<PAGE> 1
Commission File No 1-10875
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, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 15 (d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10875
NOVACARE, INC. 401(k) RETIREMENT SAVINGS PLAN
(Full title of the plan and address of the plan, if different from that of the
issuer named below)
NOVACARE, INC.
1016 West Ninth Avenue, King of Prussia, PA 19406
(Name of issuer of the securities held pursuant to the plan
and the address of it's principal executive office)
<PAGE> 2
NovaCare, Inc. 401(k) Retirement Savings Plan
Index to Financial Statements and Exhibits
<TABLE>
<CAPTION>
Financial Statements Page
-------------------- ----
<S> <C> <C>
Report of Independent Accountants 2
Financial Statements:
Statement of Net Assets Available for Plan Benefits,
with Fund Information, at December 31, 1996 and 1995 3 - 4
Statement of Changes in Net Assets Available for Plan
Benefits, with Fund Information, for the years
ended December 31, 1996 and 1995 5 - 6
Notes to Financial Statements 7 -11
Additional Information: *
Schedule of Assets Held For Investment Purposes at
December 31, 1996 12
Schedule of Reportable Transactions:
Series of Transactions in excess of 5% of
net assets for the year ended December
31, 1996 13
Exhibit Exhibit Number
------- --------------
Consent of Independent Accountants 23
</TABLE>
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
1
<PAGE> 3
Report of Independent Accountants
To the Participants and Administrator of the NovaCare, Inc.
401(k) Retirement Savings Plan.
In our opinion, the accompanying statements of net assets
available for plan benefits and the related statements of
changes in net assets available for plan benefits present
fairly, in all material respects, the net assets available for
plan benefits of the NovaCare, Inc. 401(k) Retirement Savings
Plan (the "Plan") at December 31, 1996 and 1995, and the
changes in net assets available for plan benefits for the
years then ended in conformity with generally accepted
accounting principles. 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 of these statements in
accordance with generally accepted auditing standards which
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, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
Our audits were performed for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The additional information included in the schedules of assets
held for investment purposes and of reportable transactions is
presented for purpose of additional analysis and is not a
required part of the basic financial statements but is
additional information required by the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Fund Information in
the statements of net assets available for plan benefits and
of changes in net assets available for plan benefits is
presented for purpose of additional analysis rather than to
present the net assets available for plan benefits and changes
in net assets available for plan benefits of each fund. The
schedules of assets held for investment purposes and of
reportable transactions and the Fund Information have been
subjected to the auditing procedures applied in the audits 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.
The schedules of assets held for investment purposes and of
reportable transactions that accompany the Plan's financial
statements do not disclose the historical cost of certain
assets held by the Plan trustee. Disclosure of this
information is required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under ERISA.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
June 19, 1997
2
<PAGE> 4
NovaCare, Inc. 401(k) Retirement Savings Plan
Statement of Net Assets Available for Plan Benefits, with Fund Information
<TABLE>
<CAPTION>
December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION
---------------------------------------------------------------------------------------
Fidelity
Managed Fidelity Fidelity NovaCare NovaCare
Income Puritan Magellan Stock Loan
Portfolio * Fund * Fund * Fund * Fund Total
----------- ------ ------ ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Investments, at fair value $ 19,090,269 $ 28,069,517 $ 41,165,975 $ 9,310,559 $121,880 $97,758,200
Receivables/ payables:
Employee contributions 126,817 219,089 314,562 58,732 --
719,200
Employer contributions 28,390 47,893 67,995 13,680 --
157,958
Administrative fees payable (753) (356) (180) (23) -- (1,312)
------------ ------------ ------------ ----------- -------- -----------
Net assets available for
Plan benefits $ 19,244,723 $ 28,336,143 $ 41,548,352 $ 9,382,948 $121,880 $98,634,046
============ ============ ============ =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
* Investment in this fund represents 5% or more of the Plan's net assets.
