Feed to the latest filings at the SEC
Date Filed : Jun 07, 2017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Forthe fiscal year ended December 31, 2016
Commission file number 1-8858
UNITIL CORPORATION TAX DEFERRED SAVINGS AND INVESTMENT PLAN
6Liberty Lane West, Hampton, New Hampshire 03842-1720
Financial Statements and
Report of Independent
RegisteredPublic Accounting Firm
Savings andInvestment Plan
December 31, 2016 and 2015
C O N T E N T S
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS - DECEMBER 31, 2016 AND 2015
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - YEAR ENDED DECEMBER 31, 2016
NOTES TO FINANCIAL STATEMENTS
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR) AS OF DECEMBER 31, 2016
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm
To the Members of the Unitil Corporation 401(k) Plan Committee and the Plan Administrator of the Unitil Corporation Tax Deferred Savings and Investment Plan:
We have audited the accompanying statements of net assets available for benefits of the Unitil Corporation Tax Deferred Savings and Investment Plan (thePlan) as of December 31, 2016 and 2015, and the related statement of changes in net assets available for benefits for the year ended December 31, 2016. These financial statements are the responsibility of the Plansmanagement. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes 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 theoverall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statementsreferred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2016 and 2015, and the changes in net assets available for benefits for the year ended December 31, 2016, inconformity with accounting principles generally accepted in the United States of America.
The supplemental information in the accompanying schedule ofassets (held at end of year) as of December 31, 2016 has been subjected to audit procedures performed in conjunction with the audit of the Plans financial statements. The supplemental information is the responsibility of the Plansmanagement. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness andaccuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedules, we evaluated whether the supplemental information, including its form and content, ispresented in conformity with the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated in all materialrespects in relation to the basic financial statements taken as a whole.
/s/ Caron & Bletzer, PLLC
June 7, 2017
Unitil Corporation Tax Deferred Savings and Investment Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
Investments at Fair Value
Investments at Contract Value
Notes Receivable from Participants
Net Assets Available for Benefits
(The accompanying notes are an integral part of these financial statements.)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the year ended December 31,
Additions to net assets attributed to:
Net appreciation in fair value of investments
Interest and dividends
Total investment income
Interest on notes receivable from participants
Deductions from net assets attributed to:
Benefits paid to participants
Net assets available for benefits:
Beginning of year
End of year
December 31, 2016 and 2015
NOTE A - DESCRIPTIONOF PLAN
The following description of the Unitil Corporation (Unitil or the Company) Tax Deferred Savings and Investment Plan(Plan or 401(k) Plan) provides only general information. Participants should refer to the Plan Document for a more complete description of the Plans provisions.
The Plan is a defined contribution plan coveringall employees of the Company and its wholly-owned subsidiaries Unitil Service Corp., Unitil Energy Systems, Inc., Fitchburg Gas and Electric Light Company, Northern Utilities, Inc. (Northern Utilities), Granite State Gas Transmission,Inc. (Granite State) and Usource L.L.C. (Usource) (collectively, the subsidiaries), who satisfy the eligibility requirements. The Company has engaged New York Life Trust Company (New York Life orTrustee) as the trustee of the Plan. Effective April 14, 2015, John Hancock Retirement Plan Services LLC (JHRPS) acquired the New York Life Retirement Plan Services unit of New York Life Investment Management, LLC(NYLIM). New York Life remained the trustee of the plan until September 1, 2015, at which time the plan sponsor appointed John Hancock Trust Company LLC (John Hancock) as the trustee. The Plan is subject to theprovisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (the Code).
ThePlans effective date is July 1, 1985. The Plan was amended and restated effective January 1, 2015 to comply with current federal regulations and to incorporate all previous amendments.
Employees are eligible to participate in thePlan on the first of the month following:
Participants may contribute from 1% to 85% of their compensation, as defined by the Plan Document or as limited by the Code, on a pre-tax and/or after-tax basis. Participants may elect to apply the deferral percentage to either (1) base pay, as defined by the Plan Document, or (2) total payincluding bonuses, commissions, incentive, overtime and all other forms of premium pay.
Employees of Northern Utilities who are members of the UnitedSteelworkers (USW) Local 12012-6 who elected to remain in the existing pension plan, may contribute from 1% to 75% of their compensation, as defined by the Plan Document or as limited by the Code,on a pre-tax and/or after-tax basis. As of January 1, 2015, these employees may contribute from 1% to 85% of their compensation, as defined by the Plan Document,which, as noted above, was amended and restated as of January 1, 2015.
