<PAGE> 1
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 SEPTEMBER 30, 1999 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.)
6655 LANCER BLVD., SAN ANTONIO, TEXAS 78219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 310-7000
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.
<TABLE>
<CAPTION>
TITLE SHARES OUTSTANDING AS OF
NOVEMBER 8, 1999
<S> <C>
Common stock, par value $.01 per share 9,124,857
</TABLE>
<PAGE> 2
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 602,770 $ 1,118,848
Receivables:
Trade accounts and notes 19,265,514 20,866,928
Other 594,907 565,254
------------- -------------
19,860,421 21,432,182
Less allowance for doubtful accounts (302,000) (326,000)
------------- -------------
Net receivables 19,558,421 21,106,182
------------- -------------
Inventories 36,563,327 46,128,697
Prepaid expenses 817,205 559,472
Income tax receivable 2,841,440 211,760
Deferred tax asset 124,404 117,241
------------- -------------
Total current assets 60,507,567 69,242,200
------------- -------------
Property, plant and equipment, at cost:
Land 1,259,938 1,259,938
Buildings 21,878,845 21,769,690
Machinery and equipment 20,231,644 19,699,040
Tools and dies 8,570,188 7,017,936
Leaseholds, office equipment and vehicles 8,611,352 8,148,299
Assets in progress 1,533,136 1,200,506
------------- -------------
62,085,103 59,095,409
Less accumulated depreciation and amortization (26,844,586) (24,596,773)
------------- -------------
Net property, plant and equipment 35,240,517 34,498,636
------------- -------------
Long-term receivables ($641,203 and $370,569
due from affiliates, respectively) 880,927 619,800
Long-term investments 3,574,626 3,317,131
Intangibles and other assets,
at cost, less accumulated amortization 4,156,306 5,162,200
------------- -------------
$ 104,359,943 $ 112,839,967
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 6,885,911 $ 8,854,438
Current installments of long-term debt 4,290,846 4,794,400
Line of credit with bank 20,400,000 22,300,000
Deferred licensing and maintenance fees 619,178 466,327
Accrued expenses and other liabilities 5,370,730 5,528,425
--------------- ---------------
Total current liabilities 37,566,665 41,943,590
Deferred tax liability 2,970,566 2,938,628
Long-term debt, excluding current installments 16,070,677 17,568,150
Deferred licensing and maintenance fees 1,991,000 2,131,624
--------------- ---------------
Total liabilities 58,598,908 64,581,992
--------------- ---------------
Commitments and contingencies -- --
Minority interest 599,696 --
Shareholders' equity:
Preferred stock, without par value
5,000,000 shares authorized; none issued -- --
Common stock, $.01 par value:
50,000,000 shares authorized; 9,124,857
and 9,121,482 issued and outstanding in
1999 and 1998, respectively 91,248 91,215
Additional paid-in capital 11,932,759 11,912,993
Accumulated other comprehensive loss (1,517,870) (2,581,558)
Retained earnings 34,655,202 38,835,325
--------------- ---------------
Total shareholders' equity 45,161,339 48,257,975
--------------- ---------------
$ 104,359,943 $ 112,839,967
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 29,182,638 $ 36,469,050 $ 103,482,838 $ 109,789,502
Cost of sales 28,328,664 27,148,651 86,986,644 81,529,792
------------- ------------- ------------- -------------
Gross profit 853,974 9,320,399 16,496,194 28,259,710
Selling, general and
administrative expenses 5,673,057 5,175,032 16,221,695 15,393,926
Impairment of Brazilian assets 5,955,904 -- 5,955,904 --
------------- ------------- ------------- -------------
Operating (loss) income (10,774,987) 4,145,367 (5,681,405) 12,865,784
------------- ------------- ------------- -------------
Other (income) expense:
Interest expense 857,615 1,105,812 2,661,868 3,042,420
Earnings from joint venture (323,938) -- (1,851,841) (16,125)
Gain on sale of investment (895,424) -- (895,424) --
Minority interest (66,970) -- (66,970) --
Other (income) expense, net 15,418 62,668 6,770 133,437
------------- ------------- ------------- -------------
(413,299) 1,168,480 (145,597) 3,159,732
------------- ------------- ------------- -------------
(Loss) income before income taxes (10,361,688) 2,976,887 (5,535,808) 9,706,052
------------- ------------- ------------- -------------
Income tax (benefit) expense:
Current (3,075,309) 1,276,550 (1,368,826) 3,224,738
