ARTESIAN RESOURCES CORP — Annual Report 2010

Jun 29, 2010

11-K 1 form11-k_dec2009.htm FORM 11-K DECEMBER 2009 form11-k_dec2009.htm Licensed to: Artesian Water Document Created using EDGARizer 5.1.5.0 Copyright 1995 - 2009 Thomson Reuters. All rights reserved.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

Or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _ to ___

Commission file number 000-18516

A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT FROM THAT OF THE ISSUER NAMED BELOW:

ARTESIAN RETIREMENT PLAN

B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE:

ARTESIAN RESOURCES CORPORATION

664 CHURCHMANS RD.

NEWARK, DE 19702

Artesian Retirement Plan

Financial Statements

December 31, 2009

Table of Contents

	Page
Independent Registered Public Accounting Firms’
Report	2
Independent Auditors’ Report	3
Financial
Statements
Statement of Net Assets Available for Benefits
- December 31, 2009	4
Statement of Net Assets Available for Benefits
- December 31, 2008	5
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31,
2009	6
Notes to the Financial Statements	7 -
13
Supplementary Information
Schedule H, Part IV, Line 4i - Schedule of Assets Held
for Investment Purposes	14

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees

Artesian Retirement Plan

We have audited the accompanying statement of net assets available for benefits of the Artesian Retirement Plan (the Plan) as of December 31, 2009, and the related statement of changes in net assets available for benefits for the year then ended. 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 audit.

We conducted our audit in accordance with the auditing 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2009, and the changes in net assets available for benefits for the year then ended, in conformity with U.S. generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Supplemental Schedule H, Part IV, Line 4i: Schedule of Assets Held for Investment as of December 31, 2009 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 United States Department of Labor 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 audit 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.

Santora CPA Group

June 28, 2010

2

Independent Auditors’ Report

Participants, Board of Trustees and Administrator of

Artesian Resources Corporation Retirement Plan

We have audited the accompanying statements of net assets available for benefits of Artesian Resources Corporation Retirement Plan as of December 31, 2008. This financial statement is the responsibility of the Plan’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material aspects, the net assets available for benefits of the Artesian Resources Corporation Retirement Plan as of December 31, 2008.

McBride Shopa and Company, P.A.

Wilmington, Delaware

June 25, 2010

3

Artesian Retirement Plan

Statement of Net Assets Available for Benefits

December 31, 2009

		Non- — Participant	Participant	Loan
	Total	Directed	Directed	Fund
ASSETS
Cash	$ 225	$ 0	$ 225	$ 0
Investments,
at fair value
Artesian
Resources Corp. Class A non-voting common stock	3,007,412	0	3,007,412	0
Collective
trusts	2,490,818	0	2,490,818	0
Mutual
funds	18,256,589	0	18,256,589	0
Investments,
at cost that approximate fair value
Loans
to participants	238,185	0	0	238,185
Total
investments	23,993,229	0	23,755,044	238,185
Contribution
receivable
Employer	143,091	0	143,091	0
Participants	0	0	0	0
Total
assets	24,136,320	0	23,898,135	238,185
LIABILITIES	245	0	245	0
NET
ASSETS AVAILABLE FOR BENEFITS	$ 24,136,075	$ 0	$ 23,897,890	$ 238,185

See accompanying notes to financial statements.

4

Artesian Retirement Plan

Statement of Net Assets Available for Benefits

December 31, 2008

		Non- — Participant	Participant	Loan
	Total	Directed	Directed	Fund
ASSETS
Cash	$ 1,435	$ 16	$ 1,419	$ 0
Investments,
at fair value
Artesian
Resources Corp. Class A non-voting common stock	2,453,097	1,009	2,452,088	0
Collective
trusts	2,509,137	792,022	1,717,115	0
Mutual
funds	13,257,984	4,029,127	9,228,857	0
Investments,
at cost that approximate fair value
Loans
to participants	242,391	0	0	242,391
Total
investments	18,464,044	4,822,174	13,399,479	242,391
Contribution
receivable
Employer	146,851	138,065	8,786	0
Participants	0	0	0	0
Total
assets	18,610,895	4,960,239	13,408,265	242,391
LIABILITIES
Distributions
Payable	0	0	0	0
NET
ASSETS AVAILABLE FOR BENEFITS	$ 18,610,895	$ 4,960,239	$ 13,408,265	$ 242,391

See accompanying notes to financial statements.

