<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 26, 2000
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.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1278569
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 American Drive
Neenah, Wisconsin 54956
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(Address of principal executive offices, including zip code)
(920) 722-2333
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
3,980,195 shares of common stock, $.01 par value, were outstanding at April 7,
2000.
<PAGE> 2
OUTLOOK GROUP CORP. AND SUBSIDIARIES
-------------------------------------
INDEX
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<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION:
- -------------------------------
<S> <C>
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 2
As of February 26, 2000 and May 31, 1999 (Unaudited)
Condensed Consolidated Statements of Operations 3
For the three months and nine months ended February 26, 2000 and
February 26, 1999 (Unaudited)
Condensed Consolidated Statements of Cash Flows 4
For the nine months ended February 26, 2000 and
February 26, 1999 (Unaudited)
Notes to Condensed Consolidated Financial Statements 5
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk 10
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements included herein have been
included by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. This information is unaudited but includes all
adjustments (consisting only of normal recurring accruals) which, in the
opinion of Company management, are necessary for a fair presentation of the
Company's financial position and results of operations for such periods.
The results of operations for interim periods are not necessarily
indicative of the results of operations for the entire year. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Company's 1999 Form 10-K. The May 31, 1999 Condensed Consolidated Balance
Sheet Data was derived from audited financial statements, but does not
include all disclosures required by Generally Accepted Accounting
Principles.
1
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
February 26, May 31,
ASSETS 2000 1999
================================================================= --------------------- ---------------------
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 611 $ 1,940
Accounts receivable , less allowance for 11,411 10,713
doubtful accounts of $1,299 and $771, respectively
Notes receivable-current portion 2,640 2,805
Inventories 6,760 4,899
Deferred income taxes 203 203
Income taxes refundable 1,168 876
Other 1,093 738
--------------------- ---------------------
Total current assets 23,886 22,174
Notes receivable-long term, less allowance for 1,354 1,633
doubtful accounts of $477 in both years
Property, plant, and equipment
Land 543 589
Building and improvements 11,372 11,290
Machinery and equipment 38,401 40,973
--------------------- ---------------------
50,316 52,852
Less: accumulated depreciation (26,235) (26,488)
--------------------- ---------------------
24,081 26,364
Other assets 1,491 1,596
--------------------- ---------------------
Total assets $ 50,812 $ 51,767
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
=================================================================
Current Liabilities
Current maturities of long-term debt $ 3,836 $ 2,308
Accounts payable 3,774 3,222
Book overdraft - 337
Accrued liabilities:
Salaries and wages 2,013 1,509
Other 810 790
--------------------- ---------------------
Total current liabilities 10,433 8,166
Long-term debt, less current maturities 2,800 4,753
Deferred income taxes 4,170 4,170
Shareholders' Equity
Cumulative preferred stock - -
Common stock (4,075,295 and 5,117,132 shares, respectively) 51 51
Additional paid-in capital 18,494 18,494
Retained earnings 22,058 20,682
Treasury stock (1,041,837 and 450,000 shares, respectively) (7,094) (4,449)
Officer loans (100) (100)
--------------------- ---------------------
Total shareholders' equity 33,409 34,678
--------------------- ---------------------
Total liabilities and shareholders' equity $ 50,812 $ 51,767
===================== =====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
February 26, 2000 February 26, 1999 February 26, 2000 February 26, 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 17,784 $ 14,871 $ 51,786 $ 49,651
Cost of goods sold 14,299 12,646 40,968 40,830
-------------- -------------- --------------- --------------
Gross profit 3,485 2,225 10,818 8,821
Selling, general, and
administrative expenses 2,916 2,200 8,533 7,472
-------------- -------------- --------------- --------------
Operating profit 569 25 2,285 1,349
Other income (expense):
Interest expense (189) (143) (419) (466)
