<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS 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, 1998
-------------------------------
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 401(k) 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 401(k) Savings Plan
Date: JUNE 29, 1999 /S/ GARY L. SMITH
------------- -------------------------------------
Gary L. Smith
Senior Vice President, Administration
<PAGE> 3
HOUGHTON MIFFLIN
401(K) SAVINGS PLAN
Audited Financial Statements and Supplemental Schedules
Three Years ended December 31, 1998
<PAGE> 4
Houghton Mifflin 401(k) Savings Plan
Table of Contents
Page No.
Report of Independent Auditors 3
Audited Financial Statements:
Statement of Net Assets Available for Benefits with Fund
Information as of December 31, 1998 4
Statement of Net Assets Available for Benefits with Fund
Information as of December 31, 1997 5
Statement of Changes in Net Assets Available for Benefits
with Fund Information for the year ended December 31, 1998 6
Statement of Changes in Net Assets Available for Benefits
with Fund Information for the year ended December 31, 1997 7
Statement of Changes in Net Assets Available for Benefits
with Fund Information for the year ended December 31, 1996 8
Notes to Financial Statements 9 - 20
Supplemental Schedules:
Item 27a - Schedule of Assets Held for Investment
Purposes 22 - 23
Item 27d - Schedule of Reportable Transactions (a) 24
2
<PAGE> 5
REPORT OF INDEPENDENT AUDITORS
The Retirement Committee and Participants
Houghton Mifflin 401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Houghton Mifflin 401(k) Savings Plan as of December 31, 1998 and 1997,
and the related statements of changes in net assets available for benefits for
each of the three years in the period ended December 31, 1998. 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 each of the three years in the period ended December 31, 1998, 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, 1998 and (2)
reportable transactions for the year ended December 31, 1998 are presented for
purpose 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 statement
of net assets available for benefits and the statement 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 the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Boston, Massachusetts
June 4, 1999
3
<PAGE> 6
HOUGHTON MIFFLIN 401(K) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Fund Information
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-------- -------- --------- -------- -------- ---------- ----------
Managed Houghton Investment
Income Stock Parnassus Puritan Magellan Grade
Fund Fund Fund Fund Fund Contrafund Bond Fund
-------- -------- --------- -------- -------- ---------- ----------
ASSETS
Investments (Note 3) $ 20,371 $ 70,305 $ 1,922 $ 25,632 $ 15,189 $ 19,328 $ 2,566
Contributions and
other receivables 2 9 -- 1 2 1 --
-------- -------- -------- -------- -------- -------- --------
Total assets 20,373 70,314 1,922 25,633 15,191 19,329 2,566
LIABILITIES
Withdrawals and
distributions
payable 116 336 -- 30 35 48 --
-------- -------- -------- -------- -------- -------- --------
Net assets available
for benefits $ 20,257 $ 69,978 $ 1,922 $ 25,603 $ 15,156 $ 19,281 $ 2,566
======== ======== ======== ======== ======== ======== ========
------------------------------------------------------------
Fund Information
------------------------------------------------------------
--------- ---------- ---------- ----------- -------- --------
The Putnam
Templeton Fund for Putnam New Spartan
Foreign Growth and Opportuni- U.S. Equity Total
Fund I Income ties Fund Index Fund Loans Plan
--------- ---------- ---------- ----------- -------- --------
ASSETS
Investments (Note 3) $ 980 $ 1,811 $ 2,880 $ 2,927 $ 1,725 $165,636
Contributions and
other receivables -- -- -- 1 1 17
-------- -------- -------- -------- -------- --------
Total assets 980 1,811 2,880 2,928 1,726 165,653
LIABILITIES
Withdrawals and
distributions
payable -- -- -- -- -- 565
-------- -------- -------- -------- -------- --------
Net assets available
for benefits $ 980 $ 1,811 $ 2,880 $ 2,928 $ 1,726 $165,088
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 7
HOUGHTON MIFFLIN 401(K) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------- -------- --------- -------- -------- ---------- ---------- --------
Managed Houghton Investment Asset
Income Stock Parnassus Puritan Magellan Grade Manager
Fund Fund Fund Fund Fund Contrafund Bond Fund Fund
-------- -------- --------- -------- -------- ---------- ---------- --------
ASSETS
Investments (Note 3) $ 19,104 $ 51,947 $ 2,287 $ 19,861 $ 10,908 $ 14,936 $ 1,583 $ 2,329
Contributions and
other receivables 1 20 -- 1 1 1 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total assets 19,105 51,967 2,287 19,862 10,909 14,937 1,583 2,329
