SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[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
Commission file number 1-10955
THE ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
ENVIRONMENTAL ELEMENTS CORPORATION
3700 Koppers Street
Baltimore, Maryland 21227
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of
the Environmental Elements Corporation
401(K) Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Environmental Elements Corporation 401(K) Retirement Savings
Plan (the Plan) as of December 31, 1995 and 1994, and the related statement of
changes in net assets available for plan benefits for the year ended December
31, 1995. These financial statements are the responsibility of the Plan's
Administrative Committee. 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 plan benefits of the Plan as
of December 31, 1995 and 1994, and the changes in its net assets available for
plan benefits for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of investments
held and reportable transactions are presented for purposes of additional
analysis and are not a required part of the basic 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 fund information in the statements of net assets
available for plan benefits and the changes in net assets available for plan
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for plan 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.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Baltimore, Maryland,
June 21, 1996
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1995 AND 1994
(Notes 1, 2 and 3)
<TABLE>
<CAPTION>
1995 1994
--------------- --------------
<S> <C>
ASSETS:
Investments in Pooled Separate Accounts:
Guaranteed Long-Term Account $ 1,466,068 $ 1,403,295
Guaranteed Short-Term Account 158,566 134,061
Growth and Income Stock Account 433,195 282,138
Stock Market Index Account 795,833 549,165
-------------- --------------
2,853,662 2,368,659
Environmental Elements Corporation Common Stock 342,504 388,430
Investments held with The Prudential (Note 6) 172,251 143,895
Environmental Elements Service Corporation Investments
held with NationsBank 90,068 -
NationsBank Employee Benefit Liquidity Fund 265 3,881
-------------- --------------
Total investments 3,458,750 2,904,865
-------------- --------------
Receivables:
Employer's contributions 23,458 9,092
Employees' contributions 38,503 5,848
-------------- --------------
61,961 14,940
-------------- --------------
Net assets available for plan benefits $ 3,520,711 $ 2,919,805
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1995
(Notes 1, 2 and 3)
<TABLE>
<CAPTION>
Supplemental Fund Information
Participant Directed
-----------------------------------------------------------------------
Environmental
Guaranteed Guaranteed Growth and Elements Corp.
Long-term Short-term Income Stock Stock Market Common
Account Account Account Index Account Stock
---------- ---------- ------------ ------------- --------------
<S> <C>
ADDITIONS:
Contributions-
Employer $ - $ - $ - $ - $ 82,493
Participant 158,845 23,013 53,993 50,841 84,572
----------- ---------- --------- --------- ---------
Total 158,845 23,013 53,993 50,841 167,065
----------- ---------- --------- --------- ---------
Interest income 81,566 6,655 - - -
Realized and unrealized gains
(losses) - - 107,919 205,299 (191,393)
----------- ---------- --------- --------- ---------
Total additions 240,411 29,668 161,912 256,140 (24,328)
----------- ---------- --------- --------- ---------
DEDUCTIONS:
Benefit payments (166,139) (4,048) (10,523) (22,418) (21,598)
Other - - - - -
----------- ---------- --------- --------- ---------
Total deductions (166,139) (4,048) (10,523) (22,418) (21,598)
----------- ---------- --------- --------- ---------
INCREASE IN CONTRIBUTIONS RECEIVABLE - - - - -
TRANSFERS AMONG FUNDS (11,499) (1,115) (332) 12,946 -
----------- ---------- --------- --------- ---------
NET INCREASE (DECREASE) FOR YEAR 62,773 24,505 151,057 246,668 (45,926)
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, beginning of year 1,403,295 134,061 282,138 549,165 388,430
----------- ---------- --------- --------- ---------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, end of year $ 1,466,068 $ 158,566 $ 433,195 $ 795,833 $ 342,504
=========== ========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Environmental
Elements NationsBank Nonparticipant
Investments Service Corp. Employee Directed
Held Investments Benefit --------------
