UNITED STATES
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, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From to
Commission File No. 1-7170
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan
| B. | Name of issuer of securities held pursuant to the plan and the address of its principal executive office: |
Aleris International, Inc.
25825 Science Park Drive, Suite 400
Beachwood, Ohio 44122
Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan
Audited Financial Statements and Supplemental Schedule
December 31, 2004 and 2003, and
Year Ended December 31, 2003
Contents
| 1 | ||
| Audited Financial Statements |
||
| 3 | ||
| 4 | ||
| 5 | ||
| Supplemental Schedule |
||
| Schedule H, Line 4i – Schedule of Assets (Held at End of Year) |
11 | |
| 12 | ||
| Exhibits |
||
| 23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm | ||
| 23.2 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm | ||
Report of Independent Registered Public Accounting Firm
The Plan Administrator
Commonwealth Aluminum Lewisport, LLC
Hourly 401(k) Plan
We have audited the accompanying statement of net assets available for benefits of the Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan as of December 31, 2004 and the related statement of changes in net assets available for benefits for the then year 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides 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, 2004, and the changes in net assets available for benefits for the year then ended, in conformity with U.S. generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2005, is presented for purposes of additional analysis and is not a required part of the financial statements but is 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. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 28, 2005
1
Report of Independent Registered Public Accounting Firm
The Participants and Administrators
of the Commonwealth Aluminum
Lewisport, LLC Hourly 401(k) Plan
In our opinion, the accompanying statement of net assets available for benefits presents fairly, in all material respects, the net assets available for benefits of the Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan (the Plan) at December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. This financial statement is the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of this statement in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
June 22, 2004
2
Commonwealth Aluminum Lewisport, LLC
Hourly 401(k) Plan
Statements of Net Assets Available for Benefits
| December 31 | ||||||
| 2004 |
2003 | |||||
| Assets |
||||||
| Investments, at fair value: |
||||||
| Pooled separate accounts and mutual funds |
$ | 13,107,614 | $ | 11,107,146 | ||
| Aleris International, Inc. common stock |
6,318,509 | — | ||||
| Commonwealth Industries, Inc. common stock |
— | 6,140,785 | ||||
| 19,426,123 | 17,247,931 | |||||
| Investment, at contract value: |
||||||
| Investment contract |
17,870,986 | 15,332,712 | ||||
| Participant loans |
1,470,446 | 1,352,614 | ||||
| Total investments |
38,767,555 | 33,933,257 | ||||
| Contributions receivables: |
||||||
| Employer |
— | 338,214 | ||||
| Participants |
— | 39,346 | ||||
| Interest and dividends |
— | 1,629 | ||||
| Total contributions receivable |
— | 379,189 | ||||
| Net assets available for benefits |
$ | 38,767,555 | $ | 34,312,446 | ||
See notes to financial statements.
3
Commonwealth Aluminum Lewisport, LLC
Hourly 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2004
| Additions |
|||
| Investment income: |
|||
| Net appreciation in fair value of investments |
$ | 2,684,826 | |
| Interest and dividends |
768,358 | ||
| Contributions: |
|||
| Employer |
399,357 | ||
| Participants |
2,182,085 | ||
| Total additions |
6,034,626 | ||
| Deductions |
|||
| Benefits paid to participants |
1,459,534 | ||
| Administrative expenses |
20,206 | ||
| Transfers to Commonwealth Industries, Inc. 401(k) Plan |
99,777 | ||
| Total deductions |
1,579,517 | ||
| Net increase |
4,455,109 | ||
| Net assets available for benefits: |
|||
| Beginning of year |
34,312,446 | ||
| End of year |
$ | 38,767,555 | |
See notes to financial statements.
4
Lewisport, LLC Hourly 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
1. Description of the Plan
The following description of the Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan (the Plan) provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering all collectively bargained employees at Commonwealth Industries, Inc.’s (the Company) aluminum plant in Lewisport, Kentucky. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
On December 9, 2004 Aleris International, Inc. (Aleris) completed its acquisition of the Company whereby Aleris acquired all of the outstanding common stock of the Company with the Company merging with an indirect wholly owned subsidiary of Aleris. Under the terms of the merger, each share of the Company’s common stock was exchanged for 0.815 Aleris shares.
Contributions
Beginning in 2004, participants may contribute up to 100% of their total compensation to the Plan in increments of 1% through either pretax (salary reduction) or after-tax contributions. Prior to 2004, participants could contribute up to 15% of their total compensation to the Plan. Beginning in 2004, participants’ annual contributions are matched by the Company at 30% of the first 6% of the employees’ compensation. Previously, the first 6% of the employees’ compensation contributed to the Plan was matched by the Company under a performance sharing arrangement at a rate ranging from 25% to 50% depending on the Company’s annual earnings performance as measured by a return on shareholders’ investment formula specified in the Plan. In addition, prior to 2004, the Company contributed, under a profit sharing arrangement, an amount equal to a percentage (as determined in the Plan) of the first 6% of an employee’s base salary in each year in which the return on shareholders’ investment ratio was a positive value. This additional contribution was reduced by the Company’s matching contribution under the performance sharing arrangement.