LIABILITIES
Withdrawals and
distributions
payable 3 2 -- -- 4 -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net assets available
for benefits $ 19,102 $ 51,965 $ 2,287 $ 19,862 $ 10,905 $ 14,937 $ 1,583 $ 2,329
======== ======== ======== ======== ======== ======== ======== ========
--------------------------------------------------------------------------------------
Fund Information
--------------------------------------------------------------------------------------
----------- ----------- --------- ---------- ---------- ----------- -------- --------
The Putnam
Asset Asset Templeton Fund for Putnam New Spartan
Manager: Manager: Foreign Growth and Opportuni- U.S. Equity Total
Growth Fund Income Fund Fund I Income ties Fund Index Fund Loans Plan
----------- ----------- --------- ---------- ---------- ----------- -------- --------
ASSETS
Investments (Note 3) $ 3,744 $ 727 $ 610 $ 407 $ 650 $ 574 $ 1,460 $131,127
Contributions and
other receivables -- -- -- -- -- -- 5 29
-------- -------- -------- -------- -------- -------- -------- --------
Total assets 3,744 727 610 407 650 574 1,465 131,156
LIABILITIES
Withdrawals and
distributions
payable -- -- -- -- -- -- -- 9
-------- -------- -------- -------- -------- -------- -------- --------
Net assets available
for benefits $ 3,744 $ 727 $ 610 $ 407 $ 650 $ 574 $ 1,465 $131,147
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 8
HOUGHTON MIFFLIN 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
Year Ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------- -------- --------- -------- -------- ---------- ---------- --------
Managed Houghton Investment Asset
Income Stock Parnassus Puritan Magellan Grade Manager
Fund Fund Fund Fund Fund Contrafund Bond Fund Fund
-------- -------- --------- -------- -------- ---------- ---------- --------
Additions to net assets
attributed to:
Investment income:
Interest income $ 1,149 $ 62 $ 2 $ 11 $ 11 $ 13 $ 2 $ 2
Dividend income -- 717 -- 2,339 688 1,426 127 42
Net appreciation
(depreciation)
in fair value of
investments (Note 3) (14) 13,869 (10) 1,276 3,027 3,144 24 19
-------- -------- -------- -------- -------- -------- -------- --------
1,135 14,648 (8) 3,626 3,726 4,583 153 63
Contributions:
Rollovers 261 281 103 272 485 298 78 --
Participants 678 2,719 231 1,155 1,038 1,322 130 137
Loans (21) 239 (23) (138) (164) (103) (18) (1)
Employer -- 3,545 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
918 6,784 311 1,289 1,359 1,517 190 136
-------- -------- -------- -------- -------- -------- -------- --------
Total Additions 2,053 21,432 303 4,915 5,085 6,100 343 199
Deductions from net assets attributed to:
Withdrawals and
distributions (Note 1) (1,795) (3,030) (74) (1,690) (1,105) (1,205) (143) (36)
Administrative
expenses (24) (10) -- (16) (8) (5) (4) (2)
-------- -------- -------- -------- -------- -------- -------- --------
Total Deductions (1,819) (3,040) (74) (1,706) (1,113) (1,210) (147) (38)
Net increase prior
to interfund transfers -------- -------- -------- -------- -------- -------- -------- --------
234 18,392 229 3,209 3,972 4,890 196 161
Fund transfers 921 (379) (594) 2,532 279 (546) 787 (2,490)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) 1,155 18,013 (365) 5,741 4,251 4,344 983 (2,329)
Net assets available for
benefits:
Beginning of year 19,102 51,965 2,287 19,862 10,905 14,937 1,583 2,329
-------- -------- -------- -------- -------- -------- -------- --------
End of year $ 20,257 $ 69,978 $ 1,922 $ 25,603 $ 15,156 $ 19,281 $ 2,566 $ --
======== ======== ======== ======== ======== ======== ======== ========
--------------------------------------------------------------------------------------
Fund Information
--------------------------------------------------------------------------------------
----------- ----------- --------- ---------- ---------- ----------- -------- --------
The Putnam
Asset Asset Templeton Fund for Putnam New Spartan
Manager: Manager: Foreign Growth and Opportuni- U.S. Equity Total
Growth Fund Income Fund Fund I Income ties Fund Index Fund Loans Plan
----------- ----------- --------- ---------- ---------- ----------- -------- --------
Additions to net assets
attributed to:
Investment income:
Interest income $ 3 $ 1 $ 2 $ 1 $ 2 $ 2 $ -- $ 1,263
Dividend income -- 21 98 145 87 36 -- 5,726
Net appreciation
(depreciation)
in fair value of
investments (Note 3) 105 15 (160) 20 342 420 -- 22,077
-------- -------- -------- -------- -------- -------- -------- --------
108 37 (60) 166 431 458 -- 29,066
Contributions:
Rollovers -- -- 58 268 249 235 -- 2,588
Participants 202 36 106 142 233 256 -- 8,385
Loans (4) -- 2 (4) (23) (3) 261 --
Employer -- -- -- -- -- -- -- 3,545
-------- -------- -------- -------- -------- -------- -------- --------
198 36 166 406 459 488 261 14,518
