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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, 1999
-------------------------------
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
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Houghton Mifflin 401(k) Savings Plan
Date: JUNE 27, 2000 /s/ Gary L. Smith
----------------------- -------------------------------
Gary L. Smith
Senior Vice President, Administration
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HOUGHTON MIFFLIN
401(k) SAVINGS PLAN
Audited Financial Statements and Supplemental Schedules
Years ended December 31, 1999 and 1998
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Houghton Mifflin 401(k) Savings Plan
Years ended December 31, 1999 and 1998
Table of Contents
Page No.
Report of Independent Auditors 3
Audited Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 1999 and 1998 4
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 1999 and 1998 5
Notes to Financial Statements 6 - 13
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets Held for Investment
Purposes at End of Year 15
Schedule H, Line 4j - Schedule of Reportable Transactions 16
2
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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, 1999 and 1998,
and the related statements of changes in net assets available for benefits for
the years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes at end of year as of December 31, 1999, and
reportable transactions for the year then ended, are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
Boston, Massachusetts /s/ Ernst & Young LLP
May 16, 2000
3
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Houghton Mifflin 401(k) Savings Plan
Statements of Net Assets Available for Benefits
December 31, 1999 and 1998
(In thousands of dollars)
1999 1998
-------- --------
Assets
Investments, at fair value $181,230 $165,636
Contributions and other receivables 248 17
-------- --------
Total Assets 181,478 165,653
-------- --------
Liabilities
Withdrawals and distributions payable -- 565
-------- --------
Net assets available for benefits $181,478 $165,088
======== ========
See accompanying notes to financial statements.
4
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Houghton Mifflin 401(k) Savings Plan
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 1999 and 1998
(In thousands of dollars)
1999 1998
--------- ---------
Additions to net assets attributed to:
Investment Income:
Interest income $ 1,002 $ 1,263
Dividend income 9,530 5,726
Net (depreciation) appreciation in
Fair value of investments (1,655) 22,077
--------- ---------
8,877 29,066
Contributions:
Rollovers 6,142 2,588
Participants 9,728 8,385
Employer 4,024 3,545
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19,894 14,518
--------- ---------
Total Additions 28,771 43,584
Deductions from net assets attributed to:
Withdrawals and distributions (12,306) (9,571)
Administrative expense (75) (72)
--------- ---------
Total Deductions (12,381) (9,643)
--------- ---------
Net increase 16,390 33,941
Net assets available for benefits
Beginning of Year 165,088 131,147
--------- ---------
End of Year $ 181,478 $ 165,088
========= =========
See accompanying notes to financial statements.
5
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
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 is a defined contribution plan adopted
as of January 1, 1981, and most recently amended January 1, 1998. 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 Sunburst Technologies, Inc. in May 1999,
approximately $4,222,000 of the assets and the participants' equity balances of
the retained employees, which qualified under IRC Section 401(k), transferred to
the Plan in 1999. These amounts are included in rollovers for the year ended
December 31, 1999.
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
the 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.
6
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Houghton Mifflin 401(k) 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 $160,000 for 1999 and 1998,
subject to an annual deferral limit for plans operating under Section 401(k) of
the IRC ($10,000 in 1999), to any of the 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. Subject to the above limitations, the Company
will match the first 3% of a participant's compensation that is invested in the
Houghton Mifflin Stock Fund, which consists entirely of Houghton Mifflin Company
Common Stock, on a 100% basis, and for contributions invested in the Houghton
Mifflin Stock Fund above this 3% or on contributions up to 6% invested in other
funds, the Company will match on a 50% basis. Company contributions are invested
solely in the Houghton Mifflin Stock Fund, which is considered a non-participant
directed fund.
LOANS
A participant may obtain a loan against his or her account balance up to 50% of
the total aggregate value, limited as defined. 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.
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.
7
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
1. Plan Description - continued
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.
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.
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 accounting principles
generally accepted in the United States 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.
