UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[x] Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 [cad 157]No Fee Required[cad 179]
For the fiscal year ended December 31, 2003,
or
[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to _________.
COMMISSION FILE NUMBER
0-13875
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
(Full title of the plan)
LANCER CORPORATION
6655 LANCER BOULEVARD
SAN ANTONIO, TEXAS 78219
(210) 310-7000
(Name of Issuer of the securities held pursuant to the plan
and address of its principal executive office)
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
INDEX TO FORM 11-K
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits
as of December 31, 2003 and 2002 2
Statement of Changes in Net Assets Available for Plan Benefits
as of December 31, 2003 and 2002 3
Notes to Financial Statements 4
Supplemental Schedule:
Schedule of Assets Held for Investment Purposes at End of Year 8
Index to Exhibit 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other person who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
Date: June 25, 2004
By: /s/ MARK L. FREITAS
---------------------------------------------------------
Name: Mark L. Freitas
----------------------------------------------------
Title: Chief Financial Officer
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Lancer Corporation Employee Profit Sharing Plan
San Antonio, Texas
We have audited the financial statements of the Lancer Corporation Employee
Profit Sharing Plan as of December 31, 2003 and 2002, and for the year ended
December 31, 2003, as listed in the accompanying contents page. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with The Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of Lancer
Corporation Employee Profit Sharing Plan as of December 31, 2003 and 2002, and
the changes in its net assets available for plan benefits for the year ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 2003, is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental information is the responsibility of the
Plan's management. The supplemental information has been subjected to the
auditing procedures applied in the audit of the basic financial statements, and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ THE HANKE GROUP, P.C.
San Antonio, Texas
June 10, 2004
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
ASSETS 2003 2002
INVESTMENTS $8,744,285 $7,283,708
RECEIVABLES:
Employer's contribution 30,516 224,773
Participants' contributions 8,504 26,241
---------- ----------
Total receivables 39,020 251,014
---------- ----------
TOTAL ASSETS 8,783,305 7,534,722
LIABILITIES
Administrative expense payable -- 8,800
---------- ----------
TOTAL LIABILITIES -- 8,800
---------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $8,783,305 $7,525,922
========== ==========
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See notes to financial statements. Page 2
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net apppreciation in fair value of investments $ 928,799
Dividends and interest 77,063
----------
Total investment income 1,005,862
Contributions:
Employer 276,846
Participants 791,739
Rollovers 11,090
----------
Total contributions 1,079,675
----------
TOTAL ADDITIONS 2,085,537
----------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 804,825
Administrative expenses 23,329
----------
TOTAL DEDUCTIONS 828,154
----------
Net Increase 1,257,383
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 7,525,922
----------
End of year $8,783,305
==========
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See notes to financial statements. Page 3
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Lancer Corporation (the Plan Sponsor) Employee
Profit Sharing Plan (the Plan) provides only general information. Participants
should refer to the Plan agreement for a more complete description of the Plan's
provisions.
GENERAL -- The Plan is a defined contribution plan covering all eligible
employees, as defined, of the Plan Sponsor. It is subject to the provisions of
the Employee Retirement Income Security Act of 1974.
CONTRIBUTIONS -- Employer contributions to the Plan consist of matching
contributions and discretionary profit sharing contributions made annually at
the discretion of the Plan Sponsor's Board of Directors. Employer contributions
were $276,846 for the year ended December 31, 2003. Participants are always 100%
vested in their voluntary contributions.
Participants who are inactive on the last day of the Plan year will not share in
the non-elective employer contribution unless necessary to comply with Code
Section 410(b) coverage requirement.
Each year, participants may contribute up to 25% of pre-tax compensation, as
defined in the Plan. Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined contribution
plans. Participants direct the investment of their contributions into various
investment options offered by the Plan. The Plan currently offers twenty-two
pooled separate accounts, three mutual funds, one insurance company general
account and one employer stock account.
PARTICIPANT ACCOUNTS -- Each participant's account is credited with the
participant's contribution and allocations of the Plan Sponsor's contribution
and Plan earnings and charged with an allocation of certain administrative
expenses. Allocations are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitled is the benefit that can
be provided from the participant's vested account.
FORFEITURES -- Participant forfeitures of non-vested contributions will be
applied to administrative expenses incurred by the Plan. The excess will be used
to reduce employer contributions for the year in which the forfeiture occurs.
The amount of forfeitures used to reduce administrative expenses and employer
contributions for the year ended December 31, 2003, was approximately $35,900.
Unallocated forfeitures at December 31, 2003, were approximately $43,700.
VESTING -- Participants are immediately vested in their contributions plus
actual earnings thereon. Vesting in the Plan Sponsor's contributions is based on
years of continuous service. A participant is 100% vested after six years of
credited service (or upon the death or disability of the participant).
