UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
[
X
]
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
o
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____________
to ____________
Commission file number:
001-10608
A.
Full title of the plans and address of the plans, if different from that of the
issuer named below:
Florida Public Utilities Company 401(K) Plan
B.
Name of issuer of the securities held pursuant to the plans and the address of
its principal executive office:
Florida Public Utilities Company
401 South Dixie Highway
West Palm Beach, FL 33401
FLORIDA PUBLIC UTILITIES COMPANY 401(k) PLAN
TABLE OF CONTENTS
PAGE
INDEPENDENT
AUDITOR'S REPORT
3
FINANCIAL
STATEMENTS AND NOTES FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007:
Statements of Net Assets Available for
Benefits
4
Statements of Changes in Net Assets Available
for Benefits
5
Notes to Financial Statements
.6-12
SUPPLEMENTAL
SCHEDULE AS OF DECEMBER 31, 2008:
Schedule H, Part IV Line 4i
-Assets He
ld
for Investment - Exhibit A
13
SIGNATURE
14
EXHIBIT
15
All
other schedules required by the Department of Labors rules and regulations for
reporting disclosure under the Employee Retirement Income Security Act of 1974
have been omitted, because they are not applicable.
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan
Administrator
Florida Public
Utilities Company 401(k) Plan
West Palm Beach,
Florida
We have
audited the accompanying statements of net assets available for benefits of the
Florida Public Utilities Company 401(k) Plan (the "Plan) as of December 31,
2008 and 2007 and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plans management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits 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. 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 Plans 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 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 Plan as of
December 31, 2008 and 2007 and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Our
audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental
Schedule of Assets Held for Investment as of December 31, 2008 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 Labors Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This supplemental
schedule is the responsibility of the Plans 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.
Templeton &
Company, LLP
Certified Public
Accountants
West Palm Beach,
Florida
June 29, 2009
3
FLORIDA PUBLIC UTILITIES COMPANY 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2008 AND 2007
See
accompanying notes to financial statements.
4
FLORIDA PUBLIC UTILITIES COMPANY 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
See
accompanying notes to financial statements.
5
FLORIDA PUBLIC UTILITIES COMPANY 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
1.
SUMMARY OF PLAN
The
following description of Florida Public Utilities Company (the Company) 401(k)
Plan (the Plan), as amended, is provided for general information only.
Participants should refer to the summary plan description and Plan documents for
a more detailed and complete description of the Plans provisions.
General
- The Plan is a defined contribution plan with the purpose of providing
retirement benefits to employees. This benefit plan was formed for all employees
who have met the eligibility requirements, which are generally attaining age
twenty-one and providing three months of continuous service. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Employee
Contributions
- Plan participants may elect to contribute 1% to 100% of
their pre-taxed compensation up to the maximum allowed by the Internal Revenue
Code (IRS) after attaining age 21 years and completing three months of
eligibility service. If participants are going to be age 50 or older by
the end of the calendar year, they may make Catch-Up Deferral Contributions that
exceed the IRS limit, but cannot exceed the Catch-Up Limit in effect for that
year.
Annually,
the Employer increases the employees contribution percentage by 1% each July 1
if the employees contribution is less than 6% of employee compensation.
This provision does not apply to any eligible employee who makes an affirmative
election against the increase.
Employer
Contributions
Employees attaining 21 years of age and six months of
continuous service are eligible to participate in the Plan and make voluntary
contributions. The Company makes matching contributions of 100% of an
employees contributions up to 2% of the employees compensation and 50% of an
employees contributions exceeding 2% up to 6% of an employees
compensation. The Company does not match contributions exceeding 6% of an
employees compensation.
Subsequent
Event -
During the fourth quarter of 2009, the
Plan Sponsor expects to merge with Chesapeake Utilities Company. The Plan
will either be continued at the wholly owned subsidiary level or rolled into the
Chesapeake Utilities Company plan. The Plan Sponsor is drafting a Plan
amendment that will shorten the vesting period and beginning period of a
match.
Participant
Accounts
- Plan participants have investment control over the funds that
have been deducted from their compensation and such amounts are always fully
vested. Contributions to the Plan are invested at participants discretion in
separate equity and fixed income funds. Beginning December 1, 2008, participants
can also elect to invest in a self-directed brokerage account. Each
participants account is increased by the participants contributions, the
Companys matching contribution, if applicable, prior plan rollovers and
investment earnings, and is decreased by any benefit payments or withdrawals,
investment losses and administrative expenses.
