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
For the Fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File No: 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, 1997 AND 1996
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, 1997 and 1996, and the related statement of
changes in net assets available for plan benefits for the year ended December
31, 1997. 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, 1997 and 1996, and the changes in its net assets available for
plan benefits for the year ended December 31, 1997, 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 supplemental schedules 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,
May 22, 1998
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S><C>
ASSETS:
Investments in Mutual Funds at market, participant directed:
Putnam Stable Value Fund $ 1,665,624 $ -
The George Putnam Fund of Boston 47,994 -
Putnam OTC Emerging Growth Fund 19,333 -
Putnam Income Fund 14,137 -
The Putnam Fund for Growth and Income 2,025,522 -
Putnam International Growth Fund 47,474 -
Putnam Vista Fund 50,232 -
-------------- -------------
3,870,316 -
-------------- -------------
Environmental Elements Corporation Common Stock
at market, participant directed 854,245 491,967
-------------- --------------
Investments in Pooled Separate Accounts at market,
participant directed:
Guaranteed Long-Term Account - 1,512,219
Guaranteed Short-Term Account - 191,501
Growth and Income Stock Account - 548,922
Stock Market Index Account - 1,006,073
-------------- --------------
- 3,258,715
-------------- --------------
Environmental Elements Service Corporation Investments
held with NationsBank - 9,422
-------------- --------------
NationsBank Employee Benefit Liquidity Fund - 24,104
-------------- --------------
Total investments 4,724,561 3,784,208
-------------- --------------
Receivables:
Employer's contributions - 21,624
Employees' contributions - 27,589
-------------- --------------
- 49,213
-------------- --------------
Net assets available for plan benefits $ 4,724,561 $ 3,833,421
============== ==============
</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, 1997
(Notes 1, 2 and 3)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Putnam
Putnam George Fund
Stable Putnam Putnam OTC Putnam for Growth
Value Fund of Emerging Income and
Fund Boston Growth Fund Fund Income
------------- ------------- -------------- ------------- -------------
<S><C>
TRANSFER AMONG FUNDS $ 1,581,958 $ 17,961 $ 2,491 $ - $ 1,881,545
----------- ----------- ------------ ----------- -----------
ADDITIONS:
Contributions-
Employer - - - - -
Employee 37,510 27,787 17,132 14,003 65,076
----------- ----------- ------------ ----------- -----------
Total contributions 37,510 27,787 17,132 14,003 65,076
Interest and dividends 47,464 3,557 - 134 238,271
Realized and unrealized gains
(losses) 487 (1,311) (290) - (141,140)
----------- ----------- ------------ ----------- -----------
Total additions 85,461 30,033 16,842 14,137 162,207
DEDUCTIONS:
Benefit distributions (1,795) - - - (18,230)
----------- ----------- ------------ ----------- -----------
NET INCREASE (DECREASE) 1,665,624 47,994 19,333 14,137 2,025,522
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, beginning of year - - - - -
----------- ----------- ------------ ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, end of year $ 1,665,624 $ 47,994 $ 19,333 $ 14,137 $ 2,025,522
=========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------------------------------------
Participant Directed
------------------------------------------------------------------------------------------
Environmental
Putnam Elements Growth and
International Corp. Guaranteed Guaranteed Income
Growth Putnam Vista Common Long-Term Short-Term Stock
Fund Fund Stock Account Account Account
------------- ------------- ------------- ------------- ------------- -------------
<S><C>
TRANSFER AMONG FUNDS $ 16,240 $ 8,464 $ 27,864 $(1,420,960) $ (196,024) $ (703,004)
------------ ------------ ----------- ------------ ------------ ------------
ADDITIONS:
Contributions-
Employer - - 91,848 - - -
Employee 31,314 41,439 464,471 92,554 23,820 82,652
------------ ------------ ----------- ----------- ----------- -----------
Total contributions 31,314 41,439 556,319 92,554 23,820 82,652
Interest and dividends 1,908 2,670 - 42,619 4,255 877
Realized and unrealized gains
(losses) (1,988) (2,341) (146,236) - - 113,461
------------ ------------ ----------- ----------- ----------- -----------
Total additions 31,234 41,768 410,083 135,173 28,075 196,990
DEDUCTIONS:
Benefit distributions - - (75,669) (226,432) (23,552) (42,908)
------------ ------------ ----------- ----------- ------------ ------------
NET INCREASE (DECREASE) 47,474 50,232 362,278 (1,512,219) (191,501) (548,922)
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, beginning of year - - 491,967 1,512,219 191,501 548,922
------------ ------------ ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, end of year $ 47,474 $ 50,232 $ 854,245 $ - $ - $ -
============ ============ =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
--------------
Environmental
Elements NationsBank
Service Corp. Employee
Stock Market Investments Benefit
Index Held with Liquidity Contributions
Account NationsBank Fund Receivable Total
------------ ------------- ------------- ------------- ----------
<S><C>
TRANSFER AMONG FUNDS $ (1,188,671) $ - $ (27,864) $ - $ -
------------- ------------ ------------- ------------ ------------
ADDITIONS:
Contributions-
Employer - - - (21,624) 70,224
Employee 53,380 2,828 - (27,589) 926,377
------------ ------------ ------------ ------------ ------------
Total contributions 53,380 2,828 - (49,213) 996,601
Interest and dividends 1,495 739 3,760 - 347,749
Realized and unrealized gains
(losses) 222,234 - - - 42,876
------------ ------------ ------------ ------------ ------------
Total additions 277,109 3,567 3,760 (49,213) 1,387,226
DEDUCTIONS:
Benefit distributions (94,511) (12,989) - - (496,086)
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) (1,006,073) (9,422) (24,104) (49,213) 891,140
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, beginning of year 1,006,073 9,422 24,104 49,213 3,833,421
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, end of year $ - $ - $ - $ - $ 4,724,561
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
- 2 -
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1997 AND 1996
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). 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 15% of their annual compensation on a pre-tax basis. These amounts
are invested in one or more 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 consecutive twelve-month period in
which an employee completes one thousand hours of service. Voluntary
contributions by participants are fully vested when made. Nonvested employer
contributions that are forfeited are used to reduce future employer
contributions.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statements
The accompanying financial statements are presented on the accrual basis of
accounting.