With The Held With Liquidity Contributions
Prudential NationsBank Fund Receivable Total
-------------- ------------- ----------- -------------- -----------
<S> <C>
ADDITIONS:
Contributions-
Employer $ - $ 9,370 $ - $ 14,366 $ 106,229
Participant - 78,114 - 32,655 482,033
---------- --------- ---------- --------- -----------
Total - 87,484 - 47,021 588,262
---------- --------- ---------- --------- -----------
Interest income 28,356 40 285 - 116,902
Realized and unrealized gains
(losses) - 3,757 - - 125,582
---------- --------- ---------- --------- -----------
Total additions 28,356 91,281 285 47,021 830,746
---------- --------- ---------- --------- -----------
DEDUCTIONS:
Benefit payments - (1,213) - - (225,939)
Other - - (3,901) - (3,901)
---------- --------- ---------- --------- -----------
Total deductions - (1,213) (3,901) - (229,840)
---------- --------- ---------- --------- -----------
INCREASE IN CONTRIBUTIONS RECEIVABLE - - - - -
TRANSFERS AMONG FUNDS - - - - -
---------- --------- ---------- --------- -----------
NET INCREASE (DECREASE) FOR YEAR 28,356 90,068 (3,616) 47,021 600,906
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, beginning of year 143,895 - 3,881 14,940 2,919,805
---------- --------- ---------- --------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, end of year $ 172,251 $ 90,068 $ 265 $ 61,961 $ 3,520,711
========== ========= ========== ========= ===========
</TABLE>
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1995 AND 1994
1. PLAN DESCRIPTION:
The Environmental Elements Corporation 401(K) Retirement Savings Plan (the EEC
Plan), a defined contribution 401(K) plan, was established effective October 1,
1989. Effective December 31, 1994, the Environmental Elements Service
Corporation Thrift Incentive Plan (the EESC Plan) was merged with the EEC Plan
(collectively referred to as the Plan), as described in Note 6. Employees of
Environmental Elements Corporation and Environmental Elements Service
Corporation are eligible to join the Plan on January 1, April 1, July 1 or
October 1 following the completion of six months of service. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). The Plan is administered by employees of the Environmental Elements
Corporation.
Under the terms of the Plan, an employee must make a salary reduction
contribution to the Plan in order to participate. Participants may contribute
from 1% to 20% of their annual compensation on a pre-tax basis. These amounts
are invested in one or more of five investment alternatives based upon the
decisions of the Plan participants. Allocations of income are based on the
proportion of each participant's account balance to the total of all account
balances within each fund. On termination of service, a participant may elect to
receive either a lump-sum amount equal to the value of his or her account, or
installments over various time periods. The Plan also provides for partial or
complete distributions of their account balance upon attainment of age 59-1/2 or
in the case of financial hardship, as determined by the Administrative
Committee.
Effective August 1, 1990, the Plan was amended to provide for Employer matching
contributions. The Environmental Elements Corporation (the Employer) will match
50% of the first 3% of the participant's contribution to the Plan. The Employer
match is made in the form of Employer common stock from authorized but unissued
shares of Environmental Elements Corporation stock. Participants become fully
vested in Employer matching contributions upon completion of five years of
service. A year of service is defined as a twelve consecutive month period in
which an employee completes one thousand hours of service. Voluntary
contributions by participants are fully vested when made.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statements
The accompanying financial statements are presented on the accrual basis of
accounting.
<PAGE>
Valuation of Investments
The Guaranteed Long-Term Account (GLTA) and the Guaranteed Short-Term Account
(GSTA) are stated at contract value, as determined by Connecticut General Life
Insurance Company, which management estimates to be market as the rate of return
on these investments are adjusted to market. All other investments are stated at
market value, as determined by the trustee or custodians. Investments in Pooled
Separate Accounts are held by Connecticut General Life Insurance Company
(CIGNA). The investments merged from the EESC Plan are held by The Prudential.
