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, 1998
[ ] 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>
Lynch Corporation 401(k) Savings Plan
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Contents
<S> <C>
Report of Independent Auditors.............................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits............................2
Statements of Changes in Net Assets Available for Benefits.................4
Notes to Financial Statements..............................................6
Supplemental Schedules
Line 27a-Schedule of Assets Held for Investment Purposes..................11
Line 27d-Schedule of Reportable Transactions..............................12
</TABLE>
<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, 1998 and 1997,
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, 1998 and 1997, 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 financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998, and reportable
transactions for the year then ended, are presented for purposes of additional
analysis and are not a required part of the financial statements but are
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. These supplemental schedules are the responsibility of the
Plan's management. 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 the changes in net assets available
for benefits of each fund. The supplemental schedules and Fund Information have
been subjected to auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Stamford, Connecticut
June 21, 1999
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1998
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------
Galaxy
Hancock Stable U.S. Mutual Mutual
Value Fund Treasury Qualified Discovery Fund
Fund Fund
--------------------------------------------------------------
Assets
Investments at contract value:
<S> <C> <C> <C> <C>
John Hancock Mutual Life Insurance
Company:
Unallocated Guaranteed Investment
Contracts ......................... $ 49,027
Investments at fair value:
Fleet Investment Management:
Fleet Stable Asset Fund ............. 936,886
Mutual Qualified Fund ............... $ 1,077,224
Galaxy U.S. Treasury Fund ........... $ 322,504
Mutual Discovery Fund ............... $ 229,831
Lynch Corporation Common Stock ......
East/West Communications Inc. Class A
Common Stock ......................
Participant notes receivable .........
Short-term investments ................ 34,785
---------- ---------- ---------- ----------
Total investments ...................... 1,020,698 322,504 1,077,224 229,831
Receivables:
Participants' contributions ......... 627 516 1,166 59
Employer's contribution ............. 1,390 873 2,266 233
Other ............................... 5,647 -- 113 --
---------- ---------- ---------- ----------
Total receivables ...................... 7,664 1,389 3,545 292
---------- ---------- ---------- ----------
Total assets ........................... 1,028,362 323,893 1,080,769 230,123
---------- ---------- ---------- ----------
Liabilities
Excess contributions payable ........... (2,165) (591) (2,426) (576)
Other liabilities ...................... (372) -- -- --
---------- ---------- ---------- ----------
Total liabilities ...................... (2,537) (591) (2,426) (576)
---------- ---------- ---------- ----------
Net assets available for benefits ...... $ 1,025,825 $ 323,302 $ 1,078,343 $ 229,547
=========== =========== =========== ===========
<PAGE>
<CAPTION>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1998 (Continued)
Fund Information
--------------------------------------------
Lynch
Corporation Loan
Stock Fund Fund Total
--------------------------------------------
Assets
Investments at contract value:
<S> <C> <C> <C>
John Hancock Mutual Life Insurance
Company:
Unallocated Guaranteed Investment
Contracts ......................... $ 49,027
Investments at fair value:
Fleet Investment Management:
Fleet Stable Asset Fund ............. 936,886
Mutual Qualified Fund ............... 1,077,224
Galaxy U.S. Treasury Fund ........... 322,504
Mutual Discovery Fund ............... 229,831
Lynch Corporation Common Stock ...... $ 355,179 355,179
East/West Communications Inc. Class A
Common Stock ...................... 7,557 7,557
Participant notes receivable .......... $ 79,909 79,909
Short-term investments ................ 57,360 92,145
---------- ---------- ----------
Total investments ...................... 420,096 79,909 3,150,262
---------- ---------- ----------
Receivables:
Participants' contributions ......... 162 -- 2,530
Employer's contribution ............. 517 -- 5,279
Other ............................... 80 -- 5,840
--------- ---------- ----------
Total receivables ...................... 759 -- 13,649
--------- ---------- ----------
Total assets ........................... 420,855 79,909 3,163,911
--------- ---------- ----------
Liabilities
Excess contributions payable ........... (1,678) -- (7,436)
Other liabilities ...................... -- -- (372)
--------- ---------- ----------
Total liabilities ...................... (1,678) -- (7,808)
--------- ---------- ----------
Net assets available for benefits ...... $ 419,177 $ 79,909 $3,156,103
========= ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1997
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------
Hancock Stable Galaxy
Value Fund U.S. Mutual Mutual
Treasury Qualified Discovery Fund
---------------------------------------------------------------
Assets
Investments at contract value:
<S> <C> <C> <C> <C>
John Hancock Mutual Life Insurance Company:
Unallocated Guaranteed Investment Contracts $ 262,826
Invewtment at fair value:
Fleet Investment Management:
Fleet Stable Asset Fund ................... 723,344
Mutual Qualified Fund ..................... $1,023,054
Galaxy U.S. Treasury Fund ................. $ 329,610
Mutual Discovery Fund ..................... $ 145,473
Lynch Corporation Common Stock ............
