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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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|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 REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO _________
COMMISSION FILE NO. 000-18516
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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
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2005
ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2005
INDEX
Page
INDEPENDENT AUDITORS' REPORT 1-2
FINANCIAL STATEMENTS
Statement of Net Assets Available for
Benefits, December 31, 2005 3
Statement of Net Assets Available for
Benefits, December 31, 2004 4
Statement of Changes in Net Assets
Available for Benefits, Year
Ended December 31, 2005 5
Notes to the Financial Statements 6-15
SUPPLEMENTARY INFORMATION
Schedule of Assets Held for Investment Purposes 16
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, 2005 and
2004, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2005. 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 in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an 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 audits provide 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 Artesian
Resources Corporation Retirement Plan as of December 31, 2005 and 2004, and the
changes in net assets available for plan benefits for the year ended December
31, 2005 in conformity with accounting principles generally accepted in the
United States of America.
Independent Auditors' Report (Cont'd.)
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes, referred to as, "supplementary information", 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 supplementary
information is the responsibility of the Plan's management. The supplementary
information 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.
McBride Shopa and Company, P.A.
/s/ McBride, Shopa & Co
----------------------------------
Wilmington, Delaware
June 16, 2006
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ARTESIAN RESOURCES CORPORATION RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005
Non-
participant Participant Loan
Total Directed Directed Fund
----------- ----------- ----------- -----------
ASSETS
Investments, at fair
value:
Cash $ 3,204 $ 0 $ 3,204 $ 0
Artesian Resources
Corp. Class A non-
voting common stock 2,206,813 1,222,677 984,136 0
Collective trusts 1,383,896 603,902 779,994 0
Mutual funds 16,781,143 5,065,847 11,715,296 0
Investments, at cost
Which approximate fair
value:
Loans to participants 183,216 0 0 183,216
----------- ----------- ----------- -----------
Total investments 20,558,272 6,892,426 13,482,630 183,216
Contribution receivable:
Employer 129,204 129,204 0 0
Participants 0 0 0 0
----------- ----------- ----------- -----------
Total assets 20,687,476 7,021,630 13,482,630 183,216
LIABILITIES 0 0 0 0
----------- ----------- ----------- -----------
NET ASSETS AVAILABLE
FOR BENEFITS $20,687,476 $ 7,021,630 $13,482,630 $ 183,216
=========== =========== =========== ===========
See accompanying notes to the financial statements.
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ARTESIAN RESOURCES CORPORATION RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004
Non-
participant Participant Loan
Total Directed Directed Fund
----------- ----------- ----------- -----------
ASSETS
Investments, at fair
value:
Cash $ 2,960 $ 0 $ 2,960 $ 0
Artesian Resources
Corp. Class A non-
voting common stock 1,995,789 1,110,768 885,021 0
Collective trusts 1,256,301 558,588 697,713 0
Mutual funds 13,994,463 4,248,744 9,745,719 0
Investments, at cost
Which approximate fair
value:
Loans to participants 253,113 0 0 253,113
----------- ----------- ----------- -----------
Total investments 17,502,626 5,918,100 11,331,413 253,113
Contribution receivable:
Employer 123,286 123,286 0 0
Participants 0 0 0 0
----------- ----------- ----------- -----------
Total assets 17,625,912 6,041,386 11,331,413 253,113
LIABILITIES 0 0 0 0
----------- ----------- ----------- -----------
NET ASSETS AVAILABLE
FOR BENEFITS $17,625,912 $ 6,041,386 $11,331,413 $ 253,113
=========== =========== =========== ===========
See accompanying notes to the financial statements.
