UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
(X) | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended DECEMBER 31, 2006 |
OR
( ) | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ______________ to ______________ |
Commission file number: 0-19294
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
REHABCARE GROUP, INC.
7733 Forsyth Boulevard, 23rd Floor
St. Louis, Missouri 63105
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Financial Statements and Schedules
December 31, 2006 and 2005
(With Report of Independent Registered Public Accounting Firm Thereon)
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Table of Contents
Report of Independent Registered Public Accounting Firm
The Plan Administrator
RehabCare Group, Inc. 401(k) Employee Savings Plan:
We have audited the accompanying statements of assets available for plan benefits of the RehabCare Group, Inc. 401(k) Employee Savings Plan (the Plan) as of December 31, 2006 and 2005, and the related statements of changes in assets available for plan benefits for the years 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 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, 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 assets available for plan benefits of the RehabCare Group, Inc. 401(k) Employee Savings Plan as of December 31, 2006 and 2005, and the changes in its assets available for plan benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of delinquent participant contributions for the year ended December 31, 2006 and supplemental schedule of assets (held at end of year) as of December 31, 2006 are presented for purposes of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
St. Louis, Missouri
June 20, 2007
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Statements of Assets Available for Plan Benefits
December 31, 2006 and 2005
|
|
| 2006 |
|
|
| 2005 |
|
Assets: |
|
|
|
|
|
|
|
|
Investments, at fair value: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 5,287,889 |
|
| $ | 4,537,055 |
|
Mutual funds |
|
| 57,757,648 |
|
|
| 43,700,995 |
|
RehabCare Group Inc. common stock |
|
| 2,074,100 |
|
|
| 2,723,889 |
|
Participant loans |
|
| 556,315 |
|
|
| 395,727 |
|
Self-directed brokerage accounts |
|
| 2,458,595 |
|
|
| 168,295 |
|
Common collective trusts |
|
| 1,944,422 |
|
|
| 121,579 |
|
Other investments |
|
| 1,817 |
|
|
| 2,195 |
|
Total investments |
|
| 70,080,786 |
|
|
| 51,649,735 |
|
|
|
|
|
|
|
|
|
|
Receivables: |
|
|
|
|
|
|
|
|
Participants’ contributions |
|
| 423,103 |
|
|
| 387,704 |
|
Employer contribution |
|
| 102,039 |
|
|
| 95,326 |
|
Accrued interest |
|
| 24,556 |
|
|
| 38,650 |
|
Total receivables |
|
| 549,698 |
|
|
| 521,680 |
|
Assets available for plan benefits |
| $ | 70,630,484 |
|
| $ | 52,171,415 |
|
See accompanying notes to financial statements.
| - 2 - |
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Statements of Changes of Assets Available for Plan Benefits
December 31, 2006 and 2005
|
|
| 2006 |
|
|
| 2005 |
|
Additions: |
|
|
|
|
|
|
|
|
Investment income: |
|
|
|
|
|
|
|
|
RehabCare Group Inc. common stock realized losses |
| $ | (122,548 | ) |
| $ | (125,801 | ) |
Other investment realized gains |
|
| 414,229 |
|
|
| 84,300 |
|
Unrealized appreciation, net |
|
| 2,492,312 |
|
|
| 695,514 |
|
Total appreciation of investments, net |
|
| 2,783,993 |
|
|
| 654,013 |
|
Interest and dividends: |
|
|
|
|
|
|
|
|
Cash dividends |
|
| 2,875,313 |
|
|
| 1,592,505 |
|
Interest |
|
| 490,969 |
|
|
| 238,722 |
|
Total investment income |
|
| 6,150,275 |
|
|
| 2,485,240 |
|
|
|
|
|
|
|
|
|
|
Contributions: |
|
|
|
|
|
|
|
|
Participants |
|
| 10,748,674 |
|
|
| 8,532,895 |
|
Employer |
|
| 2,573,048 |
|
|
| 2,129,214 |
|
Rollover of plan assets from previous employers |
|
| 2,905,447 |
|
|
| 1,158,391 |
|
Total contributions |
|
| 16,227,169 |
|
|
| 11,820,500 |
|
Total additions |
|
| 22,377,444 |
|
|
| 14,305,740 |
|
|
|
|
|
|
|
|
|
|
Deductions: |
|
|
|
|
|
|
|
|
Benefits paid to participants |
|
| 6,153,247 |
|
|
| 5,350,312 |
|
Administrative fees |
|
| 14,463 |
|
|
| 13,609 |
|
Total deductions |
|
| 6,167,710 |
|
|
| 5,363,921 |
|
Net increase in assets available for plan benefits |
|
| 16,209,734 |
|
|
| 8,941,819 |
|
|
|
|
|
|
|
|
|
|
Transfers: |
|
|
|
|
|
|
|
|
Transfers of assets to the Plan |
|
| 2,249,335 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
Assets available for plan benefits: |
|
|
|
|
|
|
|
|
Beginning of year |
|
| 52,171,415 |
|
|
| 43,229,596 |
|
End of year |
| $ | 70,630,484 |
|
| $ | 52,171,415 |
|
See accompanying notes to financial statements.