3
<PAGE> 5
NovaCare, Inc. 401(k) Retirement Savings Plan
Statement of Net Assets Available for Plan Benefits, with Fund Information
<TABLE>
<CAPTION>
December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION
----------------------------------------------------------------------------------------------
Fidelity
Managed Fidelity Fidelity NovaCare Fidelity NovaCare
Income Puritan Magellan Stock Money Market Loan
Portfolio * Fund * Fund * Fund * Portfolio Fund Total
----------- ------ -------- ------ --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at fair value $ 16,355,184 $ 20,128,172 $ 32,003,730 $ 4,016,385 $ 37,577 $191,019 $ 72,732,067
Receivables/ payables:
Employee contributions 254,970 371,341 545,321 116,173 --
-- 1,287,805
Employer contributions 59,741 84,367 121,578 26,838 --
-- 292,524
Due to NovaCare (132,527) (78,225) (119,928) (313,317) (37,577) -- (681,574)
Due (to) from other funds (166,402) (24,791) 150,692 40,501 -- -- --
-------- ------- ---------- ----------- -------- -------- ------------
Net assets available for
Plan benefits $ 16,370,966 $20,480,864 $ 32,701,393 $ 3,886,580 $ -- $ 191,019 $ 73,630,822
============ =========== ============ =========== ======== ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
* Investment in this fund represents 5% or more of the Plan's net assets.
4
<PAGE> 6
NovaCare, Inc. 401(k) Retirement Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits, with Fund
Information
<TABLE>
<CAPTION>
Year ended December 31, 1996
-------------------------------------------------------------------------------------------------
FUND INFORMATION
-------------------------------------------------------------------------------------------------
Fidelity
Managed Fidelity Fidelity Novacare Novacare
Income Puritan Magellan Stock Loan
Portfolio Fund Fund Fund Fund Total
--------- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets:
Investment income:
Dividends and interest $ 957,248 $ 2,966,738 $ 5,440,492 $ -- $ -- $ 9,364,478
Net appreciation
(depreciation) in fair
value of investments -- 398,436 (1,356,229) 4,444,638 -- 3,486,845
------------ ------------ ------------ ----------- ------------ -----------
957,248 3,365,174 4,084,263 4,444,638 -- 12,851,323
------------ ------------ ------------ ----------- ------------ -----------
Contributions:
Employee 3,448,831 5,369,404 8,143,788 1,413,012 -- 18,375,035
Employer 1,104,284 1,000,040 1,442,989 278,277 -- 3,825,590
Plan merger (Note 6) 1,040,328 82,163 160,603 1,229 -- 1,284,323
Investment transfers (595,961) 1,008,949 (444,207) 100,358 (69,139) --
------------ ------------ ------------ ----------- ------------ -----------
4,997,482 7,460,556 9,303,173 1,792,876 (69,139) 23,484,948
------------ ------------ ------------ ----------- ------------ -----------
Total additions 5,954,730 10,825,730 13,387,436 6,237,514 (69,139) 36,336,271
------------ ------------ ------------ ----------- ------------ -----------
Deductions from net assets:
Distributions to
participants 3,059,200 2,936,944 4,530,750 721,799 -- 11,248,693
Administrative fees 21,773 33,507 9,727 19,347 -- 84,354
------------ ------------ ------------ ----------- ------------ -----------
Total deductions 3,080,973 2,970,451 4,540,477 741,146 -- 11,333,047
------------ ------------ ------------ ----------- ------------ -----------
Net increase (decrease) 2,873,757 7,855,279 8,846,959 5,496,368 (69,139) 25,003,224
Net assets at beginning of
year 16,370,966 20,480,864 32,701,393 3,886,580 191,019 73,630,822
------------ ------------ ------------ ----------- ------------ -----------
Net assets at end of year $ 19,244,723 $ 28,336,143 $ 41,548,352 $ 9,382,948 $ 121,880 $98,634,046
============ ============ ============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
NovaCare, Inc. 401(k) Retirement Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits, with Fund
Information
<TABLE>
<CAPTION>
Year Ended December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION
-----------------------------------------------------------------------------------------------------
Fidelity Fidelity