-------- -------- -------- -------- -------- -------- -------- --------
Total Additions 306 73 106 572 890 946 261 43,584
Deductions from net assets attributed to:
Withdrawals and
distributions (Note 1) (161) (56) (26) (8) (72) (170) -- (9,571)
Administrative
expenses (2) (1) -- -- -- -- -- (72)
-------- -------- -------- -------- -------- -------- -------- --------
Total Deductions (163) (57) (26) (8) (72) (170) -- (9,643)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase prior
to interfund transfers 143 16 80 564 818 776 261 33,941
Fund transfers (3,887) (743) 290 840 1,412 1,578 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) (3,744) (727) 370 1,404 2,230 2,354 261 33,941
Net assets available for
benefits:
Beginning of year 3,744 727 610 407 650 574 1,465 131,147
-------- -------- -------- -------- -------- -------- -------- --------
End of year $ -- $ -- $ 980 $ 1,811 $ 2,880 $ 2,928 $ 1,726 $165,088
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 9
HOUGHTON MIFFLIN 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
Year Ended December 31, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------- -------- --------- -------- -------- ---------- ---------- --------
Managed Houghton Investment Asset
Income Stock Parnassus Puritan Magellan Grade Manager
Fund Fund Fund Fund Fund Contrafund Bond Fund Fund
-------- -------- --------- -------- -------- ---------- ---------- --------
Additions to net assets
attributed to:
Investment income:
Interest income $ 1,155 $ 39 $ 1 $ 11 $ 10 $ 16 $ 2 $ 2
Dividend income -- 636 444 1,574 698 1,418 90 214
Net appreciation
(depreciation)
in fair value of
investments (Note 3) (19) 13,390 (79) 1,983 1,520 1,271 33 285
-------- -------- -------- -------- -------- -------- -------- --------
1,136 14,065 366 3,568 2,228 2,705 125 501
Contributions:
Rollovers 233 164 180 269 258 167 25 51
Participants 704 2,397 187 1,058 878 1,355 109 261
Loans (11) 121 (23) (62) (14) (28) (21) (41)
Employer -- 3,166 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
926 5,848 344 1,265 1,122 1,494 113 271
-------- -------- -------- -------- -------- -------- -------- --------
Total Additions 2,062 19,913 710 4,833 3,350 4,199 238 772
Deductions from net assets attributed to:
Withdrawals and
distributions (Note 1) (2,259) (1,927) (108) (1,222) (810) (840) (90) (137)
Administrative
expenses (28) (8) -- (15) (7) (4) (2) (4)
-------- -------- -------- -------- -------- -------- -------- --------
Total Deductions (2,287) (1,935) (108) (1,237) (817) (844) (92) (141)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
prior to interfund
transfers (225) 17,978 602 3,596 2,533 3,355 146 631
Fund transfers (572) (1,526) 386 372 (59) 724 51 (565)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) (797) 16,452 988 3,968 2,474 4,079 197 66
Net assets available for
benefits:
Beginning of year 19,899 35,513 1,299 15,894 8,431 10,858 1,386 2,263
-------- -------- -------- -------- -------- -------- -------- --------
End of year $ 19,102 $ 51,965 $ 2,287 $ 19,862 $ 10,905 $ 14,937 $ 1,583 $ 2,329
======== ======== ======== ======== ======== ======== ======== ========
--------------------------------------------------------------------------------------
Fund Information
--------------------------------------------------------------------------------------
----------- ----------- --------- ---------- ---------- ----------- -------- --------
The Putnam
Asset Asset Templeton Fund for Putnam New Spartan
Manager: Manager: Foreign Growth and Opportuni- U.S. Equity Total
Growth Fund Income Fund Fund I Income ties Fund Index Fund Loans Plan
----------- ----------- --------- ---------- ---------- ----------- -------- --------
Additions to net assets
attributed to:
Investment income:
Interest income $ 6 $ 1 $ -- $ -- $ -- $ -- $ -- $ 1,243
Dividend income 402 61 42 35 12 5 -- 5,631
Net appreciation
(depreciation)
in fair value of
investments (Note 3) 531 50 (79) (48) (22) (10) -- 18,806
-------- -------- -------- -------- -------- -------- -------- --------
939 112 (37) (13) (10) (5) -- 25,680
Contributions:
Rollovers 131 18 31 30 14 6 -- 1,577
Participants 410 71 10 9 12 10 -- 7,471
Loans (18) (4) 2 (2) 1 7 93 --
Employer -- -- -- -- -- -- -- 3,166
-------- -------- -------- -------- -------- -------- -------- --------
523 85 43 37 27 23 93 12,214
-------- -------- -------- -------- -------- -------- -------- --------
Total Additions 1,462 197 6 24 17 18 93 37,894
Deductions from net assets attributed to:
Withdrawals and
distributions (Note 1) (210) (97) -- -- -- (67) -- (7,767)
Administrative
expenses (3) (2) -- -- -- -- -- (73)
-------- -------- -------- -------- -------- -------- -------- --------
Total Deductions (213) (99) -- -- -- (67) -- (7,840)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
prior to interfund
transfers 1,249 98 6 24 17 (49) 93 30,054