Valuation of Investments
Investments included in the accompanying financial statements are stated at
market value.
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. Environmental Elements Corporation
has requested a determination letter from the Internal Revenue Service for the
current plan under the new trustee, Putnam Fiduciary Trust Company. The
Administrative Committee believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Internal Revenue
Code and that the related trust 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. SCHEDULE OF INVESTMENTS HELD:
The accompanying supplemental Schedule of Investments Held represents a detailed
listing of all investments held by the Plan as of December 31, 1997.
4. 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, 1996.
<PAGE>
Schedule I
ENVIRONMENTAL ELEMENTS CORPORATION
401(K) RETIREMENT SAVINGS PLAN
SCHEDULE OF INVESTMENTS HELD
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
Number Market
Description of Investments of Shares Cost Value
- -------------------------------------------------- ----------------- ---------------- ----------------
<S><C>
Putnam Stable Value Fund 1,665,624 $ 1,665,624 $ 1,665,624
The George Putnam Fund of Boston 2,669 47,343 47,994
Putnam OTC Emerging Growth Fund 1,200 19,623 19,333
Putnam Income Fund 1,988 14,166 14,137
The Putnam Fund for Growth and Income 103,660 2,165,021 2,025,522
Putnam International Growth Fund 2,848 49,462 47,474
Putnam Vista Fund 4,232 52,573 50,232
Environmental Elements Corporation Common Stock 244,070 1,463,352 854,245
-------------- --------------
$ 5,477,164 $ 4,724,561
============== ==============
</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, 1997
<TABLE>
<CAPTION>
Assets Sold
----------------------------------------------------
Price of
Assets Gain (Loss)
Description of Assets Purchased Proceeds Cost on Sale
- -------------------------------------------- ------------------ ---------------- -------------- ----------------
<S><C>
Single Transactions:
Putnam Stable Value Fund $ 1,616,984 $ - $ - $ -
Putnam Fund for Growth and Income 1,891,675 - - -
Putnam Fund for Growth and Income 228,012 - - -
Guaranteed Long-Term Account - 1,396,731 1,396,731 -
Guaranteed Short-Term Account - 192,206 192,206 -
Growth and Income Stock Account - 692,982 347,984 344,998
Stock Market Index Account - 1,182,233 421,490 760,743
NationsBank Employee Benefit
Liquidity Fund 1,588,937 - - -
NationsBank Employee Benefit
Liquidity Fund 1,875,215 - - -
NationsBank Employee Benefit
Liquidity Fund - 3,508,760 3,508,760 -
In Aggregate:
Putnam Stable Value Fund 1,702,445 36,821 36,821 -
Putnam Fund for Growth and Income 2,211,251 44,589 46,230 (1,641)
Guaranteed Long-Term Account 118,379 1,623,341 1,623,341 -
Guaranteed Short-Term Account 25,414 215,580 215,580 -
Growth and Income Stock Account 73,348 735,891 369,984 365,907
Stock Market Index Account 48,165 1,276,744 456,100 820,644
NationsBank Employee Benefit
Liquidity Fund 3,934,563 3,958,667 3,958,667 -
Environmental Elements Corporation
Common Stock 584,183 75,669 83,737 (8,068)
</TABLE>
The accompanying notes are an integral part of this schedule.
<PAGE>
Signatures
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.
ENVIRONMENTAL ELEMENTS CORPORATION 401(K)
RETIREMENT SAVINGS PLAN
/s/ John C. Nichols June 25, 1998
____________________________ ___________________
John C. Nichols Date
Plan Administrator
