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 Winery Operations 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,
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 5-11
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
Brown-Forman Winery Operations 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 Winery Operations 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 Winery Operations Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
Participant Directed
--------------------------------
2005 2004
----------- -----------
Investments, at fair value
Mutual funds $ 9,579,396 $ 8,487,993
Common collective trust fund 2,336,308 2,328,612
Brown-Forman Corporation
Class B common stock fund 716,116 458,037
Loans to participants 315,627 349,421
----------- -----------
12,947,447 11,624,063
Profit sharing contribution receivable 350,000 367,000
Employers' contributions receivable 14,819 13,651
Employees' contributions receivable 23,463 21,853
----------- -----------
Net assets available for benefits $13,335,729 $12,026,567
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
Brown-Forman Winery Operations Savings Plan
Statement of Changes in Net Assets Available for Benefits
Years Ended December 31, 2005 and 2004
Participant Directed
--------------------------------
2005 2004
----------- -----------
Additions
Contributions
Profit sharing $ 350,000 $ 368,026
Employer 226,873 193,254
Employee 689,137 640,038
----------- -----------
1,266,010 1,201,318
Interest income 172,987 140,450
Dividend income 108,290 88,528
Net appreciation in fair value
of investments 591,924 520,616
Net transfer from Sonoma-Cutrer ESOP -- 578,240
Net transfers from other plans 133,151 --
----------- -----------
Total additions 2,272,362 2,529,152
----------- -----------
Deductions
Withdrawals by participants 959,702 2,157,126
Administrative expenses 3,498 3,479
Net transfers to other plans -- 16,742
----------- -----------
Total deductions 963,200 2,177,347
Net increase 1,309,162 351,805
Net assets available for benefits:
Beginning of year 12,026,567 11,674,762
----------- -----------
End of year $13,335,729 $12,026,567
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
Brown-Forman Winery Operations Savings Plan
Notes to Financial Statements
December 31, 2005 and 2004
1. Description of Plan
The sponsor of the Brown-Forman Winery Operations Savings 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 all eligible employees of
Fetzer Vineyards, all eligible employees of Jekel Vineyards, and all
eligible employees of Sonoma Cutrer Vineyards (collectively, the Companies)
who are not members of a collective bargaining unit. 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 an amount of
not less than 1% nor more than 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.
Eligible 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 the Companies' matching contributions
beginning on the first day of the month following completion of one year of
service. The Companies' matching contribution is equal to 50% of the
participant's elective contribution up to 5% of the
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participant's annual compensation. The Companies may also make a profit
sharing contribution to the Plan, as determined by the Companies. In order
for the Plan to pass discrimination testing for the plan year 2004, the
Companies made an additional employer contribution during 2005 to certain
non-highly compensated employees in an amount equal to the lower of the IRC
Section 415 limitation or 100% of the participants' 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 Companies' matching contribution on a monthly
basis, (ii) plan earnings on a daily basis, and (iii) the Companies' profit
sharing contribution and forfeited balances of terminated participants'
nonvested accounts 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. 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.
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 Companies' 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. The
additional employer contributions made in 2005 for plan year 2004 is 100%
vested.
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
6
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 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
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 added to the Companies'
contribution and allocated to eligible participants as defined by the Plan
agreement. The forfeited balances totaled $564 and $548 for 2005 and 2004,
respectively. In 2005 and 2004, no forfeited balances were used to
reinstate previously forfeited account balances or added to the Companies'
contribution and allocated to eligible participants.
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.
7
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:
PIMCO Total Return Fund 63,967 $ 671,656 62,398 $ 665,787
Fidelity Magellan Fund 11,919 1,268,670 11,331 1,176,005
Fidelity Equity-Income Fund 42,047 2,219,258 39,829 2,102,188
Fidelity Growth Company 12,724 809,657 13,104 734,735
Fidelity Diversified
International Fund 24,758 805,615
Fidelity Retirement
Money Market Portfolio 2,340,627 2,340,627 2,237,893 2,237,893
Managed Income Portfolio 2,336,308 2,336,308 2,328,612 2,328,612
Brown-Forman Corporation Class B
Common Stock Fund 31,743 716,116
Other investments 87,847 1,779,540 97,832 2,378,843
---------- ----------
$12,947,447 $11,624,063
========== ==========
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 $ 409,924 $ 503,377
Brown-Forman Corporation
Class B Common Stock Fund 182,000 17,239
---------- ----------
$ 591,924 $ 520,616
========== ==========
4 Tax Status
The Internal Revenue Service has determined, and informed the Companies 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.
