11-K 1 bfcsave_05.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2005 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 002-26821 A. Full Title of Plan: Brown-Forman Corporation Savings Plan B. Name of Issuer of the Securities held Pursuant to the Plan and the Address of its Principal Executive Office: Brown-Forman Corporation 850 Dixie Highway Louisville, Kentucky 40210 INDEX Pages Report of Independent Registered Public Accounting Firm 2 Financial Statements Statement of Net Assets Available for Benefits, Years Ended December 31, 2005 and 2004 3 Statement of Changes in Net Assets Available for Benefits Years Ended December 31, 2005 and 2004 4 Notes to Financial Statements 5-10 Supplemental Schedule: Form 5500 Schedule H, Line 4i - Schedule of Assets (Held at End of Year), December 31, 2005 11 Signatures 12 Consent of Independent Registered Public Accounting Firm 13 Note: Other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. Report of Independent Registered Public Accounting Firm To the Participants and Administrator of Brown-Forman Corporation Savings Plan In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Brown-Forman Corporation Savings Plan (the Plan) at December 31, 2005 and 2004, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. 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 of these statements 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. An audit 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. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic 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 the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP Louisville, Kentucky June 29, 2006 2 Brown-Forman Corporation Savings Plan Statements of Net Assets Available for Benefits December 31, 2005 and 2004 Participant Directed -------------------------------- 2005 2004 ----------- ----------- Investments, at fair value Mutual funds $183,690,678 $170,767,921 Common collective trust fund 14,284,309 14,814,685 Brown-Forman Corporation Class B common stock fund 20,355,040 10,608,309 Loans to participants 1,620,662 1,633,614 ----------- ----------- 219,950,689 197,824,529 Employers' contributions receivable 1,346,415 1,338,504 Employees' contributions receivable 286,577 281,735 ----------- ----------- Net assets available for benefits $221,583,681 $199,444,768 =========== =========== The accompanying notes are an integral part of the financial statements. 3 Brown-Forman Corporation Savings Plan Statement of Changes in Net Assets Available for Benefits Years Ended December 31, 2005 and 2004 Participant Directed -------------------------------- 2005 2004 ----------- ----------- Additions Contributions Employer $ 6,501,769 $ 6,027,993 Employee 11,986,215 10,830,404 ----------- ----------- 18,487,984 16,858,397 Interest income 1,118,929 903,903 Dividend income 2,082,207 1,852,742 Net appreciation in fair value of investments 16,295,465 13,603,632 Net transfers from other plans -- 40,942 ----------- ----------- Total additions 37,984,585 33,259,616 ----------- ----------- Deductions Withdrawals by participants 15,711,615 13,551,361 Administrative expenses 26,187 27,337 Net transfers to other plans 107,870 -- ----------- ----------- Total deductions 15,845,672 13,578,698 ----------- ----------- Net increase 22,138,913 19,680,918 Net assets available for benefits Beginning of year 199,444,768 179,763,850 ----------- ----------- End of year $221,583,681 $199,444,768 =========== =========== The accompanying notes are an integral part of the financial statements. 4 Brown-Forman Corporation Savings Plan Notes to Financial Statements December 31, 2005 and 2004 1. Description of Plan The sponsor of the Brown-Forman Corporation Savings Plan (the Plan), Brown-Forman Corporation (the Company), is a diversified producer and marketer of fine quality consumer products in domestic and international markets. The Company's operations include the production, importing, and marketing of wines and distilled spirits and the manufacture and sale of luggage. The following brief description of the Plan is provided for general information purposes only. Participants should refer to the plan agreement for more complete information. General The Plan is a defined contribution plan covering substantially all salaried employees of the Company and nonunion salaried and hourly employees of the Company's subsidiaries who are not members of a collective bargaining unit, except for certain employees of Fetzer, Jekel, and Sonoma Cutrer Vineyards. The Plan was amended to include non-union hourly employees of Blue Grass Mills, a division of the Company, effective January 1, 2001. An employee becomes eligible to participate in the Plan on the employment commencement date. