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, 1998
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, 1998 AND 1997
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, 1998 and 1997, and the related statement of
changes in net assets available for plan benefits for the years then ended.
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, 1998 and 1997, and the changes in its net assets available for
plan benefits for the years then ended, 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 supplemental schedules of investments
held and reportable transactions are presented for the purpose 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 statement of changes in net
assets available for plan benefits for the year ended December 31, 1998, is
presented for purposes of additional analysis rather than to present the net
assets available for plan benefits and changes in assets available for plan
benefits of each fund. The supplemental schedules and Fund information have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basis financial statements taken as a whole.
Baltimore, Maryland,
May 28, 1999
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
----------------------------------
401(K) RETIREMENT SAVINGS PLAN
------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
----------------------------------------------------
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
<TABLE>
<CAPTION>
1998 1997
--------------- ----------
<S> <C> <C>
ASSETS:
Investments in Mutual Funds at market, participant directed:
Putnam Stable Value Fund $ 1,565,178 $ 1,665,624
The George Putnam Fund of Boston 127,835 47,994
Putnam OTC Emerging Growth Fund 144,952 19,333
Putnam Income Fund 81,919 14,137
The Putnam Fund for Growth and Income 2,449,162 2,025,522
Putnam International Growth Fund 173,836 47,474
Putnam Vista Fund 376,827 50,232
-------------- --------------
4,919,709 3,870,316
Environmental Elements Corporation Common Stock
at market, participant directed 1,035,186 854,245
-------------- --------------
Total investments 5,954,895 4,724,561
Loan Fund 26,407 -
-------------- -------------
Net assets available for plan benefits $ 5,981,302 $ 4,724,561
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
ENVIRONMENTAL ELEMENTS CORPORATION
----------------------------------
401(K) RETIREMENT SAVINGS PLAN
------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
(Notes 1, 2 and 3)
Fund Information
--------------------------------------------------------------------------------------
Participant Directed
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Putnam
Putnam Stable George Putnam Putnam OTC Putnam Fund for
Value Fund of Emerging Income Growth and
Fund Boston Growth Fund Fund Income
--------------- --------------- -------------- --------------- ---------------
TRANSFER AMONG FUNDS $ (211,964) $ 19,133 $ 67,598 $ 33,289 $ (45,591)
-------------- -------------- -------------- -------------- --------------
ADDITIONS:
Contributions-
Employer - - - - -
Employee 77,520 52,319 45,506 36,214 199,919
-------------- -------------- -------------- -------------- --------------
Total contributions 77,520 52,319 45,506 36,214 199,919
Interest and dividends 88,107 9,076 4,468 3,166 215,490
Realized and unrealized gains (losses) - (691) 8,399 (1,554) 102,367
Loan repayments 1,757 612 - 466 24,625
-------------- -------------- -------------- -------------- --------------
Total additions 167,384 61,316 58,373 38,292 542,401
-------------- -------------- -------------- -------------- --------------
DEDUCTIONS:
Benefit distributions (36,837) (608) (352) (3,799) (39,499)
Loan issues (19,029) - - - (33,671)
-------------- -------------- -------------- -------------- --------------
Total deductions (55,866) (608) (352) (3,799) (73,170)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) (100,446) 79,841 125,619 67,782 423,640
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 1,665,624 47,994 19,333 14,137 2,025,522
-------------- -------------- -------------- -------------- --------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 1,565,178 $ 127,835 $ 144,952 $ 81,919 $ 2,449,162
============== ============== ============== ============== ==============
Fund Information
-------------------------------------------------------------------------
Participant Directed
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam Environmental
International Elements Corp.
