SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number 1-106
----------------
A: Full title of Plan:
LYNCH CORPORATION 401(k) SAVINGS PLAN
B: Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
Lynch Corporation
401 Theodore Fremd Avenue
Rye, NY 10580
<PAGE>
Audited Financial Statements
and Supplemental Schedules
Lynch Corporation 401(k) Savings Plan
Years ended December 31, 1996, 1995 and 1994
with Report of Independent Auditors
<PAGE>
Lynch Corporation 401(k) Savings Plan
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 1996, 1995 and 1994
Contents
Report of Independent Auditors..............................................1
Audited Financial Statements
Statement of Net Assets Available for Benefits..............................2
Statement of Changes in Net Assets Available for Benefits...................5
Notes to the Financial Statements...........................................8
Supplemental Schedules
Schedules of Assets Held for Investment Purposes...........................14
Schedules of Reportable Transactions.......................................16
<PAGE>
Report of Independent Auditors
Board of Directors
Lynch Corporation
We have audited the accompanying statements of net assets available for benefits
of the Lynch Corporation 401(k) Savings Plan as of December 31, 1996, 1995 and
1994, and the related statements of changes in net assets available for benefits
for the years then ended. 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 generally accepted auditing
standards. 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 benefits of the Plan at
December 31, 1996, 1995 and 1994, and the changes in its net assets available
for benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1996 and 1995, and
reportable transactions for the years then ended, are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The Fund Information in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/Ernst & Young LLP
September 30, 1998
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1996
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------
Vanguard Vanguard Tweedy
Hancock Stable U.S. Convertible Mutual Brown
Value Fund Treasury Securities Qualified Global
Fund Fund Fund Value Fund
--------------------------------------------------------------------
Assets
Investments:
John Hancock Mutual Life Insurance Company:
<S> <C> <C> <C> <C> <C>
Unallocated Guaranteed Investment Contracts $ 580,962 - - - -
Fleet Investment Management:
Fleet Stable Return Fund .................. 372,274 - - - -
Mutual Qualified Fund ..................... $ 980,660
Vanguard U.S. Treasury Fund ............... - $ 382,210 - - -
Vanguard Convertible Securities Fund ...... - - $ 57,683 - -
Tweedy Browne Global Value Fund ........... - - - - $ 64,744
Lynch Corporation Stock Fund .............. - - - - -
Participant notes receivable ............... - - - - -
Short-term investments ...................... (18,348) - - - -
-------- -------- -------- -------- --------
Total investments ............................ 934,888 382,210 57,683 980,660 64,744
Receivables:
Participants' contributions ............... 189 599 94 928 758
Employer's contribution ................... 3,197 1,205 301 2,991 217
Other ..................................... 3,152 - 54 942 72
-------- -------- -------- -------- -------
Total assets ................................. 941,426 384,014 58,132 985,521 65,791
Liabilities
Excess contributions payable ................. (808) (810) (9) (24,866) (3,586)
Other liabilities ............................ (543) (841) - (108) -
-------- -------- -------- -------- --------
Total liabilities ............................ (1,351) (1,651) (9) (24,974) (3,586)
-------- -------- -------- -------- --------
Net assets available for benefits ............ $ 940,075 $ 382,363 $ 58,123 $ 960,547 $ 62,205
========= ========= ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
------------------------------------------
Lynch
Corporation Loan
Stock Fund Fund Total
------------------------------------------
Assets
Investments:
John Hancock Mutual Life Insurance Company:
<S> <C> <C> <C>
Unallocated Guaranteed Investment Contracts - - $ 580,962
Fleet Investment Management:
Fleet Stable Return Fund .................. - - 372,274
Mutual Qualified Fund ..................... - - 980,660
Vanguard U.S. Treasury Fund ............... - - 382,210
Vanguard Convertible Securities Fund ...... - - 57,683
Tweedy Browne Global Value Fund ........... - - 64,744
Lynch Corporation Stock Fund .............. $ 338,823 - 338,823
Participant notes receivable ............... - $ 71,887 71,887
Short-term investments ...................... 24,997 - 6,649
-------- -------- ----------
Total investments ............................ 363,820 71,887 2,855,892
Receivables:
Participants' contributions ............... 171 - 2,739
Employer's contribution ................... 677 - 8,588
Other ..................................... 4,942 - 9,162
-------- -------- ----------
Total assets ................................. 369,610 71,887 2,876,381
Liabilities
Excess contributions payable ................. (651) - (30,730)
