<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K/A
FOR ANNUAL REPORT OF EMPLOYEE STOCK PURCHASE 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 (FEE REQUIRED)
For the fiscal year ended December 31, 1995.
-----------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______
Commission File Number 1-5406
------
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Houghton Mifflin Retirement Savings Plan
B . Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Houghton Mifflin Company
222 Berkeley Street
Boston, Massachusetts 02116-3764
<PAGE> 2
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees have duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Houghton Mifflin Retirement Savings Plan
Date: September 3, 1996 /s/ Gary L. Smith
-------------------------------------
Gary L. Smith
Senior Vice President, Administration
<PAGE> 3
HOUGHTON MIFFLIN
RETIREMENT SAVINGS PLAN
Audited Financial Statements
and Supplemental Schedules
Three Years ended December 31, 1995
<PAGE> 4
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
Page No.
--------
Report of Independent Auditors 2
Audited Financial Statements
Statement of Financial Condition
as of December 31, 1995 3
Statement of Financial Condition
as of December 31, 1994 4
Statement of Changes in Participants'
Equity for the year ended December 31, 1995 5
Statement of Changes in Participants'
Equity for the year ended December 31, 1994 6
Statement of Changes in Participants'
Equity for the year ended December 31, 1993 7
Notes to Financial Statements 8-21
Supplemental Schedules
Item 27a - Schedule of Assets Held for Investment Purposes 22-23
Item 27d - Schedule of Reportable Transactions 24-25
Item 27e - Schedule of Party-in-Interest Transactions 26
Consent of Independent Auditors 27
<PAGE> 5
REPORT OF INDEPENDENT AUDITORS
The Retirement Committee and Participants
Houghton Mifflin Retirement Savings Plan
We have audited the accompanying statements of financial condition of the
Houghton Mifflin Retirement Savings Plan as of December 31, 1995 and 1994, and
the related statements of changes in participants' equity for each of the three
years in the period ended December 31, 1995. 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 financial position of the Houghton Mifflin Retirement
Savings Plan at December 31, 1995 and 1994, and the changes in its participants'
equity for each of the three years in the period ended December 31, 1995, 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 (1) assets held for investment purposes as of December 31, 1995, (2)
reportable transactions for the year ended December 31, 1995 and (3)
party-in-interest transactions for the year ended December 31, 1995 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 statement of financial condition and the
statement of changes in participants' equity is presented for purposes of
additional analysis rather than to present the financial condition and changes
in participants' equity 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 1995 basic financial statements taken as a
whole.
Boston, Massachusetts
June 6, 1996
2
<PAGE> 6
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------------------
Managed Houghton Investment
Income Stock Parnassus Puritan Magellan Grade Asset
Fund Fund Fund Fund Fund Contrafund Bond Manager
--------------------------------------------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments (Note 3) $19,586 $25,765 $1,462 $12,903 $6,837 $6,020 $955 $1,716
Loans -- -- -- -- -- -- -- --
Contributions and
other receivables, net -- 14 -- -- -- -- -- --
------- ------- ------ ------- ------ ------ ---- ------
Total assets $19,586 $25,779 $1,462 $12,903 $6,837 $6,020 $955 $1,716
======= ======= ====== ======= ====== ====== ==== ======
LIABILITIES AND
PARTICIPANTS'
EQUITY
Withdrawals and
distributions
payable $ 13 $ 26 $ -- $ -- $ -- $ -- $ -- $ --
Participants'
equity 19,573 25,753 1,462 12,903 6,837 6,020 955 1,716
------- ------- ------ ------- ------ ------ ---- ------
Total liabilities
and participants'
equity $19,586 $25,779 $1,462 $12,903 $6,837 $6,020 955 $1,716
======= ======= ====== ======= ====== ====== ==== ======
<CAPTION>
December 31, 1995
---------------------------------------
Asset Asset
Manager Manager Total
Growth Income Loans Plan
---------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
ASSETS
Investments (Note 3) $2,063 $914 $ -- $78,221
Loans -- -- 887 887
Contributions and
other receivables, net -- -- 22 36
------ ---- ---- -------
Total assets $2,063 $914 $909 $79,144
====== ==== ==== =======
LIABILITIES AND
PARTICIPANTS'
EQUITY
Withdrawals and
distributions
payable $ -- $ -- $ -- $ 39
Participants'
equity 2,063 914 909 79,105
------ ---- ---- -------
Total liabilities
and participants'
equity $2,063 $914 $909 $79,144
