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