Other liabilities ............................ - - (1,492)
-------- -------- ----------
Total liabilities ............................ (651) - (32,222)
-------- -------- ----------
Net assets available for benefits ............ $ 368,959 $ 71,887 $ 2,844,159
========= ======== ===========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1995
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------
Vanguard Vanguard
Hancock U.S. Convertible Mutual
Stable Value Equities Treasury Securities Qualified
Fund Fund Fund Fund Fund
-------------------------------------------------------------------
Assets
Investments:
John Hancock Mutual Life Insurance Company:
<S> <C> <C> <C> <C> <C>
Unallocated Guaranteed Investment Contracts $ 1,167,424 - - - -
Fleet Investment Management:
Fleet Stable Return Fund .................. 113,034 - - - -
Clipper Fund, Inc. ........................ - $ 468,971 - - -
Mutual Qualified Fund ..................... - 474,928 - - $ 120,186
Vanguard U.S. Treasury Fund ............... - - $ 21,206 - -
Vanguard Convertible Securities Fund ...... - - - $15,637 -
Tweedy Browne Global Value Fund ........... - - - - -
Lynch Corporation Stock Fund .............. - - - - -
Short-term investments ....................... 3,881 3,368 756 1,306 6,016
---------- --------- --------- -------- ---------
Total investments ............................ 1,284,339 947,267 21,962 16,943 126,202
Receivables:
Participants' contributions ............... 16,730 - 1,627 1,216 9,970
Employer's contribution ................... 12,833 - 3,217 1,475 8,925
Other ..................................... 39 708 - 7 -
---------- --------- -------- -------- ---------
Total assets ................................. 1,313,941 947,975 26,806 19,641 145,097
Liabilities
Excess contributions payable ................. (4,373) - - - (4,321)
Other liabilities ............................ (2,289) (1,313) (45) - (100)
--------- --------- -------- ------- ---------
Total liabilities ............................ (6,662) (1,313) (45) - (4,421)
--------- --------- -------- ------- ---------
Net assets available for benefits ............ $ 1,307,279 $ 946,662 $ 26,761 $19,641 $ 140,676
=========== ========= ======== ======= =========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
---------------------------------------
Tweedy
Browne Lynch
Global Corporation
Value Fund Stock Fund Total
---------------------------------------
Assets
Investments:
John Hancock Mutual Life Insurance Company:
<S> <C> <C> <C>
Unallocated Guaranteed Investment Contracts - - $ 1,167,424
Fleet Investment Management:
Fleet Stable Return Fund .................. - - 113,034
Clipper Fund, Inc. ........................ - - 468,971
Mutual Qualified Fund ..................... - - 595,114
Vanguard U.S. Treasury Fund ............... - - 21,206
Vanguard Convertible Securities Fund ...... - - 15,637
Tweedy Browne Global Value Fund ........... $13,282 - 13,282
Lynch Corporation Stock Fund .............. - $ 262,840 262,840
Short-term investments ....................... 917 3,854 20,098
-------- --------- -----------
Total investments ............................ 14,199 266,694 2,677,606
Receivables:
Participants' contributions ............... 749 1,537 31,829
Employer's contribution ................... 832 2,734 30,016
Other ..................................... - - 754
-------- --------- -----------
Total assets ................................. 15,780 270,965 2,740,205
Liabilities
Excess contributions payable ................. - (71) (8,765)
Other liabilities ............................ - - (3,747)
-------- --------- -----------
Total liabilities ............................ - (71) (12,512)
-------- --------- -----------
Net assets available for benefits ............ $15,780 $ 270,894 2,727,693
======= ========= =========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1994
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------
Guaranteed Lynch
Investment Contract Equities Corporation
Fund Fund Stock Fund Total
<S> <C> <C> <C> <C>
------------------------------------------------------------
Assets
Investments:
John Hancock Mutual Life Insurance Company:
Unallocated Guaranteed Investment Contracts.. $ 999,256 -- -- $ 999,256
Clipper Fund, Inc. ........................ -- $ 325,143 -- 325,143
Mutual Qualified Fund ..................... -- 325,298 -- 325,298
Lynch Corporation Stock Fund .............. -- -- $ 111,990 111,990
Short-term investments ...................... 31,465 20,947 1,514 53,926
-------- -------- -------- --------
Total investments .............................. 1,030,721 671,388 113,504 1,815,613
Receivables:
Other .......................................... 9 1,158 2,703 3,870
-------- -------- ------- --------
Total assets ................................... 1,030,730 672,546 116,207 1,819,483
Liabilities
Other liabilities .............................. (12,042) (3,935) (1,923) (17,900)
------- ------ ------ -------
Total liabilities .............................. (12,042) (3,935) (1,923) (17,900)
Interfund transfers ............................ (48,571) 35,135 13,436 --
------- ------- ------- --------