Interest and other income 113 172 391 529
Earnings from operations -------------- --------------
before income taxes 493 54 2,257 1,412
Income tax expense 190 21 882 548
-------------- --------------
Net earnings $ 303 $ 33 $ 1,375 $ 864
============== ============== =============== ==============
Net earnings per common share - Basic $ 0.07 $ 0.01 $ 0.31 $ 0.19
Net earnings per common share - Diluted $ 0.07 $ 0.01 $ 0.31 $ 0.19
Weighted average
number of shares outstanding-Basic 4,172,825 4,667,132 4,422,127 4,667,132
============== ============== =============== ==============
Weighted average
number of shares outstanding-Diluted 4,190,623 4,668,773 4,431,748 4,667,679
============== ============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine-Month Period Ended
February 26, 2000 February 26, 1999
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 1,375 $ 864
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,898 2,942
Gain on sale of assets (21) -
Change in assets and liabilities:
Accounts and notes receivable (254) 1,541
Inventories (1,861) (55)
Other (338) (343)
Accounts payable 552 (2,586)
Accrued liabilities 524 (391)
Income taxes refundable (292) 33
---------------- ----------------------
Net cash provided by operating activities 2,583 2,005
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 414 -
Acquisition of property, plant, and equipment (919) (2,928)
Loan to officer - (100)
---------------- ----------------------
Net cash used in investing activities (505) (3,028)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in book overdraft (337) -
Payments on long-term borrowings (1,925) (1,300)
Short-term borrowings 1,500 -
Purchase of treasury stock (2,645) -
---------------- ----------------------
Net cash used in financing activities (3,407) (1,300)
Net decrease in cash (1,329) (2,323)
Cash and cash equivalents at beginning of period 1,940 2,825
---------------- ----------------------
Cash and cash equivalents at end of period $ 611 $ 502
================ ======================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
OUTLOOK GROUP CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
February 26, 2000
1. Net Earnings Per Common Share:
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.
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
February 26, 2000 February 26, 1999 February 26, 2000 February 26, 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding - Basic 4,172,825 4,667,132 4,422,127 4,667,132
Effect of dilutive securities - stock options 17,798 1,641 9,621 547
------------ ------------- -------------- ---------------
Weighted average shares outstanding - Diluted 4,190,623 4,668,773 4,431,748 4,667,679
============ ============= ============== ===============
</TABLE>
2. Inventories:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
February 26, 2000 May 31, 1999
---------------------- ----------------
<S> <C> <C>
Raw materials $ 3,923 $ 2,305
Work in process 1,315 1,107
Finished goods 1,522 1,487
====================== ================
$ 6,760 $ 4,899
====================== ================
</TABLE>
3. Income Taxes:
The effective income tax rate used to calculate the income tax expense
for the quarters ended February 26, 2000 and February 26, 1999 is based
on the anticipated income tax rate for the entire fiscal year.
4. Loan to Officer:
In July, 1998 the Company executed a $100,000 loan to the President and
Chief Operating Officer of the Company. The term of the loan is five
years at an interest rate of 8% per annum.
5. Debt:
As of February 26, 2000 the Company had borrowings of $1,500,000 on its
revolving credit agreement.
5
<PAGE> 8
6. Accounting Periods:
The Company elected to adopt 13 week quarters beginning in fiscal 1997;
however, fiscal year-end remains May 31.
7. Segment Reporting:
The Company has three reportable segments that are strategic business
units that offer different products and services. These business units
are: Outlook Graphics, Outlook Label Systems, and Outlook Packaging.
Outlook Graphics produces custom printed products on a wide range of
media including newsprint, coated paper, and heavy board, including
paperboard packaging. Outlook Graphics also provides finishing
services, promotional contract packaging, direct mailing, and
distribution services. Outlook Label Systems manufactures items such as
coupons, pressure sensitive specialty labels, printed vinyl cards,
continuous forms, cartons, and sweepstakes and specialty game pieces.
Flexographic printing and laminating of flexible packaging films is
handled by the Outlook Packaging business unit.
The Company evaluates the performance of its reportable segments based
on the income from operations of the respective business units.