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Contributions Non-highly compensated employees may contribute to the Plan between 1% and 50% of their annual compensation. Highly compensated employees may contribute between 1% and 10% of their annual compensation. Effective January 1, 2006, highly compensated employees may contribute between 1% and 16% of their annual compensation. Employee contributions are not to exceed the Section 402(g) of the Internal Revenue Code (the IRC) limitation for the calendar year of $14,000 and $13,000 for 2005 and 2004, respectively. New employees may transfer assets from their former employers' qualified plans to the Plan. Eligible participants who have attained age 50 before the close of the plan year may make catch-up contributions in an amount of 1% to 50% of the employee's compensation, subject to the limitations of the IRC. 5 Participants are eligible to receive Company matching contributions beginning on the first day of the month following completion of one year of service. The Company's matching contribution is equal to 100% of the participant's elective deferral up to 5% of the participant's annual compensation. For non-union hourly employees of Blue Grass Mills, the Company's matching contribution is equal to 50% of the participant's elective deferral up to 5% of the participant's annual compensation. Effective October 1, 2005, the Company's matching contributions for Blue Grass Mills employees shall be equal to 100% of the participant's elective deferral up to 5% of the participant's annual compensation. Each participant's account is credited with the participant's contribution on a semi-monthly basis (on a monthly basis prior to November 15, 2004), and an allocation of (i) the Company's matching contribution on a quarterly basis, and (ii) plan earnings on a daily basis. Effective March 20, 2006, participants that are paid weekly shall have their accounts credited with the participants' contributions on a weekly basis. Allocations are based on the participants' contributions and compensation as defined in the Plan. The total annual contributions, as defined by the Plan, credited to a participant's account in a plan year may not exceed the lesser of (i) $40,000, or (ii) 100% of the participant's compensation in the plan year. Additional maximum limits exist if the employee participates in a qualified defined benefit plan maintained by the Company. Participants can allocate contributions among various investment options in 1% increments. The Plan currently offers several different investment choices, including mutual funds, a money market portfolio, a common collective trust fund, and a Brown-Forman Stock Fund to participants. Vesting Participants are immediately vested in their employee contributions plus actual earnings thereon. Vesting in the Company's contributions and earnings thereon is 25% per year of continuous service with the Company. Participants will become 100% vested in their Company contributions account in case of death, normal retirement, or total and permanent disability. Hourly participants employed by Blue Grass Mills as of October 1, 2001 and whose employment terminated as a direct result of the closing of Blue Grass Mills are fully vested. 6 Withdrawals Upon termination of service, a participant can elect to transfer his vested interest in the Plan to the qualified plan of his new employer, roll over his funds into an Individual Retirement Account (IRA), or receive his vested interest in the Plan in a lump-sum amount or in the form of installment payments over a period of time not to exceed his life expectancy. Prior to March 28, 2005, if the vested account balance was less than $5,000, a lump sum distribution was made. Effective March 28, 2005, if the vested account balance is $1,000 or less, an automatic lump sum distribution will be made. If the vested account balance is greater than $1,000 up to $5,000, and the participant does not direct otherwise, it will be rolled over into an IRA with Fidelity Management Trust Company (Fidelity), the trustee and record keeper as defined by the Plan. In the event of death, the participant's beneficiary will receive the vested interest in a lump-sum payment or in the form of an installment payment. A participant may also withdraw vested interest in