sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 11-K
FOR ANNUAL REPORTS OF
EMPLOYEE STOCK REPURCHASE SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2005
-----------------
OR
|_| 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 the plan and the address of the plan, if different
from that of the issuer named below:
401(k) Savings Plan of Lynch Corporation and Participating Employees
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Lynch Corporation
140 Greenwich Avenue, 4th Floor
Greenwich, CT 06830
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Financial Statements
and Supplemental Schedule
Years Ended December 31, 2005 and 2004
CONTENTS
Report of Independent Registered Public Accounting Firm........................1
AUDITED FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits................................2
Statements of Changes in Net Assets Available for Benefits.....................3
Notes to Financial Statements..................................................4
SUPPLEMENTAL SCHEDULE
Schedule H, Line 4i - Schedule of Assets (Held at End of Year).................9
i
Report of Independent Registered Public Accounting Firm
Board of Directors and Participants
401(k) Savings Plan of Lynch Corporation
and Participating Employers
We have audited the accompanying statements of net assets available for benefits
of the 401(k) Savings Plan of Lynch Corporation and Participating Employers as
of December 31, 2005 and 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
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, 2005 and 2004, and the changes in its net assets available for
benefits for the years then ended, in conformity with U.S. 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 schedule of assets
(held at end of year) as of December 31, 2005 is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
June 9, 2006
1
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Statements of Net Assets Available for Benefits
December 31
2005 2004
--------- ---------
ASSETS
Investments $4,281,046 $3,862,238
Contributions receivable:
Participants 2,874 2,092
Employer 10,940 --
--------- ---------
13,814 2,092
--------- ---------
Total assets 4,294,860 3,864,330
--------- ---------
LIABILITIES
Return of excess participant deferrals 6,976 --
--------- ---------
Net assets available for benefits $4,287,884 $3,864,330
========== ==========
SEE ACCOMPANYING NOTES.
2
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Statements of Changes in Net Assets Available for Benefits
Year Ended December 31
2005 2004
------------- -------------
ADDITIONS
Interest and dividend income $ 250,429 $ 160,143
Net appreciation in fair value of investments 6,585 226,630
------------- -------------
257,014 386,773
Contributions:
Participants 248,712 234,251
Employer 43,906 38,773
------------- -------------
292,618 273,024
------------- -------------
Total additions 549,632 659,797
DEDUCTIONS
Benefits paid directly to participants 114,868 138,939
Fees 11,210 12,420
------------- -------------
Total deductions 126,078 151,359
------------- -------------
Net increase 423,554 508,438
Net assets available for benefits at beginning
of year 3,864,330 3,355,892
------------- -------------
Net assets available for benefits at end of year $ 4,287,884 $ 3,864,330
============= =============
SEE ACCOMPANYING NOTES.
3
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements
December 31, 2005
1. DESCRIPTION OF PLAN
The following description of the 401(k) Savings Plan of Lynch Corporation (the
Company) and Participating Employers (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 all 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 12-month
period. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
CONTRIBUTIONS
Participants may elect to contribute, on a pretax basis, between 1% and 15% of
their total annual compensation to the Plan up to the maximum allowed under the
Internal Revenue Code (the Code).
An annual mandatory employer matching contribution is made to each participant's
account equal to 62.5% 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 Company may make a discretionary matching
contribution equal to a percentage of the first $800 of the participant's
contribution. No such discretionary contribution was made in 2005 or 2004.
PARTICIPANTS' ACCOUNTS
Each participant's account is credited with the participant's contributions,
employer 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.
4
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
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 following termination of
employment, permanent disability, retirement, death, or upon termination of the
Plan in accordance with the terms of the Plan Agreement. All benefit payments
are made in lump-sum payments for an amount equal to the fair value of the
participant's vested account balance.
PARTICIPANT LOANS
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. The loans are secured by the participant's account
and bear interest at a reasonable rate as determined by the plan administrator.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan, subject to the provisions of ERISA.
EXPENSES
The majority of the Plan's administrative expenses are paid by the Company.
5
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared on the accrual basis of accounting.
