Lancer Orthodontics Inc

San Diego Business Journal, Jan 7, 1991

LANCER ORTHODONTICS INC.

Lancer Orthodontics Inc. manufactures and purchases various orthodontic products and sells them directly to orthodontists through company represetatives and independent distributors. The company also sells certain products on a private-label basis. In 1990, the company changed its year end from Aug. 31 to May 31. Because of the change in fiscal year end, operating results in 1990 reflect only nine months activity. For the nine months ended May 31, 1990, the net loss for the company was $74,200. Sales for the nine-month period totaled $6.9 million, a decrease of $2.4 million from the prior full fiscal year. On an annualized basis, net sales for 1990 would have approximated net sales in 1989. The company has experienced as slow-down in domestic sales growth which appears to be common throughout the orthodontic industry. Foreign sales continue to be strong and the company anticipates that the majority of its sales growth over the next few years will come from its foreign markets. Foreign sales accounted for $2.2 million in fiscal year 1990, compared to $3 million for fiscal year 1989. Over the past several years, Lancer has experienced increasing manufacturing costs which the company has been unable to recover with price increases. To improve gross profit, Lancer has entered into a subcontractor agreement to manufacture its products in Mexico. Under the terms of the agreement the company will move the majority of its manufacturing to the subcontractor over a nine- to 18-month period. Lancer is a party to two lawsuits arising out of the normal conduct of its business. The lawsuits involve the alleged violation of fiduciary and contractual relationships with the company by a former employee, and the alleged infringement of a patent held by Ormco Corp. While Lancer cannot predict the outcome of the lawsuits with certainty, the company does not expect these matters to have a material adverse effect on the company.