11-K 1 hartsave_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: Hartmann Employee Savings and Investment 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: Statements of Net Assets Available for Benefits, Years Ended December 31, 2005 and 2004 3 Statements of Changes in Net Assets Available for Benefits Years Ended December 31, 2005 and 2004 4 Notes to Financial Statements 5-11 Supplemental Schedule Form 5500 Schedule H, Line 4i - Schedule of Assets (Held at End of Year), December 31, 2005 12 Signatures 13 Consent of Independent Registered Public Accounting Firm 14 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 Hartmann Employee Savings and Investment 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 Hartmann Employee Savings and Investment 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 Hartmann Employee Savings and Investment Plan Statements of Net Assets Available for Benefits December 31, 2005 and 2004 2005 2004 ---------------------------------------------- --------------------------------------------- Participant Nonparticipant Participant Nonparticipant Directed Directed Total Directed Directed Total ----------- -------------- ----------- ----------- -------------- ----------- Investments, at fair value Mutual funds $ 4,758,224 $ 17,984 $ 4,776,208 $ 4,439,012 $ 17,476 $ 4,456,488 Common collective trust fund 2,496,739 -- 2,496,739 2,615,007 -- 2,615,007 Brown-Forman Corporation Class B common stock 268,659 451,262 719,921 155,174 332,595 487,769 Loan to participants 207,970 -- 207,970 221,778 -- 221,778 ----------- -------------- ----------- ----------- -------------- ----------- 7,731,592 469,246 8,200,838 7,430,971 350,071 7,781,042 Employers' contributions receivable 40,880 -- 40,880 46,261 -- 46,261 Employees' contributions receivable 14,347 -- 14,347 13,162 -- 13,162 ----------- -------------- ----------- ----------- -------------- ----------- Net assets available for benefits $ 7,786,819 $ 469,246 $ 8,256,065 $ 7,490,394 $ 350,071 $ 7,840,465 =========== ============== =========== =========== ============== ===========
The accompanying notes are an integral part of the financial statements. 3 Hartmann Employee Savings and Investment Plan Statements of Changes in Net Assets Available for Benefits Years Ended December 31, 2005 and 2004 2005 2004 ---------------------------------------------- --------------------------------------------- Participant Nonparticipant Participant Nonparticipant Directed Directed Total Directed Directed Total ----------- -------------- ----------- ----------- -------------- ----------- Additions Contributions Employer $ 165,216 -- $ 165,216 $ 163,226 -- $ 163,226 Employee 369,089 -- 369,089 331,118 -- 331,118 ----------- -------------- ----------- ----------- ------------- ----------- 534,305 -- 534,305 494,344 -- 494,344 Interest income 125,716 -- 125,716 137,385 -- 137,385 Dividend income 44,855 $ 6,969 51,824 41,724 $ 6,572 48,296 Net appreciation in fair value of investments 382,703 133,136 515,839 358,813 13,457 372,270 ----------- -------------- ----------- ----------- -------------- ----------- Total additions 1,087,579 140,105 1,227,684 1,032,266 20,029 1,052,295 ----------- -------------- ----------- ----------- -------------- ----------- Deductions Withdrawals by participants 788,205 20,810 809,015 539,746 65,866 605,612 Administrative expenses 2,949 120 3,069 3,107 155 3,262 ----------- -------------- ----------- ----------- -------------- ----------- Total deductions 791,154 20,930 812,084 542,853 66,021 608,874 ----------- -------------- ----------- ----------- -------------- ----------- Net increase (decrease) 296,425 119,175 415,600 489,413 (45,992) 443,421 Net assets available for benefits Beginning of year 7,490,394 350,071 7,840,465 7,000,981 396,063 7,397,044 ----------- -------------- ----------- ----------- -------------- ----------- End of year $ 7,786,819 $469,246 $ 8,256,065 $ 7,490,394 $350,071 $ 7,840,465 =========== ============== =========== =========== ============== ===========
The accompanying notes are an integral part of the financial statements. 4 Hartmann Employee Savings and Investment Plan Notes to Financial Statements December 31, 2005 and 2004 1. Description of Plan The sponsor of the Hartmann Employee Savings and Investment Plan (the Plan), Brown-Forman Corporation (the Sponsor), is a diversified producer and marketer of fine quality consumer products in domestic and international markets. The Sponsor'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 and non-union hourly employees of Hartmann Luggage Company (the Company). An employee becomes eligible to participate in the Plan on their 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 15% 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. Elegible participants who have attained age 50 before the close of the plan year may make catch-up contributions in an amount from 1% to 50% of the employee's compensation, subject to the limitations of the IRC. Participants are eligible to receive Company matching contributions beginning on the first day of the month following completion of one year of service. For non-retail employees, the Company's matching contribution is equal to 75% of the participant's elective deferral for the first 5% of the participant's annual compensation. For retail employees, the Company's matching contribution is equal to 50% of the participant's elective deferral for the first 2% of annual compensation and an additional 25% of the remainder of the participant's elective deferral up to 10% of annual compensation. 5 The Company also makes a Company Retirement (CORE) contribution to each salaried employee of the retail division who is employed on the last day of the plan year, except those employees at the plant location in Lebanon, Tennessee, in an amount equal to 3% of the employee's eligible compensation during the year. 