5
Commonwealth Aluminum
Lewisport, LLC Hourly 401(k) Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
An employee’s contributions made to the Plan on a pretax basis may not exceed certain Internal Revenue Service (IRS) maximum amounts. The maximum amount was $13,000 in 2004 and $12,000 in 2003. Employees who were 50 years of age or older by the end of the plan year, and were making the maximum elective contribution for the year, were entitled to make additional pretax “catch-up” contributions of up to $3,000 in 2004. Catch-up contributions are not matched by the Company. The Plan also provides that individuals may roll over all or part of a qualified total distribution from another tax-qualified plan. All employer contributions are initially invested in Aleris common stock. Participants have the option to immediately redirect their allocated portion of the contribution to other investment options.
Participant Accounts
Each participant’s account is credited with such participant’s contributions and allocations of the Company’s contributions, Plan earnings and administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Vesting and Forfeitures
Beginning in 2004, participants become 100% vested in the Company’s contributions at the end of three years of service. Previously, vesting in the Company’s contributions occurred after five years of service. Upon separation from the Company, participants receive the full current value of their contributions and the vested portion of the Company’s matching contributions. Participants who separate for reasons of retirement, death, disability, layoff (due to lack of work) or transfer at the request of the Company to a class of employment not covered by the Plan become fully vested in the value of the Company’s contributions under the Plan at the time of such separation or transfer. Participants who separate for any other reason forfeit the unvested portion of the value of the Company’s contributions. Such forfeitures may be returned to the participant’s account if the participant returns to work before five full years elapse. If a participant does not return before five years elapse, any forfeited amounts are used to reduce the Company’s contribution for other participants at the end of the plan year or to offset administrative expenses paid by the Company. Forfeitures of $17,399 and $3,844 were used to reduce the Company’s contribution and expenses, respectively, for the year ended December 31, 2004.
6
Commonwealth Aluminum
Lewisport, LLC Hourly 401(k) Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Participant Loans
A participant may borrow from the funds all or a portion of such participant’s elective deferral contributions, catch-up contributions, matching contributions, and rollover contributions under the Plan. The amount loaned to a participant cannot exceed the lesser of $50,000 or one-half of the participant’s vested employer and employee contributions. Loans bear interest based on a reasonable rate to be fixed by the Benefits Committee and are based on interest rates currently being charged for similar loans by local commercial lending institutions. The interest rate during 2004 and 2003 was prime plus one percentage point. Loans must be repaid within five years (or a reasonable time if the loan proceeds are applied to acquire or construct the participant’s principal dwelling). Interest earnings on participant loans are credited directly to the participants account.
Payment of Benefits and Withdrawals
On termination of service, distributions from the Plan are made in the form of a lump-sum cash payment equal to the vested value of his or her account, or upon death, disability or retirement. Participants may withdraw after-tax contributions and earnings on contributions once every twelve months. Subsequent contributions are allowed after a specified lapse of time as defined in the Plan. Withdrawal of before-tax contributions requires the existence of specific conditions of financial hardship as defined in the Plan. Participants who have applied for withdrawal of before-tax contributions are suspended from making further contributions for the next twelve months. Participant withdrawal of the Company’s matching contributions or a rollover contribution is not permitted before the participant separates from the Company.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. If the Company terminates or partially terminates the Plan, or permanently discontinues its contributions at any time, each participant affected will then become fully vested with the amount in their account. The Committee will determine the time and manner of distribution of benefits in the event of the Plan’s termination.
Expenses
The Company pays substantially all costs of Plan administration.
7
Commonwealth Aluminum
Lewisport, LLC Hourly 401(k) Plan
Notes to Financial Statements (continued)
2. Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting.
