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:
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,
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 5-11
Supplemental Schedules
Form 5500 Schedule H, Line 4a -
Schedule of Delinquent Participant Contributions,
Year Ended December 31, 2006 12
Form 5500 Schedule H, Line 4i -
Schedule of Assets (Held at End of Year), December 31, 2006 13
Signatures 14
Consent of Independent Registered Public Accounting Firm 15
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 statement 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,
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 and schedule of delinquent participant
contributions for the year ended December 31, 2006 are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are 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. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are 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
Hartmann Employee Savings and Investment Plan
Statements of Net Assets Available for Benefits
December 31, 2006 and 2005
2006 2005
---------------------------------------------- ---------------------------------------------
Participant Nonparticipant Participant Nonparticipant
Directed Directed Total Directed Directed Total
----------- -------------- ----------- ----------- -------------- -----------
Investments, at fair value
Mutual funds $ 5,392,890 $ 8,162 $ 5,401,052 $ 4,758,224 $ 17,984 $ 4,776,208
Common collective trust fund 2,434,765 -- 2,434,765 2,468,713 -- 2,468,713
Brown-Forman Corporation
Class B common stock fund 237,761 418,253 656,014 268,659 451,262 719,921
Loan to participants 197,062 -- 197,062 207,970 -- 207,970
----------- -------------- ----------- ----------- -------------- -----------
8,262,478 426,415 8,688,893 7,703,566 469,246 8,172,812
Employers' contributions receivable 44,277 -- 44,277 40,880 -- 40,880
Employees' contributions receivable 11,618 -- 11,618 14,347 -- 14,347
----------- -------------- ----------- ----------- -------------- -----------
Net assets available for benefits
at fair value 8,318,373 426,415 8,744,788 7,758,793 469,246 8,228,039
----------- -------------- ----------- ----------- -------------- -----------
Adjustment from fair value to
contract value for interest in
collective trust relating to fully
benefit-responsive investment
contracts 24,471 -- 24,471 28,026 -- 28,026
----------- -------------- ----------- ----------- -------------- -----------
Net assets available for benefits $ 8,342,844 $ 426,415 $ 8,769,259 $ 7,786,819 $ 469,246 $ 8,256,065
=========== ============== =========== =========== ============== ===========
The accompanying notes are an integral part of the financial statements.
3
Hartmann Employee Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2006
Participant Nonparticipant
Directed Directed Total
----------- -------------- -----------
Additions
Contributions
Employer $ 160,818 -- $ 160,818
Employee 376,161 -- 376,161
----------- ------------- -----------
536,979 -- 536,979
Interest income 134,710 -- 134,710
Dividend income 51,092 $ 7,576 58,668
Net appreciation (depreciation)
in investments 504,003 (8,621) 495,382
----------- -------------- -----------
Total additions 1,226,784 (1,045) 1,225,739
----------- -------------- -----------
Deductions
Withdrawals by participants 669,021 41,618 710,639
Administrative expenses 1,738 168 1,906
----------- -------------- -----------
Total deductions 670,759 41,786 712,545
----------- -------------- -----------
Net increase (decrease) 556,025 (42,831) 513,194
Net assets available for benefits
Beginning of year 7,786,819 469,246 8,256,065
----------- -------------- -----------
End of year $ 8,342,844 $ 426,415 $ 8,769,259
=========== ============== ===========
The accompanying notes are an integral part of the financial statements.
4
Hartmann Employee Savings and Investment Plan
Notes to Financial Statements
December 31, 2006 and 2005
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. Effective April 30, 2007, HL Operating Corp. became
the Plan Sponsor as a result of the sale of the assets of the Hartmann
Luggage Company by the Sponsor on this same date.
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 $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 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.
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 for those retail employees at the plant location in
Lebanon, Tennessee, in an amount equal to 3% of the employee's eligible
compensation during the year.
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 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, an asset allocation 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. Effective for
CORE Contributions made for plan years commencing after December 31, 2006,
the CORE account shall vest 100% after three or more years of service.
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. Participants employed by
Hartmann Luggage Company as of the date of the asset sale by the Sponsor on
April 30, 2007, and whose employment terminated as a direct result of the
sale of the assets of the Company, are fully vested in their account
balances under the Plan.
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.
6
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 applicable 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 $1,222 and $4,849 for
2006 and 2005, respectively. Also in 2006, $7,512 from forfeited nonvested
accounts were used to reinstate previously forfeited account balances of
re-employed participants and/or reduce Company contributions.
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
7
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.
Interest income is recorded on the accrual basis. Dividends are recorded on
the ex-dividend date.
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.
