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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to__________
Commission file number 000-18815
OUTLOOK GROUP CORP.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1278569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 American Drive
Neenah, Wisconsin 54956
(Address of principal executive offices, including zip code)
(920) 722-2333
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
3,353,319 share of common stock $.01 par value, were outstanding at September
30, 2002.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets
As of August 31, 2002 and May 31, 2002 4
Condensed Consolidated Statements of Operations
For the three months ended August 31, 2002 and
September 1, 2001 5
Condensed Consolidated Statements of Cash Flows
For the three months ended August 31, 2002 and
September 1, 2001 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure About Market
Risk 17
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have
been included by Outlook Group Corp. and Subsidiaries ("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 2002 Form 10-K. The May 31, 2002 Condensed
Consolidated Balance Sheet Data was derived from audited financial
statements, but does not include all disclosures required by Generally
Accepted Accounting Principles.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
August 31, May 31,
ASSETS 2002 2002
- -------------------------------------------------------------- --------------- ---------------
Current Assets
Cash and cash equivalents $ 393 $ 3,021
Accounts receivable, less allowance for
doubtful accounts of $504 and $459, respectively 8,948 7,575
Notes receivable-current portion 72 85
Inventories 6,781 5,411
Deferred income taxes 847 847
Other 345 500
--------------- ---------------
Total current assets 17,386 17,439
Notes receivable long-term, less allowance for
doubtful accounts of $652 10 187
Property, plant, and equipment
Land 583 583
Building and improvements 10,088 10,088
Machinery and equipment 37,371 37,642
--------------- ---------------
48,042 48,313
Less: accumulated depreciation (28,299) (28,340)
--------------- ---------------
19,743 19,973
Other assets 2,099 1,274
--------------- ---------------
Total assets $ 39,238 $ 38,873
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,892 $ 1,977
Accrued liabilities:
Salaries and wages 1,439 1,925
Other 655 397
--------------- ---------------
Total current liabilities 3,986 4,299
Deferred income taxes 3,209 3,209
Shareholders' Equity
Cumulative preferred stock - -
Common stock (5,142,382 and 5,137,382 shares issued,
respectively) 51 51
Additional paid-in capital 18,848 18,828
Retained earnings 25,318 24,660
Treasury stock (1,789,063 shares at both dates) (11,739) (11,739)
Officers' loans (435) (435)
--------------- ---------------
Total shareholders' equity 32,043 31,365
--------------- ---------------
Total liabilities and shareholders' equity $ 39,238 $ 38,873
=============== ===============
The accompanying notes are an integral part of these financial statements.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three-Month Period Ended
August 31, 2002 September 1, 2001
--------------- -----------------
Net sales $ 16,998 $ 17,623
Cost of goods sold 13,316 14,545
-------------- --------------
Gross profit 3,682 3,078
Selling, general, and administrative expenses 2,537 2,698
Facility relocation and legal settlement expenses - 1,256
-------------- --------------
Operating profit (loss) 1,145 (876)
Other income (expense):
Interest expense - (36)
Interest and other income (86) 130
-------------- --------------
Earnings (loss) from operations before income taxes 1,059 (782)
Income tax expense (benefit) 401 (298)
-------------- --------------
Net earnings (loss) $ 658 $ (484)
============== ==============
Net earnings (loss) per common share-Basic $ 0.20 $ (0.14)
Net earnings (loss) per common share-Diluted $ 0.20 $ (0.14)
Weighted average number of shares outstanding-Basic 3,348,541 3,499,959
============== ==============
Weighted average number of shares outstanding-Diluted 3,370,910 3,529,844
============== ==============
The accompanying notes are an integral part of these financial statements.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three-Month Period Ended
August 31, 2002 September 1, 2001
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 658 $ (485)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 776 881
Provision for doubtful accounts 5 150
Loss (gain) on sale of assets 98 (24)
Change in assets and liabilities:
Accounts and notes receivable (808) (1,419)
Inventories (1,348) 468
Other 38 (230)
Accounts payable (211) 729
Accrued liabilities (307) (31)
Income taxes refundable - (286)
-------------- --------------
Net cash used in operating activities (1,099) (247)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business-net of cash acquired (1,247) -
Proceeds from sale of assets 491 2,438
Acquisition of property, plant, and equipment (793) (905)
-------------- --------------
Net cash (used in) provided by investing activities (1,549) 1,533
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings - (400)
Exercise of stock options 20 -
Purchase of treasury stock and redeemable equity - (699)
-------------- --------------
Net cash provided by (used in) financing activities 20 (1,099)
Net (decrease) increase in cash (2,628) 187
Cash and cash equivalents at beginning of period 3,021 757
-------------- --------------
Cash and cash equivalents at end of period $ 393 $ 944
============== ==============
The accompanying notes are an integral part of these financial statements.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
August 31, 2002
1. Net Earnings (Loss) Per Common Share:
Basic earnings (loss) per share are computed by dividing net earnings
(loss) by the weighted average shares outstanding during each period.
Diluted earnings (loss) per share is computed similar to basic earnings
(loss) 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.