the case of financial hardship under guidelines promulgated by the Internal Revenue Service. The participant's contribution shall be suspended for six months after the receipt of a hardship distribution. Participant Loans A participant may request permission from the plan administrator to borrow a portion of such participant's vested accrued benefit under the Plan. Loans shall be limited to the lesser of $50,000 or 50% of the vested account balances. Loans must bear a reasonable rate of interest, be collateralized, and be repaid within five years. Participants do not share in the earnings from the Plan's investments to the extent of any outstanding loans, except that the interest paid on such loans is allocated directly to the participant's account. Forfeited Accounts Forfeited balances of terminated participants' nonvested accounts are used first to reinstate previously forfeited account balances of re-employed participants, if any, and the remaining amounts are used to reduce future company contributions. The forfeited balances totaled $28,644 and $20,237 for 2005 and 2004, respectively. Also in 2005 and 2004, $64,500 and $75,040, respectively, from forfeited nonvested accounts were used to reinstate previously forfeited account balances of re-employed participants and/or reduce company contributions. 7 2. Summary of Significant Accounting Policies Basis of Accounting The financial statements of the Plan are prepared under the accrual method of accounting. Investment Valuation and Income Recognition The Plan's investments are stated at fair value. Quoted market prices are used to value investments. Shares of mutual funds and common collective trust fund are valued at the net asset value of shares held by the Plan at year end. Participant loans are valued at their outstanding balances, which approximate fair value. The Brown-Forman Corporation Stock Fund is comprised of Brown-Forman Corporation Class B shares, which are valued at the quoted closing market price, and a cash component. The Plan presents in the accompanying statements of changes in net assets available for benefits the net appreciation or depreciation in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation or depreciation on those investments. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Management 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 net assets available for benefits and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of additions to and deductions from net assets during the reporting periods. Actual results could differ from those estimates. Payment of Benefits Benefits are recorded when paid. 8 3. Investments The Plan's investments are held by a custodian trust company. The following table presents the fair value of investments. Investments that represent 5% or more of the Plan's net assets are separately identified. December 31 -------------------------------------------------------------- 2005 2004 ---------------------------- ---------------------------- Number of Number of Shares, Units Shares, Units or Principal or Principal Amount Fair Value Amount Fair Value ------------- ---------- ------------- ---------- Investments at fair value: Fidelity Magellan Fund 405,274 $ 43,137,332 437,372 $45,394,875 Fidelity Equity-Income Fund 663,534 35,021,321 658,015 34,730,010 Fidelity Growth Company 354,649 22,566,336 353,740 19,834,174 Fidelity Retirement Money Market Portfolio 16,021,998 16,021,998 15,799,544 15,799,544 Managed Income Portfolio 14,284,309 14,284,309 14,814,685 14,814,685 Fidelity Diversified International Fund 590,267 19,207,294 504,439 14,447,129 Brown-Forman Corporation Class B Common Stock Fund 902,262 20,355,040 665,515 10,608,309 Other investments 2,516,179 49,357,059 2,034,725 42,195,803 ----------- ----------- $219,950,689 $197,824,529 =========== ===========
During 2005 and 2004, the Plan's investments, including gains and losses on investments bought and sold, as well as held during the year, appreciated in value as follows: 2005 2004 ---------- ---------- Mutual funds $ 11,081,159 $ 13,194,944 Brown-Forman Corporation Class B Common Stock Fund 5,214,306 408,688 ---------- ---------- $ 16,295,465 $ 13,603,632 ========== ========== 4 Tax Status The Internal Revenue Service has determined, and informed the Company by a letter dated April 16, 2003, that the Plan and related trust are designed in accordance with the applicable sections of the IRC. The Plan has been amended since receiving the determination letter. However, the Company believes that the Plan is designed and is currently being operated in compliance with the applicable provisions of the IRC. 9 5. 