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 June 30, 1998             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)

       Registrants 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.

                  Title                                Shares outstanding as of
                                                            August 10, 1998

Common stock, par value $.01 per share                          9,114,191

                                       1
<PAGE>

Part I - Financial Information

Item 1 - Financial Statements

                                       LANCER CORPORATION AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS

                                                      ASSETS
<TABLE>
<CAPTION>

                                                                  June 30,                     December 31,
                                                                    1998                           1997
                                                             --------------------           --------------------
                                                                 (Unaudited)

Current assets:
<S>                                                        <C>                             <C>       
  Cash                                                     $           1,022,854           $          1,850,779
                                                             --------------------           --------------------
  Receivables:
    Trade accounts and notes                                          28,607,743                     22,674,269
    Refundable income taxes                                                6,582                          1,483
    Other                                                                606,821                        298,274
                                                             --------------------           --------------------
                                                                      29,221,146                     22,974,026
    Less allowance for doubtful accounts                                (335,000)                      (335,000)
                                                             --------------------           --------------------
      Net receivables                                                 28,886,146                     22,639,026
                                                             --------------------           --------------------

  Inventories                                                         49,268,993                     44,414,567
  Prepaid expenses                                                       283,524                        178,869
  Deferred tax asset                                                     212,722                        220,849
                                                             --------------------           --------------------

      Total current assets                                            79,674,239                     69,304,090
                                                             --------------------           --------------------

Property, plant and equipment, at cost:
                                                                                         
  Land                                                                 1,259,938                      1,259,938
  Buildings                                                           18,326,647                     18,152,535
  Machinery and equipment                                             18,685,074                     17,839,310
  Tools and dies                                                       9,189,286                      8,454,022
  Leaseholds, office equipment and vehicles                            7,078,222                      6,776,193
  Construction in progress                                             2,385,708                      1,600,204
                                                             --------------------           --------------------
                                                                      56,924,875                     54,082,202
  Less accumulated depreciation and amortization                     (23,759,149)                   (22,186,770)
                                                             --------------------           --------------------
    Net property, plant and equipment                                 33,165,726                     31,895,432
                                                             --------------------           --------------------

Long-term receivables                                                    653,370                        724,959
Long-term investments                                                  3,194,393                      3,273,621
Intangibles and other assets,
   at cost, less accumulated amortization                              5,280,140                      5,470,886
                                                             --------------------           --------------------

                                                           $         121,967,868          $         110,668,988
                                                             ====================           ====================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       2


<PAGE>

                                        LANCER CORPORATION AND SUBSIDIARIES
                                      CONSOLIDATED BALANCE SHEETS (continued)

                                       LIABILITIES AND SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>

                                                                      June 30,                     December 31,
                                                                        1998                           1997
                                                                 --------------------           -------------------
                                                                     (Unaudited)
Current liabilities:
<S>                                                            <C>                            <C>                 
  Accounts payable                                             $          14,237,588          $         12,133,894
  Current installments of long-term debt                                   3,997,200                     4,444,400
  Line of credit with bank                                                24,700,000                    19,000,000
  Deferred licensing and maintenance fees                                    520,274                       538,554
  Accrued expenses and other liabilities                                   6,374,587                     5,718,003
  Income taxes payable                                                       825,427                       185,472
                                                                 --------------------           -------------------

    Total current liabilities                                             50,655,076                    42,020,323

Deferred tax liability                                                     2,398,001                     1,736,405
Other long-term liabilities                                                  845,203                       820,000
Long-term debt, excluding current installments                            19,965,350                    21,565,350
Deferred licensing and maintenance fees                                    1,315,597                     1,565,597
                                                                 --------------------           -------------------

    Total liabilities                                                     75,179,227                    67,707,675
                                                                 --------------------           -------------------

Shareholders' equity:
  Preferred stock, without par value
  5,000,000 shares authorized; none issued                                                       
                                                                                   -                             -