Three-Month Period Ended
August 31, 2002 September 1, 2001
--------------- -----------------
Weighted average shares outstanding-Basic 3,348,541 3,499,959
Effect of dilutive securities - Stock options 22,369 29,885
------------- -------------
Weighted average shares outstanding - Diluted 3,370,910 3,529,844
============= =============
2. Inventories:
Inventories consist of the following (in thousands):
August 31, 2002 May 31, 2002
--------------- ---------------
Raw materials $ 3,376 $ 2,316
Work in process 1,121 697
Finished goods 2,284 2,398
--------------- ---------------
$ 6,781 $ 5,411
=============== ===============
3. Income Taxes:
The effective income tax rate used to calculate the income tax expense
for the quarters ended August 31, 2002 and September 1, 2001 is based
on the anticipated income tax rate for the entire fiscal year.
4. Reclassifications:
Certain reclassifications have been made to the financial statements of
the prior period to conform to the August 31, 2002 presentation.
5. Accounting Periods:
The Company has adopted 13-week quarters; however, fiscal year-end
remains May 31.
6. Outlook Packaging:
The Company has merged the operations of its Outlook Packaging, Inc.
Oak Creek, Wisconsin facility with its Outlook Label Systems, Inc.
facility of Neenah, Wisconsin. That merger was completed during the
second quarter of fiscal 2002. In June 2001, the Company sold its
Outlook Packaging facility and certain equipment for approximately $2.4
million. During the first quarter of fiscal 2002, the Company incurred
approximately $700,000 of costs related to the merger including
approximately $300,000 of costs associated with the facility relocation
and related severance costs, and approximately $400,000 associated with
equipment renovations and start-up costs. The Company is not
anticipating any further costs related to the merger during fiscal 2003
and beyond.
7. Segment Reporting:
The Company has two reportable segments, Graphics and Web. Each are
strategic operations that offer different products and services. The
Graphics operation produces custom printed products on a wide range of
media including newsprint, coated paper, and heavy board, including
paperboard packaging. It also provides finishing services, promotional
contract packaging, direct mailing and distribution services. The Web
operation manufactures items such as coupons, pressure sensitive
specialty labels, printed vinyl cards, continuous forms, cartons,
sweepstakes and specialty game pieces, and printed film for meat,
coffee, snack food and non-food industries. The Web operation has
flexographic, rotary letterpress, laminating and slitting capabilities.
The Company evaluates the performance of its reportable segments based
on the net income of the respective operations. Summarized financial
information for the three-month periods ending August 31, 2002 and
September 1, 2001 are as follows:
INCOME STATEMENT DATA:
Three-Month Period Ended Three-Month Period Ended
August 31, 2002 September 1, 2001
Net Earnings Net Earnings
Net Sales (Loss) Net Sales (Loss)
------------ ------------ ------------ ------------
Graphics $ 9,335 $ 250 Graphics $ 10,069 $ 325
Web 7,927 408 Web 7,716 (809)
All Other (264) - All Other (162) -
------------ ------------ ------------ ------------
Total $ 16,998 $ 658 $ 17,623 $ (484)
============ ============ ============ ============
BALANCE SHEET DATA:
August 31, May 31,
Total Assets 2002 2002
----------- -----------
Graphics $ 21,725 $ 22,091
Web 17,513 16,782
----------- -----------
Total $ 39,238 $ 38,873
=========== ===========
8. Recently Issued Accounting Standards:
In July 2001, the FASB issued FAS No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting
and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs.
This statement is effective for the Company in fiscal year 2004. This
rule is not expected to have a material effect on the Company's
financial statements.
In August 2001, the FASB issued FAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses
the financial accounting and reporting for the impairment or disposal
of long-lived assets and supersedes FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." This statement is effective for the Company in fiscal
year 2003. The Company adopted this rule on June 1, 2002, which did not
have an impact on its consolidated financial statements.
In May 2002, the FASB issued FAS No. 145, "Rescission of FAS Nos. 4, 44
and 64, Amendment of FAS 13 and Technical corrections as of April
2002." This statement rescinds FAS No. 4, "Reporting Gains and Losses
from Extinguishments of Debt," and amends FAS No. 64, "Extinguishments
of Debt Made to Satisfy Sinking-Fund Requirements." This statement also
rescinds FAS No. 44, "Accounting for Intangible Assets of Motor
Carriers." This statement amends FAS No. 13, "Accounting for Leases,"
to eliminate an inconsistency between he required accounting for
sale-leaseback transactions. This statement also amends other existing
authoritative pronouncements to make various technical corrections,
clarify meanings or describe their applicability under changed
conditions. The provisions of this statement related to FAS 13 are
effective for transactions occurring after May 15, 2002. All other
provisions of this statement are effective for the Company in 2003.
This rule is not expected to have a material effect on the Company's
financial statements.
On July 29, 2002 the FAS issued FAS No. 146, "Accounting for Exit or
Disposal Activities." FAS 146 addresses significant issues regarding
the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring
activities that are currently accounted for pursuant to the guidance
that the Emerging Issues Task Force ("EITF") has set forth in EITF
Issues No. 94-3, Liability Recognition of Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). FAS 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002. Early
application is encouraged.
9. Related Party Transactions
As previously reported, the Company has agreed to make loans to certain
officers and key employees to purchase the common stock of the Company.