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, and (iii) the CORE contribution on an annual 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. Paysop Fund This nonparticipant directed fund consists of company contributions of Class B nonvoting common stock of Brown-Forman Corporation. Contributions for any plan year were limited to one-half of one percent of the annual compensation of all employees covered by the Plan; however, the Company is no longer contributing to this fund. This fund will be eliminated when all stock allocated to participants is withdrawn. Vesting Participants are immediately vested in their employee contributions plus actual earnings thereon. An employee becomes 100% vested in the CORE contribution after five years of service with the Company. Vesting in the Company's contributions and earning 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. 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. Withdrawals of the Paysop Fund benefits can be made in cash or a single payment of the related common stock. If payment in common stock is elected, fractional shares are paid in cash. 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 balance. 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 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 $4,849 and $160 for 2005 and 2004, respectively. Also in 2005 and 2004, $3,500 and $2,400, 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 the 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. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. 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 10,525 $ 1,120,257 11,212 $ 1,163,678 Fidelity Equity-Income Fund 13,395 706,992 13,067 689,694 Fidelity Growth Company Fund 13,576 863,813 13,996 784,730 Fidelity Retirement Money Market Portfolio 436,213 436,213 397,718 397,718 Managed Income Portfolio 2,496,739 2,496,739 2,615,007 2,615,007 Brown-Forman Corporation Class B Common Stock Fund 11,909 268,659 9,735 155,174 Other investments 79,754 1,856,903 67,272 1,642,446 ---------- ---------- 7,749,576 7,448,447 Common stock: Brown-Forman Corporation Class B common stock* 20,003 451,262 20,865 332,595 ---------- ---------- $ 8,200,838 $ 7,781,042 ========== ========== *Nonparticipant directed
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 ---------- ---------- Participant directed: Mutual funds $ 307,472 $ 353,000 Brown-Forman Corporation Class B Common Stock Fund 75,231 5,813 ---------- ---------- 382,703 358,813 Nonparticipant directed: Brown-Forman Corporation Class B common stock 133,136 13,457 ---------- ---------- Total $ 515,839 $ 372,270 ========== ========== 9 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. 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 $3,069 and $3,262 in 2005 and 2004, respectively, were allocated to participants' accounts. Certain plan investments are units of Brown-Forman Corporation Class B stock. Therefore, these transactions qualify as related party transactions. Purchases of 3,768 units for $69,020, and sales of 2,457 units for $45,236 were made during 2005. Purchases of 5,617 units for $86,160, and sales of 5,232 units for $80,264 were made during 2004. Dividends of $9,854 and $8,092 were received on Company units for the years ending December 31, 2005 and 2004, respectively. 10 4. 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. 11 Hartmann Employee Savings and Investment Plan Plan #018 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 Cost Value ---------------------------- ----------------------------------- -------- ----------- Janus Enterprise Fund 8,915 Mutual fund shares -- $ 373,657 PIMCO Total Return Fund 23,044 Mutual fund shares -- 241,964 Royce Low Priced Stock Fund 3,124 Mutual fund shares -- 48,521 Fidelity Magellan Fund* 10,525 Mutual fund shares -- 1,120,257 Fidelity Equity-Income Fund* 13,395 Mutual fund shares -- 706,992 Fidelity Growth Company Fund* 13,576 Mutual fund shares -- 863,813 Fidelity Low Priced Stock Fund* 5,543 Mutual fund shares -- 226,394 Fidelity Diversified International Fund* 11,060 Mutual fund shares -- 359,895 Fidelity Freedom Income* 1,142 Mutual fund shares -- 12,979 Fidelity Freedom 2000* 512 Mutual fund shares -- 6,256 Fidelity Freedom 2010* 2,135 Mutual fund shares -- 29,995 Fidelity Freedom 2020* 1,223 Mutual fund shares -- 17,985 Fidelity Freedom 2030* 680 Mutual fund shares -- 10,211 Fidelity Freedom 2040* 1,060 Mutual fund shares -- 9,360 Fidelity Freedom 2005* 2,292 Mutual fund shares -- 25,484 Fidelity Freedom 2015* 14,477 Mutual fund shares -- 167,215 Fidelity Freedom 2025* 1,396 Mutual fund shares -- 16,699 Fidelity Freedom 2035* 1,153 Mutual fund shares -- 14,103 Fidelity Retirement Money 418,229 Mutual fund shares Market Portfolio* -- 418,229 Fidelity Retirement Money 17,984 Mutual fund shares Market Portfolio* $ 17,984 17,984 Managed Income Portfolio* 2,496,739 Common collective trust fund, variable rate and maturity -- 2,496,739 Spartan U.S. Equity Index 1,998 Mutual fund shares Fund* -- 88,215 Brown-Forman Corporation 11,909 Class B common stock fund units -- 268,659 Class B Common Stock Fund* Brown-Forman Corporation 20,003 Class B common stock fund shares 311,518 451,262 Class B Common Stock* Participant loans* Loans, interest rates ranging from 6.5% to 7.75%, various maturity rate -- 207,970 ----------- $ 8,200,838 =========== *Party-in-interest to the Plan
12 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Hartmann Employee Savings and Investment Plan has duly caused this report to be signed by the undersigned thereunto duly authorized. HARTMANN EMPLOYEE SAVINGS AND INVESTMENT 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 13 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 Hartmann Employee Savings and Investment Plan, which appears in this Form 11-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Louisville, Kentucky June 29, 2006 14