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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 November 29, 2003
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.
3,371,983 shares of common stock, $.01 par value, were outstanding at January 9,
2004.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets
As of November 29, 2003 and May 31, 2003 4
Condensed Consolidated Statements of Operations
For the three-months and six-months ended
November 29, 2003 and November 30, 2002 5
Condensed Consolidated Statements of Cash Flows
For the six-months ended November 29, 2003 and
November 30, 2002 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About Market
Risk 17
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
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 prepared by the Company and have not been audited.
However, the foregoing statements contain all adjustments
(consisting only of normal recurring accruals) that are, in the
opinion of Company management, necessary to present fairly the
financial position of the Company at November 29, 2003, the results
of operations for the three-month and six-month periods ended
November 29, 2003 and November 30, 2002, and the results of cash
flows for the six-month period ended November 29, 2003 and November
30, 2002. 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 of the Securities and
Exchange Commission, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
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 2003 Form 10-K.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
November 29, May 31,
ASSETS 2003 2003
(Unaudited)
----------- --------
Current Assets
Cash and cash equivalents $ 2 $ 2
Accounts receivable, less allowance for
doubtful accounts of $445 and $478, respectively 9,987 7,223
Notes receivable-current portion 212 12
Inventories 11,224 7,950
Deferred income taxes 846 846
Income taxes refundable 54 810
Other 962 545
-------- --------
Total current assets 23,287 17,388
Notes receivable long-term, less allowance for
doubtful accounts of $652 in both years 160 1
Property, plant, and equipment
Land 583 583
Building and improvements 10,676 10,621
Machinery and equipment 40,330 40,237
-------- --------
51,589 51,441
Less: accumulated depreciation (30,495) (30,347)
-------- --------
21,094 21,094
Other assets 1,236 1,286
-------- --------
Total assets $ 45,777 $ 39,769
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank revolver loan $ 6,800 $ 1,500
Accounts payable 2,418 2,025
Book overdraft 755 729
Accrued liabilities:
Salaries and wages 1,680 1,612
Other 407 375
-------- --------
Total current liabilities 12,060 6,241
Deferred income taxes 3,279 3,279
Shareholders' Equity
Cumulative preferred stock - -
Common stock (5,209,882 and 5,152,382 shares issued,
respectively) 52 52
Additional paid-in capital 19,114 18,888
Retained earnings 23,602 23,422
Treasury stock (1,837,899 and 1,789,063 shares,
respectively) (12,056) (11,739)
Officers' loans (274) (374)
-------- --------
Total shareholders' equity 30,438 30,249
-------- --------
Total liabilities and shareholders' equity $ 45,777 $ 39,769
======== ========
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 Six-Month Period Ended
--------------------------------- ---------------------------------
November 29, November 30, November 29, November 30,
2003 2002 2003 2002
Net sales $ 19,342 $ 17,320 $ 36,403 $ 34,318
Cost of goods sold 15,474 13,857 30,022 27,173
----------- ----------- ----------- -----------
Gross profit 3,868 3,463 6,381 7,145
Selling, general, and
administrative expenses 2,928 2,767 5,774 5,304
----------- ----------- ----------- -----------
Operating profit 940 696 607 1,841
Other income (expense):
Interest expense (87) - (136) -
Interest and other
income (expense) 50 83 95 (3)
----------- ----------- ----------- -----------
Earnings from operations
before income taxes
and cumulative effect
of change in
accounting principle 903 779 566 1,838
Income tax expense 348 295 218 696
----------- ----------- ----------- -----------
Earnings before
cumulative effect of
change in accounting
principle 555 484 348 1,142
----------- ----------- ----------- -----------
Cumulative effect of
change in accounting
principle (net of tax) - - - (236)
----------- ----------- ----------- -----------
Net earnings $ 555 $ 484 $ 348 $ 906
=========== =========== =========== ===========
Earnings per common
share before
cumulative effect of
change in accounting
principle:
Basic and Diluted $ 0.16 $ 0.14 $ 0.10 $ 0.34