Through August 31, 2002, the Company had loans totaling $435,000. The
loans bear an interest rate of 4.9% and are for five-year terms. It is
the Company's policy that all material transactions between the
Company, its officers, directors or principal shareholders, or
affiliates of any of them, shall be on terms no less favorable to the
Company than those which could have been obtained if the transactions
had been with unaffiliated third parties on an arm's length basis, and
such transactions are approved by a majority of the members of the
Audit Committee of the Board of Directors, or a majority of the
directors who are independent and not financially interested in the
transactions.
Additionally, in fiscal 2001, the Company provided some officers and
other key employees with advances on expected bonus amounts, subject to
year-end reconciliation. Because of the rapid deterioration of general
economic conditions in the second half of fiscal 2001, final bonus
amounts were substantially lower than had been expected. In some cases,
amounts advanced against fiscal 2001 bonuses were higher than actual
bonus amounts. These amounts were carried forward, and amounts have in
part, been paid by, offsetting bonus payments earned during fiscal year
2002. At August 31, 2002, $39,236 had been paid by offsetting bonus
payments; the $60,000 balance has been converted into a note payable by
the officer. If the performance criteria are not met, the remaining
notes are payable to the Company in December 2002. As a result of
legislation enacted on July 30, 2002, the Company will no longer make
loans to its officers; however, outstanding amounts at that date may
continue until paid in accordance with their terms.
10. Acquisitions
During June 2002, the Company purchased selected assets of Paragon
Direct, Inc. for $1.4 million in cash plus assumed liabilities.
Included in the assets purchased were $300,000 in property, plant and
equipment, $500,000 in cash and receivables and $200,000 in assumed
liabilities. The preliminary estimate of the excess of cost over the
fair value of the tangible net assets acquired is $700,000. Of this
excess cost $500,000 was allocated to finite lived intangible assets
with lives ranging from 4 to 10 years. The resulting amortization
expense recorded in the first quarter of fiscal 2003 was $20,000. The
remaining $200,000 was allocated to goodwill. The Company is currently
in the process of completing its valuations of the intangible assets.
The final determination of intangible asset valuations and estimated
useful lives is expected to be completed by the end of the second
quarter of fiscal 2003.
11. Goodwill and other intangibles
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("FAS") No. 141, "Business
Combinations" and No. 142, "Goodwill and Other Intangible Assets."
These statements eliminate the pooling of interest method of accounting
for business combinations and require that goodwill and certain
intangible assets not be amortized. Instead these assets will be
reviewed for impairment annually with any related losses recognized in
earnings when incurred. Any remaining intangible assets will be
amortized over their estimated useful lives.
The Company adopted the new rules on accounting for goodwill and other
intangible assets on June 1, 2002. Application of the non-amortization
provisions of FAS No. 142 resulted in an increase in net income of
approximately $19,000, or $0.01 per diluted share, for the three months
ended August 31, 2002. Under the transitional provisions of FAS No.
142, the Company is in the process of performing impairment tests on
the net goodwill and other intangible assets associated with each of
the Company's reporting units, using a valuation date of June 1, 2002.
We are unable at this time to estimate the financial statement effect
as a result of the required impairment analysis. In the event that an
impairment loss is recognized, it will be recorded as a cumulative
effect of change in accounting principle on the consolidated statements
of earnings in accordance with the transitional provisions of FAS No.
142.
The following set forth a reconciliation of net income and earnings per
share information for the three month period ended August 31, 2002 and
September 1, 2001, respectively adjusted for the non- amortization
provisions of FAS No. 142.
Three months Three months
ended ended
August 31, 2002 September 1, 2001
--------------- -----------------
Reported net earnings (loss) $ 658 $ (484)
Add: Goodwill amortization (net of income taxes
of $11) - 19
--------------- -----------------
Adjusted net earnings (loss) $ 658 $ (465)
=============== =================
Reported basic earnings (loss) per share $ .20 $ (.14)
Add: Goodwill amortization (net of income taxes
of $11) - .01
--------------- -----------------
Adjusted basic earnings per share $ .20 $ (.13)
=============== =================
Reported diluted earnings (loss) per share $ .20 $ (.14)
Add: Goodwill amortization (net of income taxes
of $11) - .01
--------------- -----------------
Adjusted diluted earnings (loss) per share $ .20 $ (.13)
=============== =================
12. Subsequent Events
The Company declared a cash dividend of $0.05 per common share
outstanding. The dividend is payable on October 16, 2002 to
shareholders of record on October 9, 2002. Based on the current number
of shares outstanding, the payment will be approximately $168,000.
ITEM 2. MANAGEMENTS'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 first quarters of fiscal 2003 and 2002, and
its financial condition at August 31, 2002. Statements that are not historical
facts, 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" involve risks and
uncertainties. The Company's actual future results could differ materially from
those discussed, due to the factors that 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 discussed in this section,
particularly in "Results of Operations," "Liquidity and Capital Resources," and
"Disclosures Concerning Liquidity and Capital Resources Including `Off-Balance
Sheet' Arrangements."
RESULTS OF OPERATIONS
The Company's net sales for the first quarter of fiscal 2003 were $17.0 million,
down 3.5% or $600,000 from fiscal 2002 first quarter net sales of $17.6 million.
