UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly report pursuant to section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1995 Commission file number 0-13875
LANCER CORPORATION
(Exact name of registrant as specified in its charter)
Texas 74-1591073
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
235 West Turbo, San Antonio, Texas 78216
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 344-3071
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 14(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
issuers of classes of common stock, as of the latest
practicable date.
Shares outstanding as of
Title May 8, 1995
Common stock, par value 2,574,604
$.01 per share
Part I - Financial Information
Item 1 - Financial Statements
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
(Unaudited)
Assets
Current assets:
Cash $ 1,633,021 $ 2,102,390
Receivables:
Trade accounts and notes 12,748,174 9,152,033
Refundable income taxes - 342,981
Other 428,569 455,811
13,176,743 9,950,825
Less allowance for
doubtful accounts 85,000 85,000
Net receivables 13,091,743 9,865,825
Inventories 18,493,235 20,318,073
Prepaid expenses 184,731 54,827
Total current assets 33,402,730 32,341,115
Property, plant and
equipment, at cost:
Machinery and equipment 12,167,763 12,093,915
Tools and dies 5,235,387 5,189,667
Leaseholds, office equipment
and vehicles 4,169,940 3,830,330
Buildings 7,497,658 6,522,429
Land 916,843 656,740
29,987,591 28,293,081
Less accumulated depreciation
and amortization 15,425,396 15,051,379
Net property, plant and
equipment 14,562,195 13,241,702
Long-term receivables 590,251 538,312
Deferred charges and other
assets, at cost, less
applicable amortization 543,418 775,075
$ 49,098,594 $ 46,896,204
See accompanying notes to consolidated financial statements.
Part I - Financial Information
Item 1 - Financial Statements
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
March 31, December 31,
1995 1994
(Unaudited)
Liabilities and Shareholders'
Equity
Current Liabilities:
Accounts payable $ 4,867,489 $ 4,899,550
Current installments of
long-term debt 2,254,123 1,408,663
Line of credit with bank 6,500,000 6,000,000
Accrued expenses and other
liabilities 2,542,790 2,655,113
Income taxes payable 365,129 -
Total current liabilities 16,529,531 14,963,326
Other long-term liability 580,000 520,000
Deferred income taxes 970,586 1,096,961
Long-term debt, excluding current
installments 3,130,558 3,397,174
Total liabilities 21,210,675 19,977,461
Shareholders' equity:
Preferred Stock:
Without par value: 5,000,000 - -
shares authorized, none issued
Common stock:
$.01 par value; 10,000,000 shares
authorized issued and outstanding:
2,574,604 in 1995 and 1994 25,746 25,746
Additional paid-in capital 9,810,607 9,810,607
Retained earnings 18,051,566 17,082,390
Total shareholders' equity 27,887,919 26,918,743
49,098,594 46,896,204
See accompanying notes to consolidated financial statements.
Part I - Financial Information
Item 1 - Financial Statements
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31, March 31,
1995 1994
Net sales $ 20,341,217 $ 16,154,632
Cost of sales 16,472,973 12,956,015
Gross profit 3,868,244 3,198,617
Selling, general and
administrative expenses 2,634,146 2,144,082
Operating income 1,234,098 1,054,535
Other (expense) income:
Interest expense (221,314) (171,368)
Interest and other income 543,390 427,783
322,076 256,415
Earnings before income taxes 1,556,174 1,310,950
Income tax expense (benefit):
Current 713,373 532,803
Deferred (126,375) (29,950)
586,998 502,853
Net earnings $ 969,176 $ 808,097
Weighted average common
shares 2,653,068 2,434,373
Net earnings per common share $ 0.37 $ 0.33
See accompanying notes to consolidated financial statements.
Part I - Financial Information
Item 1 - Financial Statements
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, March 31,
1995 1994
Cash flow from operating
activities:
Net earnings $ 969,176 $ 808,097
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 542,387 480,664
Loss on sale and disposal of
assets 6,753 4,606
Increase in receivables (3,620,838) (2,565,578)
Decrease in refundable income
taxes 342,981 -
Increase in prepaid expenses (129,904) (60,644)
Decrease in inventories 1,824,838 998,685
Decrease in other assets 215,904 5,421
Increase (decrease) in
accounts payable (32,061) 590,308
Increase (decrease) in
accrued expenses (112,323) 91,219
Increase in income taxes
payable 365,129 437,892
Decrease in deferred income
taxes (126,375) (29,950)
Increase in other long-term
liabilities 60,000 20,000
Net cash provided by
operating activities 305,667 780,720
Cash flow from investing activities:
Proceeds from sale of assets 7,500 4,700
Acquisition of property,
plant, and equipment (1,861,380) (935,794)
Investment in common stock - (150,000)
Net cash used in investing
activities (1,853,880) (1,081,094)
Cash flow from financing activities:
Net borrowings on line of
credit agreement 500,000 200,000
Proceeds from issuance of
long-term debt 1,000,000 221,480
Retirement of long-term debt (421,156) (469,427)
Proceeds from exercise of
stock options - 57,436
Net cash provided by
financing activities 1,078,844 9,489
Net decrease in cash (469,369) (290,885)
Cash at beginning of year 2,102,390 1,353,167
Cash at end of period $ 1,633,021 $ 1,062,282
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
All adjustments (consisting of normal recurring adjustments)
have been made which are necessary for a fair presentation
of financial position and results of operations. All
intercompany balances and transactions have been eliminated
in consolidation. It is suggested that the consolidated
financial statements be read in conjunction with the
consolidated financial statements and notes thereto included
in the December 31, 1994 Annual Report on Form 10-K.