Cumulative effect of
change in accounting
principle:
Basic and Diluted - - - $ (0.07)
Earnings (loss) per
common share:
Basic and Diluted $ 0.16 $ 0.14 $ 0.10 $ 0.27
Weighted average
number of shares
outstanding-Basic 3,365,100 3,353,319 3,364,091 3,350,930
=========== =========== =========== ===========
Weighted average
number of shares
outstanding-Diluted 3,386,965 3,408,581 3,394,041 3,391,264
=========== =========== =========== ===========
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)
Six-Month Period Ended
November 29, 2003 November 30, 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 348 $ 906
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 1,655 1,601
Provision for doubtful accounts 57 110
(Gain) loss on sale of assets (26) 91
Cumulative effect of change in accounting principle - 352
Deferred Income Taxes - (116)
Change in assets and liabilities:
Accounts and notes receivable (3,180) (499)
Inventories (3,274) (440)
Other current assets (387) 44
Accounts payable 393 154
Accrued liabilities 227 (105)
Income taxes 756 -
------- -------
Net cash (used in) provided by operating activities (3,431) 2,098
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business-net of cash acquired - (1,247)
Proceeds from sale of assets 248 508
Acquisition of property, plant, and equipment (1,857) (2,089)
------- -------
Net cash used in investing activities (1,609) (2,828)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in revolving credit arrangement borrowings 5,300 -
Increase in book overdraft 26 -
Exercise of stock options 50 20
Dividends paid to shareholders (336) (168)
------- -------
Net cash provided by (used in) financing activities 5,040 (148)
Net change in cash - (878)
Cash and cash equivalents at beginning of period 2 3,021
------- -------
Cash and cash equivalents at end of period $ 2 $ 2,143
======= =======
The accompanying notes are an integral part of these financial statements.
OUTLOOK GROUP CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
The following is a reconciliation of the average shares
outstanding used to compute basic and diluted earnings per share.
Three-Month Period Six-Month Period
Ended Ended
November 30, November 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Weighted average shares
outstanding-Basic 3,365,100 3,353,319 3,364,091 3,350,930
Effect of dilutive securities -
Stock options 21,865 55,262 29,950 40,334
--------- --------- --------- ---------
Weighted average shares outstanding
- - Diluted 3,386,965 3,408,581 3,394,041 3,391,264
========= ========= ========= =========
2. Inventories:
Inventories consist of the following (in thousands):
November 29, 2003 May 31, 2003
----------------- ------------
Raw materials $ 3,976 $ 3,129
Work in process 1,197 971
Finished goods 6,051 3,850
------- -------
$11,224 $ 7,950
======= =======
3. Income Taxes:
The effective income tax rate used to calculate the income tax
expense for the quarters ended November 29, 2003 and November 30,
2002 is based on the anticipated income tax rate for the entire
fiscal year.
4. Stock Option Accounting
The Company has elected to account for all stock option plans in
accordance with APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations. No stock-based
employee compensation expense related to stock options is
reflected in net earnings (loss) as all options granted under
those plans had an exercise price equal to the market value of
the underlying common stock on the date of grant. Had
compensation cost been applied utilizing the fair value
recognition provisions of SFAS No. 123 and 148, the pro forma
effect for the six-month periods ended November 29, 2003 and
November 30, 2002 net earnings would have been $(0) and ($6,100),
respectively. There was no pro forma effect on the November 29,
2003 and November 30, 2002 earnings per share for either basic or
diluted per share amounts.
5. Concentration of Risk
A substantial portion of the Company's net sales are represented
by the International Masters Publishing Inc. (IMP) contract.
During the second quarter and the first six months of fiscal
2004, IMP accounted for approximately 18.8% and 18.5% of net
sales respectively. The loss of IMP sales would, and the loss of
one or more other 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.
6. Accounting Periods:
The Company has adopted 13-week quarters; however, fiscal
year-end remains May 31.
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 earnings (loss) of the respective operations.