Managed Fidelity Fidelity Novacare Money Novacare
Income Puritan Magellan Stock Market Loan
Portfolio Fund Fund Fund Portfolio Fund Total
--------- ---- ---- ---- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets:
Investment income:
Dividends and interest $ 873,138 $ 960,898 $ 1,694,409 $ -- $ 79,594 $ -- $ 3,608,039
Net appreciation (depreciation)
In fair value of investments -- 2,131,371 5,991,418 (1,679,745) -- -- 6,443,044
------------ ------------ ------------ ------------ ----------- --------- -----------
873,138 3,092,269 7,685,827 (1,679,745) 79,594 -- 10,051,083
------------ ------------ ------------ ------------ ----------- --------- -----------
Contributions:
Employee 4,009,088 5,374,260 7,527,897 2,104,990 -- 19,016,235
Employer 766,039 1,002,889 1,390,874 459,767 -- 3,619,569
Plan merger (note 6) 2,365,071 1,471,922 1,876,035 346,182 -- 61,518 6,120,728
Investment transfers (454,197) 23,406 660,747 (95,643) (79,594) (54,719) --
------------ ------------ ------------ ------------ ----------- --------- -----------
6,686,001 7,872,477 11,455,553 2,815,296 (79,594) 6,799 28,756,532
------------ ------------ ------------ ------------ ----------- --------- -----------
Total additions 7,559,139 10,964,746 19,141,380 1,135,551 -- 6,799 38,807,615
------------ ------------ ------------ ------------ ----------- --------- -----------
Deductions from net assets:
Plan transfers out (note 7) 1,596,067 1,061,328 2,288,030 338,079 -- -- 5,283,504
Distributions to participants 1,535,026 1,632,420 2,112,872 436,515 -- -- 5,716,833
------------ ------------ ------------ ------------ ----------- --------- -----------
Total deductions 3,131,093 2,693,748 4,400,902 774,594 -- -- 11,000,337
------------ ------------ ------------ ------------ ----------- --------- -----------
Net increase 4,428,046 8,270,998 14,740,478 360,957 -- 6,799 27,807,278
Net assets at beginning of year 11,942,920 12,209,866 17,960,915 3,525,623 -- 184,220 45,823,544
------------ ------------ ------------ ------------ ----------- --------- -----------
Net assets at end of year $ 16,370,966 $20,480,864 $ 32,701,393 $ 3,886,580 $ -- $ 191,019 $73,630,822
============ =========== ============ ============ =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
NovaCare, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
1. DESCRIPTION OF PLAN
GENERAL. The NovaCare, Inc. (the "Company") 401(k) Retirement Savings Plan (the
"Plan"), which was formed effective July 1, 1990, is a defined contribution plan
subject to the Employee Retirement Income Security Act of 1974 ("ERISA") and the
Internal Revenue Code. All full and part-time employees of the Company working a
minimum of twenty hours per week on a regularly scheduled basis may enroll
beginning on the first day of the first payroll period of the month following
six months of consecutive service.
ENROLLMENT. An eligible employee participates in the Plan by authorizing the
Company to make tax-deferred contributions to the plan on the employee's behalf,
resulting in a reduction of the employee's taxable earnings. The employee may
direct the investment of these contributions (see "Investment Directions"
below).
CONTRIBUTIONS TO THE PLAN. Participants may authorize basic contributions
ranging from 1% to 15% of their compensation. Certain highly compensated
participants may have their basic contributions limited to 6% of their
compensation. Such contributions may not exceed $9,500 for 1996 and $9,240 for
1995. The Company makes matching contributions in the amount of 30% of
participant contributions up to the first 6% of compensation. No matching
contributions are made with respect to participant contributions exceeding 6% of
compensation.
Certain percentage tests (non-discrimination) ensure that contributions by or on
behalf of employees do not favor the highly compensated. If these tests are not
met, contributions and the earnings attributable thereto will be distributed to
the highly compensated employees in accordance with the Plan document. The Plan
met the 401(k) non-discrimination test for the years ended December 31, 1996 and
1995.