Earnings per share are based on the weighted average number
of common and common equivalent (dilutive stock options)
shares outstanding each period. Fully diluted earnings per
share would not be different than earnings per common and
common equivalent share.
2. Inventory Components
The Company uses the gross profit method to determine cost
of sales and inventory for interim periods. Inventory
components are estimated based on historical relationships
as follows:
March 31, December 31,
1995 1994
Finished Goods $ 5,945,100 $ 6,531,738
Work in process 11,430,416 12,558,323
Raw material and
supplies 1,117,719 1,228,012
$ 18,493,235 $ 20,318,073
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Comparison of the Three Months Ended March 31, 1995 and 1994
Net sales for the quarter ended March 31, 1995 increased by
$4.2 million, or 26.0%, to $20.3 million from $16.1 million
for the same period last year. This increase reflects a
general increase in demand for all product lines,
particularly ice cooled dispensers and citrus dispensers.
Domestic sales accounted for 71.0% of the net sales for the
quarter ended March 31, 1995, an increase of 36.0%, from
65.8% for the same period last year.
Due to the increase in sales, the gross profit recognized
for the first quarter of 1995 increased by approximately
$670,000, or 20.9%, to $3.9 million from $3.2 million for
the same quarter last year, while the gross margin (the
percentage of net sales reflected by gross profit) for the
period decreased to 19.0% from 19.8% in the same period in
1994. The increase in gross profit is primarily due to
increased sales. The decline in gross profit percentage is
primarily due to increases in the cost of certain raw
materials which the Company was unable to recover from its
customers.
Selling, general and administrative costs during the quarter
ended March 31, 1995 increased by approximately $490,000, or
22.9%, to $2.6 million from $2.1 million for the same
quarter last year. This increase reflects higher selling
and engineering expenses, as well as an increase in costs
for employee health care.
Interest expense for the three months ended March 31, 1995
increased approximately $50,000, or 29.1%, to approximately
$221,000 from approximately $171,000 for the same period
last year, reflecting higher average outstanding debt during
1995.
Interest and other income increased for the three months
ended March 31, 1995 as compared to 1994 due primarily to
increased commissions earned under a sales representative
agreement.
Income tax expense for the three months ended March 31, 1995
increased by approximately $84,000, or 16.7%, to
approximately $587,000 from approximately $503,000 for the
same period in 1994. This increase was primarily due to
increased pretax earnings.
Net earnings for the three months ended March 31, 1995
increased by approximately $161,000, or 19.9%, to
approximately $969,000 ($.37 per share) from approximately
$808,000 ($.33 per share) for the same period in 1994. This
increase was primarily due to increased net sales and the
increase in interest and other income.
Liquidity and Capital Resources
The net decrease in cash for the three months ended March
31, 1995 was approximately $469,000 compared to a decrease
of approximately $291,000 for the same period in the prior
year.
During March 1995, the Company purchased the property and
buildings it had been leasing in Piedras Negras, Mexico (the
"Mexican Plant"). The purchase price of $1.1 million was
financed by the Company's existing lender from the proceeds
of a $1.0 million term note which is payable over a 12-month
period and bears interest at prime plus 0.25%. The balance
of the purchase price came from available funds.
The Company had $1.5 million available under a working
capital line of credit with the Company's primary lender at
March 31, 1995. Management has secured a verbal committment
from its lender to increase this line of credit by
$2,000,000 to $10,000,000 in May 1995 upon renewal. The
Company believes that cash from operations, together with
cash on hand, cash available under the line of credit and a
separate equipment line of credit with a major industrial
lender, will be sufficient to fund the Company's activities
for the foreseeable future.
Part II - Other Information
Item 1. Legal Proceedings
The Company is a party to various lawsuits and claims
generally incidental to its business. In the opinion of
management and independent legal counsel, the ultimate
disposition of these matters is not expected to have a
significant adverse effect on the Company's financial
position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Promissory Note dated April 18, 1995 between Nueva
Distribuidora Lancermex S.A. de C.V. and First
Interstate Bank of Texas, N.A.
Guaranty Agreements dated April 18, 1995 between
Lancer Corporation and First Interstate Bank of
Texas, N.A.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the
fiscal quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
LANCER CORPORATION
(Registrant)
May 8, 1995 By:
Dennis D. Stout
Chief Financial Officer
May 8, 1995 By:
Andrew O. Mitchell
Corporate Treasurer
__________________
Makers' Initials
PROMISSORY NOTE
$1,500,000.00 April 18, 1995
For value received, NUEVA DISTRIBUIDORA LANCERMEX S.A. de
C.V. (the "Makers," whether one or more), unconditionally promise
to pay to the order of FIRST INTERSTATE BANK OF TEXAS, N.A., a
national banking association (the "Payee"), at 700 N. St. Mary's,
Suite 300, San Antonio, Bexar County, Texas 78205, or such other
location as the Payee designates to the Makers in writing, the
principal sum of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($1,500,000.00), or so much as may be advanced hereunder
from time to time, in legal and lawful money of the United States
of America, with interest thereon as hereinafter specified.