Fund transfers (734) (320) 604 383 633 623 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) 515 (222) 610 407 650 574 93 30,054
Net assets available for
benefits:
Beginning of year 3,229 949 -- -- -- -- 1,372 101,093
-------- -------- -------- -------- -------- -------- -------- --------
End of year $ 3,744 $ 727 $ 610 $ 407 $ 650 $ 574 $ 1,465 $131,147
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 10
HOUGHTON MIFFLIN 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
Year Ended December 31, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------- -------- --------- -------- -------- ---------- ---------- --------
Managed Houghton Investment Asset
Income Stock Parnassus Puritan Magellan Grade Manager
Fund Fund Fund Fund Fund Contrafund Bond Fund Fund
-------- -------- --------- -------- -------- ---------- ---------- --------
Additions to net assets
attributed to:
Investment income:
Interest income $ 1,206 $ 51 $ 1 $ 10 $ 12 $ 8 $ 1 $ 1
Dividend income -- 598 40 1,783 1,261 769 79 175
Net appreciation
(depreciation)
in fair value of
investments (Note 3) -- 8,508 88 298 (353) 928 (36) 66
-------- -------- -------- -------- -------- -------- -------- --------
1,206 9,157 129 2,091 920 1,705 44 242
Contributions:
Rollovers 263 228 73 371 624 533 208 54
Participants 978 1,500 235 1,149 1,106 1,097 148 254
Loans (32) (84) (17) (85) (67) (127) (11) (5)
Employer -- 2,152 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
1,209 3,796 291 1,435 1,663 1,503 345 303
-------- -------- -------- -------- -------- -------- -------- --------
Total Additions 2,415 12,953 420 3,526 2,583 3,208 389 545
Deductions from net assets attributed to:
Withdrawals and
distributions (Note 1) (1,919) (1,671) (74) (666) (375) (544) (54) (98)
Administrative
expenses (20) (4) -- (8) (4) (2) (2) (2)
-------- -------- -------- -------- -------- -------- -------- --------
Total Deductions (1,939) (1,675) (74) (674) (379) (546) (56) (100)
Net increase (decrease)
prior to interfund -------- -------- -------- -------- -------- -------- -------- --------
transfers 476 11,278 346 2,852 2,204 2,662 333 445
Fund transfers (150) (1,518) (509) 139 (610) 2,176 98 102
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) 326 9,760 (163) 2,991 1,594 4,838 431 547
Net assets available for
benefits:
Beginning of year 19,573 25,753 1,462 12,903 6,837 6,020 955 1,716
-------- -------- -------- -------- -------- -------- -------- --------
End of year $ 19,899 $ 35,513 $ 1,299 $ 15,894 $ 8,431 $ 10,858 $ 1,386 $ 2,263
======== ======== ======== ======== ======== ======== ======== ========
----------------------------------
Fund Information
----------------------------------
----------- ----------- -------- --------
Asset Asset
Manager: Manager: Total
Growth Fund Income Fund Loans Plan
----------- ----------- -------- --------
Additions to net assets
attributed to:
Investment income:
Interest income $ 4 $ 1 $ -- $ 1,295
Dividend income 271 70 -- 5,046
Net appreciation
(depreciation)
in fair value of
investments (Note 3) 176 -- -- 9,675
-------- -------- -------- --------
451 71 -- 16,016
Contributions:
Rollovers 208 50 -- 2,612
Participants 368 96 -- 6,931
Loans (33) (2) 463 --
Employer -- -- -- 2,152
-------- -------- -------- --------
543 144 463 11,695
-------- -------- -------- --------
Total Additions 994 215 463 27,711
Deductions from net assets attributed to:
Withdrawals and
distributions (Note 1) (178) (100) -- (5,679)
Administrative
expenses (1) (1) -- (44)
-------- -------- -------- --------
Total Deductions (179) (101) -- (5,723)
-------- -------- -------- --------
Net increase (decrease)
prior to interfund
transfers 815 114 463 21,988
Fund transfers 351 (79) -- --
-------- -------- -------- --------
Net increase (decrease) 1,166 35 463 21,988
Net assets available for
benefits:
Beginning of year 2,063 914 909 79,105
-------- -------- -------- --------
End of year $ 3,229 $ 949 $ 1,372 $101,093
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 11
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
1. Plan Description
The following brief description of the Houghton Mifflin 401(k) 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 401(k) Savings Plan, formerly known as the Houghton Mifflin
Retirement Savings Plan, is a defined contribution plan adopted as of January 1,
1981, and amended July 1, 1995 and 1997. 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 ("IRC") and is subject
to the applicable provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
In connection with the acquisition of Computer Adaptive Technologies, Inc. by
Houghton Mifflin Company on July 21, 1998, approximately $92,000 of the assets
and the participants' equity balances of the retained employees, which qualified
under IRC Section 401(k), transferred to the Plan in 1998.