PARTICIPANT ACCOUNT. Each account is credited with the participant's
contributions and an allocation of (a) the Company's matching contribution and
(b) Plan earnings. Company contributions are allocated based on the matching
percentage for participant contributions. Plan earnings are allocated to each
participant's account based on the respective account balances. The benefit to
which a participant is entitled is the amount that can be provided from their
account.
VESTING. Participants are fully vested in their elective deferrals plus actual
earnings thereon. Vesting in the remainder of the account is based on years of
continuous service. Participants become fully vested upon death or disability,
attainment of normal retirement age, or after five years of credited service.
7
<PAGE> 9
NovaCare, Inc. 401(k) Retirement Savings
Notes to Financial Statements
INVESTMENT OPTIONS. Upon enrollment in the Plan, participants may
direct contributions among one or more of the following investment
funds:
I. Fidelity Managed Income Portfolio - An open-end
commingled pool which invests in short- and long-term
investment contracts issued by insurance companies
(GICs), investment contracts issued by commercial
banks (BICs), synthetic investment contracts designed
to simulate conventional GICs through the purchase of
securities and inclusion of a benefit responsive
feature (put feature), and cash equivalents.
II. Fidelity Puritan Fund - A mutual fund which invests
in common and preferred stocks and bonds, including
lower-quality, high-yielding debt securities.
III. Fidelity Magellan Fund - A mutual fund which invests
in the stocks of companies with an expected
above-average growth potential and a corresponding
higher level of risk.
IV. NovaCare Stock Fund - Funds are invested in NovaCare,
Inc. common stock.
The NovaCare Loan Fund represents loans which were outstanding as of
the dates of the RehabClinics, Inc. and the NovaCare Orthotics &
Prosthetics Plan mergers into the NovaCare Plan (see Note 6). The
NovaCare Plan does not offer participant loans.
DISTRIBUTIONS AND WITHDRAWALS. Distributions are paid in the following
manner:
I. Distributions from the Fidelity Managed Income
Portfolio, Fidelity Puritan Fund and Fidelity
Magellan Fund are paid in cash.
II. Distributions from the NovaCare Stock Fund are paid
in cash or shares of NovaCare, Inc. common stock at
the participant's option. Fractional shares are paid
in cash.
Prior to termination of service, participants may, in the event of
financial hardship, withdraw amounts from the Plan twice in any
12-month period. In the absence of financial hardship, a participant's
contribution may not be withdrawn prior to attainment of age 59 1/2.
Upon termination of service for reasons other than death, participants
are entitled to a lump-sum amount equal to the value of the vested
balance of their account. Participants with account balances exceeding
$3,500 may defer receipt of the lump-sum amount until reaching age 70
1/2. If a participant dies, the entire amount in the participant's
account is distributed in a lump-sum to the participant's
beneficiaries. A terminating participant's unvested account balance is
forfeited. Total participant forfeitures equaled $514,568 for 1996 and
will be used to reduce future employer contributions.
ADMINISTRATIVE EXPENSES. The Company may elect to pay all Plan
administrative expenses. If the Company elects not to pay such
expenses, the expenses shall be paid by the Plan. During 1996, Plan
administrative expenses were shared by both employer and participants.
All Plan administrative expenses were paid by the Company during 1995.
8
<PAGE> 10
NovaCare, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
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
terminate the Plan subject to the provisions of ERISA as described further in
the Plan document. In the event of Plan termination, participants will become
fully vested in their accounts.
2. SIGNIFICANT ACCOUNTING POLICIES
The Plan's financial statements are prepared on the accrual basis of accounting.
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at quoted market prices which represent the net asset value
of shares held by the Plan at year end. The Fidelity Managed Income Portfolio is
a common trust fund which is stated at its net asset value as determined by the
fund administrator as of the year-end valuation date. NovaCare common stock is
valued at its quoted market price at year end. Participant loans are valued at
cost which approximates fair value. Purchases and sales are recorded on a trade
date basis. Investment income is recorded when earned.
Basic and matching contributions are recorded in the period during which the
Company makes payroll deductions from participants earnings.