Growth Putnam Vista Common Loan
Fund Fund Stock Fund
--------------- -------------- ----------------- ---------------
TRANSFER AMONG FUNDS $ 43,969 $ 128,159 $ (34,593) $ -
------------- ------------- --------------- --------------
ADDITIONS:
Contributions-
Employer - - 96,138 -
Employee 68,645 157,370 28,766 -
------------- ------------- --------------- --------------
Total contributions 68,645 157,370 124,904 -
Interest and dividends 4,528 26,812 - 2,672
Realized and unrealized gains (losses) 11,996 15,646 128,236 -
Loan repayments - 23,505 - (50,965)
------------- ------------- --------------- --------------
Total additions 85,169 223,333 253,140 (48,293)
------------- ------------- --------------- --------------
DEDUCTIONS:
Benefit distributions (2,776) (2,897) (37,606) -
Loan issues - (22,000) - 74,700
------------- ------------- --------------- --------------
Total deductions (2,776) (24,897) (37,606) 74,700
------------- ------------- --------------- --------------
NET INCREASE (DECREASE) 126,362 326,595 180,941 26,407
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 47,474 50,232 854,245 -
------------- ------------- --------------- --------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 173,836 $ 376,827 $ 1,035,186 $ 26,407
============= ============= =============== ==============
Total Total
for the for the
Year Ended Year Ended
December 31, December 31,
1998 1997
--------------- --------------
<S> <C> <C>
TRANSFER AMONG FUNDS $ - $ -
-------------- --------------
ADDITIONS:
Contributions-
Employer 96,138 75,616
Employee 666,259 489,441
-------------- ---------------
Total contributions 762,397 565,057
Interest and dividends 354,319 347,749
Realized and unrealized gains (losses) 264,399 474,420
Loan repayments - -
-------------- ---------------
Total additions 1,381,115 1,387,226
-------------- ---------------
DEDUCTIONS:
Benefit distributions (124,374) (496,086)
Loan issues - -
-------------- ---------------
Total deductions (124,374) (496,086)
-------------- ---------------
NET INCREASE (DECREASE) 1,256,741 891,140
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 4,724,561 3,833,421
-------------- ---------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 5,981,302 $ 4,724,561
=============== ===============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
----------------------------------
401(K) RETIREMENT SAVINGS PLAN
------------------------------
NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
--------------------------------------------------------
DECEMBER 31, 1998 AND 1997
--------------------------
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 a lump-sum
amount equal to the vested value of his or her account. 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 participant's contribution to the Plan, not to exceed 3% of their
salary. 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>
Effective January 1, 1998, participants are permitted to borrow against their
vested 401(k) balance. A participant may take out a loan of $50,000 or up to 50%
of his/her vested balance, whichever is less. Loans must be repaid to the
participant's account through payroll deductions on an after-tax basis. All
loans must be repaid within 5 years unless for the purchase of a primary
residence (extended to 10 years). A participant may have only one loan
outstanding at a time. A loan shall bear interest at a rate that is consistent
with the provisions of the Internal Revenue Code; and the interest rate so
determined shall remain fixed throughout the duration of the loan. The interest
rate for all 1998 participant loans is 8.5%.
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 has 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 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:
-----------------------------
Investments are stated at market value and are held by Putnam Fiduciary Trust
Company (Trustee). The accompanying supplemental Schedule of Investments Held
represents a detailed listing of all investments held by the Plan as of December
31, 1998.
<PAGE>
As of December 31, 1998 and 1997, investments which were individually greater
than 5% of net assets available for plan benefits were as follows:
Description of Investment 1998 1997
---------------------------------------------- -------------- ---------
Putnam Stable Value Fund $ 1,565,178 $ 1,665,624
The Putnam Fund for Growth and Income 2,449,162 2,025,522
Putnam Vista Fund 376,827 -
Environmental Elements Corporation
Common Stock 1,035,186 854,245
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, 1998.
<PAGE>
Schedule I
----------
ENVIRONMENTAL ELEMENTS CORPORATION
----------------------------------
401(K) RETIREMENT SAVINGS PLAN
------------------------------
SCHEDULE OF INVESTMENTS HELD
----------------------------
AS OF DECEMBER 31, 1998
-----------------------
<TABLE>
<CAPTION>
Number Market
Description of Investments of Shares Cost Value
- ------------------------------------------------ -------------- --------------- ---------------
<S> <C> <C> <C>
Putnam Stable Value Fund 1,565,178 $ 1,565,178 $ 1,565,178
The George Putnam Fund of Boston 7,086 129,647 127,835
Putnam OTC Emerging Growth Fund 8,403 137,219 144,952
Putnam Income Fund 11,838 83,453 81,919
The Putnam Fund for Growth and Income 119,530 2,475,775 2,449,162
Putnam International Growth Fund 9,040 163,777 173,836
Putnam Vista Fund 28,831 364,582 376,827
Environmental Elements Corporation Common Stock 262,904 1,029,329 1,035,186
Employee Loans Receivable (interest rate 8.5%) 26,407 26,407
-------------- --------------
$ 5,975,367 $ 5,981,302
============== ==============
</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, 1998
------------------------------------
<TABLE>
<CAPTION>
Assets Sold
---------------------------------------------
Price of
Assets Gain (Loss)
Description of Assets Purchased Proceeds Cost on Sale
- ---------------------------------------- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Putnam Stable Value Fund $ 238,132 $ 338,578 $ 338,578 $ -
Putnam Fund for Growth and Income 616,801 295,528 306,047 (10,519)
Putnam Vista Fund 341,702 30,754 29,693 1,061
</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, 1999
John C. Nichols ------------------------- -------------
Plan Administrator Date