Deferred (204,426) (139,347) 13,141 366,499
------------- ------------- ------------- -------------
(3,279,735) 1,137,203 (1,355,685) 3,591,237
------------- ------------- ------------- -------------
Net (loss) earnings $ (7,081,953) $ 1,839,684 $ (4,180,123) $ 6,114,815
============= ============= ============= =============
Common Shares and
Equivalents Outstanding:
Basic 9,124,509 9,112,304 9,123,252 9,063,394
Diluted 9,124,509 9,368,008 9,123,252 9,318,998
(Loss) Earnings Per Share:
Basic $ (0.78) $ 0.20 $ (0.46) $ 0.67
Diluted $ (0.78) $ 0.20 $ (0.46) $ 0.66
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net (loss) earnings $ (4,180,123) $ 6,114,815
Adjustments to reconcile net (loss) earnings to net cash
provided by (used in) operating activities
Depreciation and amortization 2,904,009 2,283,546
Deferred licensing and maintenance fees 12,227 (220,285)
Deferred income taxes (7,115) 348,477
Loss on sale and disposal of assets 22,064 16,351
Gain on sale of long-term investments (895,424) --
Minority interest (66,970) --
Earnings from joint venture (1,851,841) (16,125)
Impairment of Brazilian assets 5,955,904 --
Changes in assets and liabilities:
Receivables 1,179,627 (4,099,916)
Prepaid expenses (257,733) (281,036)
Income taxes receivable (2,644,307) --
Inventories 8,962,284 (5,362,118)
Other assets 532,386 (326,493)
Accounts payable (1,896,166) 1,327,299
Accrued expenses 21,691 1,041,982
Income taxes payable -- 388,119
------------- -------------
Net cash provided by operating activities 7,790,513 1,214,616
------------- -------------
Cash flow from investing activities:
Proceeds from sale of assets 14,058 7,500
Acquisition of property, plant and equipment (3,916,696) (4,105,161)
Acquisition of subsidiary company (1,719,654) --
Cash proceeds from long-term investments and affiliates 2,404,770 110,767
------------- -------------
Net cash used in investing activities (3,217,522) (3,986,894)
------------- -------------
Cash flow from financing activities:
Net (repayments) borrowings under line of credit agreements (1,900,000) 4,300,000
Retirement of long-term debt, net of proceeds (2,015,192) (2,847,200)
Proceeds from exercise of stock options 19,799 307,680
------------- -------------
Net cash (used in) provided by financing activities (3,895,393) 1,760,480
------------- -------------
Effect of exchange rate changes on cash (1,193,676) (21,765)
------------- -------------
Net decrease in cash (516,078) (1,033,563)
Cash at beginning of period 1,118,848 1,850,779
------------- -------------
Cash at end of period $ 602,770 $ 817,216
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1998 Annual Report on Form 10-K.
Certain amounts in the consolidated financial statements for prior periods have
been reclassified to conform with the current year's presentation.
2. INVENTORY COMPONENTS
Inventories are stated at the lower of cost or market on a first-in, first-out
basis (average cost as to raw materials and supplies) or market (net realizable
value). Inventory components are as follows (dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Finished Goods $ 15,908 $ 21,651
Work in process 10,520 11,371
Raw material and supplies 10,135 13,107
------------- -------------
$ 36,563 $ 46,129
============= =============
</TABLE>
3. IMPAIRMENT OF BRAZILIAN ASSETS
As a result of the continuing poor business conditions in much of Latin America,
the Company has substantially reduced its manufacturing operations in Brazil.
Accordingly, the Company's investment in Brazil has been written-down to net
realizable value. The write-down resulted in a pre-tax charge of $5,955,904 in
the three months ended September 30, 1999.
4. EARNINGS PER SHARE
The company calculates (loss) earnings per share in accordance with the
Statement of Financial Accounting Standards (SFAS) No. 128. Basic (loss)
earnings per share is calculated using the weighted average number of common
shares outstanding and diluted earnings per share is calculated assuming the
issuance of common shares for all potential dilutive common shares outstanding
during the reporting period. The dilutive effect of stock options approximated
255,704 shares for the three months ended September 30, 1998, and 255,604 shares
for the nine months ended September 30, 1998. Basic and diluted earnings per
share were the same for the three months ended and nine months ended September
30, 1999.