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ARTESIAN RESOURCES CORPORATION RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2005
Non-
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 $ 62,826 $ 35,585 $ 27,241 $ 0
Interest and dividend
income from other
investments 462,505 180,957 281,548 0
Interest income from
Participant loans 14,793 0 0 14,793
Net appreciation in fair
value of investments 1,255,857 341,334 914,523 0
Contributions:
Employer 753,358 486,265 267,093 0
Participants 858,028 0 858,028 0
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3,407,367 1,044,141 2,348,433 14,793
DEDUCTIONS FROM NET
ASSETS ATTRIBUTED TO:
Administrative expenses 0 0 0 0
Participant distributions 345,803 63,897 226,275 55,631
Transfers, net 0 0 0 0
Loan transaction
transfers, net 0 0 (29,059) 29,059
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345,803 63,897 197,216 84,690
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) 3,061,564 980,244 2,151,217 (69,897)
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 17,625,912 6,041,386 11,331,413 253,113
----------- ----------- ----------- -----------
END OF YEAR $20,687,476 $ 7,021,630 $13,482,630 $ 183,216
=========== =========== =========== ===========
See accompanying notes to the financial statements.
- 5 -
ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
NOTE 1 DESCRIPTION OF THE PLAN
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
five members appointed by the Company's Board of Directors.
Plan administration expenses may be paid out of the plan
unless paid by the Company. The Company paid all such expenses
incurred during 2005. (Note 3)
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
$14,000 ($18,000 for participants age 50 and older) for all
deferrals under all plans in 2005 (basic contribution). For
every dollar an employee contributes up to 6 percent of
compensation, the Company will provide a 50 percent matching
contribution. In each Plan year, the Company may make a
discretionary contribution to the Plan based on up to 2
percent of compensation for all employees eligible to
participate in the Plan. The full discretionary contribution
was made for 2005.
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
DESCRIPTION OF THE PLAN (CONT'D.)
PARTICIPATION, VESTING AND WITHDRAWALS (CONT'D.)
The Company's Board of Directors, at its sole discretion, may
make an additional discretionary contribution. No additional
discretionary contributions were made for 2005.
Participant contributions, and the related earnings, are fully
vested. Company contributions, and the related earnings, vest
as follows:
Years of Service Vested Percentage
---------------- -----------------
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 non-vested 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:
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
DESCRIPTION OF THE PLAN (CONT'D.)
PARTICIPATION, VESTING AND WITHDRAWALS (CONT'D.)
o Only employees as of April 26, 1994 are eligible for
participation.
o 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 of Service % of Compensation
---------------- -----------------
1-5 2%
6-10 4%
11-20 5%
over 20 6%
o 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 Vested Percentage
---------------- -----------------
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%
o 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.
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
DESCRIPTION OF THE PLAN (CONT'D.)
INVESTMENT ELECTIONS
Participants may allocate basic and matching contributions
among the various mutual fund investments and/or 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 one (1) percent with a
minimum investment of one (1) percent in any selected fund.
Discretionary Company contributions are invested by the
Trustee in a uniform manner for all participants.
LOANS
Participants may borrow from the Plan under the following
guidelines:
- A participant may borrow as much as 50 percent 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 5
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.
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
DESCRIPTION OF THE PLAN (CONT'D.)
LOANS (CONT'D.)
- Interest rates on loans are prime plus one
percent at the date of the loan.
- As loans are repaid to the plan, the total
payment, principal plus interest, is credited
back to the participants 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, 2005 was made up of:
New loans $ 51,094
Loan repayments (65,360)
Transfer of interest income (14,793)
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$(29,059)
=========
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.
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
DESCRIPTION OF THE PLAN (CONT'D.)
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.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
For financial reporting purposes, the assets and liabilities
of the Plan are reflected on the accrual basis of accounting.
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.
- 11 -
ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
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.
PARTICIPANT DISTRIBUTIONS
Participant distributions are recorded when paid.
- 12 -
ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
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.
NOTE 3 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 2005:
Fees charged to the Plan $ 77,015
Revenue-sharing offsets (52,234)
---------
Net plan expenses $ 24,781
=========
NOTE 4 CREDIT RISK
The Plan has $3,204 in mutual fund money market accounts at
December 31, 2005 ($2,960 in 2004). These funds are fully
insured by the Securities Investor Protection Corporation
(SIPC).
NOTE 5 MARKET RISK
All investments in the Plan, including holdings in the
Company's Class A non-voting common stock, are subject to
market risk.
