directors present, shall call meetings of
the Board of Directors to order and shall act as chairman of the meeting. The
Secretary of the corporation shall act as secretary of all meetings of the Board
of Directors, but in the absence of the Secretary, the presiding officer may
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appoint any Assistant Secretary or any director or other person present to act
as secretary of the meeting.
3.09. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of the directors then in office, though less than a quorum of the Board
of Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the shareholders, the share holders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.
3.10. Compensation. The Board of Directors, by affirmative vote
of a majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for ser vices to the corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers and employees
and to their estates, families, dependents or beneficiaries on account of prior
services rendered by such directors, officers and employees to the corporation.
3.11. Presumption of Assent. A director of the cor poration who
is present at a meeting of the Board of Directors or a committee thereof of
which he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written dis
sent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
3.12. Committees. The Board of Directors by resolu tion adopted
by the affirmative vote of a majority of the number of directors determined as
provided in Section 0.03 may designate one or more committees, each committee to
consist of three or more directors elected by the Board of Directors, which to
the extent provided in said resolution as initially adopted, and as thereafter
supplemented or amended by further resolution adopted by a like vote, shall have
and may exercise, when the Board of Directors is not in session, the powers of
the Board of Directors
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in the management of the business and affairs of the corporation, except action
in respect to dividends to shareholders, election of the principal officers
or the filling of vacancies in the Board of Directors or committees created
pursuant to this sec tion. The Board of Directors may elect one or more
of its mem bers as alternate members of any such committee who may take the
place of any absent member or members at any meeting of such committee, upon
request by the President or upon request by the chairman of such meeting. Each
such committee shall fix its own rules governing the conduct of its activities
and shall make such reports to the Board of Directors of its activities as the
Board of Directors may request.
3.13. Meetings By Telephone or Other Communication Technology.
(a) Any or all directors may participate in a regular or special
meeting or in a committee meeting of the Board of Directors by, or
conduct the meeting through the use of, telephone or any other means
of communication by which either: (i) all participating directors may
simultaneously hear each other during the meeting or (ii) all
communication during the meeting is immediately transmitted to each
participating director, and each participating director is able to
immediately send messages to all other participating directors.
(b) If a meeting will be conducted through the use of any means
described in paragraph (a), all participating directors shall be
informed that a meeting is taking place at which official business may
be transacted. A director participating in a meeting by any means
described in paragraph (a) is deemed to be present in person at the
meeting.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corpora tion shall be
a Chairman of the Board (if one is designated), a President, one or more Vice
Presidents (the number and designations to be determined by the Board of
Directors), a Secretary, and a Treasurer (or Chief Financial Officer), each of
whom shall be elected by the Board of Directors. The Board of Directors may
designate one of the Vice Presidents as the Executive Vice President; and in
that event all references herein to Vice President(s) include the Executive Vice
President unless the context otherwise requires. Such other officers and
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assistant officers as may be deemed necessary may be elected or appointed by
the Board of Directors. Any two or more offices may be held by the same person,
except the offices of President and Secretary and the offices of President
and Vice President.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected or until his prior death, resignation or removal.
4.03. Removal. Any officer or agent may be removed by the Board
of Directors whenever in its judgment the best inter ests of the corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment shall
not of itself create contract rights.
4.04. Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be filled by
the Board of Directors for the unexpired portion of the term.
4.05. Chairman of the Board. The Board of Directors may elect one
of its members the Chairman of the Board. If designated by the Board, the
Chairman of the Board shall be the chief executive officer of the corporation
and, subject to the control of the Board of Directors, shall in general
supervise and control all of the business and affairs of the corporation. The
Chairman of the Board shall preside at all meetings of the share holders and
Board of Directors at which he is present. He shall be ex officio a member of
all standing committees and shall be chairman of such committees as determined
by the Board of Directors. He shall have such other powers and duties as may
from time to time be prescribed by the bylaws or by resolution of the Board of
Directors, and in the event he is designated the chief executive officer shall
also have all powers specified for the President as set forth in Section 4.06
below.