The Graphics business segment had net sales for the first quarter of fiscal 2003
of $9.3 million, down 7.3% from the prior year quarter, while the Web business
segment had net sales for the first quarter of fiscal 2003 of $7.9 million, an
increase of 2.7% from the prior year quarter. The Company continues to be
impacted by the general economic slowdown experienced over the past eighteen
months. Although the Company has begun to experience slight market improvements
over the past nine months, both of the Company's business segments have been
negatively impacted by the weakened economy. The continued threat of further
terrorist attacks, anthrax mailings, the ensuing loss of general investor
confidence and a volatile stock market have further affected the markets in
which the Company operates. The Company expects that it will continue to be
affected by the national economy, but is not in a position to determine how
extensive the effects of the economic slowdown will be, whether or not it will
be negatively impacted, or for how long it may be impacted by the slowdown.
During the first quarter of fiscal 2003, the Company's remaining fulfillment
client ceased using the Company's services. Although the Company will attempt to
find other fulfillment clients, this termination eliminates a client that
represented $1.0 million in fiscal 2002 sales, and $300,000 in fiscal 2003
sales.
The Company's gross profit margin for the first quarter of fiscal 2003 increased
to 21.7%, up from 17.5% in the prior year. This represents an additional
$600,000 in gross margin dollars. Gross profit margins were impacted by
management's decision to forego some lower margin projects. In addition, gross
profit margins were directly impacted by gains achieved through the Company's
decision to reduce operating costs and the merger of the Outlook Label and
Outlook Packaging subsidiaries. The Company also benefited from its decision to
realign staffing levels to be consistent with its current and anticipated level
of business activity and to eliminate staffing for marginal projects. The
Company currently believes that it has sufficient personnel to carry on its
current and anticipated business needs, but will occasionally contract for and /
or hire temporary employees to increase the number of personnel in certain
operations, as project commitments require. The Company continues its efforts
related to continuous process improvement and is committed to providing
defect-free products and services, all of which have contributed to the overall
reduction of costs.
Selling, general and administrative expenses were 14.9% of net sales for the
first quarter of fiscal 2003, or $2.5 million. During fiscal 2002, the Company
had selling, general and administrative costs of $4.0 million; however, $1.3
million of these costs were for special charges related to the facility
relocation and legal settlement costs. Excluding the special charges in fiscal
2002, selling, general and administrative costs were 15.3% of net sales or $2.7
million. In addition, the addition to reserves was $145,000 less in this quarter
than in the first quarter of fiscal 2002. Upon further analysis of the allowance
for doubtful accounts since the time of the Company's press release for the
first quarter of fiscal 2003, only a minimal increase to the allowance was
necessary in order to be consistent with Company policy. In addition,
approximately $86,000 of the equipment impairment reserve was used to offset a
loss on the trade-in of assets made in the first quarter of fiscal 2003 in
connection with a refinancing of equipment lease terms. The Company continues to
focus on reducing its operating expenses; in particular, those that do not
contribute to increased sales or increased profit margins. The Company is
deploying additional resources into marketing strategies in an attempt to
increase the Company's sales and marketing concentrations.
The Company's operating profit for the first quarter of fiscal 2003 was $1.1
million or 6.7% of net sales. The Company had an operating loss during the first
quarter of fiscal 2002 of $900,000, which included $1.3 million of special
charges. Excluding the special charges in fiscal 2002, the Company had an
operating profit for the first quarter of fiscal 2002 of $400,000 of 2.2% of net
sales.
The Company had no interest expense during the first quarter of fiscal 2003. The
other loss reflects a loss on the trade-in of assets related to a
refinancing of equipment leases; that determination was made after the Company's
first quarter earnings press release. The lease refinancing will result in lower
lease rental payments in future months. The Company paid off its remaining
long-term debt during fiscal 2002 in conjunction with the sale of its
manufacturing facility in Oak Creek, Wisconsin. The Company does, however,
maintain a revolving credit facility. The Company did not use its revolving
credit facility during fiscal 2002 or the first quarter of fiscal 2003, but pays
an unused credit facility charge to maintain its line of credit.
The Company's effective tax rate for fiscal 2002 was 33.0%. The Company is
currently accruing income tax expense at the expected annual rate of 38.0%,
although quarter-to-quarter fluctuations may occur. The fiscal 2002 rate was
lower due to benefits realized as a result of the merger of the Company's
Outlook Packaging, Inc. and Outlook Label Systems, Inc. subsidiaries, and
certain state income tax credits.
The Company reported net earnings for the first quarter of fiscal 2003 of
$700,000 or $0.20 per diluted common share. This represents 3.9% of net sales
for the first quarter of fiscal 2003. The Company reported a net loss for the
first quarter of fiscal 2002 of $500,00 or ($0.14) per diluted common share.
Excluding the one-time charges, adjusted for taxes, the Company had earnings of
$300,000 or $0.08 per diluted share during the first quarter of fiscal 2002,
which represented 1.7% of net sales for the first quarter of fiscal 2002.