====== ==== ==== =======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 7
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------------------------------------------------------
Managed Houghton Investment
Income Stock Parnassus Puritan Magellan Grade Asset
Fund Fund Fund Fund Fund Contrafund Bond Manager
--------------------------------------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments (Note 3) $24,216 $29,020 $-- $12,253 $619 $ 959 $-- $--
Loans -- -- -- -- -- -- -- --
Contributions and
other receivables, net 61 256 14 97 49 46 -- 7
------- ------- --- ------- ---- ------ --- ---
Total assets $24,277 $29,276 $14 $12,350 $668 $1,005 $-- $ 7
======= ======= === ======= ==== ====== === ===
LIABILITIES AND
PARTICIPANTS'
EQUITY
Withdrawals and
distributions
payable $ 12 $ 1 $-- $ 15 $ -- $ -- $-- $--
Participants'
equity 24,265 29,275 14 12,335 668 1,005 -- 7
------- ------- --- ------- ---- ------ --- ---
Total liabilities
and participants'
equity $24,277 $29,276 $14 $12,350 $668 $1,005 $-- $ 7
======= ======= === ======= ==== ====== === ===
<CAPTION>
December 31, 1994
------------------------------------
Asset Asset
Manager Manager Total
Growth Income Loans Plan
------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
ASSETS
Investments (Note 3) $-- $677 $-- $67,744
Loans -- -- 98 98
Contributions and
other receivables, net 24 15 -- 569
--- ---- --- -------
Total assets $24 $692 $98 $68,411
=== ==== === =======
LIABILITIES AND
PARTICIPANTS'
EQUITY
Withdrawals and
distributions
payable $-- $ -- $-- $ 28
Participants'
equity 24 692 98 68,383
--- ---- --- -------
Total liabilities
and participants'
equity $24 $692 $98 $68,411
=== ==== === =======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 8
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN PARTICIPANTS' EQUITY
<TABLE>
<CAPTION>
Year Ended December 31, 1995
----------------------------------------------------------------------------------
Managed Houghton
Income Stock Parnassus Puritan Magellan
Fund Fund Fund Fund Fund Contrafund
----------------------------------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest income $ 1,149 $ -- $ 1 $ 4 $ 5 $ 4
Dividend income 233 584 56 649 380 464
-------- -------- ------- -------- ------- -------
Net investment income 1,382 584 57 653 385 468
Realized gains (losses) -- 2,440 (4) 164 112 70
Unrealized increase/(decrease) in
fair value of investments
(Note 3) -- (3,703) (121) 1,382 722 592
-------- -------- ------- -------- ------- -------
1,382 (679) (68) 2,199 1,219 1,130
Contributions:
Rollover 403 159 176 801 646 495
Employees 648 1,387 208 1,101 731 642
Loans (121) (357) (19) (95) (68) (56)
Houghton Mifflin
Company -- 2,044 -- -- -- --
-------- -------- ------- -------- ------- -------
Total contributions 930 3,233 365 1,807 1,309 1,081
-------- -------- ------- -------- ------- -------
2,312 2,554 297 4,006 2,528 2,211
Fund transfers (4,786) (3,949) 1,219 (2,744) 4,052 3,020
Withdrawals and
distributions
(Note 1) (2,199) (2,125) (68) (692) (410) (216)
Administrative
expenses (19) (2) -- (3) (1) --
-------- -------- ------- -------- ------- -------
Net increase (decrease)
in participants'
equity (4,692) (3,522) 1,448 567 6,169 5,015
Participants' equity
at beginning of
year 24,265 29,275 14 12,336 668 1,005
-------- -------- ------- -------- ------- -------
Participants' equity
at end of year $ 19,573 $ 25,753 $ 1,462 $ 12,903 $ 6,837 $ 6,020
======== ======== ======= ======== ======= =======
<CAPTION>
Year Ended December 31, 1995
---------------------------------------------------------------------------
Investment Asset Asset
Grade Asset Manager Manager Total
Bond Manager Growth Income Loans Plan
---------------------------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest income $ 1 $ 1 $ 1 $ 1 $ -- $ 1,167
Dividend income 42 46 30 38 -- 2,522
----- ------- ------- ----- ------- --------
Net investment income 43 47 31 39 -- 3,689
Realized gains (losses) 4 28 36 8 -- 2,858
Unrealized increase/(decrease) in
fair value of investments
(Note 3) 45 182 264 64 -- (573)
----- ------- ------- ----- ------- --------
92 257 331 111 -- 5,974
Contributions:
Rollovers 132 157 253 83 -- 3,305
Employees 143 221 322 81 -- 5,484
Loans (26) (31) (28) (10) 811 --
Houghton Mifflin
Company -- -- -- -- -- 2,044
----- ------- ------- ----- ------- --------
Total contributions 249 347 547 154 811 10,833
----- ------- ------- ----- ------- --------
341 604 878 265 811 16,807
Fund transfers 642 1,260 1,255 31 -- --
Withdrawals and
distributions
(Note 1) (27) (154) (93) (73) -- (6,057)
Administrative
expenses (1) (1) (1) -- -- (28)
----- ------- ------- ----- ------- --------
Net increase (decrease)
in participants'
equity 955 1,709 2,039 223 811 10,722
Participants' equity
at beginning of
year -- 7 24 691 98 68,383