6
<PAGE> 7
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COMPREHENSIVE INCOME
The following are the components of comprehensive (loss) income (dollars in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net (loss) earnings $ (7,082) $ 1,840 $ (4,180) $ 6,115
Foreign currency translation gain (loss):
Foreign currency gain (loss) arising
during the period (779) (363) (2,087) (1,008)
Less reclassification adjustment for losses
included in net loss 3,263 -- 3,263 --
------------- ------------- ------------- -------------
Net foreign currency translation gain (loss) 2,484 (363) 1,176 (1,008)
Unrealized gain (loss) on investment (net of tax) (216) -- (114) --
------------- ------------- ------------- -------------
Comprehensive (loss) income $ (4,814) $ 1,477 $ (3,118) $ 5,107
============= ============= ============= =============
</TABLE>
Accumulated other comprehensive loss on the accompanying consolidated balance
sheets includes foreign currency translation adjustments and unrealized gain on
investment.
6. SEGMENT AND GEOGRAPHIC INFORMATION
The Company and its subsidiaries are engaged in the manufacture and distribution
of beverage dispensing equipment and related parts and components. The Company's
reportable segments are based on the geographic area of the final customer as
indicated by the following (dollars in thousands):
<TABLE>
<CAPTION>
North Latin
America America Pacific Brazil All Other Corporate Total
------- ------- ------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Three months ended September 30, 1999
Total revenues $ 20,664 2,194 3,905 523 1,897 -- $ 29,183
Operating income (loss) (1,853) (170) 447 (6,164) 10 (3,045) (10,775)
Three months ended September 30, 1998
Total revenues $ 19,313 7,322 3,970 1,209 4,655 -- $ 36,469
Operating income (loss) 4,414 904 887 (335) 888 (2,613) 4,145
Nine months ended September 30, 1999
Total revenues $ 69,343 9,181 10,497 1,349 13,113 -- $103,483
Operating income (loss) 6,597 610 1,045 (6,717) 1,739 (8,955) (5,681)
Nine months ended September 30, 1998
Total revenues $ 57,239 19,006 11,599 4,925 17,021 -- $109,790
Operating income (loss) 13,347 2,743 1,720 (249) 3,486 (8,181) 12,866
</TABLE>
All intercompany revenues are eliminated in computing revenues and operating
income. The corporate component of operating income represents corporate general
and administrative expenses.
7
<PAGE> 8
LANCER CORPORATION AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This document contains certain "forward-looking" statements as such term is
defined in the Private Securities Litigation Reform Act of 1995 and information
relating to the Company and its subsidiaries that are based on the beliefs of
the Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect," "forecast," "plan," and "intend" and words or
phrases of similar import, as they relate to the Company or its subsidiaries or
Company management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions which exist
or must be made as a result of certain factors including, without limitation,
competitive factors, general economic conditions, customer relations,
relationships with vendors, the interest rate environment, governmental
regulation and supervision, seasonality, distribution networks, product
introductions and acceptance, one-time events and other factors described herein
and in other filings made by the Company with the Securities and Exchange
Commission. Based upon changing conditions, should any one or more of these
risks or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected, forecast, planned or intended. The
Company does not intend to update these forward-looking statements.
RESULTS OF OPERATIONS
Comparison of the Three-Month Periods Ended September 30, 1999 and 1998
Net sales for the quarter ended September 30, 1999 were $29.2 million, a 20%
decrease from sales in the third quarter of 1998. Sales in the Company's North
America region rose 7%, aided by strong sales of frozen beverage dispensers.
Sales in the Latin America region (excluding Brazil) fell 70% while Brazilian
sales fell 57%. In the aggregate, sales to customers outside the United States
and Canada fell 50% due to reduced demand for traditional fountain equipment.
Market conditions continue to be particularly challenging in Latin America and
Asia.
Gross margin in the third quarter of 1999 was 2.9%, compared to 25.6% in the
third quarter last year. Reduced production levels at plants in the United
States and Mexico negatively impacted overhead absorption rates. Gross margin
was further reduced by changes in the sales mix. Sales of frozen beverage
dispensers rose during the quarter, while sales of traditional fountain
equipment declined. The Company buys the frozen beverage dispenser from a joint
venture in which the Company owns a 50% interest. Finally, the Company reserved
approximately $0.8 million for certain types of equipment whose marketability
has been impaired. The reserve increased cost of sales for the third quarter of
1999.
Selling, general and administrative expenses were $5.7 million for the third
quarter of 1999, compared to $5.2 million last year. Product development costs
rose, along with costs associated with the Allbar acquisition and the new Lancer
Ice Link subsidiary, which was formed in the third quarter of 1999.
In the quarter ended September 30, 1999, the Company expensed $6.0 million
relating to the impairment of substantially all of the Company's investment in
its Brazilian subsidiary. The Company has substantially reduced its Brazilian
operations in an effort to limit continued losses caused by the depressed
business environment in much of Latin America.