Summarized financial information for the three-month and nine-month
periods ending February 26, 2000 and February 26, 1999 are as follows:
Income Statement Data:
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
February 26, 2000 February 26, 2000
Net sales Net earnings (loss) Net sales Net earnings (loss)
--------- ------------------- --------- -------------------
<S> <C> <C> <C> <C>
Graphics $ 8,604 $ 268 Graphics $ 27,125 $ 1,308
Label Systems 5,067 528 Label Systems 13,255 1,148
Packaging 4,344 (324) Packaging 11,820 (654)
All other (231) (169) All other (414) (427)
--------- ------------------- --------- -------------------
Total $ 17,784 $ 303 Total $ 51,786 $ 1,375
Three-Month Period Ended Nine-Month Period Ended
February 26, 1999 February 26, 1999
Net sales Net earnings (loss) Net sales Net earnings (loss)
--------- ------------------- --------- -------------------
Graphics $ 8,517 $ 122 Graphics $ 27,383 $ 1,131
Label Systems 3,032 99 Label Systems 10,712 510
Packaging 3,528 (230) Packaging 12,027 (747)
All other (206) 42 All other (471) (30)
--------- ------------------- --------- -------------------
Total $ 14,871 $ 33 Total $ 49,651 $ 864
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
February 26, 2000 May 31, 1999
Total assets Total assets
------------------------ -----------------------
<S> <C> <C> <C>
Graphics $ 28,694 Graphics $ 30,312
Label Systems 7,526 Label Systems 8,032
Packaging 14,592 Packaging 13,423
------------------------ -----------------------
Total $ 50,812 Total $ 51,767
</TABLE>
6
<PAGE> 9
8. Commitments and Contingencies
The Company is a defendant in litigation filed by Barrier films
Ltd.-New York ("Barrier-NY"). This litigation, which was reported in
the Company's May 31, 1999 financial statements, alleges various causes
of action generally arising out of the acquisition of Barrier Films
Corporation from the Company by Barrier-NY. Because the complaint
presents overlapping claims, and requests multiple awards of damages of
cancellations of obligations for the same underlying facts, determining
the actual amount at issue is uncertain. However, all of the claims
made total approximately $28 million, plus elimination of payments
under Barrier-NY's promissory note to the Company, plus requests for
costs and punitive damages, without any attempt to adjust the claims
for multiple requests resulting from overlapping causes of action.
In August 1999, the Company answered the claims denying liability and
filed a counterclaim for more than $2.6 million, plus costs and other
damages. The claim is a result of Barrier-NY's failure to make payments
due the Company under the 1997 promissory note and under the Purchase
and Sale Agreement in connection with the sale of BFC. At the present
time, the litigation is at a very early state. However, the Company
believes that Barrier-NY's claims are without merit, and intends to
defend the matter, and to pursue its counterclaim, vigorously and
aggressively.
In a separate matter, Outlook Packaging, Inc., a wholly-owned
subsidiary of the Company, has commenced an action in the U.S. District
Court for the Eastern District of Wisconsin against BFC. In this suit,
which seeks monetary damages, Outlook Packaging alleges
misrepresentation, tortuous interference and breach of warranty against
BFC, based upon certain films produced by BFC for Outlook Packaging.
Discovery has not yet begun on this matter.
Because of the early stages of these claims and counterclaims, the
ultimate resolution of these matters cannot be determined. In the event
of an unanticipated adverse final judgement in this claim, the
Company's consolidated financial position and results of operations
could be materially affected.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following section presents a discussion and analysis of the Company's
results and operations during the third quarters, and first nine months, of
fiscal 2000 and 1999, and its financial condition at February 26, 2000.
Statements that are not historical facts (such as statements in the future tense
or using terms such as "believe", "expect" or "anticipate") may be
forward-looking statements that involve risks and uncertainties. The Company's
actual future results could materially differ from those discussed. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in the following sections, particularly under "General Factors."