Participant notes receivable ................
Short-term investments ...................... 21,820
---------- ---------- ---------- ----------
Total investments ............................ 1,007,990 329,610 1,023,054 145,473
Receivables:
Participants' contributions ............... 4,001 597 5,644 737
Employer's contribution ................... 6,979 3,557 7,693 1,304
Other ..................................... -- -- -- --
---------- ---------- ---------- ----------
Total receivables ............................ 10,980 4,154 13,337 2,041
---------- ---------- ---------- ----------
Total assets ................................. 1,018,970 333,764 1,036,391 147,514
---------- ---------- ---------- ----------
Liabilities
Excess contributions payable ................. (17) -- (644) --
Other liabilities ............................ (173) -- -- --
---------- ---------- ---------- ----------
Total liabilities ............................ (190) -- (644) --
---------- ---------- ---------- ----------
Net assets available for benefits ............ $ 1,018,780 $ 333,764 $ 1,035,747 $ 147,514
========== ========== ========== ==========
<PAGE>
<CAPTION>
Lynch Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1997 (Continued)
Fund Information
--------------------------------------------
Lynch
Corporation Loan
Stock Fund Fund Total
--------------------------------------------
Assets
Investments at contract value:
<S> <C> <C> <C>
John Hancock Mutual Life Insurance Company:
Unallocated Guaranteed Investment Contracts: $ 262,826
Invewtment at fair value:
Fleet Investment Management:
Fleet Stable Asset Fund ................... 723,344
Mutual Qualified Fund ..................... 1,023,054
Galaxy U.S. Treasury Fund ................. 329,610
Mutual Discovery Fund ..................... 145,473
Lynch Corporation Common Stock ............ $ 418,154 418,154
Participant notes receivable ................ $ 90,118 90,118
Short-term investments ...................... 12,119 33,939
---------- ---------- ----------
Total investments ............................ 430,273 90,118 3,026,518
Receivables:
Participants' contributions ............... 1,333 -- 12,312
Employer's contribution ................... 1,953 -- 21,486
Other ..................................... 4,729 -- 4,729
---------- ---------- ----------
Total receivables ............................ 8,015 -- 38,527
---------- ---------- ----------
Total assets ................................. 438,288 90,118 3,065,045
---------- ---------- ----------
Liabilities
Excess contributions payable ................. (72) -- (733)
Other liabilities ............................ -- -- (173)
---------- ---------- ----------
Total liabilities ............................ (72) -- (906)
---------- ---------- ----------
Net assets available for benefits ............ $ 438,216 $ 90,118 $3,064,139
========== ========== ==========
</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, 1998
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------
Galaxy
Hancock U.S. Mutual Mutual
Stable Value Treasury Qualified Discovery
Fund Fund Fund Fund
----------------------------------------------------------
Additions:
Investment income:
<S> <C> <C> <C> <C>
Net depreciation in fair value of investments ... $ -- $ -- $ (102,850) $(29,144)
Interest ........................................ 8,150 14,176 -- --
Dividends ....................................... 49,768 -- 104,944 16,310
---------- ---------- ---------- ----------
57,918 14,176 2,094 (12,834)
Contributions:
Participants .................................... 73,507 47,275 118,888 24,110
Employer ........................................ 6,761 3,773 7,004 1,327
---------- ---------- ---------- ----------
80,268 51,048 125,892 25,437
---------- ---------- ---------- ----------
Total additions ...................................... 138,186 65,224 127,986 12,603
Deductions:
Benefits paid to participants ..................... (92,830) (30,119) (72,211) (10,574)
