UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended DECEMBER 31, 2008
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 Supplemental Schedule
December 31, 2008 and 2007
(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 | 1 |
| |
Statements of Net Assets Available for Plan Benefits, December 31, 2008 and 2007 | 2 |
| |
Statements of Changes in Net Assets Available for Plan Benefits, Years Ended December 31, 2008 and 2007 | 3 |
| |
Notes to Financial Statements, December 31, 2008 and 2007 | 4 |
| |
Supplemental Schedule | |
| |
Schedule H, Line 4i – Schedule of Assets (Held at End of Year), December 31, 2008 | 10 |
The Plan Administrator
RehabCare Group, Inc. 401(k) Employee Savings Plan:
We have audited the accompanying statements of net assets available for plan benefits of the RehabCare Group, Inc. 401(k) Employee Savings Plan (the Plan) as of December 31, 2008 and 2007, and the related statements of changes in net 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. 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 plan benefits of the RehabCare Group, Inc. 401(k) Employee Savings Plan as of December 31, 2008 and 2007, and the changes in its net assets available for plan benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
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 at end of year) as of December 31, 2008 is presented for purposes 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. The 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.
/s/ KPMG LLP
St. Louis, Missouri
June 17, 2009
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2008 and 2007
| | | 2008 | | | | 2007 | |
Assets: | | | | | | | | |
Investments, at fair value: | | | | | | | | |
Cash and cash equivalents | | $ | 9,146,433 | | | $ | 7,620,858 | |
Mutual funds | | | 57,860,527 | | | | 76,738,130 | |
RehabCare Group Inc. common stock | | | 2,283,551 | | | | 3,235,691 | |
Self-directed brokerage accounts | | | 2,184,680 | | | | 2,626,999 | |
Common collective trusts | | | 11,165,074 | | | | 12,381,440 | |
Other investments | | | 177 | | | | 992 | |
Total investments, at fair value | | | 82,640,442 | | | | 102,604,110 | |
| | | | | | | | |
Participant loans | | | 1,200,344 | | | | 889,700 | |
| | | | | | | | |
Receivables: | | | | | | | | |
Participants’ contributions | | | 403,855 | | | | 542,697 | |
Employer contribution | | | 152,949 | | | | 144,615 | |
Accrued interest | | | 47,606 | | | | 33,427 | |
Total receivables | | | 604,410 | | | | 720,739 | |
Net assets available for plan benefits | | $ | 84,445,196 | | | $ | 104,214,549 | |
See accompanying notes to financial statements.
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years Ended December 31, 2008 and 2007
| | | 2008 | | | | 2007 | |
Investment income (loss): | | | | | | | | |
RehabCare Group Inc. common stock realized gains (losses), net | | $ | (170,957 | ) | | $ | 43,711 | |
Other investment realized gains (losses), net | | | (2,929,493 | ) | | | 1,066,503 | |
Unrealized appreciation (depreciation), net | | | (28,720,558 | ) | | | (1,031,674 | ) |
Total appreciation (depreciation) of investments, net | | | (31,821,008 | ) | | | 78,540 | |
Interest and dividends: | | | | | | | | |
Cash dividends | | | 1,305,317 | | | | 5,289,470 | |
Interest | | | 747,130 | | | | 713,849 | |
Other income (loss) | | | (410,729 | ) | | | 241,020 | |
Total investment income (loss) | | | (30,179,290 | ) | | | 6,322,879 | |
| | | | | | | | |
Contributions: | | | | | | | | |
Participants | | | 15,833,134 | | | | 15,184,158 | |
Employer | | | 4,000,489 | | | | 3,707,124 | |
Rollover of plan assets from previous employers | | | 1,373,816 | | | | 1,552,716 | |
Total contributions | | | 21,207,439 | | | | 20,443,998 | |
| | | | | | | | |
Deductions: | | | | | | | | |
Benefits paid to participants | | | (10,545,686 | ) | | | (11,949,423 | ) |
Administrative fees | | | (251,816 | ) | | | (22,507 | ) |
Total deductions | | | (10,797,502 | ) | | | (11,971,930 | ) |
Net change in assets available for plan benefits | | | (19,769,353 | ) | | | 14,794,947 | |
| | | | | | | | |
Transfers: | | | | | | | | |
Transfers of assets to the Plan | | | — | | | | 18,789,118 | |
| | | | | | | | |
Net assets available for plan benefits: | | | | | | | | |
Beginning of year | | | 104,214,549 | | | | 70,630,484 | |
End of year | | $ | 84,445,196 | | | $ | 104,214,549 | |
See accompanying notes to financial statements.
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2008 and 2007
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.
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, 2007, the Plan was restated to incorporate prior amendments. No significant amendments were made to the Plan in 2008. The Plan is a defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
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.