Results of Operations
In the third quarter of fiscal 2000, net sales were $17.8 million, an increase
of 19.5% or $2.9 million from the comparable prior year period. For the year to
date period, sales were $51.8 million, an increase of 4.3% or $2.1 million. For
the nine-month period, the Label business unit had a net sales increase of $2.5
million, while the Graphics and Packaging business units each had net sales
decreases of $0.2 million. The Graphics business segment had decreases of
approximately $1.4 million in the print and specialty print market, $0.8 million
in the paperboard packaging market, and $0.6 million in the entertainment
markets. These were offset by increases of approximately $1.4 million in the
promotional contract packaging markets, $0.6 million in the collateral
management market, and $0.6 million in the direct mail markets. These changes
reflect a changing services mix, and in particular a focus on several large
mailing and promotional contract packaging projects in recent periods. Within
the Packaging business unit, declines in the produce and snack foods markets of
approximately $3.4 million were offset by approximately $3.2 million of
increases in the coffee, processed meats, and industrial markets.
The Company's gross profit margin increased 4.6% to 19.6% of net sales in the
current quarter, up from 15.0% in fiscal 1999. Year to date, gross profit
margins are 20.9% of net sales in fiscal 2000 as compared to 17.8% in fiscal
1999. The third quarter increase of approximately $1.3 million in gross profit
is the result of a more profitable product sales mix resulting from the
discontinuation of unprofitable business, the types of business on which the
Company focused, and from the Company's efforts to increase manufacturing
efficiency and productivity. During the first quarter of fiscal 2000, the
Company began a personnel development and process improvement program designed
to enhance quality, reduce costs and strengthen the Company's competitive
position. This program continued through the third quarter.
Selling, general, and administrative expense increased $716,000 to 16.4% of
sales for the quarter as compared to 14.8% in the prior year's quarter. Year to
date, selling, general and administrative expense increased $1.1 million to
16.5% of sales as compared to 15.0% last year. This increase reflects the
company's sales, marketing, and product development efforts, increases to the
bad debt reserve, and additional expenses related to the implementation of new
productivity improvement and investments in employee training programs.
As a result, the operating profit percentage increased to 3.2% of sales in the
current quarter up from .2% of net sales in fiscal 1999. Year to date operating
profit was 4.4% of sales as compared to 2.7% in fiscal 1999, generating an
increase of $936,000 over the comparable year to date period.
Interest expense increased over the prior year's quarter by $46,000 but year to
date is running lower than last year by $47,000. The increase for the quarter is
the result of increased revolver borrowings and accelerated amortization of
deferred loan costs related to early loan repayments.
Income tax expense is being accrued for the year at the rate of 38.5% although
quarter to quarter fluctuations may occur.
As a result of these factors, quarterly earnings increased to $303,000 or $0.07
per share, compared to $33,000 or $0.01 per share for the comparable period last
year. Year to date, net earnings increased $511,000 or 59.1% to $1,375,000 or
$.31 per share, compared to $864,000 or $.19 per share last year.
8
<PAGE> 11
Liquidity and Capital Resources
Operating activities provided $2.6 million of increased cash during the first
nine months of fiscal 2000. Cash from operations before depreciation and
amortization generated $4.3 million. Additional cash of $1.1 million was
generated from increases in accounts payable and accrued liabilities. Decreases
in cash provided by operating activities resulted from a $1.9 million increase
in inventory, a $0.3 million increase in accounts and notes receivable, and a
$0.6 million increase in other assets and income taxes refundable. The Company
has increased its raw materials inventory to take advantage of considerable
volume discounts allowed by vendors in anticipation of expected forthcoming
price increases.
Investing activities represent the acquisition of $0.9 million in plant and
equipment for the purpose of increasing productivity and increasing capacity of
the core business. Included in this total are equipment upgrades at each of the
respective business units as well as computer software and hardware upgrades.
Acquisitions were offset by $0.4 million of proceeds from the sale of
under-utilized equipment.
Cash generated from operating activities was used to reduce long-term borrowings
by $1.9 million and to purchase treasury stock in the amount of $2.6 million. As
of the quarter end, the company had borrowed $1.5 million on its revolving
credit agreement and was in compliance with all of its loan covenants.