  Common stock, $.01 par value:
   50,000,000 shares authorized;9,106,065 and 8,902,236
   issued and outstanding in 1998 and 1997, respectively                      91,060                        89,022

  Additional paid-in capital                                              11,802,378                    11,607,504

Accumulated other comprehensive loss -
  Cumulative translation adjustment                                       (2,372,433)                   (1,727,719)

  Retained earnings                                                       37,267,636                    32,992,506
                                                                 --------------------           -------------------

    Total shareholders' equity                                            46,788,641                    42,961,313
                                                                 --------------------           -------------------
                                                                
                                                               $         121,967,868          $        110,668,988
                                                                 ====================           ===================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3


<PAGE>

                                        LANCER CORPORATION AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF INCOME
                                                    (Unaudited)


<TABLE>
<CAPTION>
                                              Three Months Ended                            Six Months Ended
                                         June 30,            June 30,                 June 30,            June 30,
                                           1998                1997                     1998                1997
                                      ----------------    ----------------         ---------------     ---------------

<S>                                 <C>                 <C>                      <C>                 <C>             
Net sales                           $      37,284,947   $      32,294,556        $     73,604,702    $     62,692,715
Cost of sales                              27,587,133          24,353,236              54,458,108          47,086,773
                                      ----------------    ----------------         ---------------     ---------------
    Gross profit                            9,697,814           7,941,320              19,146,594          15,605,942

Selling, general and
   administrative expenses                  5,220,986           4,836,694              10,218,895           9,057,344
                                      ----------------    ----------------         ---------------     ---------------

    Operating income                        4,476,828           3,104,626               8,927,699           6,548,598
                                      ----------------    ----------------         ---------------     ---------------

Other income (expense):
  Interest expense                         (1,004,576)           (826,649)             (1,936,609)         (1,374,107)
  Other income, net                           (88,445)            447,816                (261,926)            464,185
                                      ----------------    ----------------         ---------------     ---------------
                                           (1,093,021)           (378,833)             (2,198,535)           (909,922)
                                      ----------------    ----------------         ---------------     ---------------

    Income before income taxes              3,383,807           2,725,793               6,729,164           5,638,676
                                      ----------------    ----------------         ---------------     ---------------

Income tax expense:
  Current                                   1,006,692             874,813               1,948,188           1,976,437
  Deferred                                    227,613              49,786                 505,846              70,913
                                      ----------------    ----------------         ---------------     ---------------
                                            1,234,305             924,599               2,454,034           2,047,350
                                      ----------------    ----------------         ---------------     ---------------
                                     
    Net earnings                          $ 2,149,502         $ 1,801,194             $ 4,275,130         $ 3,591,326
                                      ================    ================         ===============     ===============

Common Shares and Equivalents Outstanding:
Basic                                       9,121,241           8,895,036               9,015,769           8,825,191
Diluted                                     9,336,111           9,380,837               9,283,229           9,306,839

Earnings Per Share:
Basic                                       $    0.24           $    0.20               $    0.47           $    0.41
Diluted                                     $    0.23           $    0.19               $    0.46           $    0.39

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4



<PAGE>

                                        LANCER CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                              June 30,                  June 30,
                                                                                1998                      1997
                                                                       -----------------------   -----------------------
Cash flow from operating activities:
<S>                                                                  <C>                         <C>                   
     Net earnings                                                    $              4,275,130    $            3,591,326
     Adjustments to reconcile net income to net cash used in
        operating activities (net of effects from purchase of
        subsidiaries:)
        Depreciation and amortization                                               1,618,568                 1,252,915
        Loss on sale and disposal of assets                                            23,851                      -   
        Loss (gain) on long-term investments                                           79,228                   (9,945)
        Changes in assets and liabilities:
            Receivables                                                            (6,398,049)               (6,859,945)
            Refundable income taxes                                                    (5,176)                  400,296
            Prepaid expenses                                                         (104,655)                  110,733
            Deferred taxes                                                            659,525                    25,905
            Inventories                                                            (5,186,269)               (6,195,946)
            Other assets                                                              (61,438)                  170,045
            Accounts payable                                                        2,255,851                 6,377,066
            Accrued expenses and other liabilities                                    706,240                   243,655
            Income taxes payable                                                      663,196                   293,403
            Deferred license fees and maintenance fees                               (268,280)                 (311,326)
            Other long-term liabilities                                                25,203                    25,051
                                                                       -----------------------   -----------------------
     Net cash used in operating activities                                         (1,717,075)                 (886,767)
                                                                       -----------------------   -----------------------