Participants who are age 50 or will turn age 50 by the end of the Plan year (December 31) may be eligible tomake catch-up contributions, as defined by the Plan Document and the Code.
Participants may also makerollover contributions into the Plan from other qualified plans.
New employees are automatically enrolled in the 401(k) Plan following the completion of1,000 hours of service, with the automatic employee contribution rate of 3%. This contribution rate will automatically increase by 1% on January 1st of each year until theemployees contribution is 10% of pay. Employees may elect to opt-out of the automatic enrollment and/or automatic increase features provided by the enhanced Plan benefits.
The Company matches participantcontributions on a dollar-for-dollar basis, up to the first 3% percent of their eligible compensation, as defined by the Plan Document, except as noted below. Overtimepay, commissions and other forms of premium pay are not included in the definition of compensation eligible for matching purposes.
For non-union employees who are hired on or after January 1, 2010, and for non-union employees who elected to move from the Companys existing Pension Plan and accept afrozen pension benefit, the Plan provides enhanced Plan benefits including the Company contributing 4% of eligible compensation, as defined by the Plan, each year, regardless of whether or not the non-unionemployee elects to contribute to the 401(k) Plan. The Company also matches 100% of these employees elective deferrals up to 6% of compensation.
Effective June 1, 2014, for employees of Northern Utilities who are members of USW Local 12012-6, the Companymatch increased from 50% of an employees contributions up to 5%, to 100% of the first 3% of their contributions, as defined by the Plan Document. For those USW Local 12012-6 members who are hired on orafter January 1, 2011, and for USW Local 12012-6 members who elected to move from the Companys existing Pension Plan and accept a frozen pension benefit, the Plan provides for enhanced Plan benefitsincluding the Company matching employee elective deferrals up to 6% of base pay and the Company contributing 4% of base pay each year, regardless of whether the employee elects to contribute to the 401(k) Plan.
For those Utility Workers Union of America (UWUA) Local 341 members who are hired on or after April 1, 2012 the Plan provides enhanced Planbenefits including the Company matching employee elective deferrals up to 6% of base pay and the Company contributing 4% of base pay each year, regardless of whether the employee elects to contribute to the 401(k) Plan.
For those International Brotherhood of Electrical Workers (IBEW) members who are hired on or after June 1, 2012, and for IBEW members whoelected to move from the Companys existing Pension Plan and accept a frozen pension benefit, the Plan provides enhanced Plan benefits including the Company matching employee elective deferrals up to 6% of base pay and the Company contributing4% of base pay each year, regardless of whether the employee elects to contribute to the 401(k) Plan.
For those UWUA - Local B340 members who are hired on or after June 1, 2013, the Plan provides enhancedPlan benefits including the Company matching employee elective deferrals up to 6% of base pay and the Company contributing 4% of base pay each year, regardless of whether the employee elects to contribute to the 401(k) plan.
Each participants account iscredited with the participants contribution and allocations of (a) the Companys contribution and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined by the Plan Document. Eachparticipants account is charged for the investment management fees charged by each mutual fund. Investment management fees are netted against the earnings of each fund through each funds expense ratio. The benefit to which a participantis entitled is the benefit that can be provided from the participants vested account.
Participants are immediately vested in their contributions and rollover contributions plus actual earnings thereon. For employees hired prior to the closing ofthe pension plan, these employees were vested after three years of credited service. By the end of 2015, all such employees were 100% vested.
Employeeswho are receiving the enhanced Plan benefits are always 100% vested in all employee and employer contributions.
Participants may borrow from their account balances a minimum of $1,000 up to a maximum equal to the lesser of $50,000, reduced by the highestoutstanding loan balance during the preceding twelve month period, or 50% of their vested account balance. Loan terms range from 1-5 years or up to 15 years for the purchase of a primary residence. The loansare secured by the balance in the participants account and bear interest at a rate that is fixed at the origination of the loan at the then prime rate plus one percent (1%). Principal and interest is paid ratably through payroll deductions. Asof December 31, 2016, there are 227 loans to participants, maturing from 2017 to 2031 with interest rates ranging between 4.25% and 7.50%.
Payment of Benefits
On termination of service due todeath, 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, partial distribution of anyportion of the account balance, or annual installments over a fixed number of calendar quarters or years. In-service distributions and hardship withdrawals are available to participants in accordance with theprovisions of the Plan. Payments are generally received in cash. Participants may elect to receive in-kind distributions of employer securities.