As previously reported, the Company holds notes receivable and other obligations
from the purchasers of its former Barrier operations that total approximately
$2.4 million. The Company is currently in litigation to collect those amounts;
the other party is making claims against the Company, including seeking
termination of the note. The Company is also in litigation to collect another
note that totals approximately $0.7 million. Failure of the Company to collect
these amounts, or amounts due under other notes or accounts receivable in excess
of reserves would adversely affect the Company's balance sheet and results of
operations.
The Company maintains a credit facility with a bank, and at quarter end, has
$1.5 million outstanding on the revolver. The facility provides for a maximum
revolving credit commitment of $15.0 million less $3.6 million used for standby
letters of credit. Interest on the debt outstanding varies with the Company's
selection to have the debt be based upon margins over the bank determined
preference rate or an IBOR rate. The Company's actual rate is dependent upon the
Company's performance against a specific ratio as measured against a
predetermined performance chart. Long-term Company indebtedness now consists
solely of IRB obligations.
The Company anticipates capital expenditures of approximately $2.75 million in
fiscal 2000, excluding any acquisition opportunities that 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. During the first nine months of fiscal 2000, the Company made
capital expenditures of $919,000.
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 various transactions during fiscal 1998 and 1999, and may result in
additional transactions during fiscal 2000 and beyond.
Year 2000 Compliance
The Company undertook many actions intended to assure that its computer systems
and other equipment were capable of functioning in, and processing for, periods
for the Year 2000 and beyond. These actions were generally described in the
Company's report 10-Q for the quarter ended August 28, 1999. The Company
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.)
As of April 11, 2000, the Company has not experienced any material consequences
of failure of Year 2000 Compliance, either by the Company, its suppliers, and
customers. However, Year 2000 compliance has many elements and potential
consequences, some of which may not be foreseeable or may be realized in future
periods. Therefore, there can be no assurance that unforeseen circumstances
could still not arise, or that the Company will not in the future identify
equipment or systems which are not Year 2000 compliant.
9
<PAGE> 12
General Factors
Because of the project-oriented nature of the Company's business, the Company's
largest customers have historically tended to vary from year to year depending
on the number and size of the projects completed for these customers, and the
Company is dependent upon its ability to retain, and obtain new customers.
During the first nine months of fiscal 2000, 14.2% of the Company's net sales
were to 1 customer, America Online (all in the Graphics segment). The Company's
AOL projects were primarily related to promotional mailings. The timing of these
promotional mailings is determined by AOL and the volume of activities can vary
significantly from period to period. There is no assurance that the volume of
these promotional mailings will continue in the future. The Company has no
knowledge of any impact on Outlook operations expected to result from AOL's
recently announced acquisition of Time Warner.
Changes in the Company's project mix and timing of projects make predictability
of the Company's future results very difficult. Customers generally purchase the
Company's services under cancelable purchase orders rather than long-term
contracts, although exceptions sometimes occur when the Company is required to
purchase substantial inventories or special machinery to meet orders. The
Company believes that operating without long-term contracts is consistent with
industry practices, although it increases the Company's vulnerability to losses
of business and significant period-to-period changes.
The Company uses complex and specialized equipment to provide its services.
Therefore, the Company is dependent upon the functioning of such machinery, and
its ability to acquire and maintain appropriate equipment.
As do other companies, the Company has significant accounts receivable or other
amounts due from its customers or other parties. From time to time, certain of
these accounts receivable or other amounts due have become unusually large
and/or overdue, and on occasion the Company has taken significant write-offs
relating to accounts receivable. The failure of the Company's customers to pay
in full amounts due to the Company would affect future profitability. Also, see
above regarding litigation relating to the collection of certain notes
receivable.
In addition, the Company's business requires it to maintain substantial
inventories. From time to time, changes in customer projects or Company services
can render certain inventories obsolete, and from time to time the Company has
taken substantial write-offs of obsolete inventories. The need to take such
write-offs in the future may affect future profitability and depends upon
changing customer requirements and other factors beyond the Company's control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The following discussion about the Company's risk-management activities may
include forward-looking statements that involve risk and uncertainties. Actual
results could differ materially from those discussed.