The Company adopted the new rules on accounting for goodwill and other
intangible assets on June 1, 2002. As a result, the Company is no longer
amortizing goodwill. The goodwill amortization, net of tax, for the first
quarter of fiscal 2002 was $19,000. Under this method, the Company would have
reported a net loss for the first quarter of fiscal 2002 of $500,000 or $(0.13)
per diluted common share.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities, as shown on the Condensed Consolidated
Statements of Cash Flows, was approximately $1.2 million for the first quarter
of fiscal 2003, as compared to $200,000 during the first quarter of fiscal 2002.
The Company experienced a $1.3 million increase in inventory during the first
quarter of fiscal 2003. This increase was primarily in raw materials as the
Company adjusts its inventory to meet client forecasts and production schedules.
During the first quarter of fiscal 2003, the Company increased its provision for
doubtful accounts by approximately $5,000 as compared to an increase of $150,000
during the first quarter of fiscal 2002. Depreciation and amortization for the
first quarter of fiscal 2003 was approximately $800,000 as compared to $900,000
during the first quarter of fiscal 2002.
The Company used approximately $200,000 in acquiring and upgrading existing
machinery and equipment during the first quarter of fiscal 2003. The Company
expects that it will invest approximately $3.0 million during fiscal 2003 in
capital expenditures, excluding any acquisition opportunities that become
available. The Company intends to finance these expenditures through funds
obtained from operations plus its credit facilities and possible leasing
opportunities. During the first quarter of fiscal 2003, the Company refinanced
one of its existing machinery and equipment leases to obtain a rate more
favorable to the Company. Since the initial press release for the first quarter
of fiscal 2003, reclassifications were made to reflect a loss on the trade-in of
assets related to a refinancing of equipment leases. The refinancing results in
lower lease rental payments in future months. The Company has approximately
$10.2 million in existing operating leases as of August 31, 2002; the majority
are for production related machinery and equipment. The Company does not
currently have any capital lease obligations.
Outlook Group's board of directors has determined to begin paying cash
dividends. The first dividend is payable on October 16, 2002, to shareholders of
record on October 9, 2002. The initial cash dividend of $0.05 per share would
result in a total payment of approximately $168,000 in the second quarter of
fiscal 2003. A continuation of dividends at that level in future quarter would
require similar resources in future periods.
During June 2002, the Company purchased selected assets of Paragon Direct, Inc.
for $1.4 million in cash plus assumed liabilities. The Paragon Direct business
was combined into the Company's Graphics division. Paragon Direct provides
computer-based information management services for clients in the direct
marketing industry. This acquisition opportunity was financed from operating
cash flows.
As previously reported, the Company holds a single note receivable that is
overdue. The Company has obtained a favorable judgment in excess of the value of
the note and the Company continues to pursue collection. Although the Company
has previously established a reserve, and currently believes the remaining
balance is collectible, the Company may be required to write-off the remaining
balance of the note if collection efforts prove ineffective and payments are not
received. The Company is fully reserved for this possibility and no impact on
current earnings would result if the remaining balance of the note were written
off.
The Company maintains a credit facility with a bank that provides for a maximum
revolving credit commitment of $15.0 million. Interest on the debt outstanding
can vary with the Company's selection to have the debt based upon margins over
the bank determined preference 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. The Company's failure to meet
specified performance measures could adversely affect the Company's ability to
acquire future capital to meet its needs. The Company has not used its facility
during fiscal 2002 or the first quarter of fiscal 2003; however, the Company is
subject to an unused line fee of .025% to maintain its credit facility. The
Company
currently has no amounts outstanding on its revolving credit line and is in
compliance with all of its loan covenants. The facility is currently being
renegotiated and although we cannot make assurances, we expect to renew or
replace the facility at terms the same or more favorable to the Company.
The Company regularly reassesses how its various operations complement the
Company as a whole and considers strategic decisions to acquire new operations,
expand, terminate, or sell certain existing operations. These reviews resulted
in various transactions during recent fiscal years and may results in additional
transactions during fiscal 2003 and beyond.
The Company continues to pursue the sale of its Troy, Ohio facility. Although
the Company has not yet received an acceptable offer, the facility is being
leased to a third party on a month-to-month basis. It is unclear whether the
continuing economic slowdown or other factors will continue to affect the
Company's ability to sell that facility on terms acceptable or profitable to the
Company.
FURTHER DISCLOSURES CONCERNING LIQUIDITY AND CAPITAL RESOURCES, INCLUDING
"OFF-BALANCE SHEET" ARRANGEMENTS
On January 22, 2002 the SEC issued FR-61, "Commission Statement about
Management's Discussion and Analysis of Financial Condition and Results of
Operations." The SEC has indicated that, while it intends to consider rulemaking
regarding these topics and other topics covered by the MD&A requirements, the
purpose of its statement is to suggest steps that issuers should consider in
meeting their current disclosure obligations with respect to the topics
addressed.
The Company continues to evaluate FR-61 and the effects it may have, if any, on
this and future filings. The Company has responded to each of the areas
addressed by FR-61. Any statements in this section, which discuss or are related
to future dates or periods, are "forward-looking statements."
FR-61 requires management to identify any known demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in the
Company's liquidity increasing or decreasing in any material way. FR-61 also
requires management to identify any known material trends, favorable or
unfavorable, in the Company's capital resources including any expected material
changes in the mix and relative cost of such resources.
