FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-24960
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
COVENANT TRANSPORT, INC. 401(K) AND PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Covenant Transport, Inc.
400 Birmingham Highway
Chattanooga, Tennessee 37419
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and PROFIT SHARING PLAN
Financial Statements and Supplemental Schedules
December 31, 1997 (with comparative statement of Net Assets
Available for Plan Benefits for December 31, 1996)
with
Report of Independent Accountants
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Participants and Plan Administrator
Covenant Transport, Inc.
401(k) and
Profit Sharing Plan
We have audited the accompanying statements of net assets available for plan
benefits of Covenant Transport, Inc. 401(k) and Profit Sharing Plan (the Plan)
as of December 31, 1997 and 1996, and the related statement of changes in net
assets available for benefits for the year ended December 31, 1997. 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 generally accepted auditing
standards. 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
Covenant Transport, Inc. 401(k) and Profit Sharing Plan as of December 31, 1997
and 1996, and the changes in net assets available for plan benefits for the year
ended December 31, 1997, in conformity with 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 supplemental schedules of the
Covenant Transport, Inc. 401(k) and Profit Sharing Plan are presented for the
purpose 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
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.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
May 27, 1998
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
For the years ended December 31, 1997 and 1996
1997 1996
Investments at fair value $4,919,547 $3,085,296
Contributions receivable:
Employer 8,644 6,045
Employees 24,071 16,721
--------- ----------
Net assets available for plan benefits $4,952,262 $3,108,062
========== ==========
The accompanying notes are an integral part of these financial statements.
2
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COVENANT TRANSPORT, INC.
401(k) and PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the year ended December 31, 1997
Additions to net assets attributed to:
Investment income:
Dividends $ 45,775
Net appreciation of investments 534,527
-----------
580,302
-----------
Contributions:
Employer 503,675
Employees 1,672,156
-----------
2,175,831
-----------
Total additions 2,756,133
-----------
Deductions from net assets attributed to:
Benefits paid to participants 900,355
Administrative expenses 11,578
-----------
Total deductions 911,933
Net increase in net assets 1,844,200
Net assets available for plan benefits:
Beginning of year 3,108,062
-----------
End of year $4,952,262
===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and PROFIT SHARING PLAN
Notes to Financial Statements
1. DESCRIPTION OF PLAN:
The following brief description of the Covenant Transport, Inc. 401(k) and
Profit Sharing Plan is provided for general information purposes only.
Participants should refer to the Plan agreement for more complete
information.
General - The Plan is a voluntary defined contribution savings plan covering
substantially all employees of Covenant Transport, Inc. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Funding - The Plan is funded by employee and employer contributions.
Participants may contribute up to, but not in excess of, 17% of their annual
compensation. Covenant Transport, Inc. may make discretionary matching
contributions to the plan not to exceed 6% of an employee's compensation.
Annual additions to a participant's account during any Plan year, when
combined with the total annual additions to the accounts of the participant
under any other qualified defined contribution plan maintained by Covenant
Transport, Inc., cannot exceed certain levels established by federal tax
codes.
Vesting - Participants are immediately vested in their voluntary
contributions plus actual earnings thereon. Vesting in the remainder of their
accounts is based on years of continuous service. A participant vests 20
percent annually and is 100 percent vested after five years of credited
service.
Payment of Benefits - On retirement or termination of service, a participant
may receive a lump-sum amount equal to the value of the vested portion of
their account.
Investment of Account - The Plan has five funds in which individual accounts
may be invested. The funds are as follows:
Fund A - SunTrust Employee Benefit Stable Asset Fund - This fund is
managed by SunTrust Bank. The fund is a managed portfolio of
insurance company guaranteed investment contracts and short-term
money market instruments.
Fund B - STI Classic Investment Grade Bond Fund - This fund is managed
by SunTrust Bank. The fund is a bond fund which invests primarily
in government and corporate obligations.
Fund C - STI Classic Value Income Fund - This fund is managed by
SunTrust Bank. The fund is a stock fund which invests primarily
in equity securities.