The Company has financial instruments, including notes receivable and long-term
debt, which are sensitive to changes in interest rates. However, the Company
does not use any interest-rate swaps or other types of derivative financial
instruments to limit its sensitivity to changes in interest rates because of the
relatively short-term nature of its notes receivable and variability of interest
rates on certain of its long-term debt.
The Company does not believe there has been any material changes in the reported
market risks faced by the Company since the end of its most recent fiscal year,
May 31, 1999.
10
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has previously reported that it is named as a defendant in an action
captioned Barrier Films Ltd.--New York ["Barrier-NY"] versus Outlook Group
Corp., Inc. and Joseph Baksha, the U.S. District Court for the Eastern District
of New York, Civil No. 99-CV-3057 (LDW). This suit alleges various causes of
action which arise out of the acquisition of Barrier Films Corporation ("BFC")
by Barrier-NY from the Company in May 1997.
The Company has answered denying liability and has a counterclaim for more than
$2.6 million, plus costs and other damages, as a result of Barrier-NY's failure
to make payments due the Company under the 1997 promissory note and under the
Purchase and Sale Agreement in connection with the sale of BFC. The Company
believes that Barrier-NY's claims are without merit and intends to defend the
matter, and to pursue its counterclaim, vigorously and aggressively.
The litigation remains at an early stage, and discovery has begun. However, the
Company has served Barrier-NY with a motion for judgment dismissing 15 of the 19
causes of action in Barrier-NY's amended complaint and for a judgment of
liability on the Company's counterclaim. The Company has also served a motion
that whatever remains of the litigation be transferred to the Eastern District
of Wisconsin, based on improper venue in the Eastern District of New York.
Barrier-NY has not yet responded to the motions, and the court has not yet taken
action on them.
In a separate matter, Outlook Packaging, Inc., a wholly-owned subsidiary of the
Company, has commenced an action in the U.S. district Court for the Eastern
District of Wisconsin against BFC. In this suit, which seeks monetary damages,
Outlook Packaging alleges misrepresentation, tortuous interference and breach of
warranty against BFC, based upon certain films produced by BFC for Outlook
Packaging.
BFC has answered the complaint and has filed a motion requesting that the
Wisconsin case be dismissed or consolidated with the case Barrier-NY filed in
the Eastern District of New York. Outlook Packaging is challenging that request.
Discovery has not yet begun on this matter.
Other than the foregoing, in the opinion of management, the Company is not a
defendant in any legal proceedings other than routine litigation that is not
material to its business.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See attached Exhibit Index, which is
incorporated by reference herein.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
for which this report is filed.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTLOOK GROUP CORP.
--------------------
(Registrant)
<TABLE>
<CAPTION>
<S><C>
/s/ Richard C. Fischer
Dated: April 11, 2000
----------------------------------------------------
Richard C. Fischer, Chairman and Chief Executive Officer
/s/ Paul M. Drewek
------------------------------------------
Paul M.Drewek, Chief Financial Officer
</TABLE>
<PAGE> 15
OUTLOOK GROUP CORP.
(the "Company")
EXHIBIT INDEX
to
Report on Form 10-Q for Quarter ended February 26, 2000
<TABLE>
<CAPTION>
Exhibit Filed
Number Description Herewith / Incorporated by reference
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
27 Financial Data Schedule X
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> NOV-30-1999
<PERIOD-END> FEB-26-2000
<CASH> 611
<SECURITIES> 0
<RECEIVABLES> 11,411
<ALLOWANCES> 1299
<INVENTORY> 6,760
<CURRENT-ASSETS> 23,886
<PP&E> 50,316
<DEPRECIATION> 26,235
<TOTAL-ASSETS> 50,812
<CURRENT-LIABILITIES> 10,433
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 33,358
<TOTAL-LIABILITY-AND-EQUITY> 50,812
<SALES> 17,784
<TOTAL-REVENUES> 17,784
<CGS> 14,299
<TOTAL-COSTS> 17,215
<OTHER-EXPENSES> 76
<LOSS-PROVISION> 528
<INTEREST-EXPENSE> 189
<INCOME-PRETAX> 493
<INCOME-TAX> 190
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