3. DISTRIBUTIONS PAYABLE
Distributions requested by withdrawing participants but not paid were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- ----------
<S> <C> <C>
FIDELITY MANAGED INCOME PORTFOLIO $ 43,234 $ 978,201
FIDELITY PURITAN FUND 5,868 751,433
FIDELITY MAGELLAN FUND 70,886 1,285,499
NOVACARE STOCK FUND 25,389 217,144
======== ==========
TOTAL DISTRIBUTIONS PAYABLE $145,377 $3,232,277
======== ==========
</TABLE>
Distributions are recorded as a reduction in Plan net assets when paid. For Form
5500 reporting purposes, such distributions are recorded as a reduction in Plan
assets when requested.
9
<PAGE> 11
NovaCare, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
4. PARTICIPANT ELECTIONS
At December 31, the number of participants in each investment fund were as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
FIDELITY MANAGED INCOME PORTFOLIO 4,294 2,574
FIDELITY PURITAN FUND 5,664 3,613
FIDELITY MAGELLAN FUND 6,213 3,837
NOVACARE STOCK FUND 2,801 1,719
</TABLE>
At December 31, 1996 and 1995, 6,473 and 5,085 participants, respectively, were
contributing to the Plan; 3,152 and 3,200 participants, respectively, were not
contributing to the Plan.
Because many participants direct their contributions to more than one investment
fund, the total number of participants in the Plan is less than the sum of the
number of participants in each investment fund.
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500 at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net assets available for benefits per the financial $ 98,634,046 $ 73,630,822
statements
Less: Amounts allocated to withdrawing participants (145,377) (3,232,277)
------------ ------------
Net assets available for benefits per the Form 5500 $ 98,488,669 $ 70,398,545
============ ============
</TABLE>
The following is a reconciliation of benefits paid to participants according to
the financial statements to Form 5500:
<TABLE>
<CAPTION>
Year Ended
December 31,1996
-----------------
<S> <C>
Benefits paid to participants per the financial statements $ 11,248,693
Add: Amounts allocated to withdrawing participants at December 31, 1996 145,377
Less: Amounts allocated to withdrawing participants at December 31, 1995 (3,232,277)
------------
Benefits paid per Form 5500 $ 8,161,793
============
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
10
<PAGE> 12
NovaCare, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
6. PLAN MERGER
During 1996, the net assets available for plan benefits of the Sabolich, Inc.
401(k) Profit Sharing Plan and the Coplin Physical Therapy 401(k) Profit Sharing
Plan totaling $983,488 and $300,835, respectively, were transferred to the Plan.
During 1995, the net assets available for plan benefits of the RehabClinics,
Inc. 401 (k) Profit Sharing Plan totaling $6,120,728 were merged with and into
the Plan. Included in the transfer was $61,518 relating to thirteen participant
loans.
Except for loans which were outstanding as of the dates of the RehabClinics,
Inc. and the NovaCare Orthotics & Prosthetics Plan mergers into the NovaCare
Plan, the NovaCare Plan does not provide for participant loans.
7. PLAN TRANSFERS OUT
Effective April 1, 1995, NovaCare, Inc. sold its Medical Rehabilitation
Hospitals division to HEALTHSOUTH Corporation. Due to this sale, former NovaCare
employees now employed by HEALTHSOUTH were fully vested in the matching
contributions made by NovaCare and their net assets totaling $5,283,504 were
transferred to the HEALTHSOUTH 401 (k) Retirement Savings Plan.
8. INCOME TAXES
On February 2, 1996 the Internal Revenue Service ruled that the Plan qualifies
under Section 401 (a) of the IRC and is exempt from federal income taxes under
Section 501(a) of IRC. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
is not aware of any course of action or series of events that have occurred that
might adversely affect the Plan's qualified status.
9. RELATED PARTY TRANSACTIONS
Certain Plan investments represent shares of mutual funds managed by an
affiliate of Fidelity Management Trust Company ("FMTC"). FMTC is the trustee of
the Plan. Transactions in these mutual funds are party-in-interest transactions
which are exempt from the prohibited transaction rules of ERISA.