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 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:
Fidelity Magellan Fund 12,717 $ 1,138,392 10,525 $ 1,120,257
Fidelity Equity-Income Fund 14,254 834,587 13,395 706,992
Fidelity Growth Company Fund 10,361 722,286 13,576 863,813
Fidelity Diversified
International Fund 20,911 772,675 -- --
Fidelity Retirement Money Market
Portfolio 462,322 462,322 418,229 418,229
Managed Income Portfolio 2,459,236 2,434,765 2,496,739 2,468,713
Brown-Forman Corporation Class B
Common Stock 3,503 232,047 3,791 262,835
Other investments 78,097 1,665,404 85,579 1,862,727
------------- -------------
$ 8,262,478 $ 7,703,566
Brown-Forman Corporation
Class B common Stock* 6,162 408,200 6,369 441,479
Institutional Money Market
Portfolio - Class 1* 10,053 10,053 9,783 9,783
Fidelity Retirement Money Market
Portfolio 8,162 8,162 17,984 17,984
---------- ----------
$ 8,688,893 $ 8,172,812
========== ==========
*Nonparticipant directed
9
During 2006, the Plan's investments, including gains and losses on
investments bought and sold as well as held during year, appreciated
(depreciated) in value as follows:
2006
----------
Participant directed
Mutual funds $ 512,077
Brown-Forman Corporation
Class B Common Stock Fund (8,074)
----------
504,003
Nonparticipant directed
Brown-Forman Corporation
Class B common stock (8,621)
----------
Total $ 495,382
==========
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 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 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 $1,906 in 2006 were allocated to participants'
accounts.
10
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.
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
Hartmann Employee Savings and Investment Plan
Plan #018 EIN #61-0143150
Schedule H, Line 4a --
Schedule of Delinquent Participant Contributions
Year Ended December 31, 2006
Participant Contributions Total that Constitute
Transferred Late to Non-exempt Prohibited
the Plan Transactions
--------------------------- ---------------------
$ 72 $ 72
12
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, 2006
Description of Investment Including
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Current
Lessor or Similar Party Collateral, Par or Maturity Value Cost(1) Value
---------------------------- ----------------------------------- ------------ ------------
Janus Enterprise Fund 8,873 Mutual Fund Shares -- $ 421,004
PIMCO Total Return Fund 19,346 Mutual Fund Shares -- 200,812
Royce Low Priced Stock Fund 3,480 Mutual Fund Shares -- 58,566
Hartford Capital
Appreciation Fund 276 Mutual Fund Shares -- 14,774
Fidelity Magellan Fund* 12,717 Mutual Fund Shares -- 1,138,392
Fidelity Equity-Income Fund* 14,254 Mutual Fund Shares -- 834,587
Fidelity Growth Company Fund* 10,361 Mutual Fund Shares -- 722,286
Fidelity Low Priced Stock Fund* 5,888 Mutual Fund Shares -- 256,345
Fidelity Diversified
International Fund* 20,911 Mutual Fund Shares -- 772,675
Fidelity Freedom Income* 1,154 Mutual Fund Shares -- 13,313
Fidelity Freedom 2000* 536 Mutual Fund Shares -- 6,679
Fidelity Freedom 2010* 1,835 Mutual Fund Shares -- 26,834
Fidelity Freedom 2020* 1,102 Mutual Fund Shares -- 17,109
Fidelity Freedom 2030* 945 Mutual Fund Shares -- 15,155
Fidelity Freedom 2040* 937 Mutual Fund Shares -- 8,886
Fidelity Freedom 2005* 28 Mutual Fund Shares -- 327
Fidelity Freedom 2015* 21,816 Mutual Fund Shares -- 266,153
Fidelity Freedom 2025* 2,194 Mutual Fund Shares -- 28,020
Fidelity Freedom 2035* 1,912 Mutual Fund Shares -- 25,226
Fidelity Retirement Money
Market Portfolio* 462,322 Mutual Fund Shares -- 462,322
Fidelity Retirement Money
Market Portfolio* 8,162 Mutual Fund Shares $ 8,162 8,162
Managed Income Portfolio* 2,459,236 Common collective trust fund
units -- 2,434,765
Spartan U.S. Equity Index
Fund* 2,061 Mutual Fund Shares -- 103,425
Brown-Forman Corporation
Stock Fund:
Brown-Forman Class B Stock 3,503 Common stock shares -- 232,047
Institutional Money Market Money market deposit account,
Portfolio - Class 1* interest rate 5.24% -- 5,714
Brown-Forman Corporation
Stock Fund:
Brown-Forman Class B Stock* 6,162 Common stock shares 303,206 408,200
Institutional Money Market Money market deposit account,
Portfolio - Class 1* interest rate 5.24% 10,053 10,053
Participant Loans* Loans, interest rates ranging from
5.25% to 9.5%, with variable
maturity dates through 2011. -- 197,062
------------
$ 8,688,893
============
*Party-in-interest to the Plan
(1) Cost information provided for non-participant directed investments only.
13
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, 2007
14
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
schedules of the Hartmann Employee Savings and Investment Plan, which appears in
this Form 11-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Louisville, Kentucky
June 29, 2007
15