| - 3 - |
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2006 and 2005
(1) | Plan Description |
The following description of the RehabCare Group, Inc. 401(k) Employee Savings Plan (the Plan) provides only general information. Participants should refer to the plan agreement for a more complete description of the Plan’s provisions.
General
Effective June 1, 1991, RehabCare Group, Inc. (the Company) established the Plan, a defined contribution plan for the benefit of its eligible employees. Effective July 1, 2004, the Plan was restated and thereafter amended by a first amendment, second amendment, third amendment, fourth amendment, fifth amendment, sixth amendment and seventh amendment. The Plan is a defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Eligibility
Effective June 1, 2004, employees are eligible to participate in the Plan on the first day of the month following employment. Prior to June 1, 2004, employees who had attained age 21 were eligible to participate in the Plan on the first day of the month following the completion of one year of employment.
Contributions
Each participant in the Plan may elect to contribute any amount, not to exceed 75% of eligible compensation, to the Plan up to the maximum allowable under current Internal Revenue Service regulations ($15,000 and $14,000 in 2006 and 2005, respectively). Participant contributions under the Plan are exempt from Federal income taxes. Participants may also contribute amounts representing distributions from other qualified retirement plans. The Company may make discretionary contributions to match the participants’ contributions. During the years ended December 31, 2006 and 2005, the Company’s discretionary contribution was 50% of the first 4% of a participant’s compensation contributed to the Plan.
Participant Accounts
Each participant’s account is credited with the participant’s contribution and allocations of (a) the Company’s contribution and (b) Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Each participant is 100% vested in his or her contributions and earnings thereon. The vested percentage of each participant’s Company contribution and earnings thereon is determined in accordance with the following table:
|
| Vested |
Number of years of service |
| percentage |
Less than 1 year of service |
| —% |
1 or more years of service |
| 100% |
- 4 -
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2006 and 2005
The term “year of service” in the preceding table means any calendar year in which the participant completes at least 1,000 hours of service.
Participant Loans
The Plan has a loan program for its participants. The maximum amount a participant may borrow is the lesser of 50% of the vested portion of their account balance or $50,000, reduced by the excess of the highest outstanding loan balance during the preceding one-year period ending on the day before the date on which the loan is made over the outstanding loan balance from the Plan on the date the loan was made. Loans may be outstanding for up to five years. Principal and interest is paid ratably through payroll deductions. The interest rate charged to participants is a fixed rate equal to the prime rate on the date the loan is issued. Any loans outstanding shall become due and payable in full at the end of the calendar quarter following a participant’s termination. The loans are secured by the balance in the participant’s account and bear interest at rates ranging from 4.0% to 9.0% as of December 31, 2006.
Distribution of Plan Benefits
Upon termination of service, each participant may elect to have his or her benefits distributed in either a lump-sum amount or installment payments.
Plan Fees and Commissions
Expenses incurred in the administration and operation of the Plan are paid by the Company, while investment management fees and loan administration fees are charged directly to the participants’ accounts.
Participation Forfeitures
Amounts representing forfeitures are periodically used to reduce the Company’s future contributions. For the years ended December 31, 2006 and 2005, forfeited nonvested accounts totaled approximately $27,000 and $16,000, respectively.
(2) | Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis of accounting, except for benefits paid to participants, which are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
Investment Valuation and Income Recognition
The Plan’s investments in money market funds (cash equivalents) are valued at fair value as reported by the trustee, Schwab Retirement Plan Services, Inc. Investments in mutual funds, self-directed brokerage accounts and the Company’s common stock are stated at fair value, with fair value based on quotations obtained from national securities exchanges. Investments in common collective trusts are
- 5 -
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2006 and 2005
valued at the net asset value as determined using the estimated fair value of the investments in the respective funds on the last day of the Plan year. Participant loans are valued at the unpaid principal balance of the loans, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Dividend income is recorded on the ex-dividend date. Any unrealized appreciation or depreciation for the period is reflected in the statements of changes in assets available for plan benefits. Interest income is recorded as earned on the accrual basis.