Interest expense was $0.9 million in the third quarter of 1999, down from $1.1
million last year, reflecting lower average borrowings. In the third quarter of
1999, the Company sold its investment in Victory Refrigeration, recording a gain
on the sale of $0.9 million. Also in the quarter, the Company's share of the
income of its frozen beverage joint venture was $0.3 million, versus
approximately zero in the third quarter of 1998. The minority interest benefit
of $0.1 million stems from the Company's majority ownership position in Lancer
Ice Link, LLC, and represents the minority partner's share of the subsidiary's
losses. Lancer Ice Link's financial statements are consolidated with those of
the Company. The Company recorded a tax benefit of $3.3 million in the third
quarter of 1999 because of the pre-tax loss of $10.4 million. The Company's
provision for income taxes was $1.1 million in the third quarter of 1998. The
net loss for the third quarter of 1999 was $7.1 million, compared to net income
of $1.8 million last year.
8
<PAGE> 9
Comparison of the Nine-Month Periods Ended September 30, 1999 and 1998
Net sales for the nine months ended September 30, 1999 were $103.5 million, down
6% from sales in the same period of 1998. North America sales rose 21% on strong
sales of frozen beverage dispensers. Sales in the Company's Latin America region
(excluding Brazil) declined 52%, and sales in Brazil fell 73%. Sales to
customers outside the United States declined 35% during the first three quarters
of 1999. Market conditions continue to be particularly challenging in Latin
America and Asia.
Gross margin was 15.9% in the first nine months of 1999, compared to 25.7% in
the same period last year. Reduced production levels at plants in the United
States and Mexico negatively impacted overhead absorption rates. Gross margin
was further reduced by changes in the sales mix. Sales of frozen beverage
dispensers increased during the 1999 period, while sales of traditional fountain
equipment declined. The Company buys the frozen beverage dispenser from a joint
venture in which the Company owns a 50% interest. Finally, the Company reserved
approximately $0.8 million for certain types of equipment whose marketability
has been impaired. The reserve increased cost of sales for the first nine months
of 1999.
Selling, general and administrative expenses were $16.2 million for the first
three quarters of 1999, compared to $15.4 million in the same period of 1998.
Product development costs rose, along with costs associated with the Allbar
acquisition and the new Lancer Ice Link subsidiary, which was formed in the
third quarter of 1999.
In the 1999 period, the Company expensed $6.0 million relating to the impairment
of substantially all of the Company's investment in its Brazilian subsidiary.
The Company has substantially reduced its Brazilian operations in an effort to
limit continued losses caused by the depressed business environment in much of
Latin America.
Interest expense was $2.7 million in the first three quarters of 1999, down from
$3.0 million last year, reflecting lower average borrowings in 1999. During the
third quarter of 1999, the Company sold its investment in Victory Refrigeration,
recording a gain of $0.9 million on the sale. Also in the first nine months of
1999, the Company reported income from its frozen beverage joint venture of $1.9
million, versus approximately zero in the same period of 1998. The minority
interest benefit of $0.1 million stems from the Company's majority ownership
position in Lancer Ice Link, LLC, and represents the minority partner's share of
the subsidiary's losses. Lancer Ice Link's financial statements are consolidated
with those of the Company. The Company recorded a tax benefit of $1.4 million
during the nine months ended September 30, 1999 because of the pre-tax loss of
$5.5 million. The Company's provision for income taxes was $3.6 million in the
first three quarters of 1998. The effective rate of the tax benefit in the 1999
period was lower than the statutory rate because of nondeductible losses
incurred by certain of the Company's foreign subsidiaries. The net loss for the
first nine months of 1999 was $4.2 million, versus net income of $6.1 million
last year.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash flows from operations and
amounts available under the Company's existing lines of credit. The Company has
met, and currently expects that it will continue to meet, substantially all of
its working capital and capital expenditure requirements, as well as its debt
service requirements, with funds provided by operations and borrowings under its
credit facilities. The Company is in compliance with, or has obtained waivers
of, the financial covenants contained in the credit agreement that governs the
Company's primary credit facilities.
Cash provided by operating activities was $7.8 million in the first nine months
of 1999, compared to $1.1 million in the same period last year. The company made
capital expenditures of $3.9 million, primarily for production tooling and
equipment. During the second quarter of 1999, the Company acquired certain
assets of Allbar Manufacturing, an Australian company, for approximately $1.7
million. The Company financed most of the purchase with bank debt denominated in
Australian dollars and the remainder with cash on hand.