Fund D - STI Classic Capital Growth Fund - This fund is managed by
SunTrust Bank. The fund is a managed portfolio of common stocks,
warrants, and convertible securities which in the advisor's
opinion are undervalued.
Fund E - Covenant Transport 401(k) Unitized Stock Fund - This fund
invests in the stock of Covenant Transport, Inc.
4
<PAGE>
Notes to Financial Statements, Continued
1. DESCRIPTION OF PLAN, continued:
Allocation of Benefits - The Plan instrument requires that the assets of the
Plan be accounted for separately as to participant and employer contributions
and valued annually, allocating to each participant their share of principal,
income and forfeitures. Employer voluntary contributions are allocated to all
eligible employees based on the employees contributions for the period.
Forfeitures - Forfeiture of a terminated participant's nonvested account
occurs in plan years in which he receives a distribution of the full vested
value as defined in the Plan document. Forfeitures are used to reduce the
Company's future payments and are allocated in the same manner as matching
employer contributions. Forfeitures for the year ended December 31, 1997 were
$44,321.
Administrative Expenses - The administrative expenses of the Plan are paid by
the Plan.
2. SIGNIFICANT ACCOUNTING POLICIES:
Method of Accounting - The Plan's financial statements have been prepared
using the accrual basis of accounting.
Investments - Investments are carried at fair value, as determined using the
quoted market prices.
Investment Income - The Plan presents, in the statement of changes in net
assets available for plan benefits, the realized gains or losses and the
unrealized appreciation (depreciation) in the fair value of its investments .
Realized gains (losses) are computed using the weighted average price per
share as the cost of the asset.
Use of Estimates - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of additions and
deductions during the reporting periods.
Actual results could differ from these estimates.
3. ADMINISTRATION:
The Plan is administered by SunTrust Bank Trust and Investment Services, the
Plan Trustee, who has overall responsibility for the investment of assets,
accounting for financial transactions and distributions to participants.
5
<PAGE>
Notes to Financial Statements, Continued
4. INVESTMENTS:
Investments held at December 31, 1997 and 1996, including those representing
five percent or more of the Plan's net assets, are as follows:
1997 1996
SunTrust Employee Benefit Stable Asset Fund,
43,558 and 32,810 shares, respectively $1,072,078 $ 758,888
STI Classic Investment Grade Bond Fund,
47,078 and 30,379 shares respectively 496,671 309,883
STI Classic Value Income Fund, 79,113 and
51,593 shares, respectively 1,013,440 629,637
STI Classic Capital Growth Fund, 106,220 and
69,717 shares, respectively 1,550,817 919,055
Covenant Transport 401(k) Unitized Stock Fund,
97,279 and 60,637 shares, respectively 786,541 467,833
---------------------
$4,919,547 $3,085,296
=====================
Realized gains and losses on investments for the year ended December 31,
1997, are as follows:
Aggregate Aggregate Net
Cost Proceeds Gain
Bonds $ 537,535 $ 564,187 $ 26,652
Common stock 528,876 953,202 424,326
Covenant Transport 401(k)
Unitized stock fund 295,769 307,410 11,641
---------- ---------- --------
Total $1,362,180 $1,824,799 $462,619
========== ========== ========
6
<PAGE>
Notes to Financial Statements, Continued
5. PARTICIPANT FUNDS:
The participants can elect to have their accounts invested in any of five
funds, as described in Note 1. An analysis of the changes in the separate
funds is as follows for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Fund A Fund B Fund C Fund D Fund E Total
<S> <C> <C> <C> <C> <C> <C>
Net appreciation $ 48,321 $ 14,727 $ 163,639 $ 294,420 $ 13,420 $ 534,527
Dividends - 21,451 16,999 7,325 - 45,775
Contributions:
Employer 130,033 52,506 74,957 122,566 123,613 503,675
Employee 376,263 192,835 297,743 455,683 349,632 1,672,156
Benefit payments (252,570) (98,428) (188,794) (240,428)(120,135) (900,355)
Administrative expenses (2,694) (1,049) (2,325) (3,476) (2,034) (11,578)
Transfers 15,427 6,305 23,357 (1,562) (43,527) -
Net increase 314,780 188,347 385,576 634,528 320,969 1,844,200
Net assets available for
plan benefits:
Beginning of year 733,208 317,156 645,703 937,088 474,907 3,108,062
-------------------------------------------------------------
End of year $1,047,988 $505,503 $1,031,279 $1,571,616 $795,876 $4,952,262
</TABLE>
6. 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, participants will become 100 percent vested in their accounts.