(3) | Investments |
The following table presents investments that represent 5% or more of the Plan’s net assets at December 31, 2006 and/or December 31, 2005:
|
| 2006 |
| 2005 | ||||
| Investments at fair value as determined by quoted market price |
|
|
|
| |||
|
| Mutual funds: |
|
|
|
| ||
|
|
| American Balanced Fund | $ | 5,123,800 | $ | 4,278,093 | |
|
|
| Columbia Acorn |
| 7,669,101 |
| 5,839,216 | |
|
|
| First Eagle Overseas |
| 8,092,454 |
| 4,941,258 | |
|
|
| Growth Fund of America |
| 11,973,943 |
| 9,697,300 | |
|
|
| Pimco Total Return Fund |
| 5,802,515 |
| 4,494,285 | |
|
|
| Schwab S&P 500 |
| 10,566,951 |
| 8,671,365 | |
|
|
| Sound Shore Fund |
| 4,896,520 |
| 4,057,698 | |
|
| RehabCare Group, Inc. Common Stock |
| 2,074,100 |
| 2,723,889 | ||
|
| Money market mutual fund: |
|
|
|
| ||
|
|
| Schwab Value Advantage Fund |
| 5,193,706 |
| 4,348,783 |
The following table presents the net appreciation (depreciation) of investments (including investments bought, sold, and held during the year) for the years ended December 31, 2006 and 2005:
|
| 2006 |
|
| 2005 |
|
Mutual funds | $ | 3,392,958 |
| $ | 1,731,190 |
|
Common stock – RehabCare Group, Inc. |
| (723,790 | ) |
| (1,078,197 | ) |
Common Collective Trusts |
| 114,825 |
|
| 1,020 |
|
| $ | 2,783,993 |
| $ | 654,013 |
|
- 6 -
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2006 and 2005
(4) | Related-Party Transactions |
Certain Plan investments are in funds managed by Schwab Retirement Plan Services, Inc. Schwab Retirement Plan Services, Inc. is the trustee, as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for investment administration services amounted to $14,463 and $13,612 for the years ended December 31, 2006 and 2005, respectively. Additionally, Plan investments include shares of RehabCare Group Inc. common stock. RehabCare Group, Inc. is the plan sponsor, as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions. These party-in-interest transactions are allowable under ERISA regulations.
(5) | Plan Termination |
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, all amounts credited to a participant’s deferral account will be fully vested.
(6) | Tax Status |
The Internal Revenue Service has determined and informed the Company by a letter dated March 4, 2003 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, the Plan’s administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.
(7) | Plan Transfers |
Prior to December 2006, the Company maintained a profit sharing plan, which was a defined contribution plan under Section 401(k) of the IRC, for the benefit of eligible Phase 2 Consulting, Inc. (“Phase 2”) employees. Effective December 31, 2006, the Company transferred approximately $2.2 million from the Phase 2 profit sharing plan into the RehabCare Group, Inc. 401(k) Employee Savings Plan. Phase 2 employees are now eligible to participate in the RehabCare Group, Inc. 401(k) Employee Savings Plan.
(8) | 401(k) Employee Savings Plan Committee and Trustees of the Plan |
The Plan provides for a 401(k) committee, chaired by the Company’s chief financial officer, who acts as the plan administrator with representatives from the Company’s finance, human resources, and legal departments. Schwab Retirement Plan Services, Inc. is the trustee for the Plan.
(9) | Risks and Uncertainties |
The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the participants’ account balances and the amounts reported in the statements of assets available for plan benefits.
- 7 -
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2006 and 2005
(10) | Subsequent Event |
Effective April 17, 2007, the Symphony Health Services 401(k) Plan was merged into the RehabCare Group, Inc. 401(k) Employee Savings Plan. On that date, the Company transferred $18,787,894 from the Symphony Health Services 401(k) Plan into the RehabCare Group, Inc. 401(k) Employee Savings Plan.