Net assets available for benefits .............. $ 970,117 $ 703,746 $ 127,720 $ 1,801,583
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available
for Benefits, With Fund Information
Year ended December 31, 1996
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------------
Vanguard Vanguard
Hancock U.S. Convertible Mutual
Stable Value Equities Treasury Securities Qualified
Fund Fund Fund Fund Fund
--------------------------------------------------------------------------
Additions to net assets attributed to:
Investment income
<S> <C> <C> <C> <C> <C>
Net appreciation (depreciation) in
fair value of investments ........ $ -- $ 5,929 $ -- $ (1,676) $ 122,000
Interest ........................... 53,490 -- -- -- --
Dividends .......................... 17,120 -- 2,084 7,016 92,295
------ ------ ----- ----- ------
Total investment income .............. 70,610 5,929 2,084 5,340 214,295
Contributions:
Participants ....................... 84,737 28 24,026 22,345 147,404
Employer ........................... 6,718 -- 2,275 1,208 7,424
------ ------ ----- ----- -----
Total contributions .................. 91,455 28 26,301 23,553 154,828
------ ------ ------ ------ -------
Total additions ......................... 162,065 5,957 28,385 28,893 369,123
Deductions from net assets attributed to:
Benefits paid to participants ........ (194,494) (54,850) (4,509) (1,599) (148,355)
Excess contributions and related
investment income .................. (106) -- (810) (9) (22,167)
Transfer to the Entoleter, Inc. 401(k) plan (92,825) (16,600) (480) (1,126) (30,292)
------- ------- ---- ------ -------
Total deductions ........................ (287,425) (71,450) (5,799) (2,734) (200,814)
Net increase (decrease) prior to
interfund transfers .................. (125,360) (65,493) 22,586 26,159 168,309
Interfund transfers (net) ............... (241,844) (881,169) 333,016 12,323 651,562
-------- -------- ------- ------ -------
Net increase (decrease) ................. (367,204) (946,662) 355,602 38,482 819,871
Net assets available for benefits at
beginning of year .................... 1,307,279 946,662 26,761 19,641 140,676
--------- ------- ------ ------ -------
Net assets available for benefits at end
of year .............................. $ 940,075 -- $ 382,363 $ 58,123 $ 960,547
=========== ========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------
Tweedy
Browne Lynch
Global Corporation Loan
Value Fund Stock Fund Fund Total
--------------------------------------------------------------
Additions to net assets attributed to:
Investment income
<S> <C> <C> <C> <C>
Net appreciation (depreciation) in
fair value of investments ........ $ 1,251 $ 63,130 $ -- $ 190,634
Interest ........................... -- 199 2,411 56,100
Dividends .......................... 4,667 -- -- 123,182
--------- --------- --------- ----------
Total investment income .............. 5,918 63,329 2,411 369,916
Contributions:
Participants ....................... 27,486 37,488 -- 343,514
Employer ........................... 1,114 1,937 -- 20,676
--------- --------- --------- ---------
Total contributions .................. 28,600 39,425 -- 364,190
--------- --------- --------- --------
Total additions ......................... 34,518 102,754 2,411 734,106
Deductions from net assets attributed to:
Benefits paid to participants ........ (2,083) (36,037) (920) (442,847)
Excess contributions and related
investment income .................. (3,586) (579) -- (27,257)
Transfer to the Entoleter, Inc. 401(k) plan (420) (5,793) -- (147,536)
--------- -------- --------- ----------
Total deductions ........................ (6,089) (42,409) (920) (617,640)
Net increase (decrease) prior to
interfund transfers .................. 28,429 60,345 1,491 116,466
Interfund transfers (net) ............... 17,996 37,720 70,396 --
-------- -------- -------- --------
Net increase (decrease) ................. 46,425 98,065 71,887 116,466
Net assets available for benefits at
beginning of year .................... 15,780 270,894 -- 2,727,693
-------- --------- -------- ---------
Net assets available for benefits at end
of year .............................. $ 62,205 $ 368,959 $ 71,887 $ 2,844,159
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available
for Benefits, With Fund Information
Year ended December 31, 1995
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------
Vanguard Vanguard
Hancock Stable U.S. Convertible Mutual
Value Fund Equities Treasury Securities Qualified
Fund Fund Fund Fund
------------------------------------------------------------------------------
Additions to net assets attributed to:
Investment income
<S> <C> <C> <C> <C> <C>
Net appreciation (depreciation) in fair
value of investments ................ $ -- $ 143,893 $ -- $ (379) $ (5,941)
Interest .............................. 68,015 18,768 -- -- --
Dividends ............................. 1,349 99,892 247 988 13,076
----- ------ ----- ----- ------
Total investment income ................. 69,364 262,553 247 609 7,135
Contributions:
Participants .......................... 185,768 35,083 23,296 17,556 128,937
Employer .............................. 13,233 -- 3,218 1,476 8,925