10. SUBSEQUENT EVENTS
Effective January 1, 1997, four additional investment options were added. These
new election options consist of Fidelity Retirement Government Money Market
Portfolio, Fidelity U.S. Bond Index Portfolio, Fidelity Emerging Growth Fund and
Fidelity Diversified International Fund.
11
<PAGE> 13
NovaCare, Inc. 401(k) Retirement Savings Plan
Schedule of Assets Held for Investment Purposes.
<TABLE>
<CAPTION>
December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
Number of
shares/units/ Current
Name of issuer and title of issue interest rate Cost (1) Value
- --------------------------------- ------------- -------- -----
<S> <C> <C> <C>
Mutual Funds:
Fidelity Managed Income Portfolio
19,090,269 $ 19,090,269 $ 19,090,269
Fidelity Puritan Fund
1,628,162 27,720,115 28,069,517
Fidelity Magellan Fund
510,427 41,849,011 41,165,975
88,659,395 88,325,761
NovaCare Stock Fund:
218,763 5,232,982 9,310,559
NovaCare Loan Fund ( Maturity 1997 - 1999) 6% - 13% 121,880 121,880
-------------- --------------
$ 94,014,257 $ 97,758,200
============== ==============
</TABLE>
(1) Current value at beginning of year or cost of purchase if acquired during
the year.
12
<PAGE> 14
NovaCare, Inc. 401(k) Retirement Savings Plan
Schedule of Reportable Transactions for the Year Ended December 31, 1996
Series of transactions in the same issue aggregating more than 5% of the January
1, 1996 current value of Plan assets
<TABLE>
<CAPTION>
Number of Purchase Selling Expense
Party Involved Description of Asset Transactions Price Price Incurred
- -------------- -------------------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fidelity Management Fidelity Managed Income 185 $ 7,110,882 $ - $ -
Trust Company Portfolio
Fidelity Management Fidelity Managed Income 167 - 4,375,795 -
Trust Company Portfolio
Fidelity Investments Fidelity Magellan Fund 181 16,670,123 - -
Fidelity Investments Fidelity Magellan Fund 167 - 6,151,649 -
Fidelity Investments Fidelity Puritan Fund 178 11,041,098 - -
Fidelity Investments Fidelity Puritan Fund 166 - 3,498,189 -
Fidelity Management NovaCare Stock Fund 172 2,074,544 - -
Trust Company
Fidelity Management NovaCare Stock Fund 149 - 1,262,581 -
Trust Company
</TABLE>
<TABLE>
<CAPTION>
Current Value
Cost of at Transactions Realized Gain/
Party Involved Asset (1) Date (Loss)
- -------------- --------- --------------- -------------
<S> <C> <C> <C>
Fidelity Management $ 7,110,882 7,110,882 $ -
Trust Company
Fidelity Management 4,375,795 4,375,795 -
Trust Company
Fidelity Investments 16,670,123 16,670,123 -
Fidelity Investments 6,824,841 6,151,649 (673,192)
Fidelity Investments 11,041,098 11,041,098 -
Fidelity Investments 3,449,154 3,498,189 49,035
Fidelity Management 2,074,544 2,074,544 -
Trust Company
Fidelity Management 895,525 1,262,581 367,056
Trust Company
</TABLE>
(1) Current value at beginning of year or cost of purchase if acquired during
the year.
13
<PAGE> 15
NovaCare, Inc. 401(k) Retirement Savings Plan
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
"NovaCare, Inc. 401(k) Retirement Savings Plan" has duly caused this annual
report to be signed on its behalf by the Undersigned thereunto duly authorized.
NovaCare, Inc. 401(k) Retirement Savings Plan
Date: June 19, 1997 By: /s/ Aven A. Kerr
_______________________________
Aven A. Kerr
Plan Administrator
By: /s/ Barry E. Smith
_______________________________
Barry E. Smith
Vice President, Controller, and
Chief Accounting Officer
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-36889 and No. 33-88746) of NovaCare, Inc.
of our report dated June 19, 1997 appearing on Page 2 of this Form
11-K.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
June 19, 1997
