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