5

Artesian Retirement Plan

Statement of Changes in Net Assets Available for Benefits

For the Year Ended December 31, 2009

		Participant		Participant		Loan
	Total	Directed		Directed		Fund
ADDITIONS
TO NET ASSETS ATTRIBUTED TO
Net
investment income
Artesian
Resources Corp. Class A non-voting common stock
dividends	$ 114,262	$	23	$	114,239	$	0
Interest
and dividend income from other investments	293,165		31,125		262,040		0
Interest
income from participant loans	19,044		0		0		19,044
Net
appreciation in fair value of investments	4,459,341		362,529		4,096,812		0
Contributions
Employer	879,383		128,249		751,134		0
Participants	1,016,631		0		1,016,631		0
	6,781,826		521,926		6,240,856		19,044
DEDUCTIONS
FROM NET ASSETS ATTRIBUTED TO
Participant
distributions	(1,254,487	)	(134,055	)	(1,120,432	)	0
Administrative
expense	(2,159	)	(369	)	(1,790	)	0
Transfers	0		(5,348,780	)	5,348,780		0
Loan
transfers	0		1,039		22,211		(23,250	)
	(1,256,646	)	(5,482,165	)	4,248,769		(23,250	)
NET
INCREASE/(DECREASE)	5,525,180		(4,960,239	)	10,489,625		(4,206	)
NET
ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF YEAR	18,610,895		4,960,239		13,408,265		242,391
NET
ASSETS AVAILABLE FOR BENEFITS - END
OF YEAR	$ 24,136,075	$	0	$	23,897,890	$	238,185

See accompanying notes to financial statements.

6

Artesian Retirement Plan

Notes to the Financial Statements

Note A - Description of the Plan

1.	General
	Effective
July 1, 1984, Artesian Resources Corporation (the Company)
established the Artesian Resources Corporation Retirement Plan (the Plan)
as a defined contribution retirement plan for its
employees. Pursuant to Internal Revenue Code (IRC) Section
401(k), the Plan permits employees to exclude contributions to the Plan
from their current taxable income, subject to certain
limits. The Plan is administered by a Committee of Trustees,
which consists of six members appointed by the Company’s Board of
Directors. Plan administration expenses may be paid out of the
Plan unless paid by the Company (Note C).
2.	Participation,
Vesting, and Withdrawals
	Generally,
all employees are eligible for Plan participation after attaining age 21
and completing 1,000 hours of service during a one-year
period. Employees may elect to make tax-deductible
contributions up to the IRC limitation of $16,500 ($22,000 for
participants age 50 and older) for all deferrals under all plans in 2009
(basic contribution). For every dollar an employee contributes
up to 6% of compensation, the Company will provide a 50% matching
contribution. In each Plan year, the Company may make a
discretionary contribution to the Plan based on up to 2% of compensation
for all employees eligible to participate in the Plan. The full
discretionary contribution was made for 2009. The total
matching, discretionary, and service contributions in 2009 were $340,537,
$282,115 and $256,731, respectively.
	Effective
January 1, 2007, the Company’s Board of Directors, at its sole discretion,
may make a Special Discretionary Stock Contribution to the
Plan. A Special Discretionary Stock Contribution was not made
for 2009.
	Participant
contributions, and the related earnings, are fully
vested. Company contributions, and the related earnings, vest
as follows:

| Years
of Service | |
| --- | --- |
| Less
than 2 | 0 % |
| 2
but less than 3 | 20 % |
| 3
but less than 4 | 40 % |
| 4
but less than 5 | 60 % |
| 5
but less than 6 | 80 % |
| 6 years
or more | 100 % |

Any forfeitures of nonvested contributions are offset against required Company contributions. Withdrawals may generally commence without penalty upon attaining age 59 1 / 2 or for situations involving hardship, as defined in the Plan and the IRC.