TERMS OF PAYMENT:
Interest only on this Note shall be due and payable in
monthly installments, commencing on May 31, 1995 and continuing
regularly thereafter on the last day of each calendar month until
July 31, 1995 when the entire amount of this Note, principal and
interest then remaining unpaid, shall be due and payable. Each
payment shall be credited to the discharge of the interest
accrued, the reduction of principal, and other unauthorized
charges, if any, in such manner and order as the Payee shall
determine in its sole discretion.
PAYMENT ON NON-BUSINESS DAYS:
If any payment hereunder falls due on a Saturday, Sunday or
public holiday on which commercial banks in San Antonio, Texas
are permitted or required by law to be closed, the time for such
payment shall be extended to the next day on which the Payee is
open for business, and such extension of time shall be included
in the calculation of interest accruing and payable hereunder.
RATE OF INTEREST:
From the date hereof until maturity, interest (calculated on
the basis of a year of 360 days for the actual number of days
elapsed) shall accrue on the unpaid principal balance of this
Note at a rate per annum equal to the lesser of (i) the Prime
Rate plus one-fourth of one percent (0.25%) or (ii) the Maximum
Lawful Rate. After maturity (whether by acceleration or
otherwise) until paid, interest shall accrue on the matured
principal and accrued, but unpaid, interest on this Note at a
rate per annum equal to the lesser of (i) the Prime Rate plus two
and one-quarter percent (2.25%), or (ii) the Maximum Lawful Rate.
The interest rate shall be adjusted concurrently with changes in
the Prime Rate without notice to the Makers.
As used herein, the term "Prime Rate," shall mean that rate
of interest equal on any given day to the rate of interest most
recently established by the Payee as its prime rate and entered
as such in its records, whether or not such rate is otherwise
published. The Prime Rate will automatically fluctuate upward
and downward, without special notice to the Makers or any other
person. THE PRIME RATE MAY NOT BE THE BEST OR LOWEST RATE OR A
FAVORED RATE OF INTEREST, AND ANY REPRESENTATION OR WARRANTY IN
THAT REGARD IS EXPRESSLY DISCLAIMED.
As used herein, the term "Maximum Lawful Rate" shall mean
the greater of (i) the highest non-usurious rate of interest
permitted by applicable United States law, or (ii) a rate per
annum equal to the indicated rate ceiling determined weekly in
accordance with the computation specified in Article 5069-1.04,
Vernon's Texas Civil Statutes, 1925, as amended, as such
indicated rate ceiling is in effect from time to time, but in no
event greater than twenty-eight percent (28%) per annum. Unless
precluded by law, changes in the Maximum Lawful Rate created by
statute or governmental action during the term of this Note shall
be immediately applicable to this Note on the effective date of
such changes. In the event that no Maximum Lawful Rate exists,
then the term "Maximum Lawful Rate" shall be deemed to mean a
rate per annum equal to the Prime Rate, plus five percent
(5.00%).
Notwithstanding the foregoing, if, at any time, the rate of
interest applicable to this Note (but for the limitation thereof
to the Maximum Lawful Rate) exceeds the Maximum Lawful Rate, the
rate of interest to accrue on this Note shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in such rate
of interest applicable to this Note (but for the limitation
thereof to the Maximum Lawful Rate) shall not reduce the rate of
interest to accrue on this Note below the Maximum Lawful Rate
until the total amount of interest which would have accrued if a
varying rate per annum equal to the rate of interest applicable
to this Note (but for the limitation thereof to the Maximum
Lawful Rate) had at all times been in effect.
PREPAYMENT:
The Makers reserve the right to prepay this Note in any
amount at any time prior to maturity without penalty. Interest
shall be calculated on the unpaid principal to the date of any
prepayment and any such prepayment shall be applied first toward
the payment of accrued interest and next to the principal
installments of this Note in the inverse order of maturity.
SECURITY FOR PAYMENT:
Payment of this Note is secured by, and this Note is
entitled to the benefits of, all security agreements,
assignments, deeds of trust, mortgages and lien instruments
executed by the Makers (or any of them), or other similar
instruments, guaranties, endorsements or other agreements,
executed by any other person or entity (the "Collateral
Agreements," whether one or more) to secure, guarantee or
otherwise provide for the payment hereof, in favor of or for the
benefit of the Payee, including any previously executed and any
now or hereafter executed. Without limiting the foregoing, the
Collateral Agreements include one or more security agreements
with Lancer Corporation covering certain deposit accounts held by
the Payee and pledged to secure the indebtedness evidenced by
this Note. Advances under this Note shall, at the sole option of
the Payee, be limited to the principal balance of deposit
accounts specifically pledged to secure payment of this Note.