----- ------- ------- ----- ------- --------
Participants' equity
at end of year $ 955 $ 1,716 $ 2,063 $ 914 $ 909 $ 79,105
===== ======= ======= ===== ======= ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 9
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN PARTICIPANTS' EQUITY
<TABLE>
<CAPTION>
Year Ended December 31, 1994
----------------------------------------------------------------------------
Managed Houghton
Income Stock Parnassus Puritan Magellan
Fund Fund Fund Fund Fund Contrafund
----------------------------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest income $ 1,146 $ 5 $ -- $ 1 $ -- $ --
Dividend income 393 562 -- 394 -- 4
-------- -------- ------ -------- ------ ------
Net investment income 1,539 567 -- 395 -- 4
Realized gains (losses) (20) 871 -- 33 -- --
Unrealized decrease in
fair value of investments
(Note 3) (29) (3,578) -- (343) 12 8
-------- -------- ------ -------- ------ ------
1,490 (2,140) -- 85 12 12
Contributions:
Rollover 182 47 -- 73 -- --
Employees 1,063 1,603 14 1,606 50 77
Transfer of plan assets
from McDougal Littell 707 -- -- 1,086 606 916
Houghton Mifflin
Company -- 1,966 -- -- -- --
-------- -------- ------ -------- ------ ------
Total contributions 1,952 3,616 14 2,765 656 993
-------- -------- ------ -------- ------ ------
3,442 1,476 14 2,850 668 1,005
Fund transfers (337) (1,079) -- 1,416 -- --
Withdrawals and
distributions
(Note 1) (2,716) (2,562) -- (1,009) -- --
Administrative
expenses (27) (19) -- (5) -- --
-------- -------- ------ -------- ------ ------
Net increase (decrease)
in participants'
equity 362 (2,184) 14 3,252 668 1,005
Participants' equity
at beginning of
year 23,903 31,459 -- 9,084 -- --
-------- -------- ------ -------- ------ ------
Participants' equity
at end of year $ 24,265 $ 29,275 $ 14 $ 12,336 $ 668 $1,005
======== ======== ====== ======== ====== ======
<CAPTION>
Year Ended December 31, 1994
----------------------------------------------------------
Asset Asset
Asset Manager Manager Total
Manager Growth Income Loans Plan
----------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
Investment income:
Interest income $-- $-- $-- $ -- $ 1,152
Dividend income -- -- 8 -- 1,361
--- ----- ----- -------- --------
Net investment income -- -- 8 -- 2,513
Realized gains (losses) -- -- -- -- 884
Unrealized decrease in
fair value of investments
(Note 3) -- -- (10) -- (3,940)
--- ----- ----- -------- --------
-- -- (2) -- (543)
Contributions:
Rollover -- -- -- -- 302
Employees 7 24 15 -- 4,459
Transfer of plan assets
from McDougal Littell -- -- 678 98 4,091
Houghton Mifflin
Company -- -- -- -- 1,966
--- ----- ----- -------- --------
Total contributions 7 24 693 98 10,818
--- ----- ----- -------- --------
7 24 691 98 10,275
Fund transfers -- -- -- --
Withdrawals and
distributions
(Note 1) -- -- -- (6,287)
Administrative
expenses -- -- -- (51)
----- ----- -------- --------
Net increase (decrease)
in participants'
equity 24 691 98 3,937
Participants' equity
at beginning of
year -- -- -- 64,446
----- ----- -------- --------
Participants' equity
at end of year $ 24 $ 691 $ 98 $ 68,383
===== ===== ======== ========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 10
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN PARTICIPANTS' EQUITY
<TABLE>
<CAPTION>
Year Ended December 31, 1993
-----------------------------------------------------
Houghton Mutual
Stock Fund Equity Total
Fund Investments Fund Plan
-----------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Investment income:
Interest income $ 1,370 $ 3 $ -- $ 1,373
Dividend income 300 594 475 1,369
-------- -------- -------- --------
Net investment income 1,670 597 475 2,742
Realized gains (losses) 26 3,371 24 3,421
Unrealized increase in
fair value of investments
(Note 3) 9 2,898 208 3,115
-------- -------- -------- --------
1,705 6,866 707 9,278
Contributions:
Employees 1,552 1,747 1,527 4,826
Houghton Mifflin
Company -- 1,896 -- 1,896
-------- -------- -------- --------
Total contributions 1,552 3,643 1,527 6,722
-------- -------- -------- --------
3,257 10,509 2,234 16,000
Fund transfers 1,273 (5,087) 3,814 --
Withdrawals and
distributions
(Note 1) (2,727) (3,715) (660) (7,102)
-------- -------- -------- --------
Net increase (decrease)
in participants'
equity 1,803 1,707 5,388 8,898
Participants' equity
at beginning of
year 22,100 29,752 3,696 55,548
-------- -------- -------- --------
Participants' equity
at end of year $ 23,903 $ 31,459 $ 9,084 $ 64,446
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 11
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Plan Description
The following brief description of the Houghton Mifflin Retirement Savings Plan
("the Plan") provides only general information. Participants should refer to the
Plan document for a more complete description of the Plan's provisions.
