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, 2006
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, 2006 and 2005 3
Statement of Changes in Net Assets Available for Benefits,
Year Ended December 31, 2006 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, 2006 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 Winery Operations Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement 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,
2006 and 2005, and the changes in net assets available for benefits for the year
ended December 31, 2006 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) at December 31, 2006 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, 2007
2
Brown-Forman Winery Operations Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2006 and 2005
Participant Directed
--------------------------------
2006 2005
------------ -------------
Investments, at fair value
Mutual funds $ 10,916,933 $ 9,579,396
Common collective trust fund 2,416,550 2,310,082
Brown-Forman Corporation
Class B common stock fund 806,039 716,116
Loans to participants 315,382 315,627
------------ ------------
14,454,904 12,921,221
Profit sharing contributions receivable 291,000 350,000
Employers' contributions receivable 23,202 14,819
Employees' contributions receivable 10,383 23,463
------------ ------------
Net assets available for benefits
at fair value 14,779,489 13,309,503
------------ ------------
Adjustment from fair value to contract
value for interest in collective
trust relating to fully benefit-
responsive investment contracts 24,288 26,226
------------ ------------
Net assets available for benefits $ 14,803,777 $ 13,335,729
============ ============
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
Year Ended December 31, 2006
Participant
Directed
------------
Additions
Contributions
Profit Sharing $ 290,994
Employer 283,602
Employee 884,311
------------
1,458,907
Interest income 232,363
Dividend income 125,595
Net appreciation in investments 891,163
------------
Total additions 2,708,028
------------
Deductions
Withdrawals by participants 1,052,363
Administrative expenses 2,341
Net transfers to other plans 185,276
------------
Total deductions 1,239,980
Net increase 1,468,048
Net assets available for benefits
Beginning of year 13,335,729
------------
End of year $ 14,803,777
============
The accompanying notes are an integral part of the financial statements.
4
Brown-Forman Winery Operations Savings Plan
Notes to Financial Statements
December 31, 2006 and 2005
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. For the
year ended December 31, 2005, highly compensated employees could 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 $15,000 and $14,000 for 2006 and 2005, 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. Effective May 1, 2007, participants are eligible to receive the
Companies' matching contributions the later of May 1, 2007 or the
employee's employment commencement date. The Companies' matching
contribution is equal to 50% of the participant's elective contribution up
to 5% of the participant's annual compensation. Effective May 1, 2006, the
Companies' matching contribution is equal to 100% of the first 2% of the
participant's elective contribution and 50% of the next 3% of the
participant's elective contribution up to 5% of the participant's annual
compensation. Effective May 1, 2007, the Companies' matching contribution
is equal to 100% of the participant's elective contribution up to 5% of the
participant's annual compensation. The Companies may also make a profit
sharing contribution to the Plan, as determined by the Companies.
5
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 bi-weekly shall have their accounts credited
with the participants' contributions on a bi-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, an asset allocation 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.
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 described in 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 their vested interest in the case of
financial hardship under guidelines promulgated by the Internal Revenue
Service. The participant's contributions 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 applicable participant's account.
6
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 $12 and $564 for 2006 and 2005,
respectively. In 2006, 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 are valued at the net
asset value of shares held by the Plan at year end. The Brown-Forman
Corporation Stock Fund, a unitized employer 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 value of a unit reflects
the combined market value of the underlying Sponsor stock and market value
of the short-term cash position. The Plan's interest in the Fidelity
Managed Income Portfolio (a collective trust) is valued based on
information reported by the investment advisor using the audited financial
statements of the collective trust at year-end.
As described in Financial Accounting Standards Board Staff Position, FSP
AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment
Contracts Held by Certain Investment Companies Subject to the AICPA
Investment Company Guide and Defined-Contribution Health and Welfare and
Pension Plans (the FSP), investment contracts held by a
defined-contribution plan are required to be reported at fair value.
However, contract value is the relevant measurement attribute for that
portion of the net assets available for benefits of a defined-contribution
plan attributable to fully benefit-responsive investment contracts because
contract value is the amount participants would receive if they were to
initiate permitted transactions under the terms of the Plan. The Plan
invests in investment contracts through a collective trust. As required by
the FSP, the Statement of Net Assets Available for Benefits presents the
fair value of the investment in the collective trust as well as the
adjustment of the investment in the collective trust from fair value to
contract value relating to the investment contracts. The Statement of
Changes in Net Assets Available for Benefits is prepared on a contract
value basis.
The Plan presents in the accompanying statement of changes in net assets
available for benefits the net appreciation or depreciation in the 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.
7
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 157 "Fair Value
Measurements" (SFAS 157). The standard defines fair value, outlines a
framework for measuring fair value, and details the required disclosures
about fair value measurements. The standard is effective for fiscal years
beginning after November 15, 2007. We are evaluating the impact of the
adoption of SFAS 157 on our financial statements.
