Outlook Group Corporation

1180 American Drive
Neenah, Wisconsin 54956
U.S.A.
Telephone: (920) 722-2333
Fax: (920) 727-8529
Web site: http://www.outlookgroup.com

Public Company
Incorporated: 1977 as Mailing and Printing Services Inc.
Employees: 600
Sales: $71.3 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: OUTL
NAIC: 323112 Commercial Flexographic Printing; 56191 Packaging and Labeling Services

Outlook Group Corporation is a leading printing and pack-aging company with special expertise in flexographic printing and laminating for the food industry, in the printing and packaging of promotions such as the cards and trinkets found in cereal boxes, and in printing sports cards and other collectible cards. The diversified company also provides a broad range of services to its clients. It prints brochures, reports, catalogs, and promotional materials for many commercial customers. Its flexible packaging division prints on plastic films, papers, and foil used for food packages. The firm also has expertise in packaging of promotional items. For example it can print coupons, wrap them in plastic, and insert them in the finished package. Additionally, the company handles mailing or distribution of packages for its clients. Beyond packaging, Outlook Group also sells its logistical prowess, offering information management, warehousing, inventory control, and order fulfillment services to clients.

Looking for Niche Markets in the 1980s

Outlook Group began in 1977, the project of four longtime friends in Neenah, Wisconsin. David Erdmann, Charles Thompson, John Wiley, and Elton Beattie, Jr., had known each other since high school. When they were in their early 30s, they decided to go into business together providing bulk mailing service for a local printer, Banta Corp. A fifth investor in the new company, called simply Mailing and Printing Services Inc., was Beattie’s father Elton Beattie, Sr., Erdmann took the post of president and chief executive officer, and Thompson became executive vice-president. The company gradually expanded beyond its first mission of working for Banta, and became more of a printer itself. Erdmann’s marketing strategy was to look for specialty jobs it could do for customers, and then try to persuade the clients to let the company do other jobs as well.

Business was up and down, but Mailing and Printing seized a few lucky opportunities. In 1984 the company found work printing, cutting, and wrapping cards for a trendy board game called Trivial Pursuit. This work took the company into an area that would be crucial for it, printing specialty cards. The company expanded rapidly in the mid-1980s, adding as many as 100 new employees a year. In 1986, Mailing and Printing got another card printing job, this one printing and wrapping recipe cards. The company gained valuable experience in both printing and packaging these items, enough so that it stood out as one of only a few entities in the nation that could handle this type of work.

Meanwhile, the collectible sports card market was growing. Baseball cards had long been popular, and their printing was done almost entirely by a company called Topps. The National Football League (NFL) wondered if kids might also buy cards with images of professional football players. In 1989 a marketing branch of the NFL called National Football League Proper-ties Inc. began granting licenses to entrepreneurs who wanted to get into the football card business. However, before it could get this project off the ground, it needed to find a printer who could produce the cards. Very few companies had the necessary equipment and know-how, and the NFL turned to Mailing and Printing, by then known as Outlook Graphics. Outlook took the NFL’s business, and soon garnered other sports card clients.

Outlook followed up other niche markets as well. When a manager at Procter & Gamble complained to an Outlook sales representative about the time-consuming handwork the company did stuffing its Bounce fabric softener sheets into cartons, Outlook determined that it could do the job automatically. It got a contract from Procter & Gamble, and became the company’s source for all the Bounce it sold through laundromat vending machines. Outlook levied this contract into more work from the company. Eventually Outlook printed the Bounce packages, as well as filled them. Outlook’s sales grew rapidly in the late 1980s, leaping from $7.7 million in 1986 to over $30 million in 1990. Earnings did not rise quite so steadily, dipping in 1987, but they began to rise steeply after 1989 with the addition of the sports card business.

High Flyer in the Early 1990s

Outlook Graphics made an initial public offering in 1991. The company had attracted a reputation in the Midwest and beyond for its specialty printing products, and it seemed to have an extraordinary touch for developing profitable niches. The public offering went exceptionally well. Shares started out in April 1991 at $11.50, and one year later the price had more than doubled. Outlook had prominent clients, such as Procter & Gamble, cereal manufacturer Kellogg, and food giant Kraft. Fortune magazine picked Outlook as a company to watch in a January 13, 1992 column, noting “the company can do just about anything to turn a plain piece of paper or plastic into an alluring consumer product.”

The company built much of its growth on picture cards. From football cards it went on to produce cards for other sports, and also made cards for entertainment companies, including Marvel Comics. Outlook formed a joint venture with another company to make and market picture cards based on the Beren-stain Bears series of children’s books in 1991. The company was the primary producer of cards for three major companies: Fleer Corp., Liggett Group Inc., and Upper Deck Co.. However, as the trading card market grew, many companies tried to get in on the boom. The glut in the card market led to a collapse. In 1992, the trading card industry as a whole brought in around $2 billion. Outlook was getting about 60 percent of its revenue from its card printing and packaging. However, signs that the card market was in decline were clear. Producers were asked to turn over orders in just two to three weeks, instead of the usual six weeks. With the shortened lead time, Outlook couldn’t handle all the work, and ended up outsourcing some of the work to area printers. This cut into Outlook’s profit margin. The company had too much invested in cards, and it struggled to diversify into other areas before the market fell apart. By 1992, Outlook had cut its dependence on trading cards to 50 percent, and aimed to lower this as a percentage of sales in coming years.