4.06. President. If the Chairman of the Board is not so
designated, the President shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
corporation. He shall, in the absence of the Chairman of the Board, preside at
all meetings of
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the shareholders and Board of Directors. He shall have authority, subject
to such rules as may be prescribed by the Board of Directors, to appoint
such agents and employees of the corporation as he shall deem necessary, to
prescribe their duties, powers and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discre tion of the
President. He shall have authority to sign, execute and acknowledge, on behalf
of the corporation, all deeds, mort gages, bonds, stock certificates, contracts,
leases, reports and all other documents or instruments necessary or proper to be
executed in the course of the corporation's regular business, or which shall be
authorized by resolution of the Board of Direc tors; and, except as otherwise
provided by law or the Board of Directors, he may authorize any Vice President
or other officer or agent of the corporation to sign, execute and acknowledge
such documents or instruments in his place and stead. In general, he shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time.
4.07. Executive Vice President. The Executive Vice President, if
one be designated, shall assist the Chairman of the Board and President in the
discharge of supervisory, managerial and executive duties and functions. In the
absence of the President or in the event of his death, inability or refusal to
act, the Executive Vice President shall perform the duties of the President and
when so acting shall have all the powers and duties of the President. He shall
perform such other duties as from time to time may be assigned to him by the
Board of Directors or the President.
4.08. Vice Presidents. In the absence of the Chairman of the
Board, the President and the Executive Vice President or in the event of their
death, inability or refusal to act, or in the event for any reason it shall be
impracticable for them to act personally, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the Secretary
or Assistant Secretary, certificates for shares of the corporation; and shall
perform such other duties and have such authority as from time to time may be
delegated or assigned to him by the President or by the Board of Directors. The
execution of any instrument of the corporation by any Vice President shall be
conclusive evidence, as to third parties, of his authority to act in the stead
of the President. Vice Presidents may be designated
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as the Vice President of a specified division, department or portion of the
corporation's business.
4.09. Secretary. The Secretary shall: (a) keep the minutes of the
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) keep or arrange for
the keeping of a regis ter of the post office address of each shareholder which
shall be furnished to the Secretary by such shareholder; (e) sign with the
President, or a Vice President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him by the Chairman, the President or by
the Board of Directors.
4.10. Treasurer. The Treasurer (or Chief Financial Officer)
shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; (b) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of Section
5.04; and (c) in general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other authority as from
time to time may be delegated or assigned to him by the Chairman, the President
or by the Board of Directors. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine.
4.11. Assistant Secretaries and Assistant Treasurers. There shall
be such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time autho rize. The Assistant Secretaries may sign
with the President or a Vice President certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respec tively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such
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sureties as the Board of Directors shall determine. The Assistant Secretaries
and Assistant Treasurers, in general, shall perform such duties and have such
authority as shall from time to time be delegated or assigned to them by the
Secretary or the Treasurer, respectively, or by the Chairman, the President or
the Board of Directors.
4.12. Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint any person to act as assistant to any
officer, or as agent for the corporation in his stead, or to perform the duties
of such officer whenever for any reason it is impracticable for such officer to
act personally, and such assistant or acting officer or other agent so appointed
by the Board of Directors shall have the power to perform all the duties of the
office to which he is so appointed to be assistant, or as to which he is so
appointed to act, except as such power may be otherwise defined or restricted by
the Board of Directors.
4.13. Salaries. The salaries of the principal offi cers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS
5.01. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any con tract or execute or deliver
any instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. No contract or
other trans action between the corporation and one or more of its directors or
any other corporation, firm, association, or entity in which one or more of its
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if (1)
the fact of such relationship or inter est is disclosed or known to the Board of
Directors or committee which authorizes, approves or ratifies the contract or
trans action by a vote or consent sufficient for the purpose without counting
the votes or consents of such interested directors; or (2) the fact of such
relationship or interest is disclosed or known to the shareholders entitled to
vote and they authorize,
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approve or ratify such contract or transaction by vote or written consent;
or (3) the contract or transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof
which authorizes, approves or ratifies such contract or transactions.