Accounting Matters
The Company maintains a DISC in order to defer income taxes on its foreign
sales. The Company continues to evaluate the benefit of converting the DISC to a
Foreign Sales Corporation. At the time of such conversion, the Company will be
required to provide for federal income taxes on $2.4 million of undistributed
earnings of the DISC. See 1998 Form 10-K.
9
<PAGE> 10
The Internal Revenue Service is examining the Company's U.S. income tax return
for 1995. Management does not believe that any significant adjustments will be
required.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that costs of start-up activities, including
organizational costs, be expensed as incurred. Adoption of this SOP during the
three months ended March 31, 1999 did not have a material effect on the
consolidated financial statements of the Company.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." It requires the recognition of all
derivatives as either assets or liabilities and the measurement of those
instruments at fair value. SFAS No. 133 was subsequently amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133" and will now be effective for fiscal years
beginning after June 15, 2000, with early adoption permitted. The implementation
of SFAS No. 133 is not expected to have a material impact on the Company's
financial position or results of operations.
Year 2000
The Year 2000 ("Y2K") issue arose because some computer programs use two-digit
date fields to designate a year. Some of these programs with two-digit date
fields will not recognize the year 2000, or may confuse it with the year 1900.
This date recognition problem could cause erroneous calculations, or could cause
entire systems to malfunction.
The Company has adopted a two-phase approach to the Year 2000 threat. In the
Assessment Phase, the Company generated a comprehensive inventory of the
Company's date-oriented systems, and determined which were not Y2K compliant.
The Renovation/Replacement Phase involves correcting or replacing non-compliant
systems. The Company has completed substantially all of the Assessment Phase.
The Renovation/Replacement Phase is being executed as non-compliant systems are
identified. The Company believes that it has corrected substantially all of its
high-priority and medium-priority non-compliant systems.
In the second quarter of 1998, the Company initiated correspondence with its
suppliers to determine their Y2K readiness. The Company plans to monitor the
readiness of its key suppliers throughout 1999. The Company intends to determine
the Y2K readiness of its key customers during 1999. The Coca-Cola Company was
the Company's largest customer in 1998, accounting for 23% of sales.
The Company's primary information technology ("IT") system is a BaaN ERP system
that was installed in 1996, and upgraded in 1998. The Company believes the BaaN
system, and other major IT systems, are Y2K compliant. Among non-IT systems, the
Company has replaced payroll and timekeeping systems that were non-compliant.
The Company has spent substantially all of the $200,000 it expects to spend on
all of the Company's Y2K issues.
The Company believes there is low risk of any internal critical system not being
Y2K-compliant by the end of 1999. The Company continues to assess its risk
exposure attributable to external factors and suppliers. Although the Company
has no reason to conclude that any specific supplier represents a risk, the most
likely worst-case Y2K scenario would entail production disruption due to
inability of suppliers to deliver critical parts. The Company is unable to
quantify such a scenario, but it could potentially result in a material adverse
impact on the results of operations, liquidity or financial position of the
Company. The Company continues to monitor the Y2K readiness of key suppliers,
and plans to maintain moderately higher inventories of selected items to address
perceived risks to the Company's operations. These additional inventories are
not expected to be material in relation to the Company's overall inventory.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in the Company's market risk factors
since December 31, 1998.
10
<PAGE> 11
Part II - Other Information
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated November 9, 1999.
The report incorporated the Company's earnings release for the
period ended September 30, 1999.
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)
November 12, 1999 By: /s/ GEORGE F. SCHROEDER
------------------------------------------------
George F. Schroeder
President and CEO
November 12, 1999 By: /s/ MARK L. FREITAS
------------------------------------------------
Mark L. Freitas
Vice President - Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME FOUND ON PAGE 2 TO 4 OF THE
COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 603
<SECURITIES> 0
<RECEIVABLES> 19,266
<ALLOWANCES> 302
<INVENTORY> 36,563
<CURRENT-ASSETS> 60,508
<PP&E> 62,085
<DEPRECIATION> 26,845
<TOTAL-ASSETS> 104,360
<CURRENT-LIABILITIES> 37,567
<BONDS> 0
0
0
<COMMON> 91
<OTHER-SE> 45,070
<TOTAL-LIABILITY-AND-EQUITY> 104,360
<SALES> 103,483
<TOTAL-REVENUES> 106,297
<CGS> 86,987
<TOTAL-COSTS> 109,164
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,662
<INCOME-PRETAX> (5,536)
<INCOME-TAX> (1,356)
<INCOME-CONTINUING> (4,180)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,180)
<EPS-BASIC> (.46)
<EPS-DILUTED> (.46)
</TABLE>