PARTICIPANT LOANS -- Participants may borrow from $1,000 up to a maximum of
$50,000 or 50% of their vested account balance, whichever is less. The loans are
secured by the balance in the participant's account and bear interest at a fixed
rate determined by the Plan Sponsor.
PAYMENT OF BENEFITS -- On termination of service, retirement or death, a
participant may elect to receive either a lump sum amount equal to the value of
the participant's vested interest in his or her account or annual installments
over a pre-determined period, as defined in the Plan document.
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Page 4
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING -- The financial statements of the Plan are prepared using
the accrual method of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION -- The Plan's investments are stated
at fair value. Quoted market prices are used to value investments. Investments
in pooled separate accounts and mutual funds are valued at the net asset value
of units or shares held by the Plan based on the market value of the underlying
assets. The Guaranteed Interest Accounts are stated at contract value. These are
unallocated insurance contracts invested in the general assets of Principal Life
Insurance Company. The interest rates on 2-year maturing contracts ranged
between 0.54% - 2.75% and between 1.61% - 4.22% at December 31, 2003 and 2002,
respectively. The interest rates on 5 -year maturing contracts ranged between
0.39% - 6.28% and between 1.97% - 5.74% at December 21, 2003 and 2002,
respectively.
Purchases and sales of securities are recorded on a trade date basis. Dividends
are recorded on the ex-dividend date.
PAYMENTS OF BENEFITS -- Benefits are recorded when paid.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires the plan administrator to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
3. INVESTMENTS
Investments that represent 5% or more of the Plan's net assets as of December
31, 2003 and 2002, are:
2003 2002
Guaranteed Interest Accounts $1,549,196 $1,649,268
Bond and Mortgage Account 1,008,763 997,426
Large Cap Stock Index Account 766,115 623,517
Money Market Account 748,002 618,162
Partners Large Capital Blend 482,557 430,038
Participant Loans -- 415,901
Small Company Blend Account 591,952 389,106
Medium Company Blend Account 592,422 --
International Stock Account 494,332 --
Lancer Corporation common stock -- 411,950
During 2003, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated (depreciated) in
value by $928,799 as follows:
Pooled separate accounts $ 1,054,421
Insurance company general account (10,332)
Lancer Corporation common stock (115,290)
-----------
$ 928,799
===========
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Page 5
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Principal Life
Insurance Co. Principal Life Insurance Co. is the custodian as defined by the
Plan and, therefore, these transactions qualify as party-in-interest
transactions.
The Plan Sponsor paid approximately $30,000 in professional fees related to the
Plan for the year ended December 31, 2003.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Sponsor has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants would become 100% vested in the employer's
contributions.
6. TAX STATUS
The Internal Revenue Service has determined and informed the Plan Sponsor by a
letter dated April 8, 2002, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). Although
the Plan has been amended and restated since receiving the determination letter,
the Plan Administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to Schedule H of Form 5500:
2003 2002
Net assets available for benefits per
the financial statements $ 8,783,305 $ 7,525,922
Amounts accrued for employer
contributions (30,516) (224,773)
Amounts accrued for participant
contributions (8,504) (26,241)
Amounts accrued for unpaid
administrative expenses -- 8,800
Amounts used for loan repayment 6,721 --
----------- -----------
Net assets available for benefits per
Schedule H to the Form 5500 $ 8,751,006 $ 7,283,708
=========== ===========
The following is a reconciliation of participant contributions from participants
per the financial statements for the year ended December 31, 2003 to Schedule H
of Form 5500:
Participant contributions per the
financial statements $ 791,739
Prior year accrued contributions 26,241
Current year accrued contributions (30,516)
Less loan repayment 6,721
---------
Participant contributions per the Schedule H of the 5500 $ 794,185
=========
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Page 6
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 (continued)
The following is a reconciliation of employer contributions from participants
per the financial statements for the year ended December 31, 2003, to Schedule H
of Form 5500:
Employer Contributions per the
financial statements $ 276,846
Prior year accrued contributions 224,773
Current year accrued contributions (8,504)
---------
Employer contributions per the
Schedule H of the 5500 $ 493,115
=========
The following is a reconciliation of administrative expense per the financial
statements for the year ended December 31, 2003, to Schedule H of Form 5500:
Administrative expense per the
financial statements $23,329
Prior year accrued expenses 8,800
-------
Administrative expense per the Schedule H of the 5500 $32,129
=======
8. SUBSEQUENT EVENTS
The Plan Sponsor's common stock was temporarily restricted from trading between
February 5, 2004 and May 20, 2004. This caused the investment in Lancer
Corporation stock to be temporarily frozen from investing activity during this
period. Participants regained access to their investments as of May 20, 2004,
once trading resumed.
Effective March 1, 2004, the Principal Mid-Cap Stock Index and Principal Small
Cap Stock Index were added as investment options.