The Company's primary source of liquidity has been, and continues to be, cash
flows. The Company's future cash flows are dependent upon and affected by many
factors, including but not limited to the following:
- The ability of the Company to attract new and retain existing clients
- The number and size of the projects completed for these customers
- The effects of any loss of business of one or more primary customers
- Cancellations or delays of customer orders
- Changes in sales mix
- Changes in general economic conditions and world events
- Management's effectiveness in managing the manufacturing process
- The ability to collect in full and in a timely manner, amounts due the
Company
- The ability to acquire and maintain appropriate machinery and equipment
- The ability to hire, train and retain a suitable work force
- Acquisitions or divestiture activities, such as the integration of
Paragon Direct
- Capital asset additions or disposals
- Environmental matters
The Company is dependent upon its ability to retain its existing client base,
and additionally, obtain new clients. The Company's failure to do this could
significantly affect the future profitability of the Company.
Due to the project-oriented nature of the Company's business, the Company's
largest clients have historically tended to vary from year to year depending on
the number and size of the projects completed for these clients. As with many of
the Company's clients, the timing and volume of activities can vary
significantly from period to period. There can be no assurance that the volume
from any one particular client will continue beyond the current period. The
Company had no clients during the first quarters of fiscal 2003 or 2002 that
accounted for more than 10% of net sales.
The loss of one or more principal clients or a change in the number or character
of projects for particular clients could have a material adverse effect on the
Company's sales volume and profitability. The Company's remaining fulfillment
client ceased using the Company's services in the first quarter of fiscal 2003.
Although the Company will attempt to find other fulfillment clients, the
termination eliminates a client that represented $1.0 million in fiscal 2002
sales. In the first quarter of fiscal 2003, this client represented $300,000 in
sales.
Clients 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. While the Company believes that operating without long-term
contracts is consistent with industry practices, it is committed to developing
multi-year projects that can add stability to its business. The Company
continues to concentrate its efforts on increasing the number of clients with
long-term contracts; however, the failure of the Company to add multi-year
projects would mean that the Company would remain significantly dependent on
project-by-project business, thus increasing the Company's vulnerability to
losses of business and significant period-to-period changes. This would continue
to make prediction of the Company's future results very difficult. Even though
the Company is looking to increase the volume of longer term contract work, the
Company expects that it will continue to experience significant sales
concentration give the relatively large size of projects accepted for certain
clients.
Due to the range of services that the Company provides, the product sales mix
can produce a range of profit margins. Some business in which the Company
operates, produce lower profit margins than others. A substantial change in the
mix of product sales, could materially affect profit margins. The profit margin
experienced for the current period, is not indicative of future profit margins.
The Company believes that while there may be several competitors for individual
services that it offers, few competitors offer the single source solution that
the Company can provide.
Deteriorating or weak economic conditions, including slowdowns at both the
national or local level, could affect future sales and profitability of the
Company. Similarly, world events can affect the Company as occurred in fiscal
2002. Promotional mailings by the Company's clients were significantly reduced
as a result of the September 11, 2001 terrorist attacks and the subsequent
anthrax mailings. Technologies such as the Internet will continue to affect the
demand for printing services in general and the continuing increases in postal
rates will likely impact the direct mail business. The Company is not in a
position to determine how it will be affected by these circumstances, how
extensive the effects may be, or for how long it may be impacted by these
circumstances.
Management's effectiveness in managing its manufacturing process will have a
direct impact on its future profitability. The Company regularly makes decision
that affect production schedules, shipping schedules, employee levels, and
inventory level. The Company's ineffectiveness in managing these areas could
have an effect on future profitability.
From time to time, the Company has had significant accounts receivable or other
amounts due from its customers or other parties. On occasion, certain of these
accounts receivable or other amounts due have become unusually large and / or
overdue, and the Company has written off significant accounts receivable
balances. The failure of the Company's customers to pay in full amounts due to
the Company could affect future profitability. As previously reported, the
Company holds a single note receivable that is overdue. The Company has obtained
a favorable judgment in excess of the value of the note and the Company
continues to pursue collection. Although the Company has previously established
a reserve, and currently believes the remaining balance is collectible, the
Company may be required to write-off the remaining balance of the note if
collection efforts prove ineffective and payments are not received. The Company
is fully reserved for this possibility and no impact on current earnings would
results if the remaining balance of the note were written off. The general
economic slowdown also increases the risk for the Company, as many of its
clients could negatively be impacted by the economy or the financial climate.
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. Among other factors, the Company may be affected by
equipment malfunctions, training and operational needs related to the equipment,
which may delay its utilization, maintenance requirements and technological or
mechanical obsolescence. In addition, larger companies with greater capital
resources may have an advantage in financing state of the art equipment.
The Company is dependent upon its ability to hire, train, and retain a skilled
work force. On occasion, the Company will contract for and / or hire temporary
employees to increase the number of personnel in certain operations as project
commitments require. In May of 2002, the Company announced a workforce reduction
of approximately 12% of its workforce. This reduction brings the number of
employees to approximately 505 people at September 30, 2002. The Company
currently believes that it has appropriately aligned its staffing to be
consistent with its current and anticipated levels of business activity. The
failure of the Company to properly align and maintain skilled staffing levels
could affect the future profitability of the Company.