Cash flow from investing activities:
        Acquisition of property, plant and equipment                               (2,970,170)               (5,024,484)
        Acquisition of subsidiary companies                                              -                   (3,924,166)
        Additional investments in affiliates                                             -                     (276,280)
                                                                       -----------------------   -----------------------
     Net cash used in investing activities                                         (2,970,170)               (9,224,930)
                                                                       -----------------------   -----------------------
                                                                        
Cash flow from financing activities:
        Net borrowings under line of credit agreements                              5,700,000                 7,400,000
        Proceeds from long-term debt                                                     -                    5,100,000
        Retirement of long-term debt                                               (2,047,200)               (1,024,125)
        Proceeds from exercise of stock options                                       196,912                   142,206
                                                                       -----------------------   -----------------------
Net cash provided by financing activities                                           3,849,712                11,618,081
                                                                       -----------------------   -----------------------
Effect of exchange rate changes on cash                                                 9,608                   212,172
                                                                       -----------------------   -----------------------
Net increase (decrease) in cash                                                      (827,925)                1,718,556
Cash at beginning of period                                                         1,850,779                 1,016,425
                                                                       -----------------------   -----------------------
Cash at end of period                                                    $          1,022,854      $          2,734,981
                                                                       =======================   =======================
</TABLE>

Lancer issued debt of  $3,986,000  and stock of $1,555,872 to the sellers of the
subsidiaries acquired in 1997.

The non-cash portion of these transactions is excluded from the above statement.

         See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                       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, 1997 Annual Report on Form 10-K.

Certain amounts in the  consolidated  financial  statements for prior years have
been reclassified to conform with the current years presentation.


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:

<TABLE>
<CAPTION>

                                               June 30,                   December 31,
                                                 1998                         1997
                                          --------------------         --------------------
<S>                                     <C>                          <C>                  
Finished Goods                          $          18,353,596        $          13,437,781
Work in process                                    25,046,397                   28,980,250
Raw material and supplies                           5,869,000                    1,996,536
                                          --------------------         --------------------
                                        $          49,268,993        $          44,414,567
                                          ====================         ====================

</TABLE>

3.       Earnings Per Share

The Company adopted the Statement of Financial  Accounting  Standards (SFAS) No.
128,  Earnings per Share, in 1997, and accordingly,  basic 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  267,460 and 481,648
shares  for the six  months  ended  June 30,  1998 and  1997  respectively.  All
prior-period  earnings per share data  presented in the  consolidated  financial
statements have been restated to conform to the requirements of SFAS No. 128.

                                       6
<PAGE>

4.       Comprehensive Income
 
As of  January  1,  1998,  the  Company  has  adopted  SFAS No.  130,  Reporting
Comprehensive  Income.  SFAS 130  established  new rules for the  reporting  and
display  of  comprehensive  income  and its  components.  The  adoption  of this
statement,  however,  has no impact on the Companys  net income or  stockholders
equity.   SFAS  130  requires  that  Companys   foreign   currency   translation
adjustments,   which  prior  to  the  adoption  were   reported   separately  in
stockholders equity, be included in other comprehensive income.