Summarized financial information for the three-month and
six-month periods ending November 29, 2003 and November 30, 2002
are as follows:
Income Statement Data:
Three-Month Period Ended Three-Month Period Ended
November 29, 2003 November 30, 2002
(in thousands) (in thousands)
Net Earnings Net Earnings
Net Sales (Loss) Net Sales (Loss)
--------- ------- --------- ------
Graphics $12,189 $ 202 Graphics $ 9,401 $ 100
Web 7,153 353 7,919 384
------- ------- ------- -------
Total $19,342 $ 555 Total $17,320 $ 484
Six-Month Period Ended Six-Month Period Ended
November 29, 2003 November 30, 2002
(in thousands) (in thousands)
Net Earnings Net Earnings
Net Sales (Loss) Net Sales (Loss)
--------- ------ --------- ------
Graphics $22,292 $ (187) Graphics* $18,472 $ 114
Web 14,111 535 Web 15,846 792
------- ------- ------- -------
Total $36,403 $ 348 Total $34,318 $ 906
*The net earnings for the Graphics segment includes a cumulative effect of a
change in accounting principle charge of $236 (net of tax)
Balance Sheet Data:
November 29, 2003 May 31, 2003
Total Assets (in thousands) (in thousands)
-------------- --------------
Graphics $30,745 $23,614
Web 15,032 16,155
------- -------
Total $45,777 $39,769
======= =======
8. 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. At November 29, 2003, the Company had loans totaling
$274,000. 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.
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.
9. Commitments and Contingencies
As previously reported, the Company was sued in fiscal 2003 by Silly
Productions, Inc. and its owner Thomas Riccio. The complaint alleged
nine theories of liability, all of which arose out of the actions of
a former employee of the Company who appears to have stolen small
amounts of certain materials during his employment by the Company,
including collectable cards that the Company was printing for the
plaintiffs. The plaintiffs claimed that the employee's actions
destroyed the market for its product, and in discovery alleged total
damages of $4.9 million. The Company denied liability and
aggressively defended the claims. However, to avoid the further
expense of litigation, during the second quarter, the Company
entered into a settlement agreement with the plaintiffs pursuant to
which the Company refunded Silly Productions $150,000 (part of the
fees which were previously paid to the Company), the plaintiffs
dismissed the litigation, and the parties released each other from
further liability.
In the opinion of management, the Company is not a defendant in any
other legal proceedings other than routine litigation that is not
material to its business.
10. Recently Issued Financial Accounting Pronouncements:
In May 2003, the Financial Accounting Standards Board (FASB or the
"Board) issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity."
This standard specifies that instruments within its scope embody
obligations of the issuer and that, therefore, the issuer must
classify them as liabilities. This statement is effective for the
Company in fiscal year 2004. This pronouncement is not expected to
have a material effect on the Company's financial statements.
In January 2003, the FASB issued FIN No. 46, Consolidation of
Variable Interest Entities, which requires the consolidation of and
disclosures about variable interest entities (VIEs). VIEs are
entities for which control is achieved through means other than
voting rights. In December 2003, the FASB revised FIN No. 46 to
incorporate all decisions, including those in previously issued FASB
Staff Positions, into one Interpretation. The revised Interpretation
supersedes the original Interpretation. Requirements for non-special
purpose entities acquired before February 1, 2003 are effective at
the end of the fourth quarter of fiscal 2004. While we are still
assessing the revised Interpretation, FIN No. 46 is not expected to
have a significant impact on our consolidated financial statements.
11. Subsequent Events
The Company declared a quarterly cash dividend of $0.05 per common
share outstanding on December 19, 2003. The dividend is payable on
January 15, 2004 to shareholders of record on January 8, 2004. Based
on the current number of shares outstanding, the payment will be
approximately $169,000.
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 six months of fiscal 2004 and 2003, and
its financial condition at November 29, 2003. Statements that are not historical
facts, that relate to the Company's future performance, anticipated financial
position, or results of operations for fiscal 2004 or any other future period,
are forward-looking statements within the Safe Harbor Provision of the Private
Securities Litigation Reform Act of 1995. Such statements which are generally
indicated by words or phrases such as "plan," "estimate," "project,"
"anticipate," "the Company believes," "management expects," "currently
anticipates," "remains optimistic," and similar phrases are based on current
expectations and involve risks, uncertainties and assumptions. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual future results could differ materially from
those anticipated, projected or estimated. 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." The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
The dollar amounts in the tables in this section are presented in thousands,
except for per share amounts or where otherwise indicated.