USE OF PROCEEDS:
This Note represents funds advanced to the Makers at the
Makers' special instance and request, the receipt of which is
hereby acknowledged, which funds shall be used by the Makers to
finance improvements to the Maker's maquilladora plant in Piedras
Negras, Mexico.
LIMITATION OF INTEREST:
All agreements and transactions among the Makers and the
Payee, whether now existing or hereafter arising, whether
contained herein or in any other instrument, and whether written
or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of acceleration of the
maturity hereof, late payment, prepayment, or otherwise, shall
the amount of interest contracted for, charged or received by the
Payee from the Makers for the use, forbearance, or detention of
the principal indebtedness or interest hereof, which remains
unpaid from time to time, exceed the Maximum Lawful Rate, it
particularly being the intention of the parties hereto to conform
strictly to the applicable usury laws of the State of Texas (or
applicable United States law to the extent that it permits the
Payee to contract for, charge or receive a greater amount of
interest than under Texas law). Any interest payable hereunder
or under any other instrument relating to the indebtedness
evidenced hereby that is in excess of the Maximum Lawful Rate,
shall, in the event of acceleration of maturity, late payment,
prepayment, or otherwise, be applied to a reduction of the
unrepaid indebtedness hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of such unrepaid indebtedness, such excess shall be
refunded to the Makers. To the extent not prohibited by
applicable law, determination of the Maximum Lawful Rate shall at
all times be made by amortizing, prorating, allocating and
spreading in equal parts during the full term of this loan, all
interest at any time contracted for, charged or received from the
Makers in connection with this loan, so that the actual rate of
interest on account of such indebtedness is uniform throughout
the term thereof.
SUCCESSORS AND ASSIGNS:
As used herein, the term "Payee" shall include the
successors and assigns of the Payee and any subsequent owner and
holder of this Note, and the term "Makers" shall include co-
makers, endorsers, guarantors, sureties and their respective
successors and assigns.
DEFAULT AND COLLECTION:
It is expressly provided that, upon default in the punctual
payment of this Note, or any part hereof, principal or interest,
as the same shall become due and payable, or upon default in the
performance of or compliance with any of the terms of any of the
Collateral Agreements, or if the Payee deems the Payee insecure,
either because the prospect of timely payment of this Note
becomes impaired, or because the prospect of timely performance
of any of the Collateral Agreements becomes impaired, at the
option of the Payee, the entire indebtedness evidenced hereby
shall be matured, and in the event default is made in the prompt
payment of this Note when due or declared due, and the same is
placed in the hands of an attorney for collection, or suit is
brought on the same, or the same is collected through probate,
bankruptcy or other judicial proceedings, then the Makers jointly
and severally agree and promise to pay all reasonable attorney's
fees, court costs and collection costs incurred by the Payee.
WAIVERS AND CONSENTS:
Each of the Makers waives presentment for payment, notice of
intent to accelerate, notice of acceleration, protest and notice
of protest, dishonor and diligence in collecting and the bringing
of suit against any other party, and agrees to all renewals,
extensions, partial payments, releases and substitutions of
security, in whole or in part, with or without notice, before or
after maturity. The Payee may remedy any default, without
waiving the same, or may waive any default without waiving any
prior or subsequent default.
GOVERNING LAWS AND VENUE:
This Note shall be governed by, and construed in accordance
with, the laws of the State of Texas and the United States of
America, without giving effect to the principles of choice of
laws thereof; provided, however, that in connection with any
legal action or proceeding (other than an action or proceeding to
enforce a judgment obtained in another jurisdiction) brought by
the Payee in any courts of Mexico or any political subdivision
thereof, this Note shall be deemed to be an instrument made under
the laws of Mexico and for such purposes shall be governed by,
and construed in accordance with, the laws of Mexico, and if any
provision of this Note is invalid, legally ineffective, or
contrary to the laws of Mexico, it shall be excised and all other
parts of this Note shall remain in effect and binding.
The Makers hereby irrevocably submit to the jurisdiction of
any competent court of the City of Piedras Negras, State of
Coahulia, Mexico, or of the Federal District, Mexico, or of the
United States District Court for the Western District of Texas
(San Antonio Division), United States of America, or the District
Courts of the State of Texas sitting in the County of Bexar,
State of Texas, United States of America, as the Payee may elect,
in any action or proceeding arising out of or relating to this
Note, and the Makers hereby irrevocably agree that claims with
respect to such action or proceeding may be held and determined
in any of such courts. The Makers irrevocably waive, to the
fullest extent permitted by law, any objection which the Makers
may now or hereafter have to the laying of venue of any suit,
action or proceeding with respect to this Note brought in any
court aforementioned, and the Makers further irrevocably waive
any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. The Makers
hereby expressly waive all rights of any other jurisdiction which
it may now or hereafter have by reason of its present or
subsequent domiciles.
ARBITRATION PROGRAM:
This term Note and the Collateral Agreements shall be
subject to the terms and conditions of the Arbitration Program as
described on Exhibit "A" attached hereto and made a part hereof
for all pertinent purposes.
EXECUTED in San Antonio, Bexar County, Texas on the date
first stated above.