------ ----- ----- ----- -----
Total contributions ..................... 199,001 35,083 26,514 19,032 137,862
------- ------ ------ ------ -------
Total additions ............................ 268,365 297,636 26,761 19,641 144,997
Deductions from net assets attributed to:
Benefits paid to participants ........... (9,133) (1,450) -- -- --
Excess contributions and related
investment income ................. (4,372) -- -- -- (4,321)
------ ------- ------ ------ ------
Total deductions ........................... (13,505) (1,450) -- -- (4,321)
Net increase prior to interfund transfers .. 254,860 296,186 26,761 19,641 140,676
Interfund transfers (net) .................. 82,302 (53,270) -- -- --
------ ------- ------- ------ -------
Net increase ............................... 337,162 242,916 26,761 19,641 140,676
Net assets available for benefits
Beginning of year ....................... 970,117 703,746 -- -- --
------- ------- ------- ------- -------
End of year ............................. $ 1,307,279 $ 946,662 $ 26,761 $ 19,641 $ 140,676
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------
Tweedy
Browne Lynch
Global Corporation
Value Fund Stock Fund Total
-------------------------------------------
Additions to net assets attributed to:
Investment income
<S> <C> <C> <C>
Net appreciation (depreciation) in fair
value of investments ................ $ 403 $ 128,869 $ 266,845
Interest .............................. -- 85 86,868
Dividends ............................. 362 -- 115,914
-------- -------- -------
Total investment income ................. 765 128,954 469,627
Contributions:
Participants .......................... 14,183 40,887 445,710
Employer .............................. 832 2,733 30,417
------- ------- ------
Total contributions ..................... 15,015 43,620 476,127
------- ------- -------
Total additions ............................ 15,780 172,574 945,754
Deductions from net assets attributed to:
Benefits paid to participants ........... -- (297) (10,880)
Excess contributions and related
investment income ................. -- (71) (8,764)
------- ------- ------
Total deductions ........................... -- (368) (19,644)
Net increase prior to interfund transfers .. 15,780 172,206 926,110
Interfund transfers (net) .................. -- (29,032) --
------- -------- -------
Net increase ............................... 15,780 143,174 926,110
Net assets available for benefits
Beginning of year ....................... -- 127,720 1,801,583
------- ------- ---------
End of year ............................. $ 15,780 $ 270,894 $ 2,727,693
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available
for Benefits, With Fund Information
Year ended December 31, 1994
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------
Guaranteed Lynch
Investment Contract Equities Corporation
Fund Fund Stock Fund Total
-----------------------------------------------------------
Additions to net assets attributed to:
Investment income
<S> <C> <C> <C> <C>
Net appreciation (depreciation) in fair value of
investments ................................... $ -- $ (28,913) $ 27,444 $ (1,469)
Interest ........................................ 80,727 219 29 80,975
Dividends ....................................... -- 39,759 -- 39,759
------- ------ -------- ------
Total investment income ........................... 80,727 11,065 27,473 119,265
Contributions:
Participants .................................... 169,133 135,923 15,813 320,869
Employer ........................................ 15,623 7,567 835 24,025
------ ------- ------- -------
Total contributions ............................... 184,756 143,490 16,648 344,894
-----------
Total additions ...................................... 265,483 154,555 44,121 464,159
Deductions from net assets attributed to:
Benefits paid to participants ..................... (47,483) (12,821) (3,148) (63,452)
Excess contributions and related investment income
(852) -- -- (852)
Transfer to the Morgan Group 401(k) Plan .......... (385,093) (137,385) (17,088) (539,566)
--- -------- -------- ------- --------
Total deductions ..................................... (433,428) (150,206) (20,236) (603,870)
Net increase (decrease) prior to interfund transfers . (167,945) 4,349 23,885 (139,711)
Interfund transfers (net) ............................ (14,236) 3,652 10,584 --
------- ------- ------- -------
Net increase (decrease) .............................. (182,181) 8,001 34,469 (139,711)
Net assets available for benefits at beginning of year 1,152,298 695,745 93,251 1,941,294
--------- ------- ------ ---------
Net assets available for benefits at end of year ..... $ 970,117 $ 703,746 $ 127,720 $ 1,801,583
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to the Financial Statements
Years ended December 31, 1996, 1995 and 1994
1. Description of Plan
- ----------------------
The following description of the Lynch Corporation (the "Company") 401(k)
Savings Plan (the "Plan") provides only general information. For a more complete
description of the Plan's provisions, participants should refer to the Summary
Plan Description which is available from the Company.