All administrative expenses are borne by the Plan.
PARTICIPATION
Employees of Houghton Mifflin Company and its subsidiaries who are scheduled to
provide 1,000 or more hours of service in the first twelve months after hire are
eligible. Employees are not eligible for Company matching contributions until
successful completion of one year of eligible service.
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.
9
<PAGE> 12
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
1. Plan Description - continued
CONTRIBUTIONS
Eligible employees can elect to contribute in total 1% to 15% of their
compensation, excluding compensation in excess of $160,000 for 1998 and 1997,
and $150,000 for 1996, subject to an annual deferral limit for plans operating
under Section 401(k) of the IRC ($10,000 in 1998), to any of the eleven
investment options offered by the Plan. Employee contributions are made from
participants' wages through payroll deductions. The Company will match an
employee's contribution in amounts up to 4 1/2 % of employee compensation, an
increase from the 3% that was effective until December 31, 1996. Subject to the
above limitations, the Company will match the first 3% of a participant's
compensation that is invested in the Houghton Stock Fund on a 100% basis, and
for contributions invested in the Houghton Stock Fund above this 3% or on
contributions up to 6% invested in the Managed Income Fund and the mutual fund
investments, the Company will match 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, 1998 and 1997.
In thousands of dollars 1998 1997
------- -------
Managed Income Fund $ 939 $ 937
Houghton Stock Fund 3,000 2,561
The Parnassus Fund 334 367
Fidelity Puritan(R)Fund 1,427 1,327
Fidelity Magellan(R)Fund 1,523 1,136
Fidelity Contrafund 1,620 1,522
Fidelity Investment Grade Bond Fund 208 134
Fidelity Asset Manager Fund 137 312
Fidelity Asset Manager: Growth Fund 202 541
Fidelity Asset Manager: Income Fund 36 89
Templeton Foreign Fund I 164 41
The Putnam Fund for Growth and Income 410 39
Putnam New Opportunities Fund 482 26
Spartan U.S. Equity Index Fund 491 16
------- -------
Total Participant Directed Contributions,
including rollovers $10,973 $ 9,048
======= =======
10
<PAGE> 13
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
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, must be repaid in installments, at a minimum quarterly, and must be
repaid in total 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 ("Fidelity"). 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
$5,000 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.
11
<PAGE> 14
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
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 a letter
dated February 6, 1997, that the Plan and the related trust are designed in
accordance with the applicable sections of the IRC. The Plan has been amended
since receiving the determination letter. However, the Retirement Committee
believes the Plan is designed and is currently operated in compliance with the
applicable requirements of the IRC.
SUBSEQUENT EVENT
In February 1999, the Retirement Committee voted that the Plan's Parnassus Fund
investment option be replaced by the Domini Social Equity Fund, and that the
Berger Small Cap Value Fund be added as an additional investment option for the
1999 plan year.
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 1996, the Company adopted Statement of Position (SOP) No. 94-4, "Reporting of
Investment Contracts Held By Health and Welfare Benefit Plans and Defined
Contribution Pension Plans," which was issued by the American Institute of
Certified Public Accountants in 1995. The
12
<PAGE> 15
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
2. Summary of Significant Accounting Policies - continued
BASIS OF PRESENTATION - continued
adoption of SOP 94-4 has not had a material impact on the Plan's financial
position or its results of operations.