The Company also sponsored another defined contribution plan for its employees, the Supplemental Plan, which was merged into the Plan on March 31, 2000. The contribution and vesting guidelines for the participants of the Supplemental Plan continued and consist of the following:

7

Artesian Retirement Plan

Notes to the Financial Statements (Continued)

Note A - Description of the Plan (Continued)

1. Participation, Vesting, and Withdrawals (Continued)

| • | Only
employees as of April 26, 1994 are eligible for
participation. |
| --- | --- |
| • | A
service contribution is made by the Company to the Plan for all eligible
participants each quarter based upon each employee’s years of service and
current compensation in accordance with the following
schedule: |

| Years | Percentage
of |
| --- | --- |
| of
Service | Compensation |
| 1 -
5 | 2 % |
| 6 -
10 | 4 % |
| 11
- 20 | 5 % |
| over
20 | 6 % |

• Participant contributions, and the related earnings thereon, are fully vested at all times. Company contributions, and the related earnings thereon, vest as follows:

| Years
of Service | |
| --- | --- |
| Less
than 2 | 0 % |
| 2
but less than 3 | 20 % |
| 3
but less than 4 | 40 % |
| 4
but less than 5 | 60 % |
| 5
but less than 6 | 80 % |
| 6 years
or more | 100 % |

• Forfeitures are offset against required Company contributions. Any participant who separates from the Company for any reason, shall be entitled to receive the vested interest in their account.

| 3. |
| --- |
| Effective
July 1, 2009, all contributions, as well as all prior discretionary
contributions and the corresponding earnings thereof, are participant
directed. Prior to July 1, 2009, discretionary Company
contributions were invested by the Trustee in a uniform manner for all
participants. |
| Participants
may allocate basic contributions among the various investments options,
including the Company’s Class A non-voting common
stock. |
| Participants
may elect an allocation among one or more of the investment funds in
multiples of 1% with a minimum investment of 1% in any selected
fund. |

8

Artesian Retirement Plan

Notes to the Financial Statements (Continued)

Note A - Description of the Plan (Continued)

| 4. |
| --- |
| Participants
may borrow from the Plan under the following
guidelines: |

| • | A
participant may borrow as much as 50% of his or her account balance,
subject to certain minimum and maximum limitations as defined in the
Plan. |
| --- | --- |
| • | Loans
are repaid over a period not to exceed five years, unless the loan is to
buy, build, or substantially rehabilitate the borrower’s principal
residence. |
| • | The
participant’s account balance is secured as collateral when the loan is
executed. If a participant defaults on a loan, the loan is
treated as a distribution from the Plan to the participant. |
| • | Interest
rates on loans are prime plus 1% at the date of the
loan. |
| • | As
loans are repaid to the Plan, the total payment, principal plus interest,
is credited back to the participant’s
account. |

As disclosed in the statement of changes in net assets available for benefits, the net transfer into participant loans for the year ended December 31, 2009 was made up of the following:

| New
loans | 57,748 | |
| --- | --- | --- |
| Loan
repayments | (61,954 | ) |
| Interest
income | (19,044 | ) |
| $ | (23,250 | ) |

5.	Benefits
	Participants
are entitled to a benefit payment equal to the amount credited to their
accounts upon retirement, upon permanent disability, at age 59 1 / 2 , or upon termination of
employment or death. In the event of death of a participant, a
death benefit payment is made to the participant’s
beneficiary. In the event of termination, distributions of less
than $5,000 must be made in a lump sum. All other distributions
may be made in the form of a joint and survivor annuity, installments, or
in a lump sum subject to certain restrictions as defined in the
Plan.
6.	Termination
	The
Company may amend or terminate the Plan. In the event of Plan
termination, the accounts of all participants affected shall become fully
vested and nonforfeitable. Assets remaining in the Plan may be
immediately distributed to the participants, inactive participants, and
beneficiaries in proportion to their respective account balances; or the
trust may be continued with distributions made at such time and in such
manner as though the Plan had not been
terminated.