Excess contributions and related investment income (867) (521) (1,293) (576)
---------- ---------- ---------- ----------
Total deductions ..................................... (93,697) (30,640) (73,504) (11,150)
---------- ---------- ---------- ----------
Net increase (decrease) prior to transfers ........... 44,489 34,584 54,482 1,453
Transfers (from) to other funds ...................... (37,444) (45,046) (11,886) 80,580
---------- ---------- ---------- ----------
Net increase (decrease) .............................. 7,045 (10,462) 42,596 82,033
Net assets available for benefits at beginning of year 1,018,780 333,764 1,035,747 147,514
---------- ---------- ---------- ----------
Net assets available for benefits at end of year ..... $ 1,025,825 $ 323,302 $ 1,078,343 $ 229,547
========== ========== ========== =========
<PAGE>
<CAPTION>
Lynch Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available
for Benefits, With Fund Information
Year ended December 31, 1998 (Continued)
Fund Information
----------------------------------------
Lynch
Corporation Loan
Stock Fund Fund Total
----------------------------------------
Additions:
Investment income:
<S> <C> <C> <C>
Net depreciation in fair value of investments ..... $ (55,922) $ -- $ (187,916)
Interest ........................................ 2,962 6,805 32,093
Dividends ....................................... -- -- 171,022
---------- ---------- ----------
(52,960) 6,805 15,199
Contributions:
Participants .................................... 37,027 -- 300,807
Employer ........................................ 1,946 -- 20,811
---------- ---------- ----------
38,973 -- 321,618
---------- ---------- ----------
Total additions ...................................... (13,987) 6,805 336,817
Deductions:
Benefits paid to participants ..................... (12,603) (21,815) (240,152)
Excess contributions and related investment income (1,444) -- (4,701)
---------- ---------- ----------
Total deductions ..................................... (14,047) (21,815) (244,853)
---------- ---------- ----------
Net increase (decrease) prior to transfers ........... (28,034) (15,010) 91,964
Transfers (from) to other funds ...................... 8,995 4,801 --
---------- ---------- ----------
Net increase (decrease) .............................. (19,039) (10,209) 91,964
Net assets available for benefits at beginning of year 438,216 90,118 3,064,139
---------- ---------- ----------
Net assets available for benefits at end of year ..... $ 419,177 $ 79,909 $ 3,156,103
=========== ========== ==========
</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, 1997
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------------
Vanguard Galaxy Vanguard
Hancock U.S. U.S. Convertible Mutual
Stable Value Treasury Treasury Securities Qualified
Fund Fund Fund Fund Fund
------------------------------------------------------------------------
Additions:
Investment income:
<S> <C> <C> <C> <C> <C>
Net appreciation
(depreciation) in fair value $ $ $ $ (1,021) $ 106,251
of investments ............. -- -- -- --
Interest ..................... 23,648 -- -- -- --
Dividends .................... 33,667 6,525 12,016 544 102,250
-------- -------- -------- -------- --------
57,315 6,525 12,016 (477) 208,501
Contributions:
Participants ................. 77,746 6,659 34,709 10,682 124,470
Employer ..................... 7,479 -- 3,837 -- 8,463
-------- -------- -------- -------- --------
85,225 6,659 38,546 10,682 132,933
-------- -------- -------- -------- --------
Total additions ................... 142,540 13,184 50,562 10,205 341,434
Deductions:
Benefits paid to participants .. (91,020) (39,554) (42,470) (1,468) (308,678)
Excess contributions and related
investment income.............. -- -- -- -- (386)
-------- -------- -------- -------- --------
Total deductions .................. (91,020) (39,554) (42,470) (1,468) (309,064)
-------- -------- -------- -------- --------