PARTICIPANTS' ACCOUNTS
Each participant's account is credited with the participant's 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:
DECEMBER 31,
1998 1997
----- -----
Managed Income Fund 986 1,026
Houghton Stock Fund 2,837 2,672
Mutual Fund Investments 5,144 5,075
INVESTMENTS
Investments in group annuity contracts with insurance companies are valued at
cost plus accumulated interest, which approximates fair value. Investments in
the mutual funds are carried at fair value 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.
The State Street Bank and Trust Short-Term Income Fund and/or the FMTC
Institutional Money Market are valued at their redemption prices, which
approximate fair value. Purchases and sales of securities are recorded on the
trade date of the related transactions.
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.
The Plan added four new fund investment options effective October 1, 1997
(Templeton Foreign Fund I, The Putnam Fund for Growth and Income, Putnam New
Opportunities Fund, and Spartan U.S. Equity Index Fund), increasing the total
number of funds from ten to fourteen. Also, effective on October 1, 1997 was the
closing of the Fidelity Asset Manager Fund, Fidelity Asset Manager: Income Fund
and Fidelity Asset Manager: Growth Fund to new contributions and transfers. On
October 1, 1998, these three funds were removed from the Plan, and all
investments in these funds were automatically transferred to the Fidelity
Puritan Fund.
13
<PAGE> 16
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
2. Summary of Significant Accounting Policies - continued
INVESTMENTS - continued
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. Effective
September 15, 1997, the valuation method for the Houghton Stock Fund was changed
to the share method from the unitized method.
3. Investments
A brief description of the Plan funds and investment options is provided below:
MANAGED INCOME FUND, principally invests in pools and individual insurance
contracts, and other fixed income investments. The investments held by the
fund 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 - This investment seeks 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.
FMTC Institutional Money Market - A short-term money market fund.
HOUGHTON STOCK FUND is invested in Houghton Mifflin Company common stock that is
either purchased by the fund 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. Five
of the mutual fund options are managed by Fidelity Investments (R), a
company affiliated with the Trustee, Fidelity Management Trust Company.
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.
14
<PAGE> 17
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
3. Investments - continued
MUTUAL FUND INVESTMENTS - continued
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 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 Contrafund - This is a fund which seeks capital appreciation by
investing in equity securities which are believed to be undervalued.
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.
Fidelity Asset Manager(TM) Fund - 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: Growth Fund - 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.
Fidelity Asset Manager: Income Fund - This fund seeks a high level of
current income by maintaining a diversified portfolio of stock, bonds,
short-term instruments, and other investments.
Templeton Foreign Fund I - This fund is a growth mutual fund that invests
internationally, primarily in common stocks, and seeks long term capital
growth. Foreign investments involve greater risk and may offer greater
potential returns than U.S. investments.
The Putnam Fund for Growth and Income - This fund seeks capital growth and
current income, primarily investing in common stocks that offer potential
for capital growth, current income, or both. The fund may also invest up to
20% of its assets in Foreign securities, which involve greater risk.
Putnam New Opportunities Fund - This mutual fund is an aggressive growth
mutual fund that invests primarily in the common stock of emerging industry
groups. Such investments increase the risk of greater price fluctuations.
Spartan U.S. Equity Index Fund - This mutual fund is a growth and income
mutual fund, which primarily invests in S&P 500 companies and other
securities that are based on the value of the Index, as opposed to a
strategy of selecting attractive stocks.
15
<PAGE> 18
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
3. Investments - continued
Investments held by the Plan at December 31, 1998 and 1997 are summarized as
follows:
All amounts are presented in thousands of dollars, except shares and units.
1998 1997
----------------- -----------------
MARKET MARKET
COST VALUE COST VALUE
------- ------- ------- -------
MANAGED INCOME FUND:
Aetna, group annuity contract,
4.60%, maturity date 7/2/99 $ 151 $ 151 $ 307 $ 307
------- ------- ------- -------
Total group annuity contracts 151 151 307 307
------- ------- ------- -------
FMTC Institutional Money Market
(563,503 shares in 1998 and 422,182
shares in 1997) 564 564 422 422
Fidelity Managed Income Portfolio
(19,655,896 units in 1998 and
18,374,731 units in 1997) 19,656 19,656 18,375 18,375
------- ------- ------- -------
Total 20,371 20,371 19,104 19,104
Houghton Stock Fund (1,487,944
shares in 1998 and 1,353,674 units
in 1997) 31,631 70,305 25,214 51,947
MUTUAL FUND INVESTMENTS:
The Parnassus Fund (53,040 shares
in 1998 and 63,989 shares in 1997) 1,896 1,922 2,373 2,287
Fidelity Puritan (R) Fund (1,277,149
shares in 1998 and 1,024,825
shares in 1997) 21,791 25,632 16,781 19,861
Fidelity Magellan (R) Fund (125,712
shares in 1998 and 114,489 shares
in 1997) 10,922 15,189 9,187 10,908
Fidelity Contrafund (340,341 shares
in 1998 and 320,307 shares in
1997) 14,401 19,328 12,631 14,936
Fidelity Investment-Grade Bond
(347,271 shares in 1998 and
217,403 shares in 1997) 2,513 2,566 1,544 1,583
Fidelity Asset Manager (TM)
(126,929 shares in 1997) -- -- 1,990 2,329
16
<PAGE> 19
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
3. Investments - continued
All amounts are presented in thousands of dollars, except shares and units.