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. In the event of plan termination, participants will become 100% vested in their accounts. 6. Related Party Transactions Certain Plan investments are shares of mutual funds managed by Fidelity. Fidelity is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Certain administrative costs incurred by the Plan are paid by the Company. Effective January 1, 2002, general administrative expenses of the third party record keeper, Fidelity, and the administration fee for processing loans are allocated to the participants' accounts. Effective July 1, 2002, participant recordkeeping fees were waived by Fidelity. Administration fees for loans continue to be allocated to the participants' accounts. Administrative expenses of $26,187 and $27,337 in 2005 and 2004, respectively, were allocated to participants' accounts. Certain participants of the Plan transferred their participation from (to) other defined contribution plans sponsored by the Company. As a result, ($107,870) and $40,942 of related plan assets were transferred (from) into the Plan during 2005 and 2004, respectively. Certain plan investments are units of Brown-Forman Corporation Class B stock. Therefore, these transactions qualify as related party transactions. Purchases of 408,564 units for $7,734,479, and sales of 171,796 units for $3,202,053 were made during 2005. Purchases of 282,119 units for $4,378,822, and sales of 143,276 units for $2,242,548 were made during 2004. Dividends of $236,543 and $166,771 were received on Company units during 2005 and 2004, respectively. 7. Risk 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. 10 Brown-Forman Corporation Savings Plan Plan #006 EIN #61-0143150 Schedule H, Line 4i -- Schedule of Assets (Held at End of Year) December 31, 2005 Description of Investment Including Identity of Issue, Borrower, Maturity Date, Rate of Interest, Current Lessor or Similar Party Collateral, Par or Maturity Value Value ---------------------------- ----------------------------------- ----------- Janus Enterprise Fund 193,101 Mutual Fund Shares $ 8,092,862 PIMCO Total Return Fund 827,365 Mutual Fund Shares 8,687,329 Royce Low Priced Stock Fund 97,975 Mutual Fund Shares 1,521,553 Fidelity Magellan Fund* 405,274 Mutual Fund Shares 43,137,332 Fidelity Equity-Income Fund* 663,534 Mutual Fund Shares 35,021,321 Fidelity Growth Company Fund* 354,649 Mutual Fund Shares 22,566,336 Fidelity Low Priced Stock Fund* 241,177 Mutual Fund Shares 9,849,684 Fidelity Diversified International Fund* 590,267 Mutual Fund Shares 19,207,294 Fidelity Freedom Income* 10,274 Mutual Fund Shares 116,817 Fidelity Freedom 2000* 21,466 Mutual Fund Shares 262,095 Fidelity Freedom 2010* 179,502 Mutual Fund Shares 2,522,001 Fidelity Freedom 2020* 137,114 Mutual Fund Shares 2,016,948 Fidelity Freedom 2030* 94,610 Mutual Fund Shares 1,421,048 Fidelity Freedom 2040* 31,572 Mutual Fund Shares 278,778 Fidelity Freedom 2005* 118,385 Mutual Fund Shares 1,316,441 Fidelity Freedom 2015* 191,553 Mutual Fund Shares 2,212,442 Fidelity Freedom 2025* 160,593 Mutual Fund Shares 1,920,693 Fidelity Freedom 2035* 57,055 Mutual Fund Shares 697,784 Fidelity Retirement Money Market Portfolio* 16,021,998 Mutual Fund Shares 16,021,998 Managed Income Portfolio* 14,284,309 Common collective trust fund units 14,284,309 Spartan U.S. Equity Index Fund* 154,437 Mutual Fund Shares 6,819,922 Brown-Forman Corporation Class B Common Stock Fund* 902,262 Class B common stock fund units 20,355,040 Participant loans* Loans, interest rates ranging from 6.50% to 7.75%, variable maturity 1,620,662 ----------- $219,950,689 =========== *Party-in-interest to the Plan
11 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Brown-Forman Corporation Savings Plan has duly caused this report to be signed by the undersigned thereunto duly authorized. BROWN-FORMAN CORPORATION SAVINGS PLAN BY: /s/ Bruce Cote Bruce Cote Member, Employee Benefits Committee (Plan Administrator) Vice President, Director HR Employee Services Brown-Forman Corporation June 29, 2006 12 EXHIBIT Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-74567) of Brown-Forman Corporation of our report dated June 29, 2006 relating to the financial statements and supplemental schedule of the Brown-Forman Corporation Savings Plan, which appear in this Form 11-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Louisville, Kentucky June 29, 2006 13