General
- -------
The Plan is a defined contribution plan covering substantially all non-union
employees of the Company and the employees of certain of its subsidiaries who
are at least 18 years of age and who have completed 1,000 hours of service
during a consecutive twelve-month period. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
During 1995, Fleet Financial Group and Shawmut National Corporation ("Shawmut")
merged, with Fleet Financial Group being the surviving institution. Prior to
this merger, Shawmut was the trustee of the Plan. Subsequent to the merger,
Fleet National Bank, a division of Fleet Financial Group, became the trustee of
the Plan. Additionally, as of April 1, 1995, the Company changed recordkeepers
from the John Hancock Mutual Life Insurance Company ("Hancock") to Fleet
Investment Management ("Fleet"), also a division of Fleet Financial Group, and
concurrently amended the Plan to adopt Fleet's prototype nonstandardized plan.
Effective January 1, 1996, one of the Company's subsidiaries, Entoleter, Inc.
("Entoleter") established its own defined contribution 401(k) savings plan. The
participant balances attributable to Entoleter employees ($147,536), were
transferred from the Plan in May 1996 to the new Entoleter, Inc. 401(k) Savings
Plan.
Effective January 1, 1994, one of the Company's subsidiaries, The Morgan Group,
Inc. ("Morgan"), established its own defined contribution 401(k) savings plan.
The participant balances attributable to Morgan employees ($539,566), were
transferred from the Plan in August 1994 to the new Morgan Group, Inc. 401(k)
Savings Plan.
Contributions
- -------------
Eligible employees may elect to contribute, on a pre-tax basis, between 1% and
15% (between 1% and 20% prior to April 1, 1995) of their total annual
compensation to the Plan up to the maximum allowed under the Internal Revenue
Code ($9,500 in 1996; $9,240 in 1995 and 1994). An annual mandatory employer
matching contribution is made to each participant's account equal to 25% of the
first $800 of the participant's contribution, generally on or about the closing
date of the Plan year. In addition, the employer may make a discretionary
matching contribution of up to 75% of the first $800 of the participant's
contribution. No such discretionary contribution was made in 1996, 1995 or 1994.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to the Financial Statements (continued)
Years ended December 31, 1996, 1995 and 1994
1. Description of Plan (continued)
- ----------------------------------
Participants' Accounts
- ----------------------
Each participant's account is credited with the participant's contributions,
Company's contributions and Plan earnings. 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 account.
Vesting
- -------
Participants are vested immediately in all contributions to their accounts,
including the Company's matching contributions (mandatory and discretionary, if
any) and investment earnings.
Payment of Benefits
- -------------------
Participant benefits are paid as soon as practicable in accordance with the
terms of the Plan following termination of employment, total permanent
disability, retirement, death or upon termination of the Plan. All benefit
payments are made in lump sum payments for an amount equal to the fair value of
their vested account balance.
Investment Options
- ------------------
Upon enrollment in the Plan, a participant may direct employer and participant
contributions in 1% increments of the amount contributed as follows:
Prior to April 1, 1995 (three investment elections)
Guaranteed Investment Contract Fund - Funds are invested in unallocated
guaranteed investment contracts.
Equities Fund - Funds are invested in two mutual funds, the Clipper Fund
(which invests primarily in common stock, convertible long-term corporate
debt obligations, convertible preferred stock and warrants) and the Mutual
Qualified Fund (which invests in common stocks, U.S. Government and
government agency obligations, bonds, notes of reorganization and other
equity securities).
Lynch Corporation Stock Fund - Funds are invested in the common stock of
the Company.
April 1, 1995 and subsequent (six investment elections)
Hancock Stable Value Fund (formerly the Guaranteed Investment Contract
Fund) - Funds are invested in the following: 1) unallocated guaranteed
investment contracts through Hancock and; 2) a pooled account (Fleet Stable
Return Fund) which invests primarily in unallocated guaranteed investment
contracts.
Vanguard U.S. Treasury Fund - Funds are invested in securities backed by
the full faith and credit of the U.S. Government.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to the Financial Statements (continued)
Years ended December 31, 1996, 1995 and 1994
1. Description of Plan (continued)
- ----------------------------------
Vanguard Convertible Securities Fund - Funds are primarily invested in
convertible securities, but may also be invested in non-convertible
corporate debt, U.S. Government debt, common stocks, and money markets.
Mutual Qualified Fund - Funds are invested in common stocks, U.S.
Government and government agency obligations, bonds, notes of
reorganization, and other equity securities.
Tweedy Browne Global Value Fund - Funds are invested in domestic and
foreign equities, including government and other organization debt.
Lynch Corporation Stock Fund - Funds are invested in the common stock of
the Company.
Participants may change their investment options daily.