1998 1997
------------------ ------------------
MARKET MARKET
COST VALUE COST VALUE
-------- -------- -------- --------
MUTUAL FUND INVESTMENTS (continued)
Fidelity Asset Manager: Growth
(202,609 shares in 1997) -- -- 3,142 3,744
Fidelity Asset Manager: Income
(59,664 shares in 1997) -- -- 661 727
Templeton Foreign Fund I (116,805
shares in 1998 and 61,266 shares
in 1997) 1,169 980 686 610
The Putnam Fund for Growth and
Income (88,396 shares in 1998
and 20,812 shares in 1997) 1,828 1,811 440 407
Putnam New Opportunities Fund
(49,289 shares in 1998 and 13,360
shares in 1997) 2,539 2,880 657 650
Spartan U.S. Equity Index Fund
(66,578 shares in 1998 and 16,405
shares in 1997) 2,506 2,927 569 574
-------- -------- -------- --------
Total 59,565 73,235 50,661 58,616
Loans Receivable 1,725 1,725 1,460 1,460
-------- -------- -------- --------
Total Plan Investments $113,292 $165,636 $ 96,439 $131,127
======== ======== ======== ========
17
<PAGE> 20
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
3. Investments - continued
The fair market value of individual investments that represent 5% or more of the
Plan's Participants' net assets as of December 31, 1998, and 1997 are as
follows:
All amounts are in thousands of dollars,
except shares and units. 1998 1997
------- -------
Fidelity Managed Income Portfolio (19,655,896
units in 1998 and 18,374,731 units in 1997) $19,656 $18,375
Houghton Mifflin Company Common Stock (1,487,944
shares in 1998 and 1,353,674 shares in 1997) 70,305 51,947
Fidelity Puritan(R)Fund (1,277,149 shares in 1998
and 1,024,825 shares in 1997) 25,632 19,861
Fidelity Magellan(R)Fund (125,712 shares in 1998
and 114,489 shares in 1997) 15,189 10,908
Fidelity Contrafund (340,341 shares in 1998 and
320,307 shares in 1997) 19,328 14,936
During 1998 and 1997, the Plan's investments (including investments bought, sold
and held during the year) appreciated (depreciated) in value as follows: (all
amounts are in thousands)
Year ended December 31,
------------------------
1998 1997
-------- --------
Managed Income Fund $ (14) $ (19)
Houghton Stock Fund 13,869 13,390
Parnassus Fund (10) (79)
Puritan Fund 1,276 1,983
Magellan Fund 3,027 1,520
Contrafund 3,144 1,271
Investment Grade Bond 24 33
Asset Manager 19 285
Asset Manager Growth 105 531
Asset Manager Income 15 50
Templeton Foreign I (160) (79)
The Putnam Fund for Growth and Income 20 (48)
Putnam New Opportunities Fund 342 (22)
Spartan U.S. Equity Fund 420 (10)
======== ========
Net change in fair value $ 22,077 $ 18,806
======== ========
18
<PAGE> 21
Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1998
3. Investments - continued
The Plan routinely purchases and sells common stock of the Plan's sponsor,
Houghton Mifflin Company, a party-in-interest. During 1998, the Plan had
purchases of 301,090 shares of the stock for $10,111,202 and sales of 166,820
units for $5,586,972. During 1997, the Plan had purchases of 453,499 units of
the stock for $7,442,914 and sales of 261,033 units for $4,833,295.
Plan investments include mutual funds which are administered by Fidelity.
Fidelity is the Plan's trustee and, therefore, these transactions qualify as
party-in-interest transactions.
There were no other party-in-interest transactions which were prohibited by
ERISA Section 406 and for which there is no statutory exemption.
4. Year 2000 Issues (Unaudited)
The Plan sponsor has developed a plan to modify its internal information
technology to be ready for the year 2000 and has begun converting critical data
procession systems. The project also includes determining whether third party
service providers have reasonable plans in place to become year 2000 ready. The
Plan sponsor currently expects the project to be substantially complete during
1999. Costs related to the Year 2000 project will be primarily borne by the Plan
sponsor and third party service providers. The Plan sponsor does not expect this
project to have significant effect on Plan operations.