Income Taxes
The Plan obtained a determination letter, in which the Internal Revenue Service
stated that the Plan, as amended, was in compliance with the applicable
requirements of the Internal Revenue Code. The Plan administrator believes that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, they believe
that the Plan was qualified and tax exempt as of the financial statement dates.
Administrative Expenses
All administrative expenses are borne by the Employer and, as such, have not
been included in the accompanying financial statements.
Use of Estimates
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 as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
3. RECORDKEEPER OF PLAN:
During the Plan year 1995, the Plan changed recordkeepers from NationsBank to
Sheppard Retirement Service. NationsBank was retained as the trustee for the
Plan.
4. INVESTMENTS HELD:
The accompanying supplemental Schedule of Investments Held represents a detailed
listing of all investments held by the Plan as of December 31, 1995.
5. GUARANTEED ACCOUNTS:
The GSTA contains investments in a variety of money market instruments, with
average maturities generally not exceeding six months. The GLTA invests in a
portfolio of high equity, fixed income instruments. Interest is credited to the
above accounts daily. The rate of credited interest is determined by CIGNA. Any
such change in the interest rate by CIGNA will become effective as of the first
day of the month immediately following the date the Plan is mailed notice of
such change. The rate of credited interest shall never be less than zero
percent. As of December 31, 1995, the net credited interest rates of the GSTA
and the GLTA were 5.45% and 5.65%, respectively. The average
<PAGE>
yields for the year ended December 31, 1995, for the GSTA and GLTA were
approximately 5% and 6%, respectively.
6. SCHEDULE OF REPORTABLE TRANSACTIONS:
The accompanying supplemental Schedule of Reportable Transactions represents a
listing of all transactions or series of transactions whose current value at the
time of the transaction is in excess of 5% of the current value of plan assets
as of December 31, 1994.
7. PLAN MERGER:
Effective December 31, 1994, the Environmental Elements Corporation 401(K)
Retirement Savings Plan (the EEC Plan) was merged with the Environmental
Elements Service Corporation Thrift Incentive Plan (the EESC Plan). After this
merger, the EEC Plan was the surviving plan. The assets of the EEC Plan remained
with Connecticut General Life Insurance Company during 1994. The assets of the
EESC Plan remained with their previous custodian, The Prudential during the 1995
plan year. In January 1996, the assets were transferred from the Prudential to
NationsBank pursuant to agreements of the Merger.
Management intends to make the terms and provisions of the EEC Plan applicable
to the EESC Plan participants.
<PAGE>
Schedule I
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
SCHEDULE OF INVESTMENTS HELD
AS OF DECEMBER 31, 1995
(Note 4)
<TABLE>
<CAPTION>
Market
Description of Investments Value Cost
<S> <C>
Investments in Pooled Separate Accounts:
Guaranteed Long-Term Account $ 1,466,068 $ 1,466,068
Guaranteed Short-Term Account 158,566 158,566
Growth and Income Stock Account 433,195 246,008
Stock Market Index Account 795,833 325,794
-------------- --------------
2,853,662 2,196,436
Environmental Elements Corporation Common Stock 342,504 970,396
Investments held with The Prudential 172,251 172,251
Environmental Elements Service Corporation Investments
held with NationsBank 90,068 86,328
NationsBank Employee Benefit Liquidity Fund 265 265
-------------- --------------
$ 3,458,750 $ 3,425,676
============== ==============
</TABLE>
The accompanying notes are an integral part of this schedule.
<PAGE>
Schedule II
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Note 6)
<TABLE>
<CAPTION>
Assets Sold
Price of ------------------------------------------
Assets Gain (Loss)
Description of Assets Purchased Proceeds Cost on Sale
<S> <C>
Guaranteed Long-Term Account $ 245,190 $ 179,653 $ 179,653 $ -
NationsBank Employee
Benefit Liquidity Fund 435,246 438,862 438,862 -
</TABLE>
The accompanying notes are an integral part of this schedule.
<PAGE>
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Baltimore, Maryland,
June 21, 1996