One of the Plans investment options is the Unitil Corporation Stock Fund, described below (comprised of Company shares and a money market fund). Whenreceiving payment of benefits, a participant invested in the Unitil Corporation Stock Fund may elect to receive whole shares of stock (i.e. in-kind distributions), with any fractional shares, and the cash andcash equivalent portions of the underlying stock account, being distributed in cash. In 2016, the Plan had no In-Kind distributions.
A participant who terminates his or heremployment prior to becoming eligible for benefits and does not have a 100% vested right to Company contributions, forfeits the amounts not vested. Such forfeited amounts are used to reduce future Company contributions and pay Plan administrativeexpenses. There were no forfeitures used to reduce Company contributions in 2016. There were no unallocated forfeited amounts available to reduce future Company contributions at December 31, 2016 and 2015.
The Plan offers thirty investmentportfolio or fund options consisting of registered investment companies (mutual funds), one pooled separate account (New York Life Anchor Account Stable Value Fund) and the Unitil Corporation Stock Fund, described below (comprised of Companyshares and a money market fund). Participants may change their investment options daily, and all investments within the Plan are participant-directed.
Unitil Corporation Stock Fund (Unitil Corporation, no par value common stock)
The Unitil Corporation Stock Fund (Stock Fund) is set up to hold common shares for the participants of the Plan and maintains liquidity in cash andcash equivalents to facilitate the timely settlement of participant transactions. Participants may allocate or withdraw their account balances between this fund and other funds without restrictions. At both December 31, 2016 and 2015, the StockFund had approximately 3% in cash and cash equivalents and 97% in Company stock.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Planare prepared under the accrual basis in accordance with accounting principles generally accepted in the United States of America (US GAAP).
The Plan has evaluated all events ortransactions through the date of this filing. During this period, there were no material subsequent events which impacted the Plans financial statements.
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Accordingly, actual results may differ from those estimates.
Investment Valuation and Income Recognition
Registeredinvestment companies (mutual funds) and money market funds are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. Investments in the New York LifeStable Value Fund are valued at contract value, based on information provided by the trustee. (See Note F). The Unitil Corporation Stock Fund is stated at fair value as determined by quoted market prices of both Unitil common stock and cashequivalents held in the fund.
Interest income is recorded when earned. Dividends are recorded on the ex-dividenddate. The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net appreciation (depreciation) in the fair value of investments, which consists of the realized gains or losses and the unrealized appreciation(depreciation) on those investments.
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent notes receivable fromparticipants are recorded as distributions based on the terms of the Plan document.
Benefit payments to participants are recorded when paid.
Certain Plan expenses are paid by the Companyas provided in the Administration Agreement between the Company and JHRPS. Other Plan expenses are paid by the participants through the investment management fees charged by each mutual fund. Investment management fees are netted against theearnings of each fund through each funds expense ratio. A portion of the expense ratio is paid to JHRPS to cover Plan administration expenses. If the Plans share of those fees exceeds the amount that is required by JHRPS to perform itsobligations as record-keeper, the excess fees are returned to the Plan and are available to pay future Plan expenses. If the excess fees are not used for additional Plan expenses by the end of the quarter following the calendar year that they weregenerated, JHRPS is directed by Unitil to reallocate the excess fees back to participant accounts on a pro rata basis.
NOTE C RISKS AND UNCERTAINTIES
The Plan provides for various investment options in any combination of stocks, fixed income securities, mutual funds and other 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 reasonably possible that changes in the values of investment securitieswill occur in the near term and that such changes could materially affect participants account balances and the amount reported in the Statements of Net Assets Available for Benefits.
NOTE D - PLAN TERMINATION
Although it has not expressed anyintent to do so, the Company has the right under the Plan to terminate the Plan at any time subject to the provisions of ERISA with respect to its employees by a written resolution with a copy delivered to the Plans trustee. In the event of aPlan termination, participants would become fully vested in the balance of their accounts and the Plan assets would be distributed in accordance with the terms of the Plan Document.
NOTE E TAX STATUS
The Internal Revenue Service(IRS) has determined and informed the Company by a letter dated September 29, 2016 that the Plan, including amendments made through October 15, 2015, and related trust are designed in accordance with applicable sections of theCode.
NOTE F NEW YORK LIFE STABLE VALUE FUND
Theinvestment in the Stable Value Fund is a contractual account with New York Life. New York Life maintains the Plans contributions in a separate account. The account is credited with earnings on the underlying investments and charged forparticipant withdrawals and administrative expenses. The investment contract issuer, New York Life, is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the Plan.
As described in Note B, because the investment contract is fully benefit-responsive, contract value is the relevant measurement attribute for that portion ofthe net assets available for benefits attributable to the investment contract. As such, the Statements of Net Assets Available for Benefits presents the New York Life Stable Value Fund at contract value. Participants may ordinarily direct thewithdrawal or transfer of all or a portion of their investments at contract value.