NUEVA DISTRIBUIDORA LANCERMEX S.A.
de C.V.
By:________________________________
Name:______________________________
Title:_____________________________
111845.1
NOTICE AND ACKNOWLEDGMENT
FIRST INTERSTATE BANK OF TEXAS, N.A. OF NO ORAL AGREEMENTS
This agreement (this "Agreement") is made and entered into by and
among the undersigned effective the 18th day of April, 1995.
Definitions:
As used in this Agreement, the following terms shall have the
following meanings:
Parties-The undersigned persons and entities.
Note-That certain promissory note dated April 18, 1995 in
the amount of $1,500,000.00 executed by NUEVA DISTRIBUIDORA
LANCERMEX S.A. de C.V.
Loan Documents-This Agreement and any and all promissory
notes (including, without limitation, the Note), loan
agreements, deeds of trust, builder's and mechanic's lien
contracts, security agreements, assignments, pledges,
owner's consent to pledges, letters of credit, guarantees,
and all other loan documents executed in connection with or
otherwise relating to This Loan.
This Loan-The transaction comprised of the extension of
credit and all related agreements and accommodations by or
among any of the Parties evidenced by or contained in any of
the Loan Documents.
Agreements:
In consideration of the extension of This Loan, and for other
good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each of the Parties, the Parties (i)
agree that each Party's execution of this Agreement constitutes
acknowledgment that such Party has read and understands this
Agreement, and that it is intended to be a part of and is
incorporated by reference into each of the Loan Documents; (ii)
acknowledge receipt of the following Notice; and (iii) to the
extent allowed by law, agree to be bound by the terms of this
Agreement and the Notice:
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO
THIS LOAN CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES
RELATING TO THIS LOAN.
Executed as of the date first above stated.
DEBTOR OR OBLIGOR: LENDER:
NUEVA DISTRIBUIDORA LANCERMEX FIRST INTERSTATE BANK OF
S.A. de C.V. TEXAS, N.A., a national
banking
association
By:___________________________
By:___________________________
Name:_________________________
Name:_________________________
Title:________________________
Title:________________________
LANCER CORPORATION, a Texas
corporation
By:___________________________
Name:_________________________
Title:________________________
THE STATE OF TEXAS
COUNTY OF BEXAR
This instrument was acknowledged before me on the 18th day
of April, 1995, by ______________________,
_______________________, of FIRST INTERSTATE BANK OF TEXAS, N.
A., a national banking association, on behalf of said
association.
___________________________________
Notary Public, State of Texas
THE STATE OF TEXAS
THE COUNTY OF BEXAR
This instrument was acknowledged before me on the 18th day
of April, 1995, by ___________________________________________,
______________________, of LANCER CORPORATION, a Texas
corporation, a Texas corporation, on behalf of said corporation.
___________________________________
Notary Public, State of Texas
THE STATE OF TEXAS
THE COUNTY OF _____________
This instrument was acknowledged before me on the 18th day
of April, 1995, by
_______________________________________________,
______________________, of NUEVA DISTRIBUIDORA LANCERMEX S.A. de
C.V., a _______________ corporation, on behalf of said
corporation.
___________________________________
Notary Public, State of Texas
1093-39
134257.1
134261.1
GUARANTY AGREEMENT
For and in consideration of the sum of TEN AND NO/100
DOLLARS ($10.00) and other good and valuable consideration in
hand paid to the undersigned, LANCER CORPORATION, a Texas
corporation (the "Guarantor"), the receipt and sufficiency of
which considerations are hereby acknowledged, and for the purpose
of enabling NUEVA DISTRIBUIDORA LANCERMEX S.A. de C.V. (the
"Debtor"), to obtain credit or other financial accommodations
from FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking
association, in San Antonio, Bexar County, Texas (the "Lender"),
and the benefits thereby received by the Guarantor, the Guarantor
hereby jointly and severally (with all other guarantors, if any,
and the Debtor) and unconditionally guarantees the prompt payment
when due of the Obligations as defined below.
The Obligations consist of:
1. The indebtedness represented by that certain
promissory note of the Debtor (the "Note") dated of even
date herewith, in the principal amount of $1,500,000.00,
payable to the order of the Lender, bearing interest and
being payable as therein provided;
2. All renewals, extensions and rearrangements of the
Note;
3. All interest and costs of collection owing and
that may become owing thereon or in connection therewith;
4. All indebtedness and liabilities of the Debtor to
the Lender now existing or hereafter arising, whether fixed
or contingent, liquidated or unliquidated, direct or
indirect, and whether created under or evidenced by note,
application, commitment, endorsement, agreement, overdraft
of depository account, or otherwise; and
5. The Lender's court costs and reasonable attorney's
fees if the foregoing are not paid by the Guarantor on
demand when due or if this Guaranty Agreement is enforced by
suit or through probate, bankruptcy, or other judicial
proceedings. All amounts becoming payable hereunder to the
Lender under this Guaranty Agreement shall be payable at the
Lender's office in San Antonio, Bexar County, Texas.