Investment Valuation
The Plan’s investment in the Prudential (formerly CIGNA) Guaranteed Income Fund, an unallocated insurance contract, is valued at contract value. The fair values of pooled separate accounts and mutual funds are determined based upon the quoted market prices of the underlying mutual funds which represent the net asset value of shares held by the Plan at year-end. The fair value of the Aleris International, Inc. and Commonwealth Industries, Inc. common stock is determined by the closing market price per share on the last business day of the year. Temporary investments are stated at cost which approximates fair value. Participant loans are valued at their outstanding balance, which approximate fair value. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. Investments
During 2004, the Plan’s investments (including investments purchased, sold, as well as held during the year) appreciated in fair value as determined by quoted market prices as follows:
| Common stock |
$ | 1,916,952 | |
| Pooled separate accounts and mutual funds |
767,874 | ||
| $ | 2,684,826 | ||
8
Commonwealth Aluminum
Lewisport, LLC Hourly 401(k) Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Investments that represent 5% or more of the fair value of the Plan’s net assets are as follows:
| December 31 | ||||||
| 2004 |
2003 | |||||
| Fidelity Advisor Equity Growth Fund |
$ | 3,899,397 | $ | 3,477,975 | ||
| Fidelity Advisor Balanced Account Fund |
— | 1,644,017 | ||||
| Prudential (formerly CIGNA) Guaranteed Income Fund |
17,870,986 | 15,332,712 | ||||
| Vanguard Index Trust 500 |
6,023,188 | 5,029,918 | ||||
| Aleris International, Inc. common stock |
6,318,509 | — | ||||
| Commonwealth Industries, Inc. common stock |
— | 6,140,785 | ||||
4. Investment Contract
The Plan invests in the Prudential (formerly CIGNA) Guaranteed Income Fund, which is an unallocated insurance contract. The account is credited with earnings on the underlying investments and charged for plan withdrawals and administrative expenses charged by Prudential. The contract is deemed to be fully benefit-responsive because although the trustee has the right to defer transfers or distributions under certain circumstances, the likelihood of occurrence of these circumstances is remote. The contract is included in the financial statements at contract value. There are no reserves against contract value for credit risk of the contract issuers or otherwise. The fair value of the investment contract approximates its contract value. The average yield and crediting interest rate was approximately 4.75% and 4.20%, respectively, for 2004. The crediting interest rate is reviewed twice a year and cannot be less than zero.
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated August 20, 2003, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (Code) and, therefore, the related trust is exempt from taxation. Subsequent to the issuance of the determination letter, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan sponsor has indicated that it will continue to take all necessary steps to keep the plan’s operations in compliance with the Code.
9
Commonwealth Aluminum
Lewisport, LLC Hourly 401(k) Plan
Notes to Financial Statements (continued)
6. Transaction With Parties in Interest
Certain administrative expenses of the Plan are paid to Prudential, the trustee, and therefore, qualify as party-in-interest transactions. Fees paid by the Plan to Prudential amounted to $20,206 for 2004. Certain other administrative expenses of the Plan are paid by the Company.
7. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
8. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the accompanying financial statements to the Form 5500:
| December 31 |
||||||||
| 2004 |
2003 |
|||||||
| Net assets available for benefits per the financial statements |
$ | 38,767,555 | $ | 34,312,446 | ||||
| Deemed distributions |
(46,375 | ) | (24,963 | ) | ||||
| Net assets available for benefits per the Form 5500 |
$ | 38,721,180 | $ | 34,287,483 | ||||
The following is a reconciliation of benefit payments to participants per the accompanying financial statements to the Form 5500:
| Benefit payments to participants per the financial statements |
$ | 1,459,534 | |
| Deemed distributions |
21,412 | ||
| Benefit payments to participants per the Form 5500 |
$ | 1,480,946 | |
10
Commonwealth Aluminum Lewisport, LLC
Hourly 401(k) Plan
EIN #61-1377736 Plan #002
Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)
December 31, 2004
| Identity of Issue, Borrower, Lessor, or Similar Party |
Description of Investment Including Maturity Date, Rate of Interest, Collateral, Par, Or Maturity Value |
Current Value | |||
| Prudential Retirement Brokerage Services* |
Aleris International, Inc. common stock, 373,280 shares at $16.92 per share |
$ | 6,318,509 | ||
| Prudential Retirement Insurance Company* |
Guaranteed Income Fund | 17,870,986 | |||
| Vanguard |
Vanguard Index Trust 500 Fund | 6,023,188 | |||
| Prudential Retirement Insurance Company* |
Fidelity Advisor Equity Growth Fund | 3,899,397 | |||
| Prudential Retirement Insurance Company* |
Fidelity Advisor Balanced Account Fund | 1,904,331 | |||
| Prudential Retirement Insurance Company* |
Lifetime30 Fund | 398,986 | |||
| Prudential Retirement Insurance Company* |
Lifetime20 Fund | 384,903 | |||
| Prudential Retirement Insurance Company* |
Lifetime40 Fund | 348,523 | |||
| Prudential Retirement Insurance Company* |
Lifetime50 Fund | 113,224 | |||
| Prudential Retirement Insurance Company* |
Lifetime60 Fund | 35,062 | |||
| Participant |
Loans, 5.0%-10.5% interest rate, varying maturity dates | 1,470,446 | |||
| $ | 38,767,555 | ||||
| * | Indicates a party in interest to the Plan. |
11
Pursuant to the requirements of the Securities Exchange Act of 1934, the Benefits Committee of Commonwealth Industries, Inc. has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.
| Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan | ||
| By: |
/s/ Michael D. Friday | |
| Michael D. Friday | ||
| Executive Vice President and Chief Financial Officer | ||
| Aleris International, Inc. and a member of the Benefits Committee | ||
Date: June 29, 2005
12
Exhibit Index
| Exhibit Number |
Description | |
| 23.1 | Consent of Ernst & Young LLP | |
| 23.2 | Consent of PricewaterhouseCoopers LLP | |
13