RESULTS OF OPERATIONS
Comparisons between the fiscal 2004 and fiscal 2003 periods are substantially
affected by the long-term production and supply chain management agreement
between the Company and International Masters Publishers, Inc. ("IMP"), which
was entered into in March 2003. Under this five-year agreement, the Company is
providing substantial services on behalf of IMP. The Company made significant
expenditures to support the IMP arrangement. Particular aspects of the IMP
arrangement, which both increased sales and decreased profitability in the
fiscal 2004 period to date, are discussed below.
The Company's net sales for the second quarter of fiscal 2004 were $19.3
million, up $2.0 million from the second quarter of fiscal 2003. The Graphics
business segment had second quarter net sales of $12.2 million, up 29.7% from
the second quarter of fiscal 2003, due largely to net sales of $3.4 million
under the IMP contract. Net sales to IMP during the quarter are net of any
rebates and performance bonuses due under the arrangement. Due to volume
shortfalls, the Company has recognized a $400,000 reduction in the rebates due
IMP under the agreement. See also the discussion of gross profit margin for a
description of certain IMP inventory sales included in net sales in fiscal 2004.
Sales increases were partially offset by a loss of sales, which was previously
disclosed, to two customers, which were significant in fiscal 2003; those sales
represented $2.2 million in fiscal 2003.
The Web business segment had second quarter net sales of $7.2 million, down 9.7%
from the second quarter of fiscal 2003, primarily due to decreased volumes in
its label business.
The Company's net sales performance for the second quarter of fiscal 2004 is
summarized in the following chart:
Net Sales Quarter 2 Quarter 2 Quarter 2 Quarter 2
Fiscal 2004 Fiscal 2003 $ Change % Change
----------- ----------- -------- --------
Graphics $12,189 9,401 $ 2,788 29.7%
Web 7,153 7,919 (766) -9.7%
------- ------- ------- ----
Total $19,342 $17,320 $ 2,022 11.7%
The Company's net sales for the first six months of fiscal 2004 were $36.4
million, up $2.1 million from the first six months of fiscal 2003. The Graphics
business segment had year-to-date net sales of $22.3 million, up 20.7% from the
prior year, due largely to net sales of $6.3 million under the IMP contract.
The Web business segment had year-to-date net sales of $14.1 million, down 10.9%
from the prior year, primarily due to decreased volumes in its label business.
The Company's net sales performance for the year-to-date period is summarized in
the following chart:
Net Sales Year-to-date Year-to-date Year-to-date Year-to-date
Fiscal 2004 Fiscal 2003 $ Change % Change
----------- ----------- -------- --------
Graphics $22,292 $18,472 $ 3,820 20.7
Web 14,111 15,846 (1,735) -10.9%
------- ------- ------- ----
Total $36,403 $34,318 $ 2,085 6.1%
For the year-to-date period, the Company's sales are comprised as follows:
Sales Breakdown Fiscal Fiscal
2004 2003
------ ------
Graphics 61% 54%
Web 39% 46%
--- ---
Total 100% 100%
The Company's gross profit margin for the second quarter of fiscal 2004 and
fiscal 2003 was 20.0% of net sales. For the year-to-date period, gross margins
were 17.5% of net sales in fiscal 2004 compared to 20.8% of net sales in fiscal
2003. Gross margins decreased primarily as a result of a product sales mix that
produced lower overall profit margins, a printing industry that, in general,
suffers from overcapacity and severe pricing pressures, the continuing effects
of a slumping economy, increases in certain raw materials, and the investments
in start-up costs for IMP and the other new long-term supply-chain contracts.
The Company believes it has now incurred the bulk of the transition and start-up
costs related to these contracts. In addition, margins for the quarter and six
months were affected by provisions of the IMP contract under which certain
finished inventory materials which were acquired from IMP were credited back to
IMP at cost after the Company performed additional production, overwrap and
fulfillment services. Sales of approximately $500,000 in the second quarter and
$1.3 million in the six-month period related to this IMP inventory. Since those
materials are being used in the ordinary course of the arrangement, the Company
expects that the related effect will diminish in future quarters, although these
arrangements reduced the Company's gross margins in the 2004 periods.