Net increase (decrease) prior to
transfers ..................... 51,520 (26,370) 8,092 8,737 32,370
Transfers (from) to other funds ... 27,185 (355,993) 325,672 (66,860) 42,830
-------- -------- -------- -------- --------
Net increase (decrease) ........... 78,705 (382,363) 333,764 (58,123) 75,200
Net assets available for benefits
at beginning of year ........... 940,075 382,363 -- 58,123 960,547
-------- -------- -------- -------- --------
Net assets available for benefits
at end of year ................. $ 1,018,780 $ -- $ 333,764 $ -- $ 1,035,747
========= ========= ========= ========= ==========
<PAGE>
<CAPTION>
Lynch Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available
for Benefits, With Fund Information
Year ended December 31, 1997 (Continued)
Fund Information
----------------------------------------------------------------------
Tweedy
Browne Mutual Lynch
Global Discovery Corporation Loan
Value Fund Fund Stock Fund Fund Total
----------------------------------------------------------------------
Additions:
Additions:
Investment income:
<S> <C> <C> <C> <C> <C>
Net appreciation
(depreciation) in fair value $ 5,662 $ 3,175 $ 56,541 $ -- $ 170,608
of investments .............
Interest ..................... -- -- 883 6,025 30,556
Dividends .................... -- 14,808 504 -- 170,314
--------- --------- --------- --------- ---------
5,662 17,983 57,928 6,025 371,478
Contributions:
Participants ................. 9,873 20,062 39,111 -- 323,312
Employer ..................... -- 1,534 2,373 -- 23,686
--------- --------- --------- --------- ---------
9,873 21,596 41,484 -- 346,998
--------- --------- --------- --------- ---------
Total additions ................... 15,535 39,579 99,412 6,025 718,476
Deductions:
Benefits paid to participants .. -- (3,780) (8,073) (2,680) (497,723)
Excess contributions and
related investment income.......... (387) -- -- -- (773)
--------- --------- --------- --------- ---------
Total deductions .................. (387) (3,780) (8,073) (2,680) (498,496)
--------- --------- --------- --------- ---------
Net increase (decrease) prior to
transfers ..................... 15,148 35,799 91,339 3,345 219,980
Transfers (from) to other funds ... (77,353) 111,715 (22,082) 14,886 --
--------- --------- --------- --------- ---------
Net increase (decrease) ........... (62,205) 147,514 69,257 18,231 219,980
--------- --------- --------- --------- ---------
Net assets available for benefits
at beginning of year ........... 62,205 -- 368,959 71,887 2,844,159
--------- --------- --------- --------- ---------
Net assets available for benefits
at end of year ................. $ -- $ 147,514 $ 438,216 $ 90,118 $ 3,064,139
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to Financial Statements
Years ended December 31, 1998 and 1997
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 Plan
Agreement 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").
Contributions
Eligible employees may elect to contribute, on a pre-tax basis, between 1% and
15% of their total annual compensation to the Plan up to the maximum allowed
under the Internal Revenue Code ($10,000 in 1998 and $9,500 in 1997). 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, as defined in
the Plan agreement, 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 1998 or 1997.
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 in the Plan agreement. 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 agreement following termination of employment, 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
the participants' vested account balance.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
Years ended December 31, 1998 and 1997
1. Description of Plan (continued)
Investment Options
Upon enrollment in the Plan, a participant may direct employer and participant
contributions in 1% increments to any of the Plan's investment options.
Participants may change their investment options daily.