General
The Houghton Mifflin Retirement Savings Plan, formerly known as the Houghton
Mifflin Company Employees' Saving and Thrift Plan, is a defined contribution
plan adopted as of January 1, 1981, and amended July 1, 1995. It is a long-term
savings and investment program to which Houghton Mifflin Company ("the Company")
and its employees contribute. The Plan was designed to comply with the
provisions of Sections 401(a) and 401(k) of the Internal Revenue Code and is
subject to the applicable provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
In connection with the acquisition of McDougal, Littell & Company by Houghton
Mifflin Company on March 1, 1994, the plan assets and participants' equity
balances of the McDougal, Littell & Company Employee Savings and Stock Ownership
Plan, which qualify under Internal Revenue Code Section 401(a), were transferred
to the Plan effective December 1, 1994.
In connection with the acquisition of D.C. Heath and Company by Houghton Mifflin
Company on October 31, 1995, the assets and the participants' equity balances of
the retained employees, which qualified under Internal Revenue Code Section
401(k), transferred to the Plan in 1995.
Participation
All regular employees of Houghton Mifflin Company and its participating
subsidiaries are eligible. Part-time, non-temporary, and temporary employees who
provide 1,000 or more hours of service in the first twelve months after hire are
also eligible. As of April 1, 1992, union employees became eligible. Employees
are not eligible for Company matching contributions until successful completion
of one year of eligible service. There was no significant impact on the net
assets of the Plan from the July 28, 1995 amendment.
Vesting
Each participant is immediately vested in his or her voluntary salary
contributions plus the earnings thereon. A participant becomes fully vested in
the Company's matching contributions once the contribution has been made.
8
<PAGE> 12
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Plan Description - continued
Contributions
Eligible employees can elect to contribute in total 1% to 15% of their
compensation, excluding compensation in excess of $150,000 for 1995, $150,000
for 1994, and $235,840 for 1993, subject to an annual deferral limit for plans
operating under Section 401(k) of the Internal Revenue Code ($9,240 in 1995), to
any of the ten investment options offered by the Plan. Employee contributions
are made from participants' wages through payroll deductions.
The Company may elect to match an employee's contribution equal to 1%, 2%, or 3%
of the employee's compensation. Except for union employees, the Company's
contribution is currently 3% of the employee's compensation. In March 1994,
union employees became eligible for a 1% Company matching contribution. The
matching contribution excludes compensation in excess of $150,000 in 1995,
$150,000 in 1994, and $235,840 in 1993. Subject to the above limitations, the
Company will match participant contributions to the Houghton Stock Fund on a
100% basis, the Managed Income Fund, and the Mutual Fund Investments on a 50%
basis. Company contributions are invested solely in the Houghton Stock Fund.
Federal, and in most states, state and local income taxes on these contributions
are deferred until the monies are withdrawn from the Plan.
The following table presents the participant directed contributions, including
rollovers, for the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
(In thousands of dollars)
1995 1994
------ ------
<S> <C> <C>
Managed Income Fund $1,051 $1,245
Houghton Stock Fund 1,546 1,650
Fidelity Puritan(R) Fund 1,902 1,678
Fidelity Contrafund 1,137 78
Fidelity Magellan(R) Fund 1,376 50
Fidelity Investment Grade Bond Fund 275 --
Fidelity Asset Manager 378 17
Fidelity Asset Manager: Income 165 5
Fidelity Asset Manager: Growth 572 24
The Parnassus Fund 387 14
------ ------
Total Participant Directed Contributions,
including rollovers $8,789 $4,761
====== ======
</TABLE>
9
<PAGE> 13
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Plan Description - continued
Loans
A participant may obtain a loan against his or her account balance up to 50% of
the total aggregate value. Only one loan may be outstanding at a time, and all
loans are pre-approved. The minimum amount is established at $500. The maximum
outstanding loan balance, including accrued interest, is $50,000. The interest
rate on the loan is a fixed rate, based on the prime rate published in the Wall
Street Journal on the first business day of the calendar quarter in which the
loan commences. Loans are amortized on a straight-line basis over the term of
the loan and must be repaid in installments, at a minimum quarterly, and must be
repaid within five years. The payments can be made by after-tax payroll
deductions.