9

Artesian Retirement Plan

Notes to the Financial Statements (Continued)

Note B - Significant Accounting Policies

| 1. | Basis
of Accounting |
| --- | --- |
| | For
financial reporting purposes, the assets and liabilities of the Plan are
reflected on the accrual basis of accounting. |
| 2. | Use
of Estimates |
| | The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting
period. Actual results could differ from those
estimates. |
| 3. | Investment
Valuation and Income Recognition |
| | Plan
assets held in mutual funds and the Company’s Class A non-voting
common stock are unsecured and are valued at fair value based on quoted
market prices. Plan assets held in collective trusts are
unsecured and are valued at trading unit prices, which approximates fair
value. |
| | In
accordance with the policy of stating investments at fair value, net
unrealized appreciation (depreciation) for the year is included in
the statement of changes in net assets available for
benefits. Participant loans are valued at cost, which
approximates fair value. |
| | 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. |
| 4. | Participant
Distributions |
| | Participant
distributions are generally recorded when paid. |
| 5. | Income
Taxes |
| | The
Internal Revenue Service has determined and informed the Company by a
letter dated March 19, 2002, that the original Plan plus amendments
is qualified and the trust established under the Plan is tax exempt under
the appropriate sections of the Internal Revenue Code. |
| | The
Plan has been amended since receiving the determination
letter. However, the Plan administrator and the Plan’s tax
counsel believe that the Plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue
Code. Therefore, no provision for income taxes has been
included in the financial
statements. |

10

Artesian Retirement Plan

Notes to the Financial Statements (Continued)

Note C - Plan Administration Expenses

Plan administration fees are based on asset value and number of participants. The Plan invests in various mutual funds with revenue-sharing agreements that help to offset fees. The Company paid the following net Plan expenses on behalf of the Plan in 2009:

| Fees
charged to the Plan | $ | |
| --- | --- | --- |
| Revenue-sharing
offsets | (54,431 | ) |
| Net
Plan expenses | $ 13,884 | |

Note D - Credit Risk

The Plan has no investments in mutual fund money market accounts at December 31, 2009.

Note E - Market Risk

All investments in the Plan, including holdings in the Company’s Class A non-voting common stock, are subject to market risk.

Note F - Investments

During 2009, 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:

| Artesian
Resources Corp. Class A non-voting common stock | 438,202 |
| --- | --- |
| Collective
trusts | 48,147 |
| Mutual
funds | 3,972,992 |
| $ | 4,459,341 |

The following investments each represent 5% or more of the net assets available for benefits at December 31:

	2009
Common
Stocks
Artesian
Resources Corp.
Class A
non-voting common stock	$ 3,007,412	$ 2,453,097
Collective
Trusts
Gartmore
Morley Trust Co.
Stable
Value Fund	2,490,818	2,509,137

11

Artesian Retirement Plan

Notes to the Financial Statements (Continued)

Note F - Investments (Continued)

		2008
Mutual
Funds
American
Funds Growth
Fund
of America A	4,358,955	3,064,869
Davis
Funds NY Venture A	4,096,576	3,119,778
Dodge
& Cox Funds
Stock
Fund	2,622,350	1,889,395
PIMCO
Funds Total Return
Fund
Admin	2,928,361	2,553,808
Templeton
Foreign Fund R	1,265,046	-
*Includes
both nonparticipant-directed and participant-directed
funds.