5.02. Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such indebtedness
shall be issued in its name unless authorized by or under the authority of a
resolution of the Board of Direc tors. Such authorization may be general or
confined to specific instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer(s), employee(s) or
agent(s) of the corpo ration and in such manner as shall from time to time be
deter mined by or under the authority of a resolution of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as may be selected by or
under the authority of a resolution of the Board of Directors.
5.05. Voting of Securities Owned by This Corporation. Subject
always to the specific directions of the Board of Direc tors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corpora tion by the President if he be present, or in his absence by any Vice
President of this corporation who may be present, and (b) whenever, in the
judgment of the President, or in his absence, of any Vice President it is
desirable for this corporation to exe cute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this corporation, such proxy or consent shall be executed in the name of this
corporation by the President or one of the Vice Presi dents of this corporation,
without necessity of any authorization by the Board of Directors, affixation of
corporate seal or coun tersignature or attestation by another officer. Any
person or persons designated in the manner above stated as the proxy or proxies
of this corporation shall have full right, power and authority to vote the
shares or other securities issued by such other corporation and owned by this
corporation the same as such shares or other securities might be voted by this
corporation.
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ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01. Certificates for Shares. Certificates repre senting shares
of the corporation shall be in such form, consis tent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed by the
Chairman, the President or a Vice President and by the Secretary or an Assistant
Secretary. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except as provided
in Section 6.06.
6.02. Facsimile Signatures and Seal. The seal of the corporation,
if the corporation has elected to have a seal, on any certificates for shares
may be a facsimile. The signatures of the Chairman, the President or Vice
President and the Secretary or Assistant Secretary upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent,
or a registrar, other than the corporation itself or an employee of the
corporation.
6.03. Signature by Former Officers. In case any offi cer, who has
signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the corporation with the same effect as if he were such
officer at the date of its issue.
6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corpor ation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications and other wise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
corporation with a request to register for transfer, the corporation shall not
be liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the corporation had no duty to inquire into
adverse claims or has discharged any such duty. The corporation may require
reasonable assurance that said endorsements are genuine and effective and
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compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a con spicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner
claims that his certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corpora tion has notice that such shares have been acquired
by a bona fide purchaser, and (b) files with the corporation a sufficient
indemnity bond, or affidavit and indemnity agreement, and (c) satisfies such
other reasonable requirements as may be prescribed by or under the authority of
the Board of Directors.
6.07. Consideration for Shares. The shares of the corporation may
be issued for such consideration as shall be fixed from time to time by the
Board of Directors, provided that any shares having a par value shall not be
issued for a consider ation less than the par value thereof. The consideration
to be paid for shares may be paid in whole or in part, in money, in other
property, tangible or intangible, or in labor or services actually performed for
the corporation. When payment of the consideration for which shares are to be
issued shall have been received by the corporation, such shares shall be deemed
to be fully paid and nonassessable by the corporation. No certificate shall be
issued for any share until such share is fully paid.
6.08. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the corporation.
ARTICLE VII. WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of the Wisconsin Business Corporation Law or under the provisions of
the articles of incorporation or bylaws a waiver thereof in writing signed at
any time, whether before or after the time of the meeting, by the person or
persons entitled to such notice shall be deemed equivalent to the giving of such
notice. Such waiver by a shareholder in respect of any matter of
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which notice is required under any provision of the Wisconsin Business
Corporation Law shall contain the same information as would have been required
to be included in such notice under any applicable provisions of said Law,
except that the time and place of meeting need not be stated.
ARTICLE VIII. UNANIMOUS CONSENT
WITHOUT A MEETING
Any action required by the articles of incorporation or bylaws or
any provision of the Wisconsin Business Corporation Law to be taken at a meeting
or any other action which may be taken at a meeting may be taken without a
meeting if a consent in writing setting forth the action so taken shall be
signed by all of the shareholders, directors or members of a committee thereof
entitled to vote with respect to the subject matter thereof and such consent
shall have the same force and effect as a unanimous vote.