8
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
2. Summary of Significant Accounting Policies - continued
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.
INVESTMENTS
Investments in group annuity contracts with insurance companies are valued at
cost plus accumulated interest, which approximates fair value. Investments in
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 FMTC
Institutional Money Market is valued at its redemption price, which approximates
fair value. Participant loans are valued at their outstanding balances, 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.
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.
RECLASSIFICATION
The Plan has adopted Statement of Position 99-3, "Accounting for and Reporting
of Certain Defined Contribution Benefit Plan Investments and Other Disclosure
Matters" for the 1999 financial statement presentation. Accordingly, 1998
amounts have been reclassified to conform with Statement of Position 99-3.
9
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
3. Non Participant-Directed Investments
The following is disclosure of the Houghton Mifflin Stock Fund's net assets
available for benefits at December 31, 1999 and 1998:
All amounts are presented in thousands of dollars:
1999 1998
------- -------
Assets
Investments, at fair value $64,452 $70,305
Contributions and other receivables 228 9
------- -------
Total Assets 64,680 70,314
Liabilities
Withdrawals and distributions payable -- 336
------- -------
Net assets available for benefits $64,680 $69,978
======= =======
10
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
3. Non Participant-Directed Investments - continued
The following is disclosure of the Houghton Mifflin Stock Fund's changes in net
assets available for benefits for the years ended December 31, 1999 and 1998:
All amounts are presented in thousands of dollars:
1999 1998
-------- --------
Additions to net assets attributed to:
Investment Income:
Interest income $ 56 $ 62
Dividend income 761 717
Net (depreciation) appreciation in
Fair value of investments (7,430) 13,869
-------- --------
(6,613) 14,648
Contributions:
Rollovers 312 281
Participants 3,161 2,719
Loans 248 239
Employer 4,043 3,545
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7,764 6,784
-------- --------
Total Additions 1,151 21,432
Deductions from net assets attributed to:
Withdrawals and distributions (3,461) (3,030)
Administrative expense (17) (10)
-------- --------
Total Deductions (3,478) (3,040)
Net (decrease) increase prior to interfund
transfers (2,327) 18,392
Interfund transfers (2,971) (379)
-------- --------
Net (decrease) increase (5,298) 18,013
Net assets available for benefits
Beginning of Year 69,978 51,965
-------- --------
End of Year $ 64,680 $ 69,978
======== ========
11
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
4. Investments
The fair value of the investments held by the Plan at December 31, 1999 and 1998
are summarized as follows:
All amounts are presented in thousands of dollars:
1999 1998
-------- --------
MANAGED INCOME FUND:
AUSA (1999) - Aetna (1998), group
annuity contract $ 876 $ 151
FMTC Institutional Money Market 19,284 564
Fidelity Managed Income Portfolio -- 19,656
-------- --------
Total 20,160 20,371
Houghton Mifflin Company
Common Stock 64,452 70,305
MUTUAL FUND INVESTMENTS:
The Parnassus Fund 2,422 1,922
Fidelity Puritan(R)Fund 25,155 25,632
Fidelity Magellan(R)Fund 22,511 15,189
Fidelity Contrafund 24,853 19,328
Fidelity Investment Grade Bond Fund 2,886 2,566
Berger Small Cap Value Fund 743 --
Domini Social Equity Index Fund 305 --
Templeton Foreign Fund I 2,181 980
The Putnam Fund for Growth and Income 2,239 1,811
The Putnam New Opportunities Fund 5,771 2,880
Spartan U.S. Equity Index Fund 5,870 2,927
-------- --------
Total 94,936 73,235
Loans Receivable 1,682 1,725
-------- --------
Total Plan Investments $181,230 $165,636
======== ========
12