Investments
- Participants direct the investments of their contributions into various
investment options offered by the Plan.
Vesting
- Participants become vested in the employer contributions and their related
investment earnings or losses according to the following schedule:
|
|
Years of Service
|
Vested Percent
|
1
|
0%
|
2
|
0%
|
3
|
100%
|
Employer
contributions may also automatically become fully vested upon reaching the
Plan's normal retirement age, death or disability.
Forfeitures
- Forfeitures are created when participants terminate employment before becoming
fully vested in Companys contributions. Forfeited amounts are applied to reduce
subsequent contributions by the Employer as provided in the Plan. There were no
material forfeitures under the Plan during the years ended December 31, 2008 and
2007.
Participant
Loans Receivable
- Participants may borrow from their Plan accounts a
minimum of $1,000 up to a maximum of $50,000 or 50% of their vested account
balance. The loans are secured by the balance in the participants account and
are payable over a 1 to 5 year period and bear interest at rates equal to the
prime rate plus one percent (1%) as determined monthly by the Plan
administrator.
Payment
of Benefits
- On termination of service due to death, disability or
retirement, a participant may elect to receive either a lump-sum amount equal to
the value of the participants vested interest in his or her account, or monthly
distributions. Employees at age 59 ½ may begin to receive lump-sum or monthly
distributions from their account, after retirement or while still employed,
without having to pay the IRS early withdrawal penalty, currently at 10%. For
termination of service due to other reasons, a participant may receive the value
of the vested interest in his or her account as a lump-sum distribution.
Plan
Amendment
- Effective December 1, 2008, the Plan was amended to discontinue
the Florida Public Utilities Company investment option. Additionally, the
Plan was amended to include a self-directed brokerage account investment option
starting December 1, 2008. There were no amounts invested in the
self-directed brokerage accounts at December 31, 2008.
2.
SUMMARY OF ACCOUNTING POLICIES
The
following is a summary of significant accounting policies followed by the
Plan:
Basis
of Accounting
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America.
Use
of Estimates in the Preparation of Financial Statements
- 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 increases and decreases in net assets
during the period. Actual results could differ from those estimates.
Investment
Valuation and Income Recognition
- Investments are stated at their fair
value based on quoted market prices or estimated fair value except for its
benefit-responsive investment contract which is valued at contract value (see
Note 5). Accordingly, net appreciation and depreciation in the fair value of
investments are recorded in the accompanying financial statements. Purchases and
sales of securities are recorded on a trade-date basis. Investment income is
recorded on an accrual basis. Participant loans are valued at their outstanding
loan balances, which approximate fair value.
As
required by the
Financial Accounting Standards Board issued FASB Staff
Position Nos. 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 defined contribution
plans 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.
As
required by the FSP, the statements of net assets available for benefits
presents the fair value of the investment contracts as well as the adjustment of
the fully benefit-responsive investment contracts from fair value to contract
value. The statements of changes in net assets available for benefits are
prepared on a contract value basis.
Administrative
Expenses
- In accordance with the Administrative Services Agreement,
expenses may be paid by the Plan Sponsor or deducted from participant account
balances. For the years ended December 31, 2008 and 2007, Plan expenses that
were deducted from participant account balances and shown as expenses were
$4,415 and $2,784, respectively. Certain Plan expenses, also referred to as
administrative expenses, such as annual audit fees, are paid by the Plan Sponsor
and are not included in these financial statements.
Payment
of Benefits -
Benefit payments to participants are recorded upon
distribution.
New
Accounting Pronouncements
- In September 2006, Statement of Financial
Accounting Standards No. 157,
Fair Value Measurements
(FAS 157), was
issued and is effective for fiscal years beginning after November 15, 2007. FAS
157, defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. See Note 6 for FAS 157
disclosures.
3.
INVESTMENTS
Investments
that represent more than 5% of Plan assets at December 31, 2008 and 2007 are as
follows:
During
2008 and 2007, the Plans investments (including gains and losses on investments
bought and sold as well as held during the year) appreciated (depreciated) in
value by ($3,182,057) and $561,401, respectively, as follows:
4.