ARTICLE IX. INDEMNIFICATION
9.01. Indemnification for Successful Defense. Within 20 days
after receipt of a written request pursuant to Section 9.03, the corporation
shall indemnify a director or officer, to the extent he or she has been
successful on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the director or officer was a
party because he or she is a director or officer of the corporation.
9.02. Other Indemnification.
(a) In cases not included under Section 9.01, the cor poration
shall indemnify a director or officer against all liabilities and
expenses incurred by the director or officer in a proceeding to which
the director or officer was a party because he or she is a director or
officer of the corpora tion, unless liability was incurred because the
director or officer breached or failed to perform a duty he or she
owes to the corporation and the breach or failure to perform
constitutes any of the following:
(1) A willful failure to deal fairly with the corporation or
its shareholders in connection with a
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matter in which the director or officer has a material conflict
of interest.
(2) A violation of criminal law, unless the director or
officer had reasonable cause to believe his or her conduct was
lawful or no reasonable cause to believe his or her conduct was
unlawful.
(3) A transaction from which the director or officer derived
an improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is required under this
Section shall be made pursuant to Section 9.05.
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, does not,
by itself, create a presumption that indemnification of the director or
officer is not required under this Section.
9.03. Written Request. A director or officer who seeks
indemnification under Sections 9.01 or 9.02 shall make a written request to the
corporation.
9.04. Nonduplication. The corporation shall not indemnify a
director or officer under Sections 9.01 or 9.02 if the director or officer has
previously received indemnification or allowance of expenses from any person,
including the corporation, in connection with the same proceeding. However, the
director or officer has no duty to look to any other person for indemnification.
9.05. Determination of Right to Indemnification.
(a) Unless otherwise provided by the Articles of Incorporation or by
written agreement between the director or officer and the corporation, the
director or officer seeking indemnification under Section 9.02 shall select
one of the following means for determining his or her right to
indemnification:
(1) By a majority vote of a quorum of the board of directors
consisting of directors not at the time parties to the same or related
proceedings. If a quorum of disinterested directors cannot be
obtained, by majority vote of a committee duly appointed by the
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board of directors and consisting solely of 2 or more directors
not at the time parties to the same or related proceedings.
Directors who are parties to the same or related proceedings may
participate in the designation of members of the committee.
(2) By independent legal counsel selected by a quorum of the
board of directors or its committee in the manner prescribed in
sub. (1) or, if unable to obtain such a quorum or committee, by a
majority vote of the full board of directors, including directors
who are parties to the same or related proceedings.
(3) By a panel of 3 arbitrators consisting of one arbitrator
selected by those directors entitled under sub. (2) to select
independent legal counsel, one arbi trator selected by the
director or officer seeking indemnification and one arbitrator
selected by the 2 arbitrators previously selected.
(4) By an affirmative vote of the majority of shares
represented at a meeting of shareholders at which a quorum is
present. Shares owned by, or voted under the control of, persons
who are at the time parties to the same or related proceedings,
whether as plaintiffs or defendants or in any other capacity, may
not be voted in making the determination.
(5) By a court under Section 9.08.
(6) By any other method provided for in any addi tional
right to indemnification permitted under Section 9.07.
(b) In any determination under (a), the burden of proof is on the
corporation to prove by clear and convincing evidence that
indemnification under Section 9.02 should not be allowed.
(c) A written determination as to a director's or officer's
indemnification under Section 9.02 shall be submitted to both the
corporation and the director or officer within 60 days of the
selection made under (a).
(d) If it is determined that indemnification is required under
Section 9.02, the corporation shall pay all liabilities and expenses
not prohibited by Section 9.04 within 10 days after receipt of the
written determination under (c). The corporation shall also pay all
expenses
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incurred by the director or officer in the determination
process under (a).
9.06. Advance Expenses. Within 10 days after receipt of a written
request by a director or officer who is a party to a proceeding, the corporation
shall pay or reimburse his or her reasonable expenses as incurred if the
director or officer pro vides the corporation with all of the following:
(1) A written affirmation of his or her good faith belief
that he or she has not breached or failed to perform his or her
duties to the corporation.