Trustee
Effective December 1, 1994, the Plan is administered under the terms of a Trust
Agreement with Fidelity Management Trust Company. The Plan's Trust Agreement
conforms to guidelines for salary reduction plans under Section 401(k) of the
Internal Revenue Code. Prior to December 1, 1994, the Plan was administered
under a trust agreement with State Street Bank and Trust.
Under the Trust Agreements, the Company remits contributions directly to the
Trustee, which the trustee must invest as directed by the participants. The
Trustee has discretionary authority, subject to certain limitations as specified
in the agreement, for the purchase and sale of investments. The Trustee holds
temporary cash reserves in short-term funds until the individual fund
investments can be made.
Benefit payments
Upon retirement or termination, distribution of account balances may be made as
follows: (1) a lump-sum payment of shares of Company stock and/or cash, (2)
extended cash payments over a period not to exceed 20 years, (3) periodic
payment of any amount until age 70 1/2, at which time another option must be
elected. Retiring or terminating members under the age of 65 who have over
$3,500 in the Plan may elect to defer payment of their account balance until a
later date. Members may make early withdrawals under certain limited conditions
as set forth in the Plan.
10
<PAGE> 14
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Plan Description - continued
Plan amendment or termination
While the Company currently intends to continue the Plan, it reserves the right
to amend, change or terminate the Plan at any time. In the event of termination,
all interest will be distributed to the participants or will continue to be
administered by the Plan committee and later distributed in a manner approved by
the Internal Revenue Service.
Income Tax Status
The Internal Revenue Service has determined and informed the Company by letter
dated November 23, 1995, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code. The Plan has
been amended since receiving the determination letter. However, the Plan
administrator and the Plan's tax counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable provisions of the
Internal Revenue Code.
Participant withdrawals and distributions are subject to federal income tax to
the extent such withdrawals exceed the participant's contribution to the Plan
made during the years 1981, 1982, and 1983. Participant and Company
contributions to the Plan made after January 1, 1984, are subject to federal
income tax at the time of withdrawal or distribution.
The timing of the recognition of taxable income by the participants is governed
by applicable provisions of the Internal Revenue Code.
Other
For the period January 1, 1994 through November 30, 1994, record keeping fees
and guaranteed group annuity contract insurer fees were borne by the Plan.
Effective December 1, 1994, all Plan administrative expenses are borne by the
Plan. Prior to January 1, 1994, administrative expenses of the Plan were borne
by the Company.
11
<PAGE> 15
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
supplemental schedules have been prepared to satisfy the reporting and
disclosure requirements of ERISA.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
In 1995, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) No. 94-4, "Reporting of Investment Contracts Held
By Health and Welfare Benefit Plans and Defined Contribution Pension Plans" for
fiscal years beginning after 1995. The Company intends to adopt SOP 94-4 in
1996, and does not expect the impact on its financial position or its results
of operations to be material.
Participants' Accounts
Each participant's account is credited with the participant's salary
contributions, employer contributions, and an allocation of Plan earnings. Net
investment income is allocated to participants based upon the ratio each
participant's share bears to the respective fund. The approximate number of
participants in each of the investment programs is as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
-----------------------
<S> <C> <C>
Managed Income Fund 1,229 1,310
Houghton Stock Fund 2,426 1,700
Mutual Fund Investments 3,949 1,530
</TABLE>
Investments
Investments in group annuity contracts with insurance companies are valued at
cost plus accumulated interest, which approximates current market value.
All other investments at December 31, 1995 and 1994, were reported at fair
market value as determined by quoted market prices on a national exchange on the
last day of the Plan year. The current values of the investments in the mutual
funds are determined by the number of units held by the Plan and the current
value of each unit based upon quotations obtained from national securities
exchanges on the last day of the Plan year. Purchases and sales of securities
were recorded on the trade date of the related transactions.
12
<PAGE> 16
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies - continued
Investments - continued
Dividend income is recognized on the ex-dividend date and interest income is
recorded as earned. All dividend and interest income is reinvested in the
respective funds.
Commencing on December 1, 1994, participants may direct their contributions
among ten investment options and were allowed to change their prior investment
elections subject to certain restrictions imposed by the Plan.
The State Street Bank and Trust Short-Term Income Fund and/or the Fidelity Trust
Management Company Institutional Cash Portfolio are valued at its redemption
price.
As of December 31, 1995, the common stock of Houghton Mifflin Company is valued
at the closing price on the last day of the Plan year as stated on the New York
Stock Exchange. Prior to December 1, 1994, the Company's common stock was valued
at the average of the high and low market prices on the last day of the Plan
year. The Plan employs the share accounting method to account for participants'
share activity in the Houghton Stock Fund which results in no realized gains and
losses on withdrawals and distributions.