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 ($15,500 in both 2008 and 2007). 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, 2008 and 2007, the Company’s discretionary contribution was 50% of the first 4% of a participant’s compensation contributed to the Plan.
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. Each participant may direct their account balance into one or more of the 17 investment options offered by the Plan or a self-directed investment option. The self-directed investment option allows the participant to direct contributions to be invested in any investment permitted under the Plan, including mutual funds, common stock and bonds.
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:
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2008 and 2007
| | Vested |
Number of years of service | | percentage |
Less than 1 year of service | | 0% |
1 or more years of service | | 100% |
| | |
The term “year of service” in the above table means any calendar year in which the participant completes at least 1,000 hours of service.
The Plan has a loan program for its participants. When added to the outstanding balance of all other loans to a participant, a loan may not exceed the lesser of: (a) 50% of the vested portion of their account balance or (b) $50,000, reduced by the excess of the highest outstanding loan balance during the preceding one-year period over the outstanding loan balance 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 9.3% as of December 31, 2008.
| 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 |
Investment management fees and loan administration fees are charged directly to the participants’ accounts. Effective January 1, 2008, plan administration fees are also charged to the participants’ accounts. Total fees paid by the Plan amounted to $251,816 and $22,507 for the years ended December 31, 2008 and 2007, respectively.
| Participation Forfeitures |
Amounts representing forfeitures are periodically used to reduce the Company’s future contributions. For the years ended December 31, 2008 and 2007, forfeited nonvested amounts totaled approximately $54,000 and $41,000, respectively.
(2) | Summary of Significant Accounting Policies |
The accompanying financial statements have been prepared on the accrual basis of accounting, except for benefits paid to participants, which are recorded when paid. Certain prior year amounts have been reclassified to conform to current year presentation.
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.
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2008 and 2007
| Investment Valuation and Income Recognition |
The Plan’s investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of the Plan’s investments in money market funds (cash equivalents), mutual funds, self-directed brokerage accounts and the Company’s common stock are based on quoted market prices. Investments in common collective trusts are 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.
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 net assets available for plan benefits. Interest income is recorded as earned on the accrual basis.
| Valuation of Participant Loans and Receivables |
Participant loans are recorded at amortized cost, unpaid principal plus accrued interest, which approximates fair value. The carrying values of receivables approximate fair value due to their relatively short-term nature.
The following table presents investments that represent 5% or more of the Plan’s net assets at December 31, 2008 and/or December 31, 2007:
| | 2008 | | 2007 |
Investments at fair value as determined by quoted | | | | |
| market price | | | | |
| | Mutual funds: | | | | |
| | | Columbia Acorn | $ | 6,155,252 | $ | 9,211,580 |
| | | First Eagle Overseas | | 9,327,434 | | 11,197,691 |
| | | Growth Fund of America | | 11,752,922 | | 18,336,541 |
| | | Pimco Total Return Fund | | 10,380,335 | | 8,759,179 |
| | | Schwab S&P 500 Index | | 7,177,100 | | 10,558,525 |
| | | Sound Shore Fund | | 4,784,121 | | 7,709,863 |
| | | JP Morgan Mid Cap Value Select | | 3,714,713 | | 5,753,039 |
| | Money market mutual fund: | | | | |
| | | Schwab Value Advantage Fund | | 9,145,977 | | 7,533,128 |
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2008 and 2007
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, 2008 and 2007:
| | 2008 | | | 2007 | |
Mutual funds | $ | (25,878,717 | ) | $ | (934,781 | ) |
Common stock – RehabCare Group, Inc. | | (1,087,481 | ) | | 1,070,609 | |
Common collective trusts | | (4,854,810 | ) | | (57,288 | ) |
| $ | (31,821,008 | ) | $ | 78,540 | |
| | | | | | |
(4) | Fair Value Measurements |
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“Statement 157”). This statement clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. The Plan adopted Statement 157 effective January 1, 2008. Statement 157 does not require any new fair value measurements, and the adoption of Statement 157 did not have a material impact on the Plan’s financial statements.
The following table sets forth the level within Statement 157’s fair value hierarchy for each of the Plan’s investments, which are measured at fair value on a recurring basis:
| | | | | Fair Value Measurements at December 31, 2008 Using: | |
| | Carrying value at December 31, 2008 | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | |
Cash and cash equivalents | | $ | 9,146,433 | | | $ | 9,146,433 | | | $ | — | | | $ | — | | |
Mutual funds | | | 57,860,527 | | | | 57,860,527 | | | | — | | | | — | | |
RehabCare common stock | | | 2,283,551 | | | | 2,283,551 | | | | — | | | | — | | |
Self-directed brokerage accounts | | | 2,184,680 | | | | 2,184,680 | | | | — | | | | — | | |
Common collective trusts | | | 11,165,074 | | | | — | | | | 11,165,074 | | | | — | | |
Other investments | | | 177 | | | | — | | | | — | | | | 177 | | |
Total investments, at fair value | | $ | 82,640,442 | | | $ | 71,475,191 | | | $ | 11,165,074 | | | $ | 177 | | |
| | | | | | | | | | | | | | | | | |
The 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 is a description of the valuation methodologies used for investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2008 and 2007
Cash and cash equivalents: These investments primarily consist of money market mutual funds, which are valued using the Net Asset Value (NAV) provided by the administrator of the fund. The NAV is a quoted price in an active market and classified within level 1 of the valuation hierarchy.
