sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2006
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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
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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 Employers
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
The LGL Group, Inc.
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, 2006 and 2005
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
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, 2006 and 2005, 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, 2006 and 2005, 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, 2006 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.
/s/ Ernst & Young LLP
Ernst & Young LLP
Providence, Rhode Island
June 25, 2007
1
401(k) Savings Plan of Lynch Corporation
and Participating Employers
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31
2006 2005
----------- -----------
ASSETS
Investments, at fair value $4,642,668 $4,268,296
Contributions receivable:
Participants 2,306 2,874
Employer 38,635 10,940
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40,941 13,814
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Total assets 4,683,609 4,282,110
LIABILITIES
Return of excess participant deferrals -- 6,976
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Net assets available for benefits, at fair value 4,683,609 4,275,134
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts 12,699 12,750
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Net assets available for benefits $4,696,308 $4,287,884
========= =========
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
2006 2005
----------- -----------
ADDITIONS
Interest and dividend income $ 265,621 $ 250,429
Net appreciation in fair value of investments 271,999 6,585
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537,620 257,014
Contributions:
Participants 274,793 248,712
Employer 39,035 43,906
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313,828 292,618
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Total additions 851,448 549,632
DEDUCTIONS
Benefits paid directly to participants 432,797 114,868
Fees 10,227 11,210
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Total deductions 443,024 126,078
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Net increase 408,424 423,554
Net assets available for benefits at beginning
of year 4,287,884 3,864,330
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Net assets available for benefits at end of year $4,696,308 $4,287,884
========== ==========
SEE ACCOMPANYING NOTES.
3
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements
December 31, 2006
1. DESCRIPTION OF PLAN
The following description of the 401(k) Savings Plan of Lynch Corporation 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 LGL Group, Inc. (the Company),
formerly Lynch Corporation.
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 2006 or 2005.
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
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.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared on the accrual basis of accounting.
5
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
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.
BANK OF AMERICA, N.A. STABLE ASSET FUND
Bank of America, N.A. Stable Asset Fund is a common collective trust (CCT) fund
which invests in fully benefit-responsive contracts. The fair value of the
traditional guaranteed investment contracts in the CCT is based on the
discounted future cash flows. The fair values of the general fixed maturity
synthetic guaranteed investment contracts in the CCT are calculated using the
sum of all asset market values provided by a third party. The fair value of the
constant duration synthetic guaranteed investment contracts in the CCT is
calculated using the net asset value of the underlying fund. The fair value of
the wrap contracts is determined using the market approach discounting
methodology, which incorporates the difference between current market level
rates for contract level wrap fees and the wrap fee being charged. The
difference is calculated as a dollar value and discounted by the prevailing
interpolated swap rate as of period end. Contract value represents contributions
made plus interest accrued at the contract value, less withdrawals.
The LGL Group, Inc. Stock Fund (the Fund), formerly Lynch Corporation Stock
Fund, is tracked on a unitized basis. The Fund consists of LGL Group, Inc.
common stock and funds held in the Columbia Government Reserves Fund sufficient
to meet the Fund's daily cash needs. The value of a unit reflects the combined
market value of LGL Group, Inc. common stock and the cash investments held by
the Fund. At December 31, 2006, 10,645 units were outstanding with a value of
approximately $7.16 per unit (9,754 units were outstanding with a value of $8.39
per unit at December 31, 2005).
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.
6
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENT
In December 2005, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive
Investment Contracts Held by Certain Investment Companies Subject to the AICPA
Investment Company Guide and Defined-Contribution Health and Welfare and Pension
Plans (the FSP). The FSP defines the circumstances in which an investment
contract is considered fully benefit-responsive and provides certain reporting
and disclosure requirements for fully benefit-responsive investment contracts in
defined contribution health and welfare and pension plans. The financial
statement presentation and disclosure provisions of the FSP are effective for
financial statements issued for annual periods ending after December 15, 2006,
and are required to be applied retroactively to all prior periods presented for
comparative purposes. The Plan has adopted the provisions of the FSP at December
31, 2006.
As required by the FSP, investments in the accompanying statements of net assets
available for benefits include fully benefit-responsive investment contracts
recognized at fair value. AICPA Statement of Position 94-4-1, Reporting of
Investment Contracts Held by Health and Welfare Benefit Plans and Defined
Contribution Pension Plans, as amended, requires fully benefit-responsive
investment contracts to be reported at fair value in the Plan's statement of net
assets available for benefits with a corresponding adjustment to reflect these
investments at contract value. The requirements of the FSP have been applied
retroactively to the statement of net assets available for benefits as of
December 31, 2005 presented for comparative purposes. Adoption of the FSP had no
effect on the statement of changes in net assets available for benefits for any
period presented.
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.
3. INVESTMENTS
During 2006 and 2005, the Plan's investments (including investments purchased,
sold, and held during the year) appreciated in fair value as follows:
7
401(k) Savings Plan of Lynch Corporation
and Participating Employers
Notes to Financial Statements (continued)
Year Ended December 31
2006 2005
----------- -----------
Net appreciation in fair value of investments:
Common stock $ 2,208 $(63,460)
Mutual funds 269,791 70,045
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$271,999 $ 6,585
======== ========
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
2006 2005
----------- -----------
Franklin Mutual Qualified Fund $1,691,484 $1,470,359
Bank of America, N.A. Stable Asset Fund 1,257,294 1,417,305
Franklin Mutual Discovery Fund 738,442 586,807
Columbia Government Reserves Fund 343,772 301,296
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.
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.
6. SUBSEQUENT EVENTS
Effective January 31, 2007, the Plan was merged into the Piezo Technology,
Inc. 401(k) Plan.
8
SUPPLEMENTAL SCHEDULE
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, 2006
Description of Investment,
Identity of Issuer, Including Maturity Date, Rate
Borrower, of Interest, Current
Lessor or Similar Party Par or Maturity Value Shares Value
----------------------- ------------------------------- ------------- ----------
AMVESCAP National
Trust Company Franklin Mutual Qualified Fund 77,307 $1,691,484
Bank of America, N.A. *Stable
Asset Fund 125,729 1,257,294
Franklin Mutual Discovery Fund 24,243 738,442
*Columbia Government Reserves
Fund 343,772 343,772
*Columbia Acorn USA Fund 6,396 183,311
*Columbia Core Bond Z Fund 3,659 38,606
*AIM Global Aggressive Growth
Fund 3,307 78,057
American Century Value Fund 5,178 39,299
*AIM Diversified Dividend Fund 3,012 41,117
*Columbia Balanced Fund 877 20,926
*AIM Global Health Care Fund 460 13,090
*AIM Large Cap Growth 588 6,796
*AIM Technology Fund 182 5,208
Bank of America, N.A.
*LGL Group, Inc. - Stock Fund 10,645 76,267
*Lynch Interactive Corporation
- Common Stock 18 56,008
Sunshine PCS Corp. - Common
Stock 2,205 33
Morgan Group-Common Stock 1993 209
Participant loans* 4.25% to 9.5% 65,448
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$4,655,367
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* Indicates party-in-interest to the Plan
9
SIGNATURES
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 EMPLOYERS
Date: June 29, 2007 /s/ Jeremiah Healy
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Name: Jeremiah Healy
Title: President and Chief Executive Officer
of The LGL Group, Inc.
10