Realized gains and losses are calculated based on the difference between the
average cost of the asset and the selling price. The unrealized increase/
(decrease) in the fair value of investments held is the difference in the fair
value of the assets at the beginning of the year and the fair value of the
assets at the end of the Plan year.
For fiscal years beginning in 1990, ERISA reporting requires the disclosure of
unrealized increases/(decreases) for certain investments on Form 5500, "Annual
Return/Report of Employee Benefit Plans," to be calculated using the fair market
value of the securities at the beginning of the year or the purchase price of
the securities if purchased during the year, rather than the historical cost
basis required by generally accepted accounting principles. Under this method,
the unrealized increase/(decrease) in the fair value of the Houghton Stock Fund
was approximately $(1,391,000), $(1,050,000) , and $5,910,000 for the years
ended December 31, 1995, 1994, and 1993, respectively.
13
<PAGE> 17
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments
A brief description of the Plan funds and investment options is provided below:
MANAGED INCOME FUND, formerly known as the Fixed Income Fund,
principally invests in pools and individual insurance contracts, and
other fixed income investments. The investments held consist of the
following:
Group Annuity Insurance Contracts - Investments in insurance contracts
that guarantee a specific rate of return on the invested capital over
the life of the contract.
Fidelity Managed Income Portfolio and the T. Rowe Price Stable Value
Fund - These investments seek preservation of capital and a competitive
level of income over time. Investments are high quality investment
contracts with variable and fixed rates that have maturities between
one and seven years.
HOUGHTON STOCK FUND is invested in Houghton Mifflin Company Common
Stock that is either purchased by the Trustee or contributed by
Houghton Mifflin Company. A small portion is invested in cash
equivalents for liquidity purposes.
MUTUAL FUND INVESTMENTS provide for investment in various mutual funds,
which include a bond fund, asset allocation funds, and aggressive
growth funds, all of which may directly or indirectly invest in equity
investments. Seven of the mutual fund options are managed by Fidelity
Investments (R), a company affiliated with the Trustee, Fidelity
Management Trust Company.
Fidelity Puritan (R) Fund - This is a balanced fund that seeks current
income and some capital appreciation. The portfolio principally invests
in stocks and bonds.
Fidelity Contrafund - This is a fund which seeks capital appreciation
by investing in equity securities which are believed to be undervalued.
Fidelity Magellan (R) Fund - This fund seeks long-term capital
appreciation through investment in common stocks and convertible
securities of U.S. companies. The fund diversifies investments among a
variety of industries and sectors within the market.
Fidelity Investment-Grade Bond Fund - This fund seeks to provide a high
rate of income consistent with reasonable investment risk and capital
appreciation where appropriate. The underlying investments consist of
investment-grade debt securities rated Baa or higher by Moody's
Investor Service, Inc., or at least BBB by Standard & Poor's
Corporation. The fund may also invest in preferred stocks.
14
<PAGE> 18
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments - continued
Fidelity Asset Manager(TM) - This mutual fund seeks high total return
with reduced risk over the long-term. The investment portfolio consists
of domestic and foreign stocks, bonds, and short-term instruments of
U.S. and foreign issuers.
Fidelity Asset Manager: Income - This fund seeks a high level of
current income by maintaining a diversified portfolio of stocks, bonds,
short-term instruments, and other investments.
Fidelity Asset Manager: Growth - This mutual fund seeks to maximize
total return over the long-term by allocating its assets among stocks,
bonds, short-term instruments and other investments.
The Parnassus Fund - This fund invests primarily in the equity
securities of companies that are socially conscious, and believed to be
undervalued, or fallen out of favor. The Parnassus Fund is managed by
Parnassus Financial Management.
From July 1, 1992, until December 1, 1994, an investment option designated as
the Equity Fund was available. This fund invested directly or indirectly in
equity investments through purchases of shares in a registered investment
company.
15
<PAGE> 19
Houghton Mifflin Retirement Savings Plan
Notes to Financial Statements
3. Investments - continued
Investments held by the Plan at December 31, 1995 and 1994 are summarized as
follows:
All amounts are presented in thousands of dollars, except shares and units.