The Plan adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and disclosure, on January 1, 2008. This statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are as follows:

• Level 1: unadjusted quoted prices in active markets for identical assets or liabilities that the Plan has the ability to access;

• Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in non-active markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3: inputs that are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

12

Artesian Retirement Plan

Notes to the Financial Statements (Continued)

Note F - Investments (Continued)

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2009:

| | Investments
at Fair Value as of December 31, 2009 — Level
1 | Level
2 | Level
3 | Total |
| --- | --- | --- | --- | --- |
| Registered
investment companies | $ 18,256,589 | $ - | $ - | $ 18,256,589 |
| Artesian
Resources Corporation Class A non-voting common stock | 3,007,412 | - | - | 3,007,412 |
| Common
collective fund | - | 2,490,818 | | 2,490,818 |
| Participant
loans | - | - | 238,185 | 238,185 |
| Total
investments at fair value | $ 21,264,001 | $ 2,490,818 | $ 238,185 | $ 23,993,004 |

The table below sets forth a summary of changes in the fair value of the Plan’s Level 3 assets for the year ended December 31, 2009:

| Balance
- beginning of year | Participant Loans — $ 242,391 | |
| --- | --- | --- |
| New
loans issued, loans distributed, and loan principal repayments,
net | (4,206 | ) |
| Balance
- end of year | $ 238,185 | |

Note G - Distributions Payable

Amounts allocated to withdrawing participants are reported on the Schedule H of Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, but not yet paid as of that date.

At December 31, 2009 and 2008, there were no net assets available for plan benefits for distributions to participants who have requested a distribution from the Plan prior to the end of the Plan year.

13

Suppl ementary Information

Artesian Retirement Plan

EIN 51-0002090, Plan No. 003

Schedule H, Part IV, Line 4i: Schedule of Assets Held for Investment Purposes

December 31, 2009

(a)	(b)	(c)	(d)	(e)
	Identity
of issuer, borrower,	Description
of investment, including maturity date,		Current
	lessor,
or similar party	rate
of interest, collateral, par, or maturity value	Cost	Value
	Cash
	Investment
Fund	Liquidity
Fund	$ 225	$ 225
	Common
Stocks
*	Artesian
Resources Corporation	Class A
non-voting common stock	2,701,647	3,007,412
	Collective
Trusts
	Gartmore
Morley Trust Co.	Stable
Value Fund	2,247,224	2,490,818
	Mutual
Funds
	American
Fund	Growth
Fund of America A	3,842,677	4,358,955
	Calamos	Growth
A	754,431	704,817
	Columbia
Funds	Acorn
Z	736,322	750,822
	Columbia
Funds	Mid-Cap
Value A	153,932	130,564
	Davis
Funds	New
York Venture A	3,306,975	4,096,576
	Dodge
& Cox Funds	Balanced	169,246	155,404
	Dodge
& Cox Funds	Stock
Fund	2,944,509	2,622,350
	Lord
Abbett	Mid-Cap
Value A	644,606	458,168
	PIMCO
Funds	Total
Return Fund Admin.	2,868,958	2,928,361
	Royce	Low
Priced Stock	668,015	708,295
	Templeton
Funds	Foreign
Fund R	1,620,774	1,265,046
	Vanguard	Balanced
Index	68,202	77,231
			17,778,647	18,256,589
	Participant
Loans
	Various
participants	Interest
rates range from 5.00% to 9.75%, can borrow up to 50% of account balance,
repayment terms range from five to 15 years, secured by vested
account balance.	238,185	238,185
			$ 22,965,928	$ 23,993,229

• Identifies the party as a “Party in Interest.”

14

SIGNATURES

The Plan . Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee has duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized.

| /s/
Joseph A. DiNunzio |
| --- |
| Joseph
A. DiNunzio |
| Executive
Vice President and Corporate Secretary |

15