Selling, general and administrative expenses were 15.1% of net sales for the
second quarter of fiscal 2004, or $2.9 million. During the second quarter of
fiscal 2003, the Company had selling, general and administrative costs of $2.8
million or 16.0% of net sales. In fiscal 2004 year-to-date selling, general and
administrative expenses were 15.9% of net sales while in fiscal 2003
year-to-date selling, general and administrative expense were 15.5% of net
sales. The increase is primarily the result of investments in training current
and new employees to service the new major accounts, without the benefit of
corresponding increases in sales to offset them. In addition the Company
incurred $150,000 during the second quarter of fiscal 2004 as part of a
settlement agreement with Silly Production, Inc. 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 income for the second quarter of fiscal 2004 was
approximately $940,000 or 4.9% of net sales. The Company reported an operating
profit during the second quarter of fiscal 2003 of approximately $696,000 or
4.0% of net sales. For the year-to-date period, the Company had operating income
of $607,000 or 1.7% of net sales during fiscal 2004. During the first six months
of fiscal 2003, the Company had operating income of $1.8 million or 5.4% of net
sales.
The Company had $87,000 of interest expense during the second quarter of fiscal
2004 and incurred $136,000 for the year-to-date period. The Company maintains a
revolving credit facility, which it uses to finance increased working capital
needs related to the start-up of the supply chain agreements. As of November
29,2003, the Company had $6.8 million outstanding on its revolving credit
agreement. Borrowings during the first six months of fiscal 2004 were used
primarily to fund capital expenditures of $1.9 million as well as the purchase
and production of inventory related to IMP and its other longer-term contracts.
The Company is currently accruing income tax expense at the expected annual rate
of 38.5%, although quarter-to-quarter fluctuations may occur.
The Company reported net income for the second quarter of fiscal 2004 of
$555,000 or $0.16 per diluted common share. The Company reported a net profit
for the second quarter of fiscal 2003 of $484,000 or $0.14 per diluted common
share. The Company reported net income for the year-to-date period in fiscal
2004 of $348,000 or $0.10 per diluted share. The Company reported a net profit
for the year-to-date period in fiscal 2003 of $906,000 or $0.27 per diluted
share. The results for fiscal 2003 include a loss related to the cumulative
effect of a change in accounting principle of $352,000 (net of tax of $236,000)
or $(0.07) 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 $3.4 million for the first half of
fiscal 2004, as compared to $2.1 million provided during the first half of
fiscal 2003. The Company experienced a $3.3 million increase in inventory during
the first six months of fiscal 2004. This increase was primarily in finished
goods, which resulted both from the acquisition from IMP of its finished goods
which are being sold back to IMP based on demand, and the Company's production
of finished goods to meet various customers' forecast requirements. The Company
also had an increase in raw materials as the Company adjusted its inventory to
meet client forecasts and production schedules . In June 2003, the Company
purchased $2.0 million of completed inventory from IMP as part of its contract
obligation and had approximately $800,000 of that inventory remaining as of
November 29, 2003. Accounts and notes receivable increased by approximately $3.2
million during the first six months of fiscal 2004. The most significant source
of cash and liquidity for the Company are the payments received from its
customers; therefore, changes in rapidity at which customers pay and any other
significant disruption in customer payments can affect Company liquidity. The
largest share of this increase is related to the invoicing under the IMP
contract. At November 29, 2003, the Company has approximately $2.2 million in
accounts receivable related to IMP for contract and non-contract work. As of
January 9, 2004 approximately $1.1 million has been paid. Depreciation and
amortization for the first half month of fiscal 2004 and fiscal 2003 was
approximately $1.7 million and $1.6 million respectively.
The Company used approximately $1.9 million of cash in acquiring and upgrading
existing machinery and equipment during the first six months of fiscal 2004. The
Company expects that it will invest approximately $3.5 million during fiscal
2004 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. The Company has approximately $9.8 million in minimum lease
payments under existing operating leases as of November 29, 2003; the majority
are for production related machinery and equipment. The Company does not
currently have any capital lease obligations. See "Disclosures about Contractual
Obligations and Commercial Commitments" below.