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Market Market
Cost Value Cost Value
-------------------- --------------------
<S> <C> <C> <C> <C>
Managed Income Fund:
Metropolitan Life
Insurance, group
annuity contract,
8.95%, maturity
date 7/1/96 $ 6,305 $ 6,305 $ 5,787 $ 5,787
SunAmerica Life Insurance
Company, group annuity
contract, 4.83%,
maturity date 7/1/95 -- -- 3,221 3,221
Aetna, group annuity
contract, 5.10%,
maturity date 7/2/99 608 608 743 743
------- ------- ------- -------
Total group annuity
contracts 6,913 6,913 9,751 9,751
------- ------- ------- -------
T. Rowe Price Stable
Value Fund (6,335,157
units in 1994) -- -- 6,335 6,335
Fidelity Managed Income
Portfolio (12,672,740
units in 1995 and
8,130,396 units
in 1994) 12,673 12,673 8,130 8,130
------- ------- ------- -------
Total $19,586 $19,586 $24,216 $24,216
======= ======= ======= =======
</TABLE>
16
<PAGE> 20
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments - continued
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Market Market
Cost Value Cost Value
-------------------- --------------------
<S> <C> <C> <C> <C>
Houghton Stock Fund:
Houghton Mifflin
Company Common Stock
(593,219 shares
in 1995 and 635,835
shares in 1994) $15,018 $25,507 $14,689 $28,851
Fidelity Trust Management
Company Institutional
Cash Portfolio (257,961
shares in 1995 and
169,445 shares in 1994) 258 258 169 169
------- ------- ------- -------
Total $15,276 $25,765 $14,858 $29,020
======= ======= ======= =======
</TABLE>
17
<PAGE> 21
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments - continued
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Market Market
Cost Value Cost Value
-------------------- --------------------
<S> <C> <C> <C> <C>
Mutual Fund Investments:
The Parnassus Fund $ 1,583 $ 1,462 $ -- $ --
(46,023 shares in 1995)
Fidelity Puritan (R) Fund
(758,549 shares in 1995,
820,324 shares in 1994) 11,643 12,903 12,271 12,149
Fidelity Magellan (R) Fund
(79,519 shares in 1995,
9,260 shares in 1994) 6,104 6,837 607 619
Fidelity Contrafund,
(158,332 shares in 1995,
31,687 shares in 1994) 5,419 6,020 951 959
Fidelity Investment-Grade
Bond,(129,362 shares
in 1995) 909 955 -- --
Fidelity Asset Manager (TM)
(108,302 shares in 1995) 1,544 1,716 -- --
Fidelity Asset Manager: Growth
(135,974 shares in 1995) 1,799 2,063 -- --
Fidelity Asset Manager:
Income, (78,809 shares
in 1995, 64,989 shares
in 1994 850 914 687 677
</TABLE>
18
<PAGE> 22
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments - continued
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Market Market
Cost Value Cost Value
-------------------- --------------------
<S> <C> <C> <C> <C>
Mutual Fund Investments-continued:
Fidelity Trust Management
Company Institutional Cash
Portfolio (104,000 shares
in 1994 -- -- 104 104
------- ------- ------- -------
Total 29,851 32,870 14,620 14,508
------- ------- ------- -------
Total Plan Investments $64,713 $78,221 $53,694 $67,744
======= ======= ======= =======
</TABLE>
The fair market value of individual investments that represent 5% or more of the
Plan's net assets as of December 31, 1995, and 1994 are as follows:
All amounts are in thousands of dollars, except shares and units.
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Metropolitan Life Insurance,
group annuity contract, 8.95%
maturity date 7/1/96 $ 6,305 $ 5,787
T. Rowe Price Stable Value
Fund, 6,335,157 units in 1994 -- 6,335
Fidelity Managed Income
Portfolio, (12,672,740 units
in 1995 and 8,130,396 units
in 1994) 12,673 8,130
Houghton Mifflin Company
Common Stock, (593,219 shares
in 1995 and 635,835 shares in 1994) 25,507 28,851
</TABLE>
19
<PAGE> 23
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments - continued
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Fidelity Puritan (R) Fund
(758,549 shares in 1995 and
820,324 shares in 1994) $12,903 $12,149
Fidelity Magellan (R) Fund
(79,519 shares in 1995 and
9,260 shares in 1994) 6,837 --
Fidelity Contrafund
(158,332 shares in 1995)
31,686 shares in 1994) 6,020 --
</TABLE>
The net change in unrealized increase/(decrease)in the fair value of Plan
investments is as follows (In thousands of dollars):
Unrealized increase/(decrease)
in fair value of investments
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Managed Income Houghton Stock Mutual Fund
Fund Fund Investments
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1992 $ 20 $14,872 $ 13
December 31, 1993 29 17,770 221
------ ------- ----
$ 9 $ 2,898 $208
====== ======= ====
</TABLE>
20
<PAGE> 24
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments - continued
Unrealized increase/(decrease)
in fair value of investments
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Managed Income Houghton Stock Mutual Fund
Fund Fund Investments
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1993 $ 29 $ 17,770 $ (221)
December 31, 1994 0 14,192 (112)
------- -------- -------
$ (29) $ (3,578) $ (333)
======= ======== =======
December 31, 1994 $ 0 14,192 (112)
December 31, 1995 0 10,489 3,018
------- -------- -------
$ 0 $ (3,703) $ 3,130
======= ======== =======
</TABLE>
21
<PAGE> 25
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULES
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1995
Name of plan sponsor: Houghton Mifflin Company
Employer Identification number: 04-1456030
Three-digit plan number: 003
In thousands of dollars, except shares and unit amounts
<TABLE>
<CAPTION>
Description of Investment,
Including Rate of Interest
Identity of Issue and Maturity Date Cost Current Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metropolitan Life Guaranteed group annuity
Insurance contract 8.95%, maturity
date 7/1/96 $ 6,305 $ 6,305
SunAmerica Life Insurance Guaranteed group annuity
Company contract, 4.83%,
maturity date 7/1/95 -- --
Aetna Insurance Guaranteed group annuity
contract, 5.10%,
maturity date 7/2/99 608 608
Fidelity Managed
Income Fund, 12,672,740
units in 1995 12,673 12,673
======== ========
$ 19,586 $ 19,586
Houghton Mifflin *
Company Common Stock, 593,219
shares $ 15,018 $ 25,507
Fidelity Trust Management
Company Institutional
Cash Portfolio, 257,961 shares 258 258
======== ========
$ 15,276 $ 25,765
</TABLE>
* Indicates party-in-interest to the Plan.