INVESTMENT VALUATION
The Plan's investments are stated at fair value. The shares of mutual funds are
valued at quoted market prices, which represent the net asset values of shares
held by the Plan at year end. Common stock is valued at the last reported sales
price on the last business day of the year. The fair value of participation
units owned by the Plan in the common collective trust fund is based on the
redemption value of the fund on the last business day of the plan year.
The Lynch Corporation Stock Fund (the Fund) is tracked on a unitized basis. The
Fund consists of Lynch Corporation common stock and funds held in the Galaxy
U.S. Treasury Fund sufficient to meet the Fund's daily cash needs. Unitizing the
Fund allows for daily trades. The value of a unit reflects the combined market
value of Lynch Corporation common stock and the cash investments held by the
Fund. At December 31, 2005, 9,754 units were outstanding with a value of $8.39
per unit (8,149 units were outstanding with a value of $13.73 per unit at
December 31, 2004).
The participant loans are valued at their outstanding balances, which
approximate fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. 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.
6
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
3. INVESTMENTS
During 2005 and 2004, the Plan's investments (including investments purchased,
sold, as well as held during the year) appreciated in fair value as follows:
Year Ended December 31
2005 2004
--------- ---------
Net appreciation in fair value of investments:
Common stock $ (63,460) $ 44,044
Mutual funds 70,045 182,586
--------- ---------
$ 6,585 $ 226,630
========= =========
The fair value of individual investments that represents 5% or more of the
Plan's net assets available for benefits is as follows:
December 31
2005 2004
--------- ---------
Franklin Mutual Qualified Fund $1,470,359 $1,272,472
Fleet Stable Asset Fund 1,417,305 1,346,768
Franklin Mutual Discovery Fund 586,807 473,673
Columbia Government Reserves Fund (formerly
Galaxy U.S. Treasury Money Market Fund) 301,296 271,204
4. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market, and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits.
7
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated May 27, 2003, stating that the Plan is qualified under Section 401(a) of
the Code and, therefore, the related trust is exempt from taxation. Once
qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan Sponsor has indicated that it will take the
necessary steps, if any, to maintain its qualification.
8
Supplemental Schedule
401(k) Savings Plan of Lynch Corporation
and Participating Employers
401(k) Savings Plan of Lynch Corporation
and Participating Employers
EIN #38-1799862 Plan #004
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005
IDENTITY OF ISSUER, DESCRIPTION OF INVESTMENT, INCLUDING
BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE SHARES VALUE
------------------------------ ------------------------------------------ ------- ----------
AMVESCAP National
Trust Company Franklin Mutual Fund 74,223 $1,470,359
*Fleet Stable Asset Fund 141,731 1,417,305
Franklin Mutual Discovery Fund 22,338 586,807
*Columbia Government Reserves Fund
(formerly Galaxy U.S. Treasury Money
Market Fund) 301,296 301,296
*Columbia Acorn USA Fund 6,001 162,203
*Columbia Core Bond Z Fund (formerly
Columbia Quality Bond Plus Fund) 3,795 40,375
*AIM Global Aggressive Growth Fund 1,876 40,172
American Century Value Fund 4,909 34,117
*AIM Diversified Dividend Fund
(formerly AIM Core Stock Fund) 1,723 21,387
*Columbia Balanced Fund 703 15,485
*AIM Global Health Care Fund
(formerly AIM Health Sciences Fund) 301 9,063
*AIM Blue Chip Investor Fund 345 4,159
*AIM Technology Fund 120 3,101
Fleet National Bank
*Lynch Corporation - Stock Fund 9,754 81,916
*Lynch Interactive Corporation -
Common Stock 1,861 40,448
Sunshine PCS Corp. - Common Stock 2,269 255
Morgan Group Holding Company -
Common Stock 2,057 206
Participant loans* 4% to 9.5% 52,392
----------
$4,281,046
==========
* Indicates party-in-interest to the Plan.
9
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
401(K) SAVINGS PLAN OF LYNCH
CORPORATION AND PARTICIPATING EMPLOYEES
Date: June 27, 2006 /s/ Eugene C. Hynes
-------------------------------------
Name: Eugene C. Hynes
Title: Vice President of Lynch Corporation
10