(2) A written undertaking, executed personally or on his or
her behalf, to repay the allowance to the extent that it is
ultimately determined under Section 9.05 that indemnification
under Section 9.02 is not required and that indemnification is
not ordered by a court under Section 9.08(b)(2). The undertaking
under this subsection shall be an unlimited general obligation of
the director or officer and may be accepted without reference to
his or her ability to repay the allowance. The undertaking may be
secured or unsecured.
9.07. Nonexclusivity.
(a) Except as provided in (b), Sections 9.01, 9.02 and 9.06
do not preclude any additional right to indemnification or
allowance of expenses that a director or officer may have under
any of the following:
(1) The articles of incorporation.
(2) A written agreement between the director or officer and
the corporation.
(3) A resolution of the board of directors.
(4) A resolution, after notice, adopted by a majority vote
of all of the corporation's voting shares then issued and
outstanding.
(b) Regardless of the existence of an additional right under (a),
the corporation shall not indemnify a director or officer, or permit a
director or officer to retain any allowance of expenses unless it is
determined by or on behalf of the corporation that the director or
officer did
- 20 -
<PAGE> 26
not breach or fail to perform a duty he or she owes to the corporation
which constitutes conduct under Section 9.02(a)(1), (2), (3) or (4). A
director or officer who is a party to the same or related proceeding
for which indemnification or an allowance of expenses is sought may
not participate in a determination under this subsection.
(c) Sections 9.01 to 9.12 do not affect the corpora tion's power
to pay or reimburse expenses incurred by a director or officer in any
of the following circumstances.
(1) As a witness in a proceeding to which he or she is not a
party.
(2) As a plaintiff or petitioner in a proceeding because he
or she is or was an employee, agent, director or officer of the
corporation.
9.08. Court-Ordered Indemnification.
(a) Except as provided otherwise by written agreement between the
director or officer and the corporation, a director or officer who is
a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent
jurisdiction. Application may be made for an initial determination by
the court under Section 9.05(a)(5) or for review by the court of an
adverse determination under Section 9.05(a) (1), (2), (3), (4) or (6).
After receipt of an application, the court shall give any notice it
considers necessary.
(b) The court shall order indemnification if it deter mines any
of the following:
(1) That the director or officer is entitled to
indemnification under Sections 9.01 or 9.02.
(2) That the director or officer is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, regardless of whether indemnification is required
under Section 9.02.
(c) If the court determines under (b) that the director or
officer is entitled to indemnification, the corporation shall pay the
director's or officer's expenses incurred to obtain the court-ordered
indemnification.
9.09. Indemnification of Employees or Agents. The corporation may
indemnify and allow reasonable expenses of an
- 21 -
<PAGE> 27
employee or agent who is not a director or officer to the extent provided by
the Articles of Incorporation or Bylaws, by general or specific action of
the board of directors or by contract.
9.10. Insurance. The corporation may purchase and maintain
insurance on behalf of an individual who is an employee, agent, director or
officer of the corporation against liability asserted against or incurred by the
individual in his or her capacity as an employee, agent, director or officer,
regardless of whether the corporation is required or authorized to indemnify or
allow expenses to the individual against the same liability under Sections 9.01,
9.02, 9.06 and 9.09.
9.11. Liberal Construction. In order for the corpora tion to
obtain and retain qualified directors and officers, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors and officers and, accordingly, the indemnification above provided for
shall be granted in all cases unless to do so would clearly contravene
applicable law, controlling precedent or public policy.
9.12. Definitions Applicable to This Article.
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust
or other enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the corporation.
(b) "Corporation" means this corporation and any domestic or
foreign predecessor of this corporation where the predecessor
corporation's existence ceased upon the consummation of a merger or
other transaction.
(c) "Director or Officer" means any of the following:
(1) A natural person who is or was a director or officer of
this corporation.
