Brush Engineered Materials 11-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2005
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-15885
BRUSH ENGINEERED MATERIALS INC.
SAVINGS AND INVESTMENT PLAN
(Full Title of the Plan)
BRUSH ENGINEERED MATERIALS INC.
17876 St. Clair Avenue
Cleveland, Ohio 44110
(Name of issuer of the securities held
pursuant to the plan and the address
of its principal executive office.)
Brush Engineered Materials Inc.
Savings and Investment Plan
Required Information
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Page No. |
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Report of Independent Registered Public Accounting Firm |
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Statements
of Net Assets Available for Benefits —
December 31, 2005 and 2004 |
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Statement of Changes in Net Assets Available for
Benefits — Year Ended December 31, 2005 |
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Notes to Financial Statements |
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4-8 |
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Schedule required to be filed under ERISA |
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Schedule H, Line 4i, Schedule of Assets (Held at End of Year) |
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9 |
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Signature |
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Exhibits |
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23.1 Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm |
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Report of Independent Registered Public Accounting Firm
Brush Engineered Materials Inc. Savings and Investment Plan
We have audited the accompanying statements of net assets available for benefits of the Brush
Engineered Materials Inc. Savings and Investment Plan as of December 31, 2005 and 2004, and the
related statement of changes in net assets available for benefits for the year ended December 31,
2005. 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 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 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, 2005 and 2004, and the
changes in its net assets available for benefits for the year ended December 31, 2005, in
conformity with U.S. generally accepted accounting principles.
Our audits were 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 audits 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 27, 2006
Brush Engineered Materials Inc.
Savings and Investment Plan
Statements of Net Assets Available for Benefits
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December 31 |
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2005 |
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2004 |
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Assets |
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Investments |
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$ |
132,880,323 |
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$ |
127,946,467 |
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Contribution receivables: |
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Employer |
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87,852 |
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35,166 |
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Participants |
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277,773 |
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220,327 |
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Total contribution receivables |
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365,625 |
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255,493 |
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Pending sales |
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127,852 |
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143,229 |
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Net assets available for benefits |
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$ |
133,373,800 |
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$ |
128,345,189 |
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See accompanying notes to financial statements.
2
Brush Engineered Materials Inc.
Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
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Additions |
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Net investment income: |
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Net appreciation in fair value of investments |
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$ |
1,818,082 |
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Interest and dividends |
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3,209,111 |
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5,027,193 |
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Contributions: |
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Participants |
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6,884,892 |
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Employer |
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2,331,817 |
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Employee PreTax Catch-up |
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182,896 |
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Rollover |
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244,174 |
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9,643,779 |
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Total additions |
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14,670,972 |
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Deductions |
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Benefits paid directly to participants |
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9,620,515 |
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Administration fee |
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14,844 |
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Defaulted loans |
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7,002 |
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Total Deductions |
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9,642,361 |
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Net increase |
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5,028,611 |
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Net assets available for benefits: |
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Beginning of year |
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128,345,189 |
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End of year |
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133,373,800 |
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See accompanying notes to financial statements.
3
Brush Engineered Materials Inc.
Savings and Investment Plan
Notes to Financial Statements
December 31, 2005 and 2004
and Year Ended December 31, 2005
NOTE A — Description of the Plan
The following description of the Brush Engineered Materials Inc. Savings and Investment Plan (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 that covers certain eligible employees of Brush Engineered
Materials Inc. (Company) and participating employers who have adopted the Plan (Company reference
includes participating employers where appropriate). The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
The Plan provides for basic contributions by employees of up to 6% of their earnings through either
pre-tax (salary reduction) or after-tax contributions. Currently, basic contributions are matched
by the Company at the rate of 50% of such contributions. The rate at which such basic
contributions are matched by the Company may be decreased or increased (up to a 100% rate) by
action of the Company’s Board of Directors.
An employee who makes basic contributions of 6% of earnings may also make supplemental
contributions of up to 44% of earnings which are not matched by Company contributions and which may
be made in any combination of pre-tax and/or after-tax contributions.
An employee’s contributions made to the Plan on a pre-tax basis may not exceed certain IRS maximum
amounts. The maximum amount $14,000 in 2005. If an employee will be 50 or older by the end of the
plan year, and is making the maximum elective contribution for the year, he/she may make additional
pre-tax “catch-up” contributions of up to 75% of earnings. In 2005, the maximum amount for a
catch-up contribution is $4,000.