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 period. Actual results
could differ from those estimates.
Payment of Benefits
Benefits are recorded when paid.
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 at fair value at one or both year ends are
separately identified.
December 31
--------------------------------------------------------------
2006 2005
---------------------------- ----------------------------
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
Fidelity Magellan Fund 13,391 $ 1,198,783 11,919 1,268,670
Fidelity Equity-Income Fund 46,123 2,700,523 42,047 2,219,258
Fidelity Growth Company Fund 11,051 770,384 12,724 809,657
Fidelity Diversified
International Fund 28,222 1,042,786 24,758 805,615
Fidelity Retirement Money Market
Portfolio 2,496,086 2,496,086 2,340,627 2,340,627
Managed Income Portfolio 2,440,838 2,416,550 2,336,308 2,310,082
Brown-Forman Corporation Class B
Common Stock 11,876 786,666 10,107 700,592
Other investments 199,786 3,043,126 103,371 1,795,064
------------ ------------
$ 14,454,904 $ 12,921,221
============ ============
8
During 2006, the Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year, appreciated
(depreciated) in value as follows:
2006
----------
Mutual funds $ 921,409
Brown-Forman Corporation
Class B Common Stock (30,246)
----------
$ 891,163
==========
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. 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 described in 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 recordkeeper, 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 $2,341 in 2006 were allocated to participants'
accounts. Fees for loans continue to be allocated to participants accounts.
Certain participants of the Plan transferred their participation to other
defined contribution plans sponsored by the Sponsor. As a result, $185,276
of related plan assets were transferred from the Plan during 2006.
The Brown-Forman Corporation Class B Common Stock Fund is a unitized
employer stock fund comprised of Brown-Forman Corporation Class B shares
and a cash component. The participants of the Plan, as well as participants
in other Sponsor plans, may invest in this employer stock fund. The total
fund was comprised of $23,158,920 of Brown-Forman Corporation Class B
Common Stock and $570,323 of the cash component as of December 31, 2006.
During 2006, purchases and sales of 411,824 and 408,109 shares of
Brown-Forman Corporation Class B stock, respectively, were made by the
employer stock fund. Participants in the Plan have a 3% interest in this
fund.
9
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.
10
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, 2006
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 5,342 Mutual Fund Shares $ 253,479
PIMCO Total Return Fund 52,858 Mutual Fund Shares 548,668
Royce Low Priced Stock Fund 9,438 Mutual Fund Shares 158,839
Hartford Capital
Appreciation Fund 116 Mutual Fund Shares 6,190
Fidelity Magellan Fund* 13,391 Mutual Fund Shares 1,198,783
Fidelity Equity-Income Fund* 46,123 Mutual Fund Shares 2,700,523
Fidelity Growth Company Fund* 11,051 Mutual Fund Shares 770,384
Fidelity Low Priced Stock Fund* 3,901 Mutual Fund Shares 169,836
Fidelity Diversified
International Fund* 28,222 Mutual Fund Shares 1,042,786
Fidelity Freedom Income* 387 Mutual Fund Shares 4,462
Fidelity Freedom 2000* 270 Mutual Fund Shares 3,365
Fidelity Freedom 2010* 14,539 Mutual Fund Shares 212,567
Fidelity Freedom 2020* 27,232 Mutual Fund Shares 422,916
Fidelity Freedom 2030* 10,540 Mutual Fund Shares 168,949
Fidelity Freedom 2040* 26,118 Mutual Fund Shares 247,596
Fidelity Freedom 2005* 411 Mutual Fund Shares 4,772
Fidelity Freedom 2015* 11,311 Mutual Fund Shares 137,995
Fidelity Freedom 2025* 9,454 Mutual Fund Shares 120,725
Fidelity Freedom 2035* 4,700 Mutual Fund Shares 61,996
Fidelity Freedom 2045* 113 Mutual Fund Shares 1,210
Fidelity Retirement Money
Market Portfolio* 2,496,086 Mutual Fund Shares 2,496,086
Managed Income Portfolio* 2,440,838 Common collective trust fund
units 2,416,550
Spartan U.S. Equity Index
Fund* 3,683 Mutual Fund Shares 184,806
Brown-Forman Corporation
Stock Fund:
Brown-Forman Class B Stock* 11,876 Common stock shares 786,666
Institutional Money Market Money market deposit account,
Portfolio - Class 1* interest rate 5.24% 19,373
Participant Loans* Loans, interest rates ranging from
5.25% to 9.5%, with variable
maturity dates through 2011. 315,382
-------------
$ 14,454,904
=============
*Party-in-interest to the Plan
11
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 by 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, 2007
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, 2007 relating to the financial statements and supplemental
schedule of the Brown-Forman Winery Operations Savings Plan, which appears in
this Form 11-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Louisville, Kentucky
June 29, 2007
13