Participant Notes Receivable
- ----------------------------
Effective April 1, 1995, participants may borrow from their fund accounts a
minimum of $1,000 or up to 50% of their account balance (not to exceed $50,000).
All loans must, by their terms, require repayment over a period not to exceed
five years, unless for the purchase of the participant's primary residence for
which the term shall be determined by the Company. Loan transactions are treated
as a transfer between the investment fund and the loan fund. The loans are
secured by 50% of the balance in the participant's account and bear interest at
a reasonable rate as determined by the Plan administrator in accordance with
Internal Revenue Service (the "IRS") and Department of Labor (the "DOL")
regulations. A participant's loan shall immediately become due and payable upon
termination of employment or failure to make a principal and/or interest payment
as provided in the loan agreement.
Plan Termination
- ----------------
Although it has not expressed any intent to do so, the Company has the right
under the Plan to change or discontinue its contributions at any time and to
terminate the Plan, subject to the provisions of ERISA. In the event of Plan
termination, or if contributions to the Plan cease, the Plan must distribute the
assets to the participants in an amount equal to the fair value of their
participants' accounts and pay any related expenses.
Expenses
- --------
Substantially all of the administrative expenses of the Plan were paid by the
Company.
2. Significant Accounting Policies
- ----------------------------------
Use of Estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to the Financial Statements (continued)
Years ended December 31, 1996, 1995 and 1994
2. Significant Accounting Policies (continued)
- ----------------------------------------------
Investment Valuation
- --------------------
Investments, except for the unallocated guaranteed investment contracts, in the
Plan are stated at fair value. The shares of registered investment companies
(i.e., mutual funds) are valued at quoted market prices which represent the net
asset values of shares held by the Plan at year-end. The participant notes
receivable are valued at their outstanding balances, which approximate fair
value.
The unallocated guaranteed investment contracts are valued at contract value
which approximates fair value as estimated by Hancock. Contract value represents
contributions made under the contract, plus interest at the contract rate, less
funds used to pay retirement benefits and certain administrative expenses.
Lynch Corporation common stock is valued at the last reported sales price on the
last business day of the year.
Purchases and sales of securities are recorded on a trade-date basis. Historical
cost of the Plan's investments are determined by the weighed average method.
Interest income is recorded as earned on the accrual basis. Dividends are
recorded on the ex-dividend date.
Net appreciation (depreciation) reflected in the statement of changes in net
assets available for benefits includes the change in the difference between fair
value and the cost of investments, as well as realized gains and losses
associated with the sale of investments.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform to the current
year's financial statement presentation.
3. Investments
- --------------
The fair value of individual investments that represent 5% or
more of the Plan's net assets are as follows:
<TABLE>
<CAPTION>
December 31
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
John Hancock Mutual Life Insurance Company
Unallocated Guaranteed Investment Contracts $ 580,962 $1,167,424 $ 999,256
Fleet Stable Return Fund .................... 372,274 -- --
Clipper Fund, Inc. .......................... -- 468,971 325,143
Mutual Qualified Fund ....................... 980,660 595,114 325,298
Vanguard U.S. Treasury Fund ................. 382,210 -- --
Lynch Corporation Stock Fund ................ 338,823 262,840 111,990
</TABLE>
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to the Financial Statements (continued)
Years ended December 31, 1996, 1995 and 1994
3. Investments (continued)
- --------------------------
Tremont Advisers, Inc., an affiliate of the Company, provided investment
advisory services for the Equities Fund until the dissolution of the Fund in
1996. The fees for such services were paid by the Company.
4. Contracts with Insurance Company
- -----------------------------------
During 1996 and 1995, the Plan held unallocated guaranteed investment contracts
with maturities in 1996 through 1999 with Hancock. Contributions from the Plan
are accepted by Hancock throughout the first year of each contract and interest
is earned over the contract lives at guaranteed annual rates ranging from 5.39%
to 8.68%.
5. Differences Between Financial Statements and Form 5500
- ---------------------------------------------------------
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31
1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
Net assets available for plan benefits per the financial
statements .......................................... $ 2,844,159 $ 2,727,693 $ 1,801,583
Benefits payable to participants ....................... -- (94,977) --
----------- ----------- -----------
Net assets available for plan benefits per the Form 5500 $ 2,844,159 $ 2,632,716 $ 1,801,583
=========== =========== ===========
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31
1996 1995
-----------------------
<S> <C> <C>
Benefits paid to participants per the financial statements $ 442,847 $ 10,880
Add: Benefits payable to participants at December
31, 1996 and 1995, respectively .................... -- 94,977
Deduct: Benefits payable to participants at December
31, 1995 and 1994, respectively ........................ (94,977) --
--------- ---------
Benefits paid to participants per the Form 5500 .......... $ 347,870 $ 105,857
========= =========
</TABLE>
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to the Financial Statements (continued)
Years ended December 31, 1996, 1995 and 1994
6. Income Tax Status
- --------------------
On April 1, 1995, the Company implemented a prototype nonstandardized plan
developed by Fleet. The Fleet prototype plan has secured a favorable opinion
letter from the Internal Revenue Service ("IRS") stating that the form of the
underlying prototype plan document is qualified under Section 401(a) of the
Internal Revenue Code ("Code"). The Company intends to file for a determination
letter. The Plan is required to operate in conformity with the Code to be a
qualified plan under Section 401(a) of the Code. The Plan Administrator and
management of the Company plan to take the necessary steps, if any, to maintain
the Plan's qualified status.