(2) A natural person who, while a director or officer of
this corporation, is or was serving at the corporation's request
as a director, officer, partner, trustee, member of any governing
or decision-making committee, employee or agent of another
corporation or foreign corporation, partnership, joint venture,
trust or other enterprise.
- 22 -
<PAGE> 28
(3) A natural person who, while a director or officer of
this corporation, is or was serving an employe benefit plan
because his or her duties to the corporation also impose duties
on, or otherwise involve services by, the person to the plan or
to participants or beneficiaries of the plan.
(4) Unless the context requires otherwise, the estate or
personal representative of a director or officer.
For purposes of this Article, it shall be conclusively presumed that any
Director or Officer serving as a director, officer, partner, trustee,
member of any governing or decision-making committee, employee or agent of an
Affiliate shall be so serving at the request of the corporation.
(d) "Expenses" include fees, costs, charges, disburse ments,
attorney fees and other expenses incurred in connec tion with a
proceeding.
(e) "Liability" includes the obligation to pay a judg ment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employe benefit plan, and
reasonable expenses.
(f) "Party" includes a natural person who was or is, or who is
threatened to be made, a named defendant or respondent in a
proceeding.
(g) "Proceeding" means any threatened, pending or com pleted
civil, criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal, which
involves foreign, federal, state or local law and which is brought by
or in the right of the corporation or by any other person.
ARTICLE X. SEAL
The Board of Directors may provide a corporate seal which shall
be circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
- 23 -
<PAGE> 29
ARTICLE XI. AMENDMENTS
11.01. By Shareholders. These bylaws may be altered, amended or
repealed and new bylaws may be adopted by the share holders by affirmative vote
of not less than a majority of the shares present or represented at an annual or
special meeting of the shareholders at which a quorum is in attendance.
11.02. By Directors. These bylaws may also be altered, amended or
repealed and new bylaws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the shareholders shall be
amended or repealed by the Board of Directors if the bylaw so adopted so
provides.
11.03. Implied Amendments. Any action taken or autho rized by the
shareholders or by the Board of Directors, which would be inconsistent with the
bylaws then in effect but is taken or authorized by affirmative vote of not less
than the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be given
the same effect as though the bylaws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
ARTICLE XII. FISCAL YEAR
The fiscal year of the corporation shall end on the date set
forth in Section 0.05.
- 24 -
<PAGE> 1
EXHIBIT 10.3(b)
TERM NOTE
$100,000.00 Neenah, Wisconsin
July 22, 1998
FOR VALUE RECEIVED, JOSEPH J. BAKSHA, an Illinois resident individual (the
"Borrower"), hereby promises to pay to the order of OUTLOOK GROUP CORP. ("OGC")
the principal sum of ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($100,000), as set
forth herein.
The outstanding unpaid principal balance of this Note shall be paid in a
single installment on July 22, 2003, unless accelerated as provided herein, on
which date the outstanding unpaid principal balance of this Note shall be paid
in full.
The unpaid principal balance of this Note shall bear interest at the rate
of eight per cent (8%) per annum. Interest accrued through the anniversary date
hereof in each year on each such anniversary date, commencing on July 22, 1999
and continuing thereafter until the principal is paid in full.
Notwithstanding the foregoing, the outstanding principal balance and any
accrued interest, shall be due and payable: upon the last day of Borrower's
employment in the event the Borrower voluntarily terminates his employment with
OGC; and 60 days after any termination of the Borrower's employment by OGC for
cause.
In the event that any amount of the principal of, or interest on, this Note
is not paid on the date when due (whether at stated maturity, by acceleration or
otherwise), in addition to the rate of interest otherwise payable with respect
to this Note and to the extent permitted by Law, the entire principal amount
outstanding under this Note shall bear interest at the applicable rate set forth
above plus 3% until all such overdue amounts have been paid in full; without
limiting the generality of the foregoing, all overdue interest on this Note
shall be payable ON DEMAND.
All interest and other amounts payable under this Note shall be computed
for the actual number of days elapsed on the basis of a 360-day year.