Currently, participants can direct, in increments of 1%, their basic, supplemental, rollover,
catch-up, Company matching, and transfer contributions (as described in the Plan) to be invested in
any of the fund options offered by the Plan. Participants can also transfer amounts between fund
options on each investment change date.
The Company made PAYSOP contributions to the Plan for plan years 1984 through 1986.
Beginning March 1, 2006, employees can also contribute on a Roth 401(k) basis under the Plan.
4
Brush Engineered Materials Inc.
Savings and Investment Plan
Notes to Financial Statements – Continued
Vesting
All employee and Company contributions are fully vested at all times.
Participant Loans
A participant may borrow funds from his account, provided such loan is secured by 50% of the value
of the participant’s account immediately prior to the loan and evidenced by a promissory note
executed by the participant.
Payment of Benefits
At retirement, death or other termination, a participant (or his death beneficiary) is eligible to
receive a distribution of all employee and Company contributions credited to the employee’s account
plus or minus any net gain or loss thereon.
The value of distributions and withdrawals is based on the value of a participant’s account on the
valuation date immediately preceding the date of distribution or withdrawal and is deducted from
the participant’s account as of such valuation date.
Distribution to a participant or a person designated by the participant as his death beneficiary is
made under one or more (as applicable) of the following methods as elected by the participant (or
in certain cases the death beneficiary):
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(i) |
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Lump sum payment in cash; |
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(ii) |
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Lump sum payment in cash, except that a participant’s interest in the Company
Stock Fund and the PAYSOP contributions account will be paid in full shares of Common
Stock of the Company, with any fractional shares being paid in cash; and |
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(iii) |
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Periodic distributions, not more frequently than monthly, of at least $200. |
Insurance Policies
Prior to June 1, 1989, participants who were employees of Williams Advanced Materials Inc. could
have directed a portion of their contributions to be used to purchase insurance policies that were
excluded from the former Williams Advanced Materials Inc. Savings and Investment Plan assets. Life
insurance policies on the lives of participants, purchased under the former Williams Advanced
Materials Inc. Savings and Investment Plan prior to July 1, 1989, may continue to be held.
5
Brush Engineered Materials Inc.
Savings and Investment Plan
Notes to Financial Statements — Continued
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.
Note B
— Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared on the accrual basis of accounting.
Investment Valuation
Investments are stated at fair value. Investment in the company stock fund is valued based on the
latest reported closing price of the stock component and the actual cash held in the fund. The
shares of registered investment companies are valued at quoted market prices that represent the net
asset values of shares held by the Plan at the latest closing price. Investment in participation
units of the money market funds are stated at fair value as determined by Fidelity Management Trust
Company, the Trustee. Participant loans are valued at their outstanding balances, which
approximate fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest and dividend income
is recorded on the accrual basis.
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.
6
Brush Engineered Materials Inc.
Savings and Investment Plan
Notes to Financial Statements — Continued
NOTE C — Investments
During
2005, 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:
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Net Realized |
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and Unrealized |
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Appreciation in |
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Fair Value of |
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Investments |
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Brush Engineered Materials Inc. Common Stock |
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$ |
(1,663,173 |
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Shares of registered investment companies |
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3,481,255 |
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$ |
1,818,082 |
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Investments that represent 5% or more of fair value of the Plan’s net assets are as
follows:
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December 31 |
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2005 |
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2004 |
Vanguard Asset Allocation Fund |
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$ |
11,565,947 |
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$ |
11,309,695 |
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PIMCO Total Return Fund |
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10,703,419 |
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10,614,399 |
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Brush Engineered Materials Inc. Common Stock |
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11,935,549 |
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14,797,022 |
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TORRAY Fund |
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9,675,093 |
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11,341,183 |
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Fidelity Blue Chip Growth Fund |
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21,869,742 |
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22,967,192 |
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Fidelity Diversified International Fund |
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16,178,179 |
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13,108,927 |
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Fidelity Money Market Trust: Retirement
Money Market Portfolio |
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9,838,066 |
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10,029,905 |
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Spartan U.S. Equity Index Fund |
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17,404,236 |
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17,789,887 |
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7
Brush Engineered Materials Inc.