9
However, the Companies believe that the Plan is designed and is currently
being operated in compliance with the applicable provisions of the IRC.
5 Plan Termination
Although they have not expressed any intent to do so, the Companies have
the right under the Plan to discontinue their 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 Sponsor.
Effective January 1, 2002, general administration 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.
Administrative expenses of $3,498 and $3,479 in 2005 and 2004,
respectively, were allocated to participants' accounts. Fees for loans
continue to be allocated to participants accounts.
Due to the termination of the Sonoma-Cutrer Vineyard, Inc. Employee Stock
Ownership Plan (ESOP Plan), certain participants of the ESOP Plan
transferred their participation to the Plan. As a result, $578,240 was
transferred into the Plan during 2004.
Certain participants of the Plan transferred their participation from (to)
other defined contribution plans sponsored by the Sponsor. As a result,
$133,151 and ($16,742) of related plan assets were transferred into (from)
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 9,460 units for $180,377, and sales of 6,451 units for
$104,298 were made during 2005. Purchases of 8,872 units for $137,902, and
sales of 4,947 units for $76,943 were made during 2004. Dividends of $8,561
and $6,635 were received on Company units for the years ending December 31,
2005 and 2004, respectively.
10
7. 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
Brown-Forman Winery Operations Savings Plan
Plan #020 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 4,440 Mutual fund shares $ 186,070
PIMCO Total Return Fund 63,967 Mutual fund shares 671,656
Royce Low Priced Stock Fund 4,997 Mutual fund shares 77,603
Fidelity Magellan Fund* 11,919 Mutual fund shares 1,268,670
Fidelity Equity-Income Fund* 42,047 Mutual fund shares 2,219,258
Fidelity Growth Company Fund* 12,724 Mutual fund shares 809,657
Fidelity Low Priced Stock Fund* 3,245 Mutual fund shares 132,531
Fidelity Diversified 24,758 Mutual fund shares
International Fund* 805,615
Fidelity Freedom 2000* 715 Mutual fund shares 8,734
Fidelity Freedom 2010* 7,465 Mutual fund shares 104,880
Fidelity Freedom 2020* 20,252 Mutual fund shares 297,903
Fidelity Freedom 2030* 8,471 Mutual fund shares 127,239
Fidelity Freedom 2040* 16,769 Mutual fund shares 148,070
Fidelity Freedom 2005* 303 Mutual fund shares 3,370
Fidelity Freedom 2015* 4,492 Mutual fund shares 51,880
Fidelity Freedom 2025* 9,463 Mutual fund shares 113,176
Fidelity Freedom 2035* 3,353 Mutual fund shares 41,008
Fidelity Retirement Money 2,340,627 Mutual fund shares
Market Portfolio* 2,340,627
Managed Income Portfolio* 2,336,308 Common collective trust fund units 2,336,308
Spartan U.S. Equity Index 3,882 Mutual fund shares
Fund* 171,449
Brown-Forman Corporation
Class B Common Stock Fund* 31,743 Class B common stock fund units 716,116
Participant loans* Loans, interest rates ranging from 6.50%
to 7.75%, various maturity dates 315,627
-----------
$12,947,447
===========
*Party-in-interest to the Plan
12
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Brown-Forman Winery Operations Savings Plan has duly caused this report to be
signed on behalf of the undersigned thereunto duly authorized.
BROWN-FORMAN WINERY OPERATIONS 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
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 Brown-Forman Winery Operations Savings Plan as of and for
the years ended December 31, 2005 and 2004 which appear in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Louisville, Kentucky
June 29, 2006
14