The Guarantor hereby waives (a) any notice of acceptance of
this guaranty by the Lender; (b) any notice of the creation,
advancement, increase, existence, extension, renewal, or
rearrangement of the Obligations or any part thereof; (c) any
indulgence with respect to the Obligations (or any part thereof)
and with respect to any nonpayment thereof; (d) grace, demand,
protest, presentment, notice of demand, notice of intent to
accelerate, notice of acceleration, notice of protest, or notice
of presentment, and all other notices, whether similar or
dissimilar, with respect to the Obligations; and (e) notice of
the amount of the Obligations outstanding at any time. The
Lender at its option may, at any time and without notice to or
further consent by the Guarantor, accelerate, extend, or renew
the maturity of the Obligations or any part thereof and may grant
any other indulgence with respect thereto. Neither the Lender's
rights nor the Guarantor's obligations and liabilities will be
affected or impaired in any manner by (i) any renewal, extension,
or rearrangement of (or any other indulgence with respect to) the
Obligations or any part thereof; (ii) any release, withdrawal or
subordination of, or substitution for, any security or other
guaranty now or hereafter held by the Lender for payment of the
Obligations or any part thereof; (iii) any release of the Debtor
or any other person primarily or secondarily liable on the
Obligations or any part thereof (including any maker, endorser,
guarantor, or surety); (iv) any delay in enforcing payment of the
Obligations or any part thereof; or (v) any delay, omission, lack
of diligence, or lack of care in exercising any right or power
with respect to the Obligations or any security therefor or
guaranty thereof. Lender shall not be required as a condition of
enforcing the Guarantor's liabilities and obligations hereunder
requiring payment by the Guarantor hereunder to: (a) obtain or
assert a claim for judgment against the Debtor for the
Obligations or any part thereof; (b) collect or attempt to
collect all or any part of the Obligations from the Debtor or any
other person or from any other source; (c) foreclose against or
seek to realize upon any security now or hereafter existing for
the Obligations or any part thereof; (d) assert any other right
or remedy to which the Lender is or may be entitled in connection
with the Obligations (or any part thereof) or any security
therefor or other guaranty thereof; or (e) assert or file any
claim against the assets or estate of the Debtor or other person
liable for the Obligations or any part thereof.
The Guarantor expressly waives any right to the benefit of
(or to require or control application of) any security or the
proceeds thereof now existing or hereafter obtained by the Lender
as security for the Obligations or any part thereof. The Lender
need not apply to any of the Obligations any monies, payments, or
other property at any time received by, paid to, or in the
possession of the Lender, except as the Lender determines in its
sole discretion.
The Guarantor will be and remain fully liable under this
Guaranty Agreement, as provided herein, even if the Debtor may
not be liable for any part of the Obligations (a) because the
Debtor's indebtedness now or at any time hereafter exceeds the
amount or type permitted by law; (b) because such Obligation was
ultra vires; (c) because any person creating or guaranteeing the
same acted without authority; or (d) because of the Debtor's lack
of capacity, bankruptcy, insolvency or dissolution such as to
render the Obligations void, unenforceable or uncollectible as
against the Debtor. Nothing herein, however, shall be deemed to
admit or deny the existence of any right of the Guarantor to any
offset, reduction or abatement of Guarantor's Obligations
hereunder by reason of any claim, right or cause of action (or
any realization thereon), if any, of Guarantor or the Debtor
against the Lender for any reason.
Any notice or demand to the Guarantor hereunder or in
connection herewith must be in writing and may be given (and will
conclusively be deemed and considered to have been given and
received) by the deposit of such notice in the United States
mails, postage prepaid and addressed to the Guarantor at its
address shown herein. Nonetheless, actual notice will always be
effective, no matter how given or received. The last preceding
sentence will never be construed to affect or impair any waiver
of notice or demand herein provided or to require the giving of
notice or demand to or upon the Guarantor in any situation or for
any reason. Nothing herein may be construed to cancel, amend,
discharge, or limit any other guaranty or similar undertaking by
or obligation of the Guarantor in favor of the Lender.
This Guaranty is a continuing guaranty. It will continue to
be effective (or shall be reinstated, as the case may be) without
notice or further act if, at any time, any payment of any of the
Obligations is rescinded or must otherwise be returned by the
Lender upon or in connection with the insolvency, bankruptcy or
reorganization of the Debtor, any other Guarantor or otherwise,
all as though such payment had never been made to the Lender.
Without impairing the Lender's right to demand and collect the
balance of the Obligations from the Guarantor, the Lender may
compound with any one or more guarantors for such amount as it
may see fit and may release any guarantor from all further
liability to the Lender for such Obligations. Such compounding
and release will not in any manner impair the rights of each
guarantor as against any other guarantor or the rights of Lender
against any other guarantor.
The Guarantor hereby agrees that any and all indebtedness
now or hereafter owed or owing by the Debtor to the Guarantor
shall be and remain subordinate in payment to all of the
Obligations. Should the Guarantor receive any payment on account
of any of said subordinated indebtedness (or by reason of any
security therefor), the Guarantor shall hold the amount received
in trust for the benefit of the Lender and, upon Lender's demand,
shall remit same to Lender for application on the Obligations.