7. Year 2000 (Unaudited)
- ------------------------
The Company has developed a plan to modify its internal information technology
to be ready for the year 2000 and has begun converting critical data processing
systems. The project also includes determining whether third party service
providers have reasonable plans in place to become year 2000 compliant. The
Company currently expects the project to be substantially complete by early
1999. The Company does not expect this project to have a significant effect on
operations.
<PAGE>
Supplemental Schedules
----------------------
<PAGE>
Lynch Corporation 401(k) Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
Description of Investment, Including Current or
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Par or Contract
Lessor or Similar Party Maturity Value Cost Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hancock Stable Value Fund:
John Hancock Mutual Life Insurance
Company
Unallocated Guaranteed Group Annuity Contract Number 4551
Investment Contracts Association 239, 7.52% due May 30, 1997 $332,057 $332,057
Association 287, 5.39% due May 29, 1998 205,729 205,729
Group Annuity Contract Number 9008, 6.56%
due June 30, 1999 43,176 43,176
Fleet Stable Return Fund ................... 372,274 shares 372,274 372,274
Vanguard U.S. Treasury Fund ................... 382,210 shares 382,210 382,210
Vanguard Convertible Securities Fund .......... 4,960 shares 59,999 57,683
Mutual Qualified Fund ......................... 30,202 shares 892,659 980,660
Tweedy Browne Global Value Fund ............... 4,481 shares 63,325 64,744
Lynch Corporation Stock Fund:
Lynch Corporation Common Stock*............. 4,806 shares 169,125 338,823
Participant notes receivable................... Loans bear interest at 8.25% -- 71,887
Short-term investments ....................... 6,649 6,649
----- -----
$2,527,203 $2,855,892
========== ==========
</TABLE>
* Indicates party-in-interest to the Plan.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1995
<TABLE>
<CAPTION>
Description of Investment, Including Current or
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Par or Contract
Lessor or Similar Party Maturity Value Cost Value
- ---------------------------------------------------------------------------------------------------------------------------------
Hancock Stable Value Fund:
John Hancock Mutual Life Insurance Company
<S> <C> <C> <C>
Unallocated Guaranteed
Investment Contracts Group Annuity Contract Number 4551
Association 181, 8.68% due May 31, 1996 $ 513,787 $ 513,787
Association 239, 7.52% due May 30, 1997 310,277 310,277
Association 287, 5.39% due May 29, 1998 195,207 195,207
Group Annuity Contract Number 9008, 6.56%
due June 30, 1999 148,153 148,153
Fleet Stable Return Fund ...................... 113,034 shares 113,034 113,034
Equities Fund:
Clipper Fund, Inc. ............................ 7,721 shares 388,127 468,971
Mutual Qualified Fund ......................... 15,969 shares 411,301 474,928
Vanguard U.S. Treasury Fund....................... 21,206 shares 21,206 21,206
Vanguard Convertible Securities Fund ............. 1,346 shares 16,016 15,637
Mutual Qualified Fund ............................ 4,041 shares 126,127 120,186
Tweedy Browne Global Value Fund .................. 1,026 shares 12,879 13,282
Lynch Corporation Stock Fund:
Lynch Corporation Common Stock* ............... 4,493 shares 119,681 262,840
Short-term investments .......................... 20,098 20,098
------ ------
$2,395,893 $2,677,606
</TABLE>
* Indicates party-in-interest to the Plan.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Schedule of Reportable Transactions
Year ended December 31, 1996
<TABLE>
<CAPTION>
Current Value
of Asset on
Purchase Selling Cost of Transaction Net Gain/
Identity of Party Involved Description of Assets Price Price Asset Date (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
Category (i)--A single transaction in
excess of 5% of plan assets
<S> <C> <C> <C> <C> <C> <C>
John Hancock Mutual Life
Insurance Company Guaranteed Investment Contracts
530,645 shares ............. $530,645 $ -- $530,645 $530,645 $ --
Fleet Investment Management Vanguard U.S. Treasury Fund
306,391 shares ............. 306,391 -- 306,391 306,391 --
Short-term investments
365,546 shares ............. 365,546 -- 365,546 365,546 --