The Company had $5.0 million provided by financing activities. The Company has
borrowed $5.3 million against its revolving credit facility to finance its
increased working capital needs and capital expenditures during the first six
months of fiscal 2004. Borrowings during the first six month of fiscal 2004 were
primarily used to fund capital expenditures of $1.9 million and to purchase and
build inventory under its longer-term contracts. As of January 9, 2004, the
Company had $6.6 million outstanding on its revolving credit agreement. The
Company expects that it will continue to use its revolving credit facility for
the foreseeable future, and as contracts mature and assuming sales at contract
levels, the Company's use of its revolving credit facility are expected to
diminish because the start-up costs and related inventory purchases are being
absorbed into the Company's sales over time.
The Company declared a quarterly cash dividend of $0.05 per common share
outstanding on December 19, 2003. The dividend is payable on January 15, 2004 to
shareholders of record on January 8, 2004. Based on the current number of shares
outstanding, the payment will be approximately $169,000. A continuation of
dividends at this level in future quarters would require similar resources in
future periods.
During June 2002, the Company purchased selected assets of Paragon Direct, Inc.
for $1.2 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 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. In
addition, the Company converted two customers with account receivable balances
to note receivables during the second quarter of fiscal 2004. The notes are for
approximately $391,000 and have terms of twenty four months.
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 is in compliance with
all of its related loan covenants. Management believes that the remaining
availability of $8.4 million as of January 9, 2004 will be sufficient to meet
the Company's expected liquidity needs from borrowing unless the Company were to
make an acquisition or enter into a significant new customer arrangement
requiring substantial up-front expenditures. In those cases, the Company would
need to expand or add additional bank financing arrangements to meet those
needs. The Company is in the early state of negotiating and extending the credit
facility. This is expected to be completed by the fourth quarter of fiscal 2004,
although the Company cannot assure that it will be able to reach a satisfactory
agreement.
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 result in additional
transactions during fiscal 2004 and beyond. The Company previously announced
that it had accepted an offer in principle to sell its Troy, Ohio facility.
However, the prospective buyer has since withdrawn its offer and the Company
will continue to lease this unused building to a third party on a month-to-month
basis.
The Company's primary source of liquidity has been cash flows, and in particular
payments received from its customers but supplemented with borrowings. The
Company's future cash receipts are dependent upon and affected by many factors,
including but not limited to the following:
o The ability of the Company to attract new and retain existing
clients
o The number and size of the projects completed for these
customers
o The effects of any loss of business of one or more primary
customers
o Cancellations or delays of customer orders
o Changes in sales mix
o Changes in general economic conditions and world events
o Management's effectiveness in managing the manufacturing
process
o The ability to collect in full and in a timely manner, amounts
due the Company
o Continued availability of bank financing
Additionally, liquidity will be affected by cash needs including:
o The ability and need to acquire and maintain appropriate
machinery and equipment
o The ability and need to hire, train and retain a suitable work
force
o Acquisitions or divestiture activities
o Capital asset additions or disposals
o Environmental compliance matters
The Company is dependent upon its ability to retain its existing client base,
and additionally, obtain new clients. Its success will depend upon the Company's
ability to use existing technical and manufacturing capabilities and knowledge
in the development and introduction of new value-added products and services
targeted at new markets and clients through increased marketing initiatives that
allow the Company to differentiate its products and services from that of its
competitor's. The failure to utilize its capabilities or properly identify and
address the evolving needs of targeted customers and markets, will limit the
Company's ability to capture and develop new business opportunities. In
addition, the Company's success is dependent on its ability to manufacture
products at a competitive cost and subsequently price them competitively. 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 fiscal 2003 that accounted for more than 10% of
net sales. However, the entry into the IMP agreement in late fiscal 2003 has
resulted in an increased dependence upon sales to IMP, which is now the
Company's largest customer and its only customer with sales in excess of 10%
during fiscal 2004. During the second quarter and the first six months of fiscal
2004, International Masters Publishing Inc. accounted for approximately 18.8%
and 18.5% of net sales respectively.