Diversification Efforts in the Mid-1990s

Outlook struggled to find another market as profitable as trading cards to protect itself from being dragged down as the trend faltered. Late in 1992, Outlook spent $5.4 million to acquire a powdered food mixing and packaging plant in Oconomowoc, Wisconsin. The plant was owned by Nestle Beverage Co., and packaged foods like powdered gravy, hot cocoa mix, and malted milk. Outlook named the company Outlook Foods, and operated it as a subsidiary. It began by operating the plant under contract to Nestle, keeping the same employees and machinery. But within a year, Outlook was adding new customers of its own. The plant was expected to bring in from $25 to $35 million in revenue. The company hoped the added income would cushion it from stagnation in its trading card business. Several months after the Nestle deal was settled, Outlook made another acquisition. It bought up a Milwaukee-area flexographic printing and laminating company named Sun-rise Packaging Inc. Outlook renamed this company Outlook Packaging. The new purchase broadened Outlook’s food pack-aging capabilities. It already had contracts from major manufacturers like Oscar Mayer Foods Corp. and General Mills for work at its Oconomowoc plant, and it hoped to be able to offer more services to food industry customers.

The diversification strategy brought Outlook work in a more stable industry—food packaging—as opposed to the boomand-bust work of printing trading cards. The company hoped to grow at a more modest rate of 20 percent annually in the mid-1990s. Although this was less than the explosive growth the company had seen when it first gained all its trading card business, the company executives hoped this rate was sustainable. One more acquisition in the mid-1990s added depth to the firm’s packaging division. It bought Barrier Films in 1995, a company which turned resins into the filmy plastic used to wrap food products such as prepackaged salads.

Falling Profits in the Late 1990s

Outlook repositioned itself as a broad-ranged packaging and printing company in order to get away from its dependence on trading cards. Nevertheless, the firm was unable to recapture the profit margins it had in the early 1990s, when the trading card market was still growing. Earnings in fiscal 1992 were $5.8 million on sales of $64 million. In 1995, sales had almost doubled, to $120 million, but profits were only $1.3 million. The company had continued to print trading cards, even though the market was no longer growing. But the failing trading card market took another chop in the neck with the baseball players strike of 1995. The whole sports card industry suffered as a result. In late 1995, Outlook lost its major trading card contract when it was dropped by Fleer Corp.. The company lost money for the next two years, and as the company’s profitability vanished, its stock price tumbled. By 1996 Outlook shares were going for approximately $5, less than half what they had cost at the 1991 public offering.

Company Perspectives:

Our mission is to be “the best” by exceeding all others in performance through profitably satisfying the needs of our clients for the goods and services that are derived from core competencies in printing, packaging, and mailing in a safe and quality working environment.

In 1997 Outlook announced that it would sell off two of its divisions, Barrier Films and Outlook Foods, the Oconomowoc dry food packaging plant. Barrier, which was based in Sparks, Nevada, was sold in February 1997 to World Class Film Corp. of Yonkers, New York. Then in August, Outlook announced that it had agreed to be acquired by a Minneapolis-based lever-aged buyout group, a private company called Goldner Hawn Johnson & Morrison. Goldner Hawn agreed to pay $8.25 a share for Outlook, which came to about $38 million. Outlook was to remain headquartered in Neenah, and the deal did not include its Outlook Foods subsidiary, which was to be sold to a company in Illinois. Goldner Hawn was founded in 1990, and specialized in buying up midwestern manufacturing companies. Outlook’s management considered the deal the best it could do for its shareholders. Goldner Hawn said it would continue to operate the company, and retain its employees.

But the deal did not come off. In November 1997, Outlook announced that it was making a new acquisition, buying the packaging division of a California company called R.P. Packaging. Outlook bought R.P.’s general converting division, a plant in Emeryville, California. It planned to move production to its Oconomowoc facility, but retain the California sales force. This gave Outlook increased capacity for flexographic printing and laminating, and an entrance into the West Coast market. But the Oconomowoc food processing division had been scheduled for sale to a company in Hinsdale, Illinois. In December 1997, the division did find a new owner, but it was Outlook’s president David Erdmann. He bought Outlook Foods and left the company he had founded. The new principals were Richard Fischer, chairman, and Joseph Baksha, president.

In June 1998, Fischer and Baksha announced that the acquisition deal with Goldner Hawn had been cancelled. The buyout had been pending for almost a year, while Outlook sold off its Barrier Films and Outlook Foods divisions. But in the time since the deal was first announced, Outlook made a surprising return to profitability. By June 1998, the company had had four straight quarters of profits. Fischer and Baksha refrained from discussing details of why they pulled out of the buyout, but it was clear that Outlook seemed in better shape financially in 1998 than it had in 1997.

Under its new management, Outlook trimmed down, shed-ding unprofitable customers. It continued to improve slowly, earning $753,000 in 1998 and then around $1.4 million in 1999. Sales that year were close to $67 million. Earnings were rising at a faster rate than sales. The company was now profitable, and showing modest growth. But what Fischer and Baksha really wanted was a new buyer. In late 1999 they told shareholders that they still wanted to sell, preferably to a larger company who would continue to run the business. But there were no takers. Into the year 2000 Outlook’s managers were still hoping for a buyer. Yet even without a merger, the company seemed to be doing better. By the third quarter of 2000, Outlook was able to report that earnings were up almost 60 percent over the same period a year earlier, and sales too were rising.