The following are the components of comprehensive income:
<TABLE>
<CAPTION>
                                                  Three Months Ended                                 Six Months Ended
                                          June 30, 1998         June 30, 1997            June 30,1998                June 30,1997
                                      -------------------    -------------------   ----------------------     ----------------------

<S>                                    <C>                    <C>                   <C>                         <C>               
Net earnings as reported               $       2,149,502      $       1,801,194     $          4,275,130         $        3,591,326
Foreign currency translation (loss)             (644,244)              (124,882)                (644,714)                  (166,180)
                                      -------------------    -------------------   ----------------------     ----------------------
Comprehensive income                   $       1,505,258      $       1,676,312     $          3,630,416         $        3,425,146
                                      ===================    ==================    ======================     ======================
</TABLE>


Accumulated  foreign  currency  translation   adjustments  on  the  accompanying
Consolidated  Balance Sheets account for all of the Companys other comprehensive
income.



Item 2 - Managements  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 June 30, 1998 and 1997

Net sales for the  quarter  ended  June 30,  1998 were  $37.3  million,  a 15.5%
increase from sales in the second quarter of 1997. The increase  reflects strong
sales  throughout  the  Americas and in Europe.  Sales to customers  outside the
United States were 45.5% of total sales in the second quarter of 1998,  compared
to 55.1% of net sales in the same period last year.

Gross  margin in the  second  quarter  of 1998 was  26.0%,  up from 24.6% in the
second quarter of 1997. The Companys emphasis on controlling  overhead costs and
improving  manufacturing  efficiencies  contributed to the  improvement in gross
margin.

Selling,  general and  administrative  expenses  were $5.2  million in the three
months  ended June 30,  1998,  an increase of $0.4  million,  or 8.3%,  from the
second  quarter of 1997.  Expenses rose in support of the higher level of sales,
and because of Lancers new operation in Belgium which commenced in March 1997.

                                       7
<PAGE>

Interest  expense was $1.0 million in the second  quarter of 1998,  up from $0.8
million in the second quarter last year. The increased  interest expense in 1998
was  caused by higher  borrowings  related  to  capital  spending  and growth in
current assets during the past year.  Lancers second quarter  effective tax rate
increased  to 36.5% in 1998  from  33.9%  in  1997.  The tax rate in the  second
quarter of 1997 was  unusually  low  because of the  recognition  of tax credits
relating to research and development  expenditures in prior years.  Net earnings
for the 1998  quarter  were $2.1  million,  up from $1.8  million  in the second
quarter of 1997.


Comparison of the Six-Month Periods ended June 30, 1998 and 1997

Net sales for the six months  ended June 30,  1998 were $73.6  million,  a 17.4%
increase  from sales in the same period of 1997.  The increase  reflects  strong
sales in the  Americas  and in  Europe,  plus the  inclusion  of sales  from the
Companys  New Zealand  operation,  which was  acquired in the second  quarter of
1997. Sales to customers  outside the United States were 48.1% in the first half
of 1998, compared to 50.3% in the same period of 1997.

Gross  margin in the first six  months of 1998 was  26.0%,  up from 24.9% in the
first half of 1997.  The Companys  emphasis on  controlling  overhead  costs and
improving  manufacturing  efficiencies  contributed to the  improvement in gross
margin.

Selling,  general and  administrative  expenses  were $10.2 million in the first
half of 1998,  and increase of $1.2 million,  or 12.8%,  from the same period of
1997.  Expenses rose in support of higher sales  levels,  and because of Lancers
new operations in Belgium and New Zealand.


Interest  expense was $1.9 million in the first six months of 1998, up from $1.4
million in the first half of last year. The increased  interest  expense in 1998
was caused by higher  borrowings  related to capital  spending  and to growth in
current assets during the past year.  The Companys  effective tax rate was 36.5%
in the six months ended June 30,  1998,  compared to 36.3% in the same period of
1997.  The positive  impact of tax credits,  partially  offset by  nondeductible
losses  incurred by certain of the Companys  foreign  subsidiaries,  lowered the
effective  tax rate in the 1997  period.  Net earnings in the first half of 1998
were $4.3 million, up from $3.6 million in the same period last year.