No Guarantor will exercise any right it may acquire by way of
subrogation under this Guaranty, by payment made hereunder or
otherwise, until all of the Obligations have been paid in full.
If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when any Obligations remain
outstanding, such amount shall be held in trust for the benefit
of the Lender and shall forthwith be paid to the Lender to be
credited and applied upon the Obligations, whether same or any
portion thereof are then due. The Guarantor hereby waives all
rights to which the Guarantor may be (or might otherwise become)
entitled pursuant to Sections 34.02 and 34.03 of the Texas
Business and Commerce Code as in effect from time to time, except
the Guarantor shall be entitled to any applicable right of
subrogation after the full and final payment of the Obligations.
This Guaranty Agreement will be transferable and negotiable
by the Lender, with the same force and effect and to the same
extent that the Obligations are transferable. On the Lender's
assignment or transfer of any of the Obligations hereby
guaranteed, the legal holder or owner of the Obligations (or part
thereof or interest therein thus transferred or assigned by the
Lender) will also, unless provided otherwise by the Lender in its
assignment, have and may exercise all rights granted to the
Lender under this Guaranty Agreement to the extent of the part of
or interest in the Obligations thus assigned or transferred to
said person. The Guarantor hereby expressly waives notice of
transfer or assignment of the Obligations (or any part thereof)
or the rights of the Lender hereunder. Anything in this
paragraph to the contrary notwithstanding, all Obligations to the
Lender will be paid in full first, before any assignee receives
any benefits of this Guaranty agreement.
This Guaranty Agreement is governed by the law of the State
of Texas, except as Federal law may apply. The Guarantor agrees
and consents to the jurisdiction of the District Courts of Bexar
County, Texas and of the United States District Court for the
Western District of Texas (San Antonio Division), and
acknowledges that such courts shall constitute proper and
convenient forums with respect to the subject matter hereof, and
further agree that such courts shall be the sole and exclusive
forums for the regulation of any actions between the Guarantor
and the Lender with respect to the subject matter hereof.
This Guaranty Agreement and the Guarantor's obligations
hereunder will be binding on the Guarantor and the Guarantor's
heirs, legal representatives, personal representative, executors,
administrators and successors.
As used in this Guaranty Agreement and as required by the
context, each number (singular and plural) includes all numbers,
each gender includes all genders and, unless the context requires
otherwise, the words "person" and "party" include "person,"
"corporation," "firm," "partnership," "limited partnership,"
"joint venture," "association" or other entity.
EXECUTED effective April 18, 1995.
LANCER CORPORATION, a Texas
corporation
By:___________________________
Name:_________________________
Title:________________________
Address:
235 West Turbo
San Antonio, Texas 78216
1093-39
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 1,633,021
<SECURITIES> 0
<RECEIVABLES> 13,176,743
<ALLOWANCES> 85,000
<INVENTORY> 18,493,235
<CURRENT-ASSETS> 33,402,730
<PP&E> 29,987,591
<DEPRECIATION> 15,425,396
<TOTAL-ASSETS> 49,098,594
<CURRENT-LIABILITIES> 16,529,531
<BONDS> 0
<COMMON> 25,746
0
0
<OTHER-SE> 27,862,173
<TOTAL-LIABILITY-AND-EQUITY> 49,098,594
<SALES> 20,341,217
<TOTAL-REVENUES> 20,341,217
<CGS> 16,472,973
<TOTAL-COSTS> 16,472,973
<OTHER-EXPENSES> 2,634,146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221,314
<INCOME-PRETAX> 1,556,174
<INCOME-TAX> 586,998
<INCOME-CONTINUING> 969,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 969,176
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
EXHIBIT "A"
ARBITRATION PROGRAM
(a) Binding Arbitration. Upon the request of any party,
whether made before or after the institution of any legal
proceeding, any action, dispute, claim, or controversy of any
kind (e.g., whether in contract or in tort, statutory or common
law, legal or equitable) now existing or hereafter arising
between the parties in any way arising out of, pertaining to or
in connection with (1) the agreement, document or instrument to
which this Arbitration Program is attached or in which it is
referred to or any related agreements, documents, or instruments
(the "Documents"); (2) all past and present loans, credits,
accounts, deposit accounts (whether demand deposits or time
deposits), safe deposit boxes, safekeeping agreements,
guarantees, letters of credit, goods or services, or other
transactions, contracts or agreements; (3) any incidents,
omissions, acts, practices, or occurrences causing injury to
either party whereby the other party or its agents, employees or
representatives may be liable, in whole or in part; or (4) any
aspect of the past or present relationships of the parties, shall
be resolved by binding arbitration in accordance with the terms
of this Arbitration Program. The foregoing matters shall be
referred to as a "Dispute." Any party to this Arbitration
Program may, by summary proceedings (e.g., a plea in abatement or
motion to stay further proceedings), bring an action in court to
compel arbitration of any Disputes.