** Indicates reportable transactions to the Plan.
22
<PAGE> 26
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULES
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - continued
DECEMBER 31, 1995
In thousands of dollars, except shares and units
<TABLE>
<CAPTION>
Description of Investment,
Including Maturity Date,
Identity of Issue and Rate of Interest Cost Current Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Parnassus fund 46,022 shares $ 1,583 $ 1,462
Fidelity Puritan(R)Fund 758,549 shares 11,643 12,903
Fidelity Magellan(R)Fund 79,519 shares 6,104 6,837
Fidelity Contrafund 158,332 shares 5,419 6,020
Fidelity Investment-Grade Bond Fund 129,362 shares 909 955
Fidelity Asset Manager(TM) 108,302 shares 1,544 1,716
Fidelity Asset Manager: Growth 135,974 shares 1,799 2,063
Fidelity Asset Manager: Income 78,809 shares 850 914
-------- --------
$ 29,851 $ 32,870
Loans Receivable Loans receivable from
Plan participants at
various maturities and
various interest rates $ 887 $ 887
</TABLE>
23
<PAGE> 27
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE
Item 27d - REPORTABLE TRANSACTIONS (a)
YEAR ENDED DECEMBER 31, 1995
Category (i)
Single transaction within the plan year that exceeded 5% of value of net assets
available for plan benefits:
<TABLE>
<CAPTION>
Description Number of
of Issue Shares/Units Selling or
(Number of or Face Purchase Exchange Cost of Realized
transactions) Amount Price Price Asset Gain/(Loss)
- ------------- ------------ ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
T. Rowe Price
Stable Value
Fund 6,568,012 $6,568,012 -- -- --
</TABLE>
Category (iii)
Series of transactions within the plan year that exceeded 5% of value of net
assets available for plan benefits:
<TABLE>
<CAPTION>
Description No. of Purchase No. of Selling
of issues Trans. Price Trans. Price Gain/(Loss)
- --------------------- ------ ---------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Fidelity Managed
Income Portfolio 123 $9,860,926 186 $5,657,002 $ --
Houghton Stock Fund 207 2,880,824 185 4,923,832 2,440,368
Fidelity Puritan (R)
Fund 187 5,143,598 153 6,038,922 163,653
Fidelity
Contrafund 170 5,350,503 87 952,303 69,800
Fidelity Magellan (R)
Fund 184 6,464,282 112 1,079,709 112,319
</TABLE>
24
<PAGE> 28
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE
Item 27d - REPORTABLE TRANSACTIONS - continued (a)
YEAR ENDED DECEMBER 31, 1995
(a) Reportable transactions are defined as any single transaction or series
of transactions involving an amount in excess of 5% of the fair value
of the Plan's assets as of the beginning of the year.
There were no category (ii) or (iv) reportable transactions during 1995.
25
<PAGE> 29
HOUGHTON MIFFLIN RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE
Item 27e-SCHEDULE OF PARTY-IN-INTEREST TRANSACTIONS
YEAR ENDED DECEMBER 31, 1995
There were no party-in-interest transactions which were prohibited by ERISA
Section 406 and for which there is no statutory or administrative exemption.
26
<PAGE> 30
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 2-69298) pertaining to the Houghton Mifflin Retirement Savings
Plan of Houghton Mifflin Company of our report dated June 6, 1996, with respect
to the financial statements and schedules of the Houghton Mifflin Retirement
Savings Plan included in this Annual Report (Form 11-K) for the year ended
December 31, 1995.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Boston, Massachusetts
June 24, 1996
27