Liquidity and Capital Resources

The Companys  principal  sources of liquidity are cash flows from operations and
amounts available under the Companys  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.

Net cash used in operating  activities  was $1.7 million in the first six months
of 1998,  compared to $0.9 million in the same period of 1997.  Capital spending
was $3.0 million in the first half of 1998.  Lancer completed  construction of a
32,000 square foot office addition to its primary facility in San Antonio during
the first quarter of 1998. The Company funded the capital  expenditures  and the
cash used in operations with borrowings under its credit facilities.

Effective July 15, 1998, the company  increased its revolving  facility from $25
million to $35 million, and amended certain financial covenants.  The Company is
in compliance with the financial covenants contained in its credit agreement.

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 1997 Form 10-K.

The Internal  Revenue  Service is examining the Companys U.S.  income tax return
for 1995.  Management does not believe that any significant  adjustments will be
required as a result of this examination.

                                       8
<PAGE>

In June 1998 the  Financial  Accounting  Standards  Board  issued  SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,  which established
standards of accounting and reporting for derivative instruments and for hedging
activities.  It requires that all derivatives be recognized as either assets and
liabilities   in  the  statement  of  financial   position  and  measures  these
instruments at fair value. This statement is effective for financial  statements
for periods beginning June 15, 1999. The Company believes that SFAS No. 133 will
not have a material impact on its financial statements and disclosures.


Year 2000

In 1997, Lancer  implemented a BaaN ERP manufacturing  system which is year 2000
compliant.  The Company is also working with its vendors and processing banks to
ensure that their systems are year 2000  compliant.  The Company does not expect
to incur any additional material expenses relating to year 2000 compliance.



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 Companys financial position or results of operations.

Item 4 - Submission of Matters to a Vote of Security Holders

At the annual meeting of  shareholders  of the Company held on May 28, 1998, the
shareholders  elected  six members of the Board of  Directors  of the Company to
serve  until the next  annual  meeting  of the  shareholders  and  ratifies  the
appointment  of KPMG Peat Marwick LLP as the Companys  independent  auditors for
the 1998 fiscal year.
 
The vote for nominated directors was as follows:
<TABLE>
<CAPTION>

       Nominee                    For                 Against               Abstain
-----------------------    -------------------   -------------------   -------------------
<S>                             <C>                     <C>                   <C>  
Alfred A. Schroeder             8,149,550               1,826                 8,732
George F. Schroeder             8,149,550               1,826                 8,732
Walter J. Beigler               8,149,550               1,826                 8,732
Jean M. Braley                  8,149,550               1,826                 8,732
Charles K. Clymer               8,149,550               1,826                 8,732
Micheal E. Smith                8,149,550               1,826                 8,732
</TABLE>

The vote for ratifying the appointment KPMG Peat Marwick LLP was as follows:

<TABLE>
<CAPTION>
                                   For                 Against               Abstain
                           -------------------   -------------------   -------------------
<S>                             <C>                     <C>                  <C>   
                                8,147,035               1,225                11,848

</TABLE>

                                       9

<PAGE>






Item 6 - Exhibits and Reports on Form 8-K

         (a)      Exhibits:

                  10.38   Third  Amendment to Credit  Agreement  dated July 15,
                          1998 between  Lancer Corporation and The Frost
                          National Bank and NationsBank, N.A.

         (b)      Reports on Form 8-K

                  None


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)



August 13, 1998              By:  /s/ George F. Schroeder   
                                  George F. Schroeder
                                  President and CEO



August 13, 1998              By:  /s/ Christi A. Rohmer
                                  Christi A. Rohmer
                                  Vice President - Controller

                                       10