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. There can be no
assurance that any decisions to acquire new operations, expand, terminate or
sell certain existing operations will be implemented successfully. The Company's
failure to successfully implement any initiatives could affect future
profitability.
From time to time, the Company may sell or dispose of assets, which it feels are
under-performing or are no longer needed in the businesses in which the Company
operates. There can be no assurance that the Company will be able to sell or
dispose of the assets in a manner, which is profitable to the Company. In
addition, the Company will make investments in assets that it feels are needed
to acquire and maintain the businesses in which the Company operates. Again,
there can be no assurance that the Company will be able to acquire the necessary
assets, or that the Company can obtain a reasonable return on the investments.
The Company and the industry in which it operates are subject to environmental
laws and regulation concerning emission into the air, discharges into waterways
and the generation, handling and disposal of waste materials. These laws and
regulations are constantly evolving, making it difficult to predict the effect
they may have upon the future capital expenditures, profitability and
competitive position of 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.
The Company has no "off balance sheet" arrangements, which would otherwise
constitute balance sheet liabilities. See below, however, for information
regarding the Company's operating leases.
DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
FFR-61 encourages Company's to identify obligations and commitments to make
future payments under contracts such as debt and lease agreements, and under
contingent commitments, such as debt guarantees. It is also suggested that the
disclosure reference the various parts of a registrant's filings, which
discussed these commitments. The SEC believes that investors would find it
beneficial if aggregated information about contractual obligations and
commercial commitments were provided in a single location such that a total
picture of obligations would be readily available. In addition, the SEC had
suggested the use of a least one additional aid to present the total picture of
a registrant's liquidity and capital resource and the integral role of on and
off balance sheet arrangements may be schedules of contractual obligations and
commercial commitments as of the latest balance sheet date.
The Company has disclosed information pertaining to these events in its fiscal
2002 Report on Form 10-K. In addition, the Company has prepared schedules
suggested by the SEC in FR-61 for the period ending August 31, 2002. The Company
had no commercial commitments to report as of the latest balance sheet date.
- ---------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------
Contractual Less than 1 - 3 4 - 5 After 5
Obligations Total 1 year years years years
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt $ 0 $ 0 $ 0 $ 0 $ 0
Capital lease obligation 0 0 0 0 0
Operating leases 10,188 1,807 5,261 3,065 55
Unconditional purchase
obligations 0 0 0 0 0
Other long-term obligations 0 0 0 0 0
Total contractual cash ------------- ------------ ----------- ---------- -----------
obligations $ 10,188 $ 1,807 $ 5,261 $ 3,065 $ 55
============= ============ =========== ========== ===========
DISCLOSURES ABOUT CERTAIN TRADING ACTIVITIES THAT INCLUDE NON-EXCHANGE TRADED
CONTRACTS ACCOUNTED FOR AT FAIR VALUE
The Company does not have any trading activities that include non-exchange
traded contracts accounted for at fair value.
DISCLOSURES ABOUT EFFECTS OF TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES
As previously reported, the Company has agreed to make loans to certain officers
and key employees to purchase the common stock of the Company. At August 31,
2002, the Company had loans totaling $435,000. The loans bear an interest rate
of 4.9% and are for a five-year term. It is the Company's polity that all
material transactions between the Company, its officers, directors or principal
shareholders, or affiliates of any of them, shall be on terms no less favorable
to the Company than those which could have been obtained if the transaction had
been with unaffiliated third parties on an arm's length, and such transactions
are approved by a majority of the members of the Audit Committee of the Board of
Directors, or a majority of the directors who are independent and not
financially interested in the transactions.
Additionally, in fiscal 2001, the Company provided some officers and other key
employees with advances on expected bonus amounts, subject to year-end
reconciliation. Because of the rapid deterioration of general economic
conditions in the second half of fiscal 2001, final bonus amounts were
substantially lower than had been expected. In some cases, amounts advanced
against fiscal 2001 bonuses were higher than actual bonus amounts. These amounts
were carried forward, and amounts have in part, been paid by, offsetting bonus
payments earned during fiscal year 2002. At August 31, 2002, $39,236 had been
paid by offsetting bonus payments; the $60,000 balance has been converted into a
note payable by the officer. If the performance criteria are not met, the
remaining notes are payable to the Company in December 2002. As a result of
legislation enacted on July 30, 2002, the Company will no longer make loans to
its officers; however, outstanding amounts at that date may continue until paid
in accordance with their terms.
DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES
On December 12, 2001, the SEC issued FR-60 " Cautionary Advice Regarding
Disclosure About Critical Accounting Policies." FR-60 is an intermediate step to
alert companies to prepare adequate disclosure that will facilitate an
understanding of the Company's financial status, and the possibility, likelihood
and implications of changes in its financial and operating status. It encourages
companies to aid awareness in its "critical accounting policies, the judgments
and uncertainties affecting the application of those policies, and the
likelihood that materially different amounts would be reported under different
conditions or using different assumptions."
The Company's accounting policies are disclosed in its fiscal 2002 Report on
Form 10-K. The more critical of these policies include revenue recognition and
the use of estimates (which inherently involve judgment and uncertainties) in
valuing inventory, accounts receivable, and fixed assets.