<PAGE> 2
Payments of principal, interest and other amounts due hereunder are to be
made in lawful money of the United States of America to OGC, 1180 American
Drive, Neenah, Wisconsin, or at such other place as the holder shall designate
in writing to the Borrower.
Presentment, demand, notice of dishonor and protest are hereby waived.
Borrower hereby agrees (to the extent permitted by Law) to pay all reasonable
fees and expenses incurred by OGC or any subsequent holder, including the
reasonable fees of counsel, in connection with the protection and enforcement of
the rights of OGC or an subsequent holder under this Note, including without
limitation the collection of any amounts due under this Note and the protection
and enforcement of such rights in any bankruptcy, reorganization or insolvency
proceeding involving the Borrower.
This Note constitutes the Note contemplated by the Employment Agreement
dated June 1, 1997 between the Borrower and OGC. Baksha hereby grants OGC a
security interest in, and this Note is secured by a pledge of, the number of
shares of OGC common stock, the market value of which approximates the principal
amount of this Note, which will be delivered by the Borrower to OGC, together
with a confirmation of the number of shares pledged, within ten business days of
the date hereof.
/s/ Joseph J. Baksha (SEAL)
JOSEPH J. BAKSHA
- 2 -
<PAGE> 1
Exhibit 10.8(d)
OGC 1998 10-K
[WILLOW CREEK PRESS LETTERHEAD]
04 June 1998
To: Joe Baksha of Outlook Group
From: Nancy Ravanelli
Re: Discount on Outstanding Note
Hi Joe...
This fax is to confirm your earlier conversation with Tom.
Outlook Group agrees to accept a lump sum payment of $730,000 plus all accrued
unpaid interest as settlement in full for Willow Creek's outstanding note
balance of $805,000.
Willow Creek agrees to pay this balance plus interest on or before July 6, 1998.
Please fax back your agreement to this offer. If you have any questions, please
give me or Tom a call.
Thank you.
/s/
* * *
[accepted orally by Outlook Group]
<PAGE> 1
EXHIBIT 21.1
Fiscal 1998 10-K
OUTLOOK GROUP CORP.
List of Subsidiaries*
Outlook Foods, Inc., a Wisconsin corporation
Outlook Label Systems, Inc., a Wisconsin corporation
Outlook Packaging, Inc., a Wisconsin corporation
(All are wholly-owned by Outlook Group Corp.)
- ------------------
* Represents all companies at to which Outlook Group Corp.
holds 50% or more of the outstanding securities.
<PAGE> 1
[PricewaterhouseCoopers LLP letterhead]
EXHIBIT 23.1
OGC 1998 10-K
Consent of Independent Accountants
We consent to incorporation by reference in the registration statements of
Outlook Group Corp. on Forms S-8 (Nos. 33-44491 and 33-44075) of our reports
dated July 20, 1998 on our audits of the consolidated financial statements and
financial statement schedule of Outlook Group Corp. and Subsidiaries as of May
31, 1998 and 1997, and for the years ended May 31, 1998, 1997, and 1996, which
reports are included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
-----------------------------------
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
August 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IDENTIFY
SPECIFIC FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH IDENTIFY FILING
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 2,825
<SECURITIES> 0
<RECEIVABLES> 11,427
<ALLOWANCES> 1,576
<INVENTORY> 5,707
<CURRENT-ASSETS> 23,425
<PP&E> 48,460
<DEPRECIATION> 23,293
<TOTAL-ASSETS> 53,457
<CURRENT-LIABILITIES> 9,240
<BONDS> 0
<COMMON> 51
0
0
<OTHER-SE> 33,332
<TOTAL-LIABILITY-AND-EQUITY> 53,457
<SALES> 66,951
<TOTAL-REVENUES> 66,951
<CGS> 54,545
<TOTAL-COSTS> 64,999
<OTHER-EXPENSES> (1,409)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,968
<INCOME-PRETAX> 1,393
<INCOME-TAX> 640
<INCOME-CONTINUING> 753
<DISCONTINUED> (920)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