Although significant long-term contracts provide more stability to the Company,
they can increase the Company's dependence on specific customers. In particular,
a very substantial portion of the Company's sales are now represented by the IMP
contract. The loss of IMP sales would, and the loss of one or more other
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.
During the third quarter of fiscal 2003, the Company was notified of reductions
in volume by two of its major clients with ongoing projects. These clients
represented approximately $2.2 million of sales during fiscal 2003.
Except for specific longer-term contracts, 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, like the IMP multi-year contract. 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.
Until then, the Company expects that it will continue to experience significant
sales concentration given the relatively large size of projects accepted for
certain clients.
Due to the range of services that the Company provides, product sales mix can
produce a range of profit margins. Some businesses in which the Company operates
produce lower profit margins than others. For example, certain aspects of the
IMP arrangement relating to inventory, which were discussed above, have
negatively affected the Company's margins during the reported periods. 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. The Company cannot assure
the levels of its sales under its longer-term contracts, including the IMP
contract, due to many factors that could cause its actual results to differ.
These factors include contract disputes, performance problems, customer
financial difficulties or changes in business strategies, changes in demand for
the customer's products and / or future negotiated changes to the agreements.
The September 11, 2001 terrorist attacks, the U.S. and international response,
the fear of additional attacks, and the war with Iraq and its aftermath have
substantially affected the United States economy as a whole. Some of these
matters, such as the anthrax mailings, have specifically affected the industry
in which the Company operates because of their effect on promotional mailings.
These events could adversely affect business and operating results in other ways
that presently cannot be predicted and for an undeterminable period of time.
Technologies such as the Internet will continue to affect the demand for
printing services in general and the continuing increases in postal rates and
legislation changes such as the national "do not call" list and "can spam"
limitations will likely impact the direct mail business.
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 levels. 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. Declining general economic
conditions also increase the risk for the Company, as many of its clients could
negatively be impacted by the depressed economy. As sales to specific customers
such as IMP become a larger percentage of the Company's sales and receivables,
disputes or collection problems with any particular customer such as IMP could
affect a larger portion of the Company's sales and/or receivables. Additionally,
several customers with contractual arrangements have extended payment terms and
payments have generally been received according to the terms of the contract.
The Company uses complex and specialized equipment to provide its services and
manufacture its products; therefore, the Company depends upon the functioning of
such machinery and its ability to acquire and maintain appropriate equipment. In
addition, the Company has acquired specialized machinery related to the IMP
arrangement and may need to acquire specific machinery in order to perform tasks
for a particular customer or types of projects, and may need to make
modifications to meet customer needs. In certain cases, the cost of this
machinery is factored into costs or prices charged to related customers;
however, the costs may not be fully recovered, such as in the event sales to
customers do not reach anticipated levels. Among other factors, the Company may
be affected by equipment malfunctions, the inability to configure machinery on a
timely basis, 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. 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. In
addition, as occurred in the third quarter of fiscal 2003, the Company may in
the future again incur additional employee expenses because of the need to
maintain a work force in excess of current needs to service anticipated customer
products; such a decision would increase expenses in the short term.
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. Acquisitions,
in particular, are subject to potential problems and inherent risks, including:
o Difficulties in identifying, financing and completing viable
acquisitions
o Difficulties in integrating the acquired company, retaining
the acquired company's customers and achieving the expected
benefits of the acquisition, such as expected revenue
increases and cost savings
o Loss of key employees of the acquired company
o The resulting diversion of managements' attention away from
current operations
o The assumption of undisclosed liabilities
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, such as the Troy
facility, 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 emissions 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
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 resources and the integral role of on and off balance sheet
arrangements. The Company has prepared a schedule 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
2003 Report on Form 10-K. In addition, the Company has prepared schedules
suggested by the SEC for the period ending November 29, 2003. 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
(Dollars in thousands) ----- --------- ------- ----- -------
- ------------
Long-term debt $ 0 $ 0 $ 0 $ 0 $ 0
Capital lease obligation 0 0 0 0 0
Operating leases 9,780 2,161 5,760 1,859 0
Unconditional purchase obligations
0 0 0 0 0
Other long-term obligations 0 0 0 0 0
------ ------ ------ ------ ------
Total contractual cash obligations $9,780 $2,161 $5,760 $1,859 $ 0
====== ====== ====== ====== ======
In addition, at November 29, 2003, the Company had borrowed $6.8 million against
its $15.0 million bank revolver agreement. The Company is in compliance with its
covenants under the related agreement. The Company is currently in the process
of re-negotiating a revised credit facility with its lender. This is expected to
be completed in the fourth quarter of fiscal 2004, although the Company cannot
assure that it will reach a satisfactory agreement.