Certain events could limit the ability of the Plan to transact atcontract value with the issuer. Such events include the following: (1) total or partial Plan termination; (2) changes to the Plans prohibition on competing investment options; (3) mergers; (4) spin-offs; (5) lay-offs; (6) early retirement incentive programs; (7) sales or closings of all or part of a participating plan sponsors operations; (8) bankruptcy; (9) receivership; or (10) thefailure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The Plan administrator does not believe that the occurrence of any such event, which would limit the Plansability to transact at contract value with participants, is probable.
NOTE G FAIR VALUE OF PLAN ASSETS
The Plan follows the guidance set forth by the FASB for reporting fair value of Plan investments. The FASB guidance establishes a three-tier fair valuehierarchy, which prioritizes the inputs used in measuring fair value as follows:
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, thedetermination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instruments level within the fairvalue hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Fair value is a market-based measureconsidered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Companys own assumptions are set to reflect those that market participantswould use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observabilityof prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.
There have been no changes in the valuation techniques used during the current period.
Registered Investment Companies
These securities, consisting of mutual funds, are valued based on quoted prices from the market. These securities are categorized inLevel 1 as they are actively traded and no valuation adjustments have been applied.
Unitil Corporation Stock Fund
This fund includes publicly traded common stock of Unitil Corporation valued at quoted prices available on the New York Stock Exchange(categorized as Level 1) as well as cash and cash equivalents held in the PIMCO Money Market Fund. The PIMCO Money Market Fund is categorized as Level 1 as it is actively traded and no valuation adjustments have been applied.
Assets measured at fair value on a recurring basis as of December 31, 2016 are as follows:
Registered Investment Companies
Common Stock Fund
Total Investments at Fair Value
Assets measured at fair value on a recurring basis as of December 31, 2015 are as follows:
NOTE H - PARTY-IN-INTERESTTRANSACTIONS
Certain Plan investments such as shares of registered investment companies in the Mainstay fund family and the New York Life Stable ValueFund are managed by affiliates of New York Life Trust Company, which was the trustee of the Plan until September 1, 2015 (See Note A), and therefore, these transactions qualify asparty-in-interest transactions as that term is defined in Section 3(14) of ERISA. Also included in the Plans assets are common shares of Unitil Corporation,the Plans sponsor, and notes receivable from participants. These transactions also qualify as party-in-interest transactions. As of December 31, 2016 and2015, there were 273,398 and 253,837 common shares, respectively, of Unitil Corporation, a gross value of $12,395,865 and $9,466,472, respectively, included in the Plans assets. During the year ended December 31, 2016, the UnitilCorporation common stock included in the Plans assets appreciated by $2,548,907.
Employer Identification Number 02-0381573
Plan Number 002
SCHEDULE H, LINE 4i SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2016
Description of Investment IncludingMaturity Date, Rate of Interest, Collateral,Par or MaturityValue
Lessor or Similar Party
Investments at Fair Value:
Growth Fund of America
Invesco Growth and Income Fund
American Balanced Fund
MainStay S&P 500 Index Fund
American Euro Pacific Growth Fund
PIMCO Real Return Fund Admin
Dodge & Cox Income Fund
Jennison Small Company Fund Z
JP Morgan Mid Cap Value Fund
Mainstay High Yield Corporate Bond Fund
Fidelity Advisor Mid Cap II (Inst)
Delaware Small Value Fund A
BlackRock LifePath Retirement Fund
BlackRock LifePath 2020 Fund
BlackRock LifePath 2025 Fund
BlackRock LifePath 2030 Fund
BlackRock LifePath 2035 Fund
BlackRock LifePath 2040 Fund
BlackRock LifePath 2045 Fund
BlackRock LifePath 2050 Fund
BlackRock LifePath 2055 Fund
Loomis Sayles Core Plus Bond Fund A
Dreyfus Appreciation Fund
Oppenheimer Developing Markets Fund A
MFS International Value Fund A
Cohen & Steers Institutional Realty Shares
Columbia Acorn International Fund Z
PIMCO Money Market Fund Admin.
Unitil Corporation Common Stock
Investments at Contract Value:
New York Life Stable Value Fund
Total Investments on Financial Statements
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly causedthis annual report to be signed on its behalf by the undersigned hereunto duly authorized.
UNITIL CORPORATION TAX DEFERRED SAVINGS AND INVESTMENT PLAN
/s/ Mark H. Collin