Mutual funds: These investments are public investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is a quoted price in an active market and classified within level 1 of the valuation hierarchy.
RehabCare common stock: RehabCare common stock is valued at the closing price reported on the New York Stock Exchange and is classified within level 1 of the valuation hierarchy.
Self-directed brokerage accounts: These investments are valued by the trustee based on quoted market prices obtained from national securities exchanges and are classified within level 1 of the valuation hierarchy.
Common collective trusts: These investments are public investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is classified within level 2 of the valuation hierarchy because the NAV’s unit price is quoted on a private market that is not active; however, the unit price is based on underlying investments which are traded on an active market.
The following table sets forth a summary of changes in the fair value of the Plan’s level 3 assets for the year ended December 31, 2008:
| | | Other Investments | | |
Balance, beginning of year | | $ | 992 | | |
Purchases, sales, issuances and settlements (net) | | | (815 | ) | |
Balance, end of year | | $ | 177 | | |
| | | | | |
(5) | 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. 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.
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.
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 2008 and 2007
The Plan obtained its latest determination letter on April 24, 2009, in which the Internal Revenue Service stated the Plan as then designed was in compliance with the applicable requirements of the Internal Revenue Code (IRC). The Company believes that the Plan is designed and currently being operated in compliance with the applicable requirements of the IRC and is, therefore, not subject to federal income taxes under present income tax laws. Therefore, no provision for income taxes has been made in the accompanying financial statements.
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 approximately $18.8 million from the Symphony Health Services 401(k) Plan into the RehabCare Group, Inc. 401(k) Employee Savings Plan.
(9) | 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.
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 statement of net assets available for plan benefits.
REHABCARE GROUP, INC.
401(k) EMPLOYEE SAVINGS PLAN
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2008
(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 |
| | | | | | |
* | Schwab Money Market Fund | | Money market mutual fund | | $ | 456 |
* | Schwab Value Advantage Fund | | Money market mutual fund, 9,145,977 shares | | | 9,145,977 |
* | RehabCare Stock Fund | | Common stock, 150,630 shares | | | 2,283,551 |
| Personal Choice Retirement Accounts | | Self-directed brokerage accounts | | | 2,184,680 |
| Alger Small Cap Growth | | Mutual fund, 81,024 shares | | | 1,249,393 |
| Columbia Acorn | | Mutual fund, 347,558 shares | | | 6,155,252 |
| Davis New York Venture Fund A | | Mutual fund, 88,876 shares | | | 2,099,250 |
| First Eagle Overseas | | Mutual fund, 561,217 shares | | | 9,327,434 |
| Growth Fund of America | | Mutual fund, 581,828 shares | | | 11,752,922 |
| JP Morgan Mid Cap Value Select | | Mutual fund, 240,279 shares | | | 3,714,713 |
| Pimco Total Return Fund | | Mutual fund, 1,023,702 shares | | | 10,380,335 |
* | Schwab S&P 500 | | Mutual fund, 516,710 shares | | | 7,177,100 |
| Sound Shore Fund | | Mutual fund, 210,199 shares | | | 4,784,121 |
| Thornburg International Value | | Mutual fund, 62,758 shares | | | 1,220,007 |
| Cash value of life insurance | | Life insurance contract | | | 177 |
* | Schwab Managed Retirement 2010 | | Common Collective Trust, 89,019 shares | | | 1,087,808 |
* | Schwab Managed Retirement 2020 | | Common Collective Trust, 219,304 shares | | | 2,675,505 |
* | Schwab Managed Retirement 2030 | | Common Collective Trust, 296,381 shares | | | 3,633,633 |
* | Schwab Managed Retirement 2040 | | Common Collective Trust, 275,357 shares | | | 3,329,062 |
* | Schwab Managed Retirement Inc | | Common Collective Trust, 43,472 shares | | | 439,066 |
| Participant loans | | Interest rates range from 4.0% to 9.3%, 260 loans | | | 1,200,344 |
| | | | | $ | 83,840,786 |
* Represents a party-in-interest transaction allowable under ERISA regulations.
See accompanying report of independent registered public accounting firm.
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 17, 2009 | | /s/ jay w. shreiner |
(Date) | | Jay W. Shreiner |
| | Executive Vice President, Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. | | Description |
| | |
23 | | Consent of KPMG LLP dated June 17, 2009 |
| | |