(b) Governing Rules. All Disputes between the parties
shall be resolved by binding arbitration administered by the
American Arbitration Association (the "AAA") in accordance with
the terms of this Arbitration Program, the Commercial Arbitration
Rules of the AAA, and, to the maximum extent applicable, the
Federal Arbitration Act (Title 9 of the United States Code). In
the event of any inconsistency between this Arbitration Program
and such statute and rules, this Arbitration Program shall
control. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction; provided, however,
that nothing contained herein shall be deemed to be a waiver by
any party that is a bank of the protections afforded to it under
12 U.S.C. 91 or Texas Banking Code art. 342-609.
(c) No Waiver: Preservation of Remedies. No provision of,
nor the exercise of any rights under, this Arbitration Program
shall limit the right of any party to employ other remedies,
including, without limitation (1) foreclosing against any real or
personal property collateral or other security by the exercise of
a power of sale under a deed of trust, mortgage, or other
security agreement or instrument, or applicable law; (2)
exercising self-help remedies (including set-off rights); or (3)
obtaining provisional or ancillary remedies such as injunctive
relief, sequestration, attachment, garnishment, or the
appointment of a receiver from a court having jurisdiction
before, during, or after the pendency of any arbitration. The
institution and maintenance of an action for judicial relief or
pursuit of provisional or ancillary remedies or exercise of self
help remedies shall not constitute a waiver of the right of any
party, including the plaintiff, to submit the Dispute to
arbitration nor render inapplicable the compulsory arbitration
provisions hereof. Without limitation of the foregoing, the
parties shall be entitled to the benefits of each and all of the
remedies and assistance provided for by applicable law.
In Disputes involving indebtedness or other monetary
obligations, each party agrees that the other party may proceed
against all liable persons, jointly and severally, or against one
or more of them, less than all, without impairing rights against
other liable persons. Nor shall a party be required to join the
principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A
party may release or settle with one or more liable persons as
the party deems fit without releasing or impairing rights to
proceed against any persons not so released.
(d) Statutes of Limitation. All statutes of limitation
that would otherwise be applicable shall apply to any arbitration
proceeding.
(e) Scope of Award: Modification or Vacation of Award:
Qualifications. The arbitrators shall resolve all Disputes in
accordance with the applicable substantive law. Any arbitrators
shall be practicing attorneys licensed to practice law in the
State of Texas and shall be knowledgeable in the subject matter
of the Dispute. With respect to a Dispute in which the claim or
amount in controversy does not exceed $1 million, a single
arbitrator (who shall have authority to render a maximum award of
$1 million, including all damages of any kind and costs, fees and
the like) shall be chosen and shall decide the Dispute.
With respect to a Dispute in which the claim or amount in
controversy exceeds $1 million, the Dispute shall be decided by a
majority vote of three (3) arbitrators. The arbitrators may
grant any remedy or relief that the arbitrators deem just and
equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary
to make effective the award. In all arbitration proceedings in
which the amount in controversy exceeds $1 million in the
aggregate, the arbitrators shall make specific, written findings
of fact and conclusions of law. In all arbitration proceedings
in which the amount in controversy exceeds $1 million, in the
aggregate, the parties shall have, in addition to the limited
statutory right to seek vacation of modification of an award
pursuant to applicable law, the right to seek vacation or
modification of any award that is based in whole or in part on an
incorrect ruling of law; provided, however, that any such
application for vacation or modification of an award based on an
incorrect ruling of law must be filed in a court having
jurisdiction over the Dispute within fifteen (15) days from the
date the award is rendered. The arbitrators' findings of fact
shall be binding on all parties and shall not be subject to
further review except as otherwise allowed by applicable law.
(f) Other Matters and Miscellaneous. To the maximum extent
practicable, an arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the
AAA. Arbitration proceedings hereunder shall be conducted at one
of the following locations in the State of Texas agreed to in
writing by the parties or, in the absence of such agreement,
selected by the AAA: (1) Austin; (2) Dallas; (3) Fort Worth; (4)
Houston; or (5) San Antonio. Arbitrators shall be empowered to
impose sanctions and to take such other actions as the
arbitrators deem necessary to the same extent a judge could do
pursuant to the Federal Rules of Civil Procedure, the Texas Rules
of Civil Procedure, and applicable law.
This Arbitration Program constitutes the entire agreement of
the parties with respect to its subject matter and supersedes all
prior discussions, arrangements, negotiations, and other
communications on dispute resolution. The provisions of this
Arbitration Program shall survive any termination, amendment, or
expiration of the Documents, unless the parties otherwise
expressly agree in writing. To the extent permitted by
applicable law, the arbitrator shall have the power to award
recovery of all costs and fees (including attorneys' fees,
administrative fees, and arbitrators' fees) to the prevailing
party.
This Arbitration Program may be amended, changed, or
modified only by the express provisions of a writing which
specifically refers to this Arbitration Program and which is
signed by all the parties hereto. If any term, covenant,
condition or provision of this Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or
invalidity or unenforceability shall not affect the legality,
validity or enforceability of the remaining parts of this
Arbitration Program, and all such remaining parts hereof shall be
valid and enforceable and have full force and effect as if the
illegal, invalid or unenforceable part had not been included.
The captions or headings in this Arbitration Program are for
convenience of reference only and are not intended to constitute
any part of the body or text of this Arbitration Program. Each
party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information
required in the ordinary course of business of the parties or by
applicable law or regulation.