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
NOTE 6 INVESTMENTS REPRESENTING 5% OR MORE OF NET ASSETS
AVAILABLE FOR BENEFITS
During 2005, 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:
Artesian Resources Corp. Class A
non-voting common stock $ 104,486
Collective Trusts 43,981
Mutual funds 1,107,390
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$ 1,255,857
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The following investments each represent 5% or more of the net
assets available for benefits at December 31:
2005 * 2004 *
----------- -----------
Common Stocks
Artesian Resources Corp.
Class A non-voting
common stock $ 2,206,813 $ 1,995,789
Collective Trusts
Gartmore Morley Trust Co.
Stable Value Fund 1,383,896 1,256,301
Mutual Funds
American Funds Growth
Fund of America A $ 4,459,847 $ 3,714,650
Davis Funds NY Venture A 4,548,589 4,056,245
Dodge & Cox Funds
Stock Fund 2,991,141 2,563,932
PIMCO Funds Total Return
Fund Admin 1,561,024 1,288,336
Templeton Funds
Foreign Fund R 1,232,589 989,095
* Includes both non-participant directed and
participant directed funds
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 31st but
not yet paid as of that date.
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ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2005
NOTE 7 RECONCILIATION OF FINANCIAL STATEMENTS TO SCHEDULE H
OF FORM 5500
The following is a reconciliation of net assets available for
benefits per the financial statements at December 31, 2005 and
2004 to Schedule H of Form 5500:
2005 2004
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Net assets available
for benefits per the
financial statements $20,687,476 $17,625,912
Amounts allocated to
withdrawing participants - -
----------- -----------
Net assets available for
benefits per Schedule H
to the Form 5500 $20,687,476 $17,625,912
=========== ===========
The following is a reconciliation of benefits paid to
participants per the financial statements for the year ended
December 31, 2005 to Schedule H of Form 5500:
Benefits paid to participants
per the financial statements $ 345,803
Add: Amounts allocated to
withdrawing participants at
December 31, 2005 -
Less: Amounts allocated to
withdrawing participants at
December 31, 2004 -
----------
Benefits paid to participants
per Schedule H of Form 5500 $ 345,803
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SUPPLEMENTARY INFORMATION
ARTESIAN RESOURCES CORPORATION
RETIREMENT PLAN
EIN: 51-0002090, PLAN NO.: 003
SCHEDULE H, PART IV, LINE 4i: SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR AS OF DECEMBER 31, 2005
(a) (b) Identity of issue, borrower, (c) Description of investment including maturity date, (e) Current
lessor or similar party rate of interest, collateral, par or maturity value (d) Cost** Value **
--------------------------------- --------------------------------------------------- ----------- ------------
Cash
----
Investment Liquidity Fund $ 3,204 $ 3,204
Common Stocks
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* Artesian Resources
Corporation Class A non-voting common stock 1,686,485 2,206,813
Collective Trusts
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Gartmore Morley Trust Co Stable Value Fund 1,289,741 1,383,896
Mutual Funds
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American Funds Growth Fund of America A 3,019,970 4,459,847
Calamos Growth A 387,844 500,921
Columbia Funds Acorn Z 420,722 557,069
Columbia Funds Mid Cap Value A 43,501 43,080
Davis Funds New York Venture A 3,059,338 4,548,589
Dodge & Cox Funds Balanced 75,329 82,604
Dodge & Cox Funds Stock Fund 2,159,985 2,991,141
Lord Abbett Mid-Cap Value A 385,617 436,880
PIMCO Funds Total Return Fund Admin 1,591,121 1,561,024
Royce Low-Priced Stock 290,754 367,399
Templeton Funds Foreign Fund R 940,605 1,232,589
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12,374,786 16,781,143
Participant Loans
-----------------
Various Participants Interest rates range from 5.00%
to 10.50%, can borrow up to 50%
of account balance, repayment
terms range from 5 to 15 years,
secured by vested account balance 0 183,216
----------- -----------
$15,354,216 $20,558,272
=========== ===========
* Identifies the party as a "Party in Interest".
** Includes both nonparticipant directed and participant directed funds.
- 16 -