REVENUE RECOGNITION
The Company recognizes revenue when all of the following criteria are met:
persuasive evidence of an arrangement exists; delivery has occurred; the
seller's price to the buyer is fixed or determinable; and collectivity is
reasonably assured. These criteria are generally satisfied and the Company
recognizes revenue upon shipment. The Company's revenue recognition policies are
in accordance with Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements." The Company also offers certain of its
customers the right to return products that do no meet the standards agreed
upon. The Company continuously monitors and tracks such product returns, and
while such returns have historically been minimal, the Company cannot guarantee
that it will continue to experience the same return rates that it has in the
past. Any significant increase in product quality failure rates and the
resulting credit returns could have a material adverse impact on the Company's
operating results.
ACCOUNTS AND NOTES RECEIVABLE
The Company performs ongoing credit evaluations of its customers and adjusts
credit limits based upon payment history and the customer's current credit
worthiness, as determined by the review of the customer's current credit
information. The Company continuously monitors collections and payments from its
customers and maintains a provision for estimated credit losses based upon the
Company's historical experience and any specific customer collection issues that
have been identified. The Company values accounts and notes receivable net of an
allowance for uncollectible accounts. The allowance is calculated based upon the
Company's evaluation of specific customer accounts where the Company has
information that the customer may have an inability to meet its financial
obligations (bankruptcy, etc.). In these cases, the Company uses its judgment,
based on the best available facts and circumstances, and records a specific
reserve for the customer against amounts due, to reduce the receivable to the
amounts that is expected to be collected. These specific reserves are
re-evaluated and adjusted as additional information is received that impacts the
amount reserved. The same technique used to compute this allowance at May 31,
2002 has been used during the first quarter of fiscal 2003. However, the
ultimate collectibility of a receivable is dependent upon the financial
condition of an individual customer, which could change rapidly and without
advance warning.
INVENTORY
The Company values inventory at the lower of cost or market. Cost is determined
using the first-in, first-out method. Valuing inventories at the lower of cost
or market requires the use of estimates and judgment. As discussed under
"Further Disclosures Concerning Liquidity and Capital Resources, Including
`Off-Balance Sheet' Arrangements," customers may cancel their order, change
production quantities or delay production for a number of reasons. Any of these,
or certain additional actions, could create excess inventory levels, which would
impact the valuation of inventory. The Company continues to use the same
techniques to value inventory as have been used in the past. Any actions taken
by the Company's customers that could impact the value of inventory are
considered when determining the lower of cost or market valuations. The Company
regularly reviews inventory quantities on hand and records a provision for
excess and obsolete inventory based on its forecast of product demand and
production requirements. Generally, the Company does not experience issues with
obsolete inventory due to the nature of its products. If the Company were not
able to achieve its expectations of the net realizable value of the inventory at
its current value, the Company would have to adjust its reserves accordingly.
FIXED ASSETS AND GOODWILL
The Company continues to apply the criteria established in evaluating and
establishing a reserve for long-lived assets determined to be impaired under
Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed of." At August 31, 2002 the
Company had recorded an impairment reserve of $317,000 associated with certain
machinery and equipment. On June 1, 2002, the Company adopted the provision of
FAS No. 142 "Goodwill and Other Intangible Assets" for evaluating and
establishing any reserves for intangible assets determined to be impaired. Going
forward the Company will need to review goodwill periodically to determine
whether it has become impaired and thus must be written off.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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, consisting of notes receivable, 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.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. In response to
the Sarbanes-Oxley Act of 2002, the Company and its certifying
officers have implemented disclosure controls and procedures,
building upon its pre-existing practices and procedures, to ensure
that material information relating to the Company is made known by
the signing officers, so as to be reflected in periodic SEC
reports. The Company and those officers will regularly evaluate
the effectiveness of those disclosure controls and procedures,
including within 90 days prior to the filing of any periodic SEC
report. The Company believes that these disclosure controls and
procedures are effective, based upon this evaluation.
(b) Changes in internal controls. During the period covered by this
report, there were not any significant changes in the Company's
internal controls or in other factors, which could significantly
affect these internal controls subsequent to the date of their
evaluation, including any corrective actions with respect to
significant deficiencies and material weaknesses.
(c) Asset-backed issuers. Not applicable.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
99.1 Sarbanes-Oxley Section 906 Certification by the CEO
99.2 Sarbanes-Oxley Section 906 Certification by the CFO
(b) Report on Form 8-K
On June 1, 2002, the Company filed an 8-K to disclose the
acquisition of selected assets of Paragon Direct, Inc.
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.
------------------
(Registrant)
Dated: October 10, 2002
/s/ Richard C. Fischer
--------------------------------------
Richard C. Fischer, Chairman and Chief
Executive Officer
/s/ Paul M. Drewek
--------------------------------------
Paul M. Drewek, Chief Financial
Officer
CERTIFICATIONS
I, Richard C. Fischer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Outlook
Group Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a. Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made know to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies in the design or operation
of internal control which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: October 10, 2002
/s/ Richard C. Fischer
-------------------------------------
Richard C. Fischer
Chairman and Chief Executive Officer
I, Paul M. Drewek, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Outlook
Group Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a. Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made know to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies in the design or operation
of internal control which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: October 10, 2002
/s/ Paul M. Drewek
-------------------------------------
Paul M. Drewek
Chief Financial Officer