UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 11-K

 

 

or

 

 

Commission file number 033-51670

 

NEIGHBORCARE, INC.

UNION 401(K) PLAN

(Full title of Plan)

 

NEIGHBORCARE, INC.

601 EAST PRATT STREET, THIRD FLOOR

BALTIMORE, MD 21202

 

(Name of issuer of the securities held pursuant to the Plan

and address of its principal executive office)

 

(Former title of Plan if changed from last report)

 

 

NEIGHBORCARE, INC. UNION 401(k) PLAN

 

Financial Statements and Supplemental Schedule

 

December 31, 2003

 

(With Report of Independent Registered Public Accounting Firm Thereon)

 

 

NEIGHBORCARE, INC. UNION 401(k) PLAN

 

Table of Contents

 

Report of Independent Registered Public Accounting Firm
Statement of Net Assets Available for Benefits – December 31, 2003
Statement of Changes in Net Assets Available for Benefits – Period from September 1, 2003 (inception) to December 31, 2003
Notes to Financial Statements
Schedule:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) – December 31, 2003

 

* * * * * * *

 

The other schedules required by Schedule H, Item 4 of the Department of Labor Form 5500, Annual Return/ Report of Employee Benefit Plan, are not applicable and are therefore omitted.

 

 

Report of Independent Registered Public Accounting Firm

 

The Pension Committee and the Participants

NeighborCare, Inc. Union 401(k) Plan:

 

We have audited the accompanying statement of net assets available for benefits of the NeighborCare, Inc. Union 401(k) Plan (the Plan) as of December 31, 2003, and the related statement of changes in net assets available for benefits for the period from September 1, 2003 (inception) to December 31, 2003. 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 audit.

 

We conducted our audit 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 audit provides 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, 2003, and the changes in net assets available for benefits for the period from September 1, 2003 (inception) to December 31, 2003, in conformity with U.S. generally accepted accounting principles.

 

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 at end of year) 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 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

 

June 22, 2004

 

 

NeighborCare, Inc. Union 401(K) Plan

Statement of Net Assets Available for Benefits

December 31, 2003

 

		December 31, 2003
Assets
Investments at fair value		$	1,040,649
Participant loans		164,517
Contributions receivable:
Participants		8,016
Employer		3,375
Net assets available for benefits		1,216,557

 

See accompanying notes

 

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NeighborCare, Inc. Union 401(K) Plan

Statement of Changes in Net Assets Available for Benefits

Period from September 1, 2003 (inception) to December 31, 2003

 

		Year ended December 31 2003
Additions
Net appreciation (depreciation) in fair value of investments		$	42,838
Interest and dividend income		6,580
Participant contributions		45,052
Employer contributions		13,290
Transfers from Genesis Health Ventures Inc. Union Retirement Plan		1,124,155
Total additions		1,231,915
Deductions
Benefits paid to participants		14,356
Administrative expenses		1,002
Total deductions		15,358
Net increase		1,216,557
Net assets available for benefits at beginning of period		—
Net assets available for benefits at end of period		$	1,216,557

 

See accompanying notes

 

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NEIGHBORCARE, INC. UNION 401(k) PLAN

 

Notes to Financial Statements

 

December 31, 2003

 

(1)   Description of the Plan and Other Matters

 

NeighborCare, Inc. (formerly named Genesis Health Ventures, Inc.) (NeighborCare or the Company) was incorporated in May 1985 as a Pennsylvania corporation. On December 1, 2003, the Company completed the distribution of the common stock (the “spin-off”) of Genesis Healthcare Corporation (GHC), previously the Company’s inpatient services division and on December 2, 2003, the Company changed its name to NeighborCare, Inc. The spin-off was effected by way of a pro-rata tax free distribution of the common stock of GHC to holders of NeighborCare’s common stock on December 1, 2003 at a rate of 0.5 shares of GHC stock for each share of NeighborCare, Inc. common stock owned as of October 15, 2003. In contemplation of the spin-off, the Company established the NeighborCare, Inc. Union 401(k) Plan (the Plan) which was effective September 1, 2003.

 

The Plan terms are similar to the terms of the Genesis Health Ventures, Inc. Union Retirement Savings Plan (GHV Plan), which remained with GHC. Participants of the GHV Plan that remained union associates of NeighborCare after the spin-off, became participants of the Plan and their account and loan balances of $1,124,155 were transferred in September 2003.

 

The following description of the Plan provides only general information. Participants should refer to the Plan document for more complete information.

 

(a)   General

 

The Plan is a defined contribution plan for employees of the Company covered by collective bargaining agreements that are eligible to participate in the Plan on the first day of January or July following one year of service. The Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA).

 

Under a trust agreement between the Plan and Wachovia Bank, N.A. (trustee) the Plan’s assets are held and managed by the trustee.

 

(b)   Contributions

 

Each year, participants may contribute to the Plan through salary deductions of 1% to 50% of such participant’s compensation, as defined in the Plan. The Company matches 50% of the participant’s pre-tax contributions up to 3% of such participant’s compensation. Participants may also contribute amounts representing distributions from other qualified pension plans. Participants direct the investment of their contributions into various investment options offered by the Plan. Contributions are subject to certain limitations.

 

(c)   Participant Accounts

 

Although Plan assets are collectively invested, records are maintained for each participant’s individual account. Each participant’s account is credited with the participant’s contribution and allocation of the Company’s contribution and Plan earnings (losses). 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 account.