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 agreed to make loans to certain officers and
key employees to purchase the common stock of the Company. At November 29, 2003,
the Company had loans totaling $274,000. The loans bear an interest rate of 4.9%
and are for a five-year term. 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 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.
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
The Company's accounting policies are disclosed in its fiscal 2003 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, fixed assets and intangible assets.
Management has discussed the development, selection and disclosure of these
estimates and assumptions with the audit committee and its board of directors.
REVENUE RECOGNITION
Revenue is recognized by the Company when all of the following criteria are met:
persuasive evidence of a selling arrangement exists; the Company's price to the
customer is fixed; collectibility is reasonably assured; and title has
transferred to the customer. Generally, these criteria are met at the time of
shipment. 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
amount 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,
2003 has been used during the first six months of fiscal 2004. 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 adopted Statement of Financial Accounting Standards ("SFAS") No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" during
fiscal 2003. In accordance with the provision of SFAS 144, the Company reviews
property, plant, and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of property, plant and equipment is measured by
comparison of its carrying amount to future net cash flows which the property,
plant and equipment are expected to generate. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the property, plant and equipment, if any, exceed its
fair market value. The Company has established a reserve of $247,000 as of
November 29, 2003.
On June 1, 2002, the Company adopted the provision of SFAS No. 142 "Goodwill and
Other Intangible Assets" for evaluating whether goodwill or indefinite-lived
intangible assets are impaired. Going forward the Company will need to review
goodwill and other indefinite-lived intangible assets on at least an annual
basis to determine whether they are impaired.
The Company recorded a goodwill impairment charge of $352,000 ($236,000 net of
taxes) during fiscal 2003, in its Graphics segment. The impairment has been
recorded as a cumulative effect of change in accounting principle on the
consolidated statements of operations.
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 is exposed to changing interest rates, principally under its
revolving credit facility and outstanding notes receivable. Currently, 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.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: The Company's management, with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report. Based on such evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Company's disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on
a timely basis, information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act.
Internal Control Over Financial Reporting: There have not been any changes in
the Company's internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal
quarter to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, the Company was sued in fiscal 2003 by Silly
Productions, Inc. and its owner Thomas Riccio. The complaint alleged nine
theories of liability, all of which arose out of the actions of a former
employee of the Company who appears to have stolen small amounts of certain
materials during his employment by the Company, including collectable cards that
the Company was printing for the plaintiffs. The plaintiffs claimed that the
employee's actions destroyed the market for its product, and in discovery
alleged total damages of $4.9 million. The Company denied liability and
aggressively defended the claims. However, to avoid the further expense of
litigation, during the second quarter, the Company entered into a settlement
agreement with the plaintiffs pursuant to which the Company paid Silly
Productions $150,000. The plaintiffs dismissed the litigation, and the parties
released each other from further liability.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
31.1 Sarbanes-Oxley Section 302 Certification by the CEO
31.2 Sarbanes-Oxley Section 302 Certification by the CFO
32.1 Sarbanes-Oxley Section 906 Certification by the CEO
32.2 Sarbanes-Oxley Section 906 Certification by the CFO
(b) Reports on Form 8-K.
None incorporate by reference into other documents. However, the
Company submitted a Form 8-K dated October 10, 2003 to report the
Company's fiscal 2004 first quarter results for the period ended
August 30, 2003. The Company also submitted a Form 8-K dated January
7, 2004 to report the Company's fiscal 2004 second quarter results
for the period ended November 29, 2003.
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: January 13, 2004
/s/ Richard C Fischer
---------------------
Richard C. Fischer, Chairman and Chief Executive Officer
/s/ Paul M. Drewek
------------------
Paul M. Drewek, Chief Financial Officer