PARTY IN INTEREST TRANSACTIONS
As
of December 31, 2007, certain Plan investments consisted of shares of common
stock of Florida Public Utilities Company with a fair market value of $234,671.
There were no Plan investments in Florida Public Utilities Company stock at
December 31, 2008.
Certain
Plan investments are shares of mutual funds managed by MassMutual, the current
contract record keeper as defined by the Plan; therefore, these transactions
qualify as party-in-interest transactions. Additionally, fees for the investment
management services are paid by the Company.
5.
INVESTMENT CONTRACT WITH INSURANCE COMPANY
In
2005, the Plan entered into an investment contract with Massachusetts Mutual
Life Insurance Company (MassMutual). MassMutual maintains the contributions in
a general account. The account is credited with earnings on the underlying
investments and charged for participant withdrawals and administrative expenses.
The guaranteed investment contract issuer is contractually obligated to
repay the principal and a specified interest rate that is guaranteed to the
Plan.
Because
the guaranteed investment contract is fully benefit-responsive, contract value
is the relevant measurement attribute for that portion of the net assets
available for benefits attributable to the guaranteed investment contract.
Contract value, as reported to the Plan by MassMutual, represents
contributions made under the contract, plus earnings, less participant
withdrawals and administrative expenses. Participants may ordinarily
direct the withdrawal or transfer of all or a portion of their investment at
contract value.
There
are no reserves against contract value for credit risk of the contract issuer or
otherwise. The crediting interest rate is based on a formula agreed upon
with the issuer, but may not be less than zero percent. Interest rates are
reviewed for resetting at least semi-annually.
Certain
events, such as the premature termination of the contract by the Plan or the
termination of the Plan, would limit the Plans ability to transact at contract
value with MassMutual. The Plan administrator believes the occurrence of
such events that would also limit the Plans ability to transact at contract
value with the Plan participants is not probable.
MassMutual
is required to hold reserves in an amount at least equal to the minimum required
by law. The fair value of the guaranteed investment contract at December
31, 2008 and 2007 was $2,699,988 and $1,528,225, respectively. MassMutual
has the right to fully or partially terminate the contract upon the occurrence
of certain events specified in the investment agreement. The average yield
and crediting interest rate on the contract at December 31, 2008 and 2007 was
4.30% and 4.12%, respectively.
6.
FAIR VALUE MEASUREMENTS
SFAS
No. 157 establishes 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 SFAS No. 157 are described below:
Level
1
Inputs
to the valuation methodology are unadjusted quoted prices for identical assets
or liabilities in active markets.
Level
2
Inputs
to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument.
Level
3
Inputs
to the valuation methodology are unobservable and significant to the fair value
measurement.
A
financial instrument's level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value measurement.
The
following table sets forth by level, within the fair value hierarchy, the Plan's
investments at fair value as of December 31, 2008.
The
table below sets forth a summary of changes in the fair value of the Plans
Level 3 investments for the year ended December 31, 2008.
7.
PLAN TERMINATION
Although
the Company has not expressed any intent to terminate the Plan, it has the right
to discontinue contributions and terminate the Plan subject to the Employee
Retirement Income Security Act (ERISA) of 1974. In the event the Plan is
terminated, participants would become 100% vested in their employer
contributions.
8.
RECONCILIATION TO FORM 5500
The
following is a reconciliation of net assets available for benefits per the
financial statements to Form 5500 for the years ended December 31, 2008 and
2007:
9.
TAX STATUS
The
Plan obtained its last determination letter on November 25, 2003, in which the
Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code. The
Plan has been amended since receiving the determination letter; however, the
Company, MassMutual, and the Plan administrator believe that the Plan is
currently designed and operating in compliance with the applicable requirements
of the Internal Revenue Code.
10.
REFUNDS OF EXCESS CONTRIBUTIONS
During
2007, the Plan received contributions from participants in excess of Plan and
IRS limitations. Such amounts were refunded in 2008.
11.
RISKS AND UNCERTAINTIES
The
Plan provides for various investment options. Investment securities are exposed
to various risks, such as interest rate, credit and overall market volatility.
Due to the level of risk associated with certain investment securities and the
level of uncertainty related to changes in the value of investment securities,
it is reasonably possible that changes in risks in the near term could
materially affect participants account balances and the amounts reported in the
statements of net assets available for benefits and the changes in net assets
available for benefits.