 

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(d)   Vesting

 

Participants are immediately vested in their pre-tax contributions plus actual earnings and losses thereon. Vesting in the Company’s matching contributions and earnings and losses thereon is based upon years of continuous service as follows:

 

Years of vesting service		Vested percentage
Less than 2 years		0	%
2 years		20	%
3 years		40	%
4 years		60	%
5 years		80	%
6 years or more		100	%

 

(e)   Payment of Benefits

 

Normal and deferred retirement benefits, disability benefits, and vested benefits are distributed as lump-sum or in approximately equal installments over a period of years not to exceed the life expectancy of the participant and his or her designated beneficiary. Death benefits are paid as a single-sum or in installments over a period not to exceed five years, pursuant to the participant’s written election on forms provided by the Company.

 

(f)    Participant Loans

 

Participants may borrow a minimum of $1,000 and a maximum of 50% of their vested balance in the Plan, up to a maximum of $50,000. Such loans, upon approval by the Company, are generally repaid through payroll deductions over a period not to exceed five years and bear interest at a market rate at the date of the loan. Interest rates range from 4.00% to 9.50% as of December 31, 2003.

 

(g)   Forfeited Accounts

 

Non-vested benefits, which are forfeited, will be used to reduce future employer matching contributions. As of December 31, 2003, there were no forfeited nonvested accounts.

 

(2)   Summary of Significant Accounting Policies

 

(a)   Basis of Preparation and Use of Estimates

 

The Plan’s financial statements are prepared on the accrual basis of accounting. 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 those estimates.

 

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(b)   Investments

 

Plan investments are stated at fair value based on quoted market parices. Participant loans are valued at their outstanding balances which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.

 

The Plan invests in various investment securities that 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 participants’ account balances and the accounts reported in the statement of net assets available for benefits.

 

(c)   Plan Expenses

 

Company personnel perform various administrative services for the Plan, including maintenance of participant records. Certain plan expenses are paid by the Company.

 

(d)   Benefits to Participants

 

Benefit payments to participants are recorded when paid.

 

(3)   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 participants become 100% vested in the Company’s matching contributions.

 

(4)   Investments

 

Investments, including amounts that represent 5% or more of the Plan’s net assets as of December 31, 2003, were as follows:

 

Common Collective Trust Funds:
Wachovia Diversified Bond Group Trust		$	82,864
Wachovia Enhanced Stock Market Fund		130,568
		213,432
Mutual Funds:
Federated Capital Preservation Fund		403,086
American Funds Growth Fund		177,965
Templeton Growth Fund		118,228
Vanguard Wellington Fund		109,815
Other mutual funds		4,342
		813,436
Common Stock		13,781
		$	1,040,649

 

6

 

During the period from September 1, 2003 to December 31, 2003, the Plan’s investments (including investments bought, sold, and held during the year) appreciated in value by $42,838 as follows:

 

Mutual Funds and Common Collective Trust Funds		$	39,416
NeighborCare, Inc. Common Stock		3,422
		$	42,838

 

(5)   Tax Status

 

The Plan is a standardized prototype plan that has received an opinion letter dated August 30, 2001 stating that the Plan and related trust are designed in accordance with the applicable sections of the Internal Revenue Code (IRC). The Plan administrator and the Plan’s tax counsel believe the Plan continues to operate in compliance with the IRC.

 

(6)   Party-in-Interest Transactions

 

Plan investments in the Wachovia Diversified Bond Group Trust Fund and the Wachovia Enhanced Stock Market Fund are shares of mutual funds managed by the trustee. Plan investments in common stock of NeighborCare, Inc. and Genesis Healthcare Corporation common stock, represents shares of the Company’s and the Company’s largest customer’s publicly traded stock.  These transactions qualify as party-in-interest transactions.

 

(7)   Reconciliation of Financial Statements to Form 5500

 

The following is a reconciliation of net assets available for benefits as of December 31, 2003 from the financial statements to Form 5500:

 

Net assets available for benefits per the financial statements		$	1,216,557
Employer and participant contributions receivable		(11,391		)
Net assets available for benefits per Form 5500		$	1,205,166

 

The following is a reconciliation of contributions per the financial statements for the period from September 1, 2003 to December 31, 2003, to Form 5500:

 

Contributions per the financial statements		$	58,342
Less: contributions receivable		(11,391		)
Contributions per Form 5500		$	46,951

 

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NEIGHBORCARE, INC. UNION 401(k) PLAN

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

December 31, 2003

 

Identity of issue		Description of investments		Current value
Wachovia Diversified Bond Group Trust*		Common Collective Trust Fund		$	82,864
Wachovia Enhanced Stock Market Fund*		Common Collective Trust Fund		130,568
				213,432
Federated Capital Preservation Fund		Mutual Fund		403,086
American Funds Growth Fund		Mutual Fund		177,965
Templeton Growth Fund		Mutual Fund		118,228
Vanguard Wellington Fund		Mutual Fund		109,815
MFS New Discovery Fund		Mutual Fund		2,190
Dreyfus MidCap Index Fund		Mutual Fund		2,152
				813,436
Genesis Healthcare Corporation*		Common Stock		4,687
NeighborCare, Inc.*		Common Stock		9,094
				13,781
Participant loans*		Loans with interest rates ranging from 4.00% to 9.50%		164,517
				$	1,205,166

 

Note:      Current value was determined based on quoted market prices except for participant loans, which are valued at their ourstanding balances, which approximates fair value.

 

*Party-in-interest transactions.

 

See accompanying Report of Independent Registered Public Accounting Firm.

 

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	NEIGHBORCARE, INC.
	By:	/s/  Kathleen F. Ayres
		Kathleen F. Ayres
		Senior Vice President, Human Resources
Dated:  June 28, 2004

 

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EXHIBIT INDEX

 

Exhibit No.		Exhibit
23.1		Consent of Independent Registered Public Accounting Firm

 

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