19
<PAGE> 22
SUPPLEMENTAL SCHEDULES
20
<PAGE> 23
Houghton Mifflin 401(k) Savings Plan
Supplemental Schedules
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
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 and Current
Identity of Issue Maturity Date Cost Value
- ----------------------------------------- ------------------------------ ------- -------
<S> <C> <C> <C>
Aetna Insurance Company Guaranteed group annuity
contract, 4.60%, maturity
date 7/2/99 $ 151 $ 151
FMTC Institutional Money Market* 563,503 shares 564 564
Fidelity Managed Income Fund* 19,655,896 units 19,656 19,656
------- -------
20,371 20,371
Houghton Mifflin Company*
Common Stock 1,487,944 shares 31,631 70,305
The Parnassus Fund 53,040 shares 1,896 1,922
Fidelity Puritan(R) Fund* 1,277,149 shares 21,791 25,632
Fidelity Magellan(R) Fund* 125,712 shares 10,922 15,189
Fidelity Contrafund* 340,341 shares 14,401 19,328
Fidelity Investment-Grade Bond Fund* 347,271 shares 2,513 2,566
Templeton Foreign Fund I 116,805 shares 1,169 980
The Putnam Fund for Growth and Income 88,396 shares 1,828 1,811
</TABLE>
* Indicates party-in-interest to the Plan.
21
<PAGE> 24
Houghton Mifflin 401(k) Savings Plan
Supplemental Schedules
Item 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - continued
DECEMBER 31, 1998
In thousands of dollars, except shares and unit amounts
<TABLE>
<CAPTION>
Description of Investment,
Including Rate of Interest and Current
Identity of Issue Maturity Date Cost Value
- ----------------------------------------- ------------------------------ -------- --------
<S> <C> <C> <C>
The Putnam New Opportunities Fund 49,289 shares 2,539 2,880
Spartan U.S. Equity Index Fund 66,578 shares 2,506 2,927
-------- --------
59,565 73,235
Loans Receivable Loans receivable from Plan
participants at various
maturities and various interest
rates 1,725 1,725
-------- --------
TOTAL $113,292 $165,636
======== ========
</TABLE>
* Indicates party-in-interest to the Plan.
22
<PAGE> 25
Houghton Mifflin 401(k) Savings Plan
Supplemental Schedule
Item 27d - Reportable Transactions (a)
Year Ended December 31, 1998
CATEGORY (iii)
Series of transactions within the plan year that exceeded 5% of value of net
assets available for benefits:
<TABLE>
<CAPTION>
Current Value
No. of of Asset on
Identity of Description Trans- Purchase Selling Cost of Transaction
Party Involved of Issues actions Price Price Asset Date Gain/(Loss)
- -------------- ---------------- ------- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Houghton* Houghton Stock 239 $10,111,202 N/A $10,111,202 $10,111,202 N/A
Mifflin Co. Fund 215 N/A $5,586,972 $ 3,693,992 $ 5,586,972 $1,892,980
Fidelity* Fidelity Puritan 227 $ 8,267,231 N/A $ 8,267,231 $ 8,267,231 N/A
Fund 175 N/A $3,771,751 $ 3,258,162 $ 3,771,751 $ 513,589
Fidelity* Fidelity 217 $ 4,644,342 N/A $ 4,644,342 $ 4,644,342 N/A
Contrafund 162 N/A $3,401,069 $ 2,875,095 $ 3,401,069 $ 525,974
Fidelity* FMTC
Institutional 133 $ 6,839,239 N/A $ 6,839,239 $ 6,839,239 N/A
Money Market 195 N/A $6,734,133 $ 6,734,133 $ 6,734,133 $ --
</TABLE>
(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.
* Indicates party-in-interest to the Plan.
There were no category (i), (ii) or (iv) reportable transactions during 1998.
23
<PAGE> 26
Houghton Mifflin 401(k) Savings Plan
Index To Exhibits
Item 6(a)
<TABLE>
<CAPTION>
Page Number in
Exhibit No. Description of Document This Report
- ----------- ----------------------- --------------
<S> <C> <C>
(23) Consent of Independent Auditors 25
</TABLE>
24
<PAGE> 1
Exhibit 23
Houghton Mifflin 401(k) Savings Plan
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 Nos. 2-69298) pertaining to the Houghton Mifflin 401(k) Savings Plan, of our
report dated June 4, 1999, with respect to the financial statements and
schedules of the Houghton Mifflin 401(k) Savings Plan included in this Annual
Report (Form 11-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
Boston, Massachusetts
June 24, 1999
25