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Houghton Mifflin 401(k) Savings Plan
Notes to Financial Statements
4. Investments - continued
During 1999 and 1998, the Plan's investments (including investments bought, sold
and held during the year) appreciated (depreciated) in value as follows:
All amounts are presented in thousands of dollars:
Year ended December 31,
1999 1998
-------- --------
Houghton Mifflin Company
Common Stock $ (7,430) $ 13,869
Fidelity Managed Income Portfolio -- (14)
The Parnassus Fund 691 (10)
Fidelity Puritan(R)Fund (1,309) 1,276
Fidelity Magellan(R)Fund 2,402 3,027
Fidelity Contrafund 1,303 3,144
Fidelity Investment Grade Bond Fund (190) 24
Fidelity Asset Manager -- 19
Fidelity Asset Manager Growth -- 105
Fidelity Asset Manager Income -- 15
Berger Small Cap Value Fund 7 --
Domini Social Equity Index Fund 27 --
Templeton Foreign Fund I 420 (160)
The Putnam Fund for Growth and Income (211) 20
The Putnam New Opportunities Fund 1,844 342
Spartan U.S. Equity Index Fund 791 420
-------- --------
Net change in fair value $ (1,655) $ 22,077
======== ========
The Plan routinely purchases and sells common stock of the Plan's sponsor,
Houghton Mifflin Company, a party-in-interest. During 1999, the Plan had
purchases of 225,018 shares of the stock for $9,771,371 and sales of 185,219
shares for $8,194,740. During 1998, the Plan had purchases of 301,090 shares of
the stock for $10,111,202 and sales of 166,820 shares for $5,586,972.
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.
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SUPPLEMENTAL SCHEDULES
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Houghton Mifflin 401(k) Savings Plan
Employer Identification No. 04-1456030 Plan No. 003
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 1999
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>
AUSA Insurance Company Guaranteed group annuity
contracts $ 876
FMTC Institutional Money Market* 19,284,284 shares 19,284
---------------
20,160
Houghton Mifflin Company*
Common Stock 1,527,743 shares $36,709 64,452
The Parnassus Fund 47,794 shares 2,422
Fidelity Puritan (R) Fund* 1,321,870 shares 25,155
Fidelity Magellan (R) Fund* 164,760 shares 22,511
Fidelity Contrafund* 414,082 shares 24,853
Fidelity Investment Grade Bond Fund* 418,880 shares 2,886
Berger Small Cap Value Fund 34,284 shares 743
Domini Social Equity Index Fund 7,271 shares 305
Templeton Foreign Fund I 194,377 shares 2,181
The Putnam Fund for Growth and Income 119,396 shares 2,239
The Putnam New Opportunities Fund 63,443 shares 5,771
Spartan U.S. Equity Index Fund 112,691 shares 5,870
---------------
179,548
Loans Receivable * 7.75% to 10.75% 1,682
---------------
TOTAL $181,230
===============
</TABLE>
* Indicates party-in-interest to the Plan.
15
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Houghton Mifflin 401(k) Savings Plan
Employer Identification No. 04-1456030 Plan No. 003
Schedule H, Line 4j - Schedule of Reportable Transactions
Year Ended December 31, 1999
<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)
--------------- ----------------- --------- -------------- ------------ ------------- -------------- ------------
CATEGORY (iii)
Series of transactions within the plan year that exceeded 5% of value of net
assets available for benefits:
<S> <C> <C> <C> <C> <C> <C> <C>
Houghton* Common Stock 232 $9,771,371 N/A $9,771,371 $9,771,371 N/A
Mifflin 216 N/A $8,194,740 4,693,173 8,194,740 $3,501,567
Company
</TABLE>
* Indicates party-in-interest to the Plan.
There were no category (i), (ii) or (iv) reportable transactions during 1999.
16
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Houghton Mifflin 401(k) Savings Plan
Index To Exhibits
Item 6(a)
PAGE NUMBER IN
EXHIBIT NO DESCRIPTION OF DOCUMENT THIS REPORT
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(23) Consent of Independent Auditors 18
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