176,500 shares ............. 176,500 -- 176,500 176,500 --
314,574 shares ............. 314,574 -- 314,574 314,574 --
365,811 shares ............. -- 365,811 365,811 365,811 --
323,916 shares ............. -- 323,916 323,916 323,916 --
199,305 shares ............. -- 199,305 199,305 199,305 --
Category (iii)--A series of transactions
in excess of 5% of plan assets
John Hancock Mutual Life
Insurance Company
Guaranteed Investment Contracts
52,872 shares .............. 52,872 -- 52,872 52,872 --
639,334 shares ............. -- 639,334 639,334 639,334 --
Fleet Stable Return Fund
Fleet Investment Management 432,273 shares ............. 432,273 -- 432,273 432,273 --
173,033 shares ............. -- 173,033 173,033 173,033 --
</TABLE>
<PAGE>
Lynch Corporation 401(k) Savings Plan
Schedule of Reportable Transactions (continued)
Year ended December 31, 1996
<TABLE>
<CAPTION>
Current Value
of Asset on
Identity of Purchase Selling Cost of Transaction Net Gain/
Party Involved Description of Assets Price Price Asset Date (Loss)
- -----------------------------------------------------------------------------------------------------------
Category (iii)--A series of transactions in excess of 5% of plan assets (continued)
Fleet Investment Management
(continued)
<S> <C> <C> <C> <C> <C>
Clipper Fund, Inc.
2 shares ................ $ 121 $ - $ 121 $ 121 $ -
7,723 shares ............ - 538,647 388,248 538,647 150,399
Mutual Qualified Fund
14,553 shares ........... 470,220 - 470,220 470,220 -
7,281 shares ............ - 234,789 206,731 234,789 28,058
Vanguard U.S. Treasury Fund
366,419 shares .......... 366,419 - 366,419 366,419 -
5,415 shares ............ - 5,415 5,415 5,415 -
Lynch Corporation Stock Fund
1,205 shares ............ 80,502 - 80,502 80,502 -
892 shares .............. - 67,649 31,058 67,649 36,591
Short-term investments
1,633,947 shares ........ 1,633,947 - 1,633,947 1,633,947 -
1,677,396 shares ........ - 1,677,396 1,677,396 1,677,396 -
</TABLE>
There were no Category (ii) or (iv) reportable transactions during 1996.
"Lease Rental" and "Expenses Incurred with Transaction" columns were not
applicable during 1996.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Schedule of Reportable Transactions
Year ended December 31, 1995
<TABLE>
<CAPTION>
Current Value
of Asset on
Purchase Selling Cost of Transaction Net Gain/
Identity of Party Involved Description of Assets Price Price Asset Date (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
Category (i)--A single transaction in excess of 5% of plan assets
<S> <C> <C> <C> <C> <C> <C>
Fleet Investment Management ............... Short-term investments
115,621 shares ............ $ - 115,621 115,621 115,621 $ -
Category (iii)--A series of transactions in excess of 5% of plan assets
John Hancock Mutual Life Insurance Company
Guaranteed Investment Contracts
181,078 shares ............. 181,078 - 181,078 181,078 -
12,910 shares .............. - 12,910 12,910 12,910 -
Fleet Investment Management Fleet Stable Return Fund
113,034 shares ............. 113,034 - 113,034 113,034 -
Equities Fund:
Mutual Qualified Fund
3,795 shares ............ 109,131 - 109,131 109,131 -
23 shares ............... - 758 595 758 163
Mutual Qualified Fund
4,048 shares ............... 126,348 - 126,348 126,348 -
7 shares ................... - 221 221 221 -
Short-term investments
548,944 shares ............. 548,944 - 548,944 548,944 -
582,772 shares ............. - 582,772 582,772 582,772 -
</TABLE>
There were no Category (ii) or (iv) reportable transactions during 1995.
"Lease Rental" and "Expenses Incurred with Transaction" columns were not
applicable during 1995.
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the 401(k) Plan Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
LYNCH CORPORATION 401(k) SAVINGS PLAN
By: s/Robert E. Dolan
Robert E. Dolan
Member of the 401(k) Plan Committee
Dated: December 10, 1998
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-46953) pertaining to the Lynch Corporation 401(k) Savings Plan of our
report dated September 30, 1998, with respect to the financial statements and
schedules of the Lynch Corporation 401(k) Savings Plan included in this Annual
Report (Form 11-K) for the year ended December 31, 1995.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
December 4, 1998