Effective April 1, 2004, the following investment options will no longer be
available:
o Principal Partners Large-Cap Value
o American Century Capital Value Fund
o Principal Medium Company Value
o Principal Medium Company Blend
o Principal Small Company Blend
o Principal International Small Company
o Principal Bond Emphasis Balanced
o Principal Stock Emphasis Balanced
o Principal Real Estate
9. RISKS AND UNCERTAINTIES
The Plan may invest in various types of investment securities. Investment
securities are exposed to various risks, such as interest rate, market, and
credit risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could
materially affect the amounts reported in the statement of net assets available
for Plan benefits.
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Page 7
SUPPLEMENTAL SCHEDULE
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
EMPLOYER IDENTIFICATION NUMBER: 74-1591073
PLAN NUMBER: 001
DECEMBER 31, 2003
--------------------------------------------------------------------------------
Schedule H, Line 4(i): Schedule of Assets Held for Investment Purposes at End of
Year
Description of investment including
Identity of issue, borrower, maturity date, rate of interest, Current
lessor or similar party collateral, par or maturity value Value
------------------------------------ ------------------------------------------------------------------------
* Principal Life Insurance Company Insurance Company General
Guaranteed Interest 1,549,196
* Principal Life Insurance Company Pooled Separate Accounts
Money Market 748,002
* Principal Life Insurance Company Pooled Separate Accounts
Bond and Mortgage 1,008,763
* Principal Life Insurance Company Pooled Separate Accounts
Government Securities 264,965
American Century Capital Mutual Fund
Value Fund 75,224
* Principal Life Insurance Company Pooled Separate Accounts
Bond Emphasis Balanced 35,054
* Principal Life Insurance Company Pooled Separate Accounts
Large Cap Stock Index 766,115
* Principal Life Insurance Company Pooled Separate Accounts
Lifetime Strategic Income 1,059
* Principal Life Insurance Company Pooled Separate Accounts
Lifetime 2010 12,546
* Principal Life Insurance Company Pooled Separate Accounts
Lifetime 2020 19,428
* Principal Life Insurance Company Pooled Separate Accounts
Lifetime 2030 14,476
* Principal Life Insurance Company Pooled Separate Accounts
Lifetime 2040 15,821
* Principal Life Insurance Company Pooled Separate Accounts
Lifetime 2050 23,586
* Principal Life Insurance Company Pooled Separate Accounts
Medium Company Value 153,805
* denotes party-in-interest
--------------------------------------------------------------------------------
See accompanying report of independent registered public accounting firm.
Page 9
LANCER CORPORATION EMPLOYEE PROFIT SHARING PLAN
EMPLOYER IDENTIFICATION NUMBER: 74-1591073
PLAN NUMBER: 001
DECEMBER 31, 2003
--------------------------------------------------------------------------------
Schedule H, Line 4(i): Schedule of Assets Held for Investment Purposes at End of
Year (continued)
Description of investment including
Identity of issue, borrower, maturity date, rate of interest, Current
lessor or similar party collateral, par or maturity value Value
------------------------------------ -----------------------------------------------------------------------
* Principal Life Insurance Company Pooled Separate Accounts
Partners Large-Cap Value $ 78,643
* Principal Life Insurance Company Pooled Separate Accounts
Real Estate 61,999
* Principal Life Insurance Company Pooled Separate Accounts
Stock Emphasis Balanced 55,212
Fidelity Advisor Mutual Fund
Mid Cap 180,531
* Principal Life Insurance Company Pooled Separate Accounts
Partners Large Capital Blend 482,557
* Principal Life Insurance Company Pooled Separate Accounts
Medium Company Blend 592,422
* Principal Life Insurance Company Pooled Separate Accounts
Partners Small-Cap Value 157,486
* Principal Life Insurance Company Pooled Separate Accounts
Small Company Blend 591,952
* Principal Life Insurance Company Pooled Separate Accounts
Small Company Growth 266,308
* Principal Life Insurance Company Pooled Separate Accounts
International Stock 494,332
* Principal Life Insurance Company Pooled Separate Accounts
International Small Company 122,940
Janus Advisor Mutual Fund
Capital Appreciation 192,801
* Lancer Corporation Common Stock 349,638
Participant Loans Various due dates with interest
rates ranging from 6.00% to 11.50% 429,424
-----------
$ 8,744,285
===========
* denotes party-in-interest
--------------------------------------------------------------------------------
See accompanying report of independent registered public accounting firm.
Page 10
EXHIBIT INDEX
Exhibit
Number Title
23.1 Consent of the Hanke Group, P.C.
99.1 Certification of Chief Executive Officer Pursuant To
Section 906 of the Sarbanes-Oxley Act Of 2002
99.2 Certification of Chief Financial Officer Pursuant To
Section 906 of the Sarbanes-Oxley Act Of 2002