Effective April 11, 1997, the Fleet Stable Return Fund changed its name to the
Fleet Stable Asset Fund (part of the Hancock Stable Value Fund investment
option). In connection with the name change, the assets of the Fleet Stable
Return Fund were sold and repurchased into the Fleet Stable Asset Fund.
In April 1997, funds invested by participants in the Vanguard U.S. Treasury Fund
and the Vanguard Convertible Securities Fund were transferred to the Galaxy U.S.
Treasury Fund and all funds invested in the Tweedy Browne Global Value Fund were
transferred to the Mutual Discovery Fund.
During 1997, for each share of Lynch Corporation common stock held by the Lynch
Corporation Stock Fund, a stock dividend equal to one share of East/West
Communications Inc. (an affiliate of the Company) Class A Common Stock was
declared and issued. The total stock dividend paid to the Lynch Corporation
Stock Fund was 5,038 shares.
Participant Notes Receivable
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 the Internal Revenue
Service (the "IRS") and Department of Labor ("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 will distribute the
assets to the participants in an amount equal to the fair value of their
accounts and pay any related expenses.
Expenses
Substantially all of the administrative expenses of the Plan were paid by the
Company.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
Years ended December 31, 1998 and 1997
2. Significant Accounting Policies
Use of Estimates
The preparation of 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.
Reclassifications
Certain prior year amounts were reclassified to conform to current year
presentation.
Investment Valuation
Except for the unallocated guaranteed investment contracts, the Plan's
investments 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 the John Hancock Mutual Life
Insurance Company ("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 and East/West Communications Inc. Class A common stock are
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 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 the realized gains and losses
associated with the sale of investments.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
Years ended December 31, 1998 and 1997
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
1998 1997
-------------------------------------
<S> <C> <C>
John Hancock Mutual Life Insurance Company:
Unallocated Guaranteed
Investment Contracts ................... -- $ 262,826
Fleet Stable Asset Fund ................... $ 936,886 723,344
Mutual Qualified Fund ..................... 1,077,224 1,023,054
Mutual Discovery Fund ..................... 229,831
Galaxy U.S. Treasury Fund ................. 322,504 329,610
Lynch Corporation Common Stock ............ 355,179 418,154
</TABLE>
4. Contracts with Insurance Company
During 1998 and 1997, the Plan held unallocated guaranteed investment contracts
with maturities in 1997 through 1999 with Hancock. Contributions from the Plan
were 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 7.52%. The underlying assets within the contract are restricted solely for
administrative expense and benefit payments made by the Plan.
5. Income Tax Status
The Plan intends to apply for but has not received a determination letter from
the Internal Revenue Service stating that the Plan is qualified under Section
401(a) of the Internal Revenue Code (the "Code"). The Plan Administrator has
indicated that it will take the necessary steps, if any, to maintain the Plan's
qualified status.
<PAGE>
Lynch Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
Years ended December 31, 1998 and 1997
6. Year 2000 Issue (unaudited)
The Company has determined that it will be necessary to take certain steps in
order to ensure that the Plan's information systems are prepared to handle year
2000 dates. The Company's focus will include both internal systems and third
party service providers. With regard to internal systems that must be modified
or replaced to function properly, both internal and external resources are being
utilized to replace or modify existing software applications, and test the
software and equipment for the year 2000 modifications. The Company has
substantially completed this effort. Costs associated with modifying software
and equipment are not significant and will be paid by the Company. In addition,
Plan management established formal communications with its third party service
providers to determine that they have developed plans to address their own year
2000 problems as they relate to the Plan's operations. All third party service
providers have indicated that they will be year 2000 compliant. If modification
of data processing systems of either the Plan, the Company, or its service
providers are not completed timely, the year 2000 problem could have a material
impact on the operations of the Plan. Plan management has not developed a
contingency plan, because they are confident that all systems will be year 2000
ready.