7. FEDERAL INCOME TAXES:
The Internal Revenue Service has determined and informed the Company by a
letter dated February 26, 1996, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code (IRC).
The Plan has been amended since receiving the determination letter. However,
the Plan 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
<PAGE>
Notes to Financial Statements, Continued
8. FORM 5500
Differences between the Plan's 1997 financial statements and Form 5500 ERISA
filing are as follows:
Financial Form
Statements 5500
Investment income $580,302 $571,013
Stable Asset Fund $1,072,078 $1,071,966
Other Mutual Funds $3,060,928 $3,051,755
Employer Securities $786,541 $786,537
The above differences are due to rounding, accrued income and certain
classifications which were used in the financial statements, but not the Form
5500.
8
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and PROFIT SHARING PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(b) (c)
Identity of issuer, Description of investment including (e)
borrower, lessor, maturity date, rate of interest, (d) Current
or similar party collateral, par or maturity value Cost Value
SunTrust Bank Employee Benefit Stable Asset Fund,
43,558 shares $1,001,749 $1,072,078
SunTrust Bank STI Classic Investment Grade Bond Fund,
47,078 shares 483,249 496,671
SunTrust Bank STI Classic Value Income Fund,
79,113 shares 1,029,332 1,013,440
SunTrust Bank STI Classic Capital Growth Fund,
106,220 shares 1,541,963 1,550,817
Covenant Transport, Inc. Covenant Transport 401(k) Unitized
Stock Fund, 97,279 shares 829,485 786,541
----------- ----------
$4,885,778 $4,919,547
</TABLE>
See accompanying Report of Independent Accountants.
9
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and PROFIT SHARING PLAN
Item 27d - Schedule of Reportable Transactions
For the year ended December 31, 1997
1. Single transactions exceeding 5% of total assets as of December 31, 1997.
None
2. Series of transactions of same issue exceeding 5% of total assets as of
December 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(h)
Current
(a) Value of (i)
Identity (b) (c) (d) (g) Asset on Net
of Party Description Purchase Selling Cost of Transaction Gain or
Involved of Asset Price Price Asset Date (loss)
SunTrust Bank Stable Asset Fund $680,701 $ - $680,701 $ - $ -
SunTrust Bank Stable Asset Fund - 421,085 395,886 421,085 25,199
SunTrust Bank Investment Grade
Bond Fund 315,765 - 315,765 - -
SunTrust Bank Investment Grade
Bond Fund - 143,102 141,650 143,102 1,452
SunTrust Bank Value Income Fund 614,553 - 614,553 - -
SunTrust Bank Value Income Fund - 235,328 218,749 235,328 16,579
SunTrust Bank Capital Growth Fund 899,578 - 899,578 - -
SunTrust Bank Capital Growth Fund - 333,420 310,127 333,420 23,293
Covenant 401(k) Unitized
Transport Stock Fund 513,960 - 513,960 - -
Covenant 401(k) Unitized
Transport Stock Fund - 307,409 295,769 307,409 11,640
</TABLE>
See accompanying Report of Independent Accountants.
10
<PAGE>
SIGNATURES
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.
COVENANT TRANSPORT, INC. 401(K) AND
PROFIT SHARING PLAN
COVENANT TRANSPORT, INC.
Date: 6/30/98
By: /s/
David R. Parker, Chairman, President, and
Chief Executive Officer
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Covenant Transport, Inc. on Form S-8 of our report dated May 27, 1998, on our
audit of the Covenant Transport, Inc. 401(k) and Profit Sharing Plan as of
December 31, 1997, which report is included in this Annual Report of Form 11-K.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
June 29, 1998
<PAGE>