Savings and Investment Plan
Notes to Financial Statements — Continued
NOTE D — Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated July 25, 2002,
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 Administrator believes the Plan
is being operated in compliance with the applicable requirements of the Code and, therefore,
believes that the Plan, as amended, is qualified and the related trust is tax exempt.
NOTE E — Transactions with Parties-in-Interest
All legal and accounting expenses of the Plan are paid by the Company. All administrative fees are
paid by the Plan Other than as described above or pursuant to the trust agreement, the Plan did
not have any agreements or transactions with parties-in-interest.
During 2005, the Plan had the following transactions related to shares of Brush Engineered
Materials Inc. Common Stock:
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Purchases |
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$ |
8,252,372 |
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Sales |
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9,731,187 |
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NOTE F — 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 statements of net assets available
for benefits.
NOTE G — Subsequent Event
Effective April 3, 2006, Thin Film Technology, Inc. 401(k) Profit Sharing Plan was merged into and
made a part of the Plan. Further, Thin Film Technology, Inc. adopted and became an Employer under
the Plan for eligible employees of all location effective April 3, 2006.
8
Brush Engineered Materials Inc.
Savings and Investment Plan
EIN: 34-1919973 Plan Number — 003
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2005
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Description |
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Current |
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of Investment |
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Value |
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Brush Engineered Materials Inc. Common Stock * |
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751,818.000 shares |
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$ |
11,935,549 |
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Shares of registered investment companies: |
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Vanguard Asset Allocation Fund |
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456,610.613 shares |
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11,565,947 |
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Vanguard Midcap IDX Adm Fund |
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57,534.324 shares |
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4,601,595 |
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3rd Avenue Real Estate Val |
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69,396.082 shares |
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2,037,469 |
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Harbor Small Cap Value IS |
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88,576.787 shares |
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1,756,478 |
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PIMCO Total Return Fund |
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1,019,373.226 shares |
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10,703,419 |
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MSI Small Company Growth Fund |
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159,308.659 shares |
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1,961,090 |
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TORRAY Fund |
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247,952.154 shares |
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9,675,093 |
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Fidelity Blue Chip Growth Fund* |
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506,713.218 shares |
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21,869,742 |
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Fidelity Diversified International Fund* |
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497,178.199 shares |
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16,178,179 |
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Fidelity Freedom Income Fund* |
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23,131.140 shares |
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263,001 |
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Fidelity Freedom 2000 Fund* |
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66,359.810 shares |
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810,253 |
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Fidelity Freedom 2005 Fund* |
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14,596.023 shares |
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162,308 |
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Fidelity Freedom 2010 Fund* |
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133,603.616 shares |
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1,877,131 |
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Fidelity Freedom 2015 Fund* |
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77,432.640 shares |
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894,347 |
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Fidelity Freedom 2020 Fund* |
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202,744.874 shares |
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2,982,377 |
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Fidelity Freedom 2025 Fund* |
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35,397.937 shares |
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423,359 |
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Fidelity Freedom 2030 Fund* |
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65,944.122 shares |
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990,481 |
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Fidelity Freedom 2035 Fund* |
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7,284.836 shares |
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89,094 |
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Fidelity Freedom 2040 Fund* |
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92,245.748 shares |
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814,530 |
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Spartan U.S. Equity Index Fund* |
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394,117.667 shares |
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17,404,236 |
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107,060,129 |
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Money market funds: |
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Fidelity Employee Benefits Money Market Fund* |
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586,145.95 shares |
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586,146 |
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Fidelity Money Market Trust: Retirement Money
Market Portfolio* |
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9,838,066.140 shares |
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9,838,066 |
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10,424,212 |
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Participant Promissory Notes * |
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1.54 - 9.91
with maturity dates
through 2020 |
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3,460,433 |
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$ |
132,880,323 |
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| * |
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Party-in-interest to the Plan. |
9
SIGNATURE
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 thereunto duly authorized.
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BRUSH ENGINEERED MATERIALS INC.
SAVINGS AND INVESTMENT PLAN |
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By
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/s/ Michael C. Hasychak |
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Vice President, Treasurer and Secretary |
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Brush Engineered Materials Inc. |
Date: June 29, 2006
10