<PAGE>
Supplemental Schedules
<PAGE>
Lynch Corporation 401(k) Savings Plan
EIN-38-1799862 Plan-004
Line 27a-Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Description of Investment, Including
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Par or Current or
Lessor or Similar Party Maturity Value Cost Contract Value
- ---------------------------------------------------------------------------------------------------------------------------------
Hancock Stable Value Fund:
John Hancock Mutual Life Insurance
Company*
<S> <C> <C> <C>
Unallocated Guaranteed Investment Contracts.................... Group Annuity Contract Number
9008, 6.56%
due June 30, 1999 $ 49,027 $ 49,027
Fleet Stable Asset Fund* ...................................... 93,689 shares 936,886 936,886
Galaxy U.S. Treasury Fund ........................................ 322,504 shares 322,504 322,504
Mutual Qualified Fund ............................................ 65,445 shares 1,081,062 1,077,224
Mutual Discovery Fund ............................................ 13,308 shares 254,065 229,831
Lynch Corporation Stock Fund:
Lynch Corporation Common Stock* ............................... 5,038 shares 196,421 355,179
East/West Communications Inc. Class A Common Stock* ........... 5,038 shares 504 7,557
Participant notes receivable ..................................... Loans bear interest between
8.25% and 8.5% -- 79,909
Short-term investments .......................................... 92,145 92,145
----------- ----------
$2,932,614 $3,150,262
=========== ==========
</TABLE>
* Indicates party-in-interest to the Plan.
<PAGE>
Lynch Corporation 401(k) Savings Plan
EIN-38-1799862 Plan-004
Line 27d-Schedule of Reportable Transactions
Year ended December 31, 1998
<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 the current value of plan assets
<S> <C> <C> <C> <C> <C> <C>
John Hancock Mutual
Life Insurance Company*
Guaranteed Investment Contracts
220,592 shares ............. -- $220,592 $220,592 $220,592 $ --
Fleet Investment Management* Short-term investments
220,592 shares ............. $220,592 -- 220,592 220,592 --
Short-term investments
221,482 shares ............. -- 221,482 221,482 221,482 --
Fleet Stable Asset Fund
22,148 shares .............. 221,482 -- 221,482 221,482 --
Category (iii)--A series of transactions in excess of 5% of plan assets
John Hancock Mutual Life
Insurance Company*
Guaranteed Investment Contracts
6,793 shares ............... $ 6,793 -- $ 6,793 $ 6,793 $ --
220,592 shares ............. -- $220,592 220,592 220,592 --
Fleet Investment Management* Fleet Stable Asset Fund
26,590 shares .............. 265,892 -- 265,892 265,892 --
5,235 shares ............... -- 52,350 52,350 52,350 --
</TABLE>
<PAGE>
Lynch Corporation 401(k) Savings Plan
EIN-38-1799862 Plan-004
Line 27d-Schedule of Reportable Transactions (continued)
Year ended December 31, 1998
<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 (iii)--A series of transactions in excess of 5% of the current value of plan assets (continued)
<S> <C> <C> <C> <C> <C> <C>
Fleet Investment Management*
(continued)
Galaxy U.S. Treasury Fund
97,934 shares ....... $ 97,934 -- $ 97,934 $ 97,934 $ --
105,040 shares ...... -- $105,040 105,040 105,040 --
Mutual Qualified Fund
16,069 shares ....... 284,159 -- 284,159 284,159 --
6,898 shares ........ -- 127,139 113,349 127,139 13,790
Mutual Discovery Fund
7,359 shares ........ 144,450 -- 144,450 144,450 --
1,752 shares ........ -- 30,948 33,794 30,948 (2,846)
Short-term investments
415,104 shares ..... 415,104 -- 415,104 415,104 --
356,898 shares ..... -- 356,898 356,898 356,898 --
</TABLE>
There were no Category (ii) or (iv) reportable transactions during 1998.
"Lease Rental" and "Expenses Incurred with Transaction" columns were not
applicable during 1998.
* Indicates party-in-interest to the Plan.
<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: June 29, 1999
Exhibit 23
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 June 21, 1999, 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, 1998.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
June 28, 1999