- 8 -
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Schedule H, Line 4a – Schedule of Delinquent Participant Contributions
Year Ended December 31, 2006
Identity of party involved |
| Relationship to plan, employer or other party-in-interest |
| Description of transaction, including rate of interest |
| Amount on line 4(a) |
| Lost interest |
|
|
|
|
|
|
|
|
|
RehabCare Group, Inc. |
| Plan sponsor |
| 2006 employee deferrals not deposited to Plan in a timely manner. Rate of return was 3.2%. |
| $902 |
| $29 |
There were unintentional delays by the Company in submitting 2006 employee deferrals in the amount of $902. In April 2007, the Company reimbursed the Plan for lost interest in the amount of $29.
See accompanying report of independent registered public accounting firm.
- 9 -
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2006
(a) | (b) Identity of issue, borrower, lessor, or similar party |
| (c) Description of investment including maturity date, rate of interest, collateral, par, or maturity value |
|
| (e) Current value |
|
|
|
|
|
|
|
| Cash |
| Interest-bearing cash |
| $ | 94,103 |
* | Schwab Money Market Fund |
| Money market mutual fund, 80 shares |
|
| 80 |
* | Schwab Value Advantage Fund |
| Money market mutual fund, 5,193,706 shares |
|
| 5,193,706 |
* | RehabCare Stock Fund |
| Common stock, 139,670 shares |
|
| 2,074,100 |
| Personal Choice Retirement Accounts |
| Self-directed brokerage accounts |
|
| 2,458,595 |
| American Balanced Fund |
| Mutual fund, 270,243 shares |
|
| 5,123,800 |
| Columbia Acorn |
| Mutual fund, 258,132 shares |
|
| 7,669,101 |
| Davis New York Venture Fund A |
| Mutual fund, 15,420 shares |
|
| 593,992 |
| First Eagle Overseas |
| Mutual fund, 322,666 shares |
|
| 8,092,454 |
| Growth Fund of America |
| Mutual fund, 368,997 shares |
|
| 11,973,943 |
| JP Morgan Mid Cap Value Select |
| Mutual fund, 116,995 shares |
|
| 3,038,372 |
| Pimco Total Return Fund |
| Mutual fund, 559,009 shares |
|
| 5,802,515 |
* | Schwab S&P 500 |
| Mutual fund, 483,835 shares |
|
| 10,566,951 |
| Sound Shore Fund |
| Mutual fund, 124,943 shares |
|
| 4,896,520 |
| Cash value of life insurance |
| Life insurance contract |
|
| 1,817 |
* | Schwab Managed Retirement 2010 |
| Common Collective Trust, 13,978 shares |
|
| 209,676 |
* | Schwab Managed Retirement 2020 |
| Common Collective Trust, 27,411 shares |
|
| 456,935 |
* | Schwab Managed Retirement 2030 |
| Common Collective Trust, 34,022 shares |
|
| 614,103 |
* | Schwab Managed Retirement 2040 |
| Common Collective Trust, 31,624 shares |
|
| 585,681 |
* | Schwab Managed Retirement Inc |
| Common Collective Trust, 6,992 shares |
|
| 78,027 |
| Participant loans |
| Interest rates range from 4.0% to 9.0%, 124 loans |
|
| 556,315 |
|
|
|
|
| $ | 70,080,786 |
* Represents a party-in-interest transaction allowable under ERISA regulations.
See accompanying report of independent registered public accounting firm.
- 10 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
|
| REHABCARE GROUP, INC. |
|
| 401(k) EMPLOYEE SAVINGS PLAN |
|
| (Name of plan) |
|
|
|
June 22, 2007 |
| /S/ JAY W. SHREINER |
(Date) |
| Jay W. Shreiner |
|
| Senior Vice President, Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
| Description |
|
|
|
23 |
| Consent of KPMG LLP dated June 20, 2007 |
|
|
|
Exhibit 23
Consent of Independent Registered Public Accounting Firm
The Plan Administrator of
RehabCare Group, Inc. 401(k) Employee Savings Plan:
We consent to the incorporation by reference in the registration statement (No. 33-67944) on Form S-8 of RehabCare Group, Inc. 401(k) Employee Savings Plan (the Plan) of our report dated June 20, 2007, with respect to the statements of assets available for plan benefits of the Plan as of December 31, 2006 and 2005; the related statements of changes in assets available for plan benefits for the years then ended; and the related supplemental schedule of delinquent participant contributions for the year ended December 31, 2006 and schedule of assets (held at end of year) as of December 31, 2006, which report appears in the December 31, 2006 annual report on Form 11-K of RehabCare Group, Inc. 401(k) Employee Savings Plan.
/s/ KPMG LLP
St. Louis, Missouri
June 20, 2007