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, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-24960
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, 1998 (with comparative statement of
Net Assets Available for Plan Benefits for December 31, 1997)
with
Report of Independent Accountants
<PAGE>
Report of Independent Accountants
To Participants and Plan Administrator
Covenant Transport, Inc.
401(k) and Profit Sharing 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
benefits of the Covenant Transport, Inc. 401(k) and Profit Sharing Plan (the
"Plan") at December 31, 1998 and 1997, and the changes in net assets available
for benefits for the year ended December 31, 1998 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 conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes and Reportable Transactions 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. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules 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.
By: /s/
PricewaterhouseCoopers LLP
May 27, 1999
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and Profit Sharing Plan
Statements of Net Assets Available for Plan Benefits
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Investments at fair value $ 8,212,879 $ 4,919,547
Contributions receivable:
Employer - 8,644
Employees
- 24,071
----------- -----------
Net assets available for benefits $ 8,212,879 $ 4,952,262
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
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, 1998
<S> <C>
Additions to net assets attributed to:
Investment income:
Dividends $ 581,353
Net appreciation of investments 485,721
Contributions:
Employer 841,104
Employees 2,597,607
------------
Total additions 4,505,785
Deductions from net assets attributed to:
Benefits paid to participants 1,242,080
Administrative expenses 3,088
------------
Total deductions 1,245,168
Net increase in net assets 3,260,617
Net assets available for benefits;
Beginning of year 4,952,262
------------
End of year $ 8,212,879
============
</TABLE>
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:
o 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.
o 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.
o 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.
o 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.
o 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 document 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, 1998
were $208,964.
Administrative Expenses - The administrative expenses of the Plan are
primarily paid by the Company.
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>
4. INVESTMENTS:
Investments held at December 31, 1998 and 1997, including those
representing five percent or more of the Plan's net assets, are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Sun Trust Employee Benefit Stable Asset Fund,
72,204 and 43,558 shares, respectively $1,899,383 $1,072,078
STI Classic Investment Grade Bond Fund,
78,016 and 47,078 shares, respectively 837,889 496,671
STI Classic Value Income Fund,
121,383 and 79,113 shares, respectively 1,432,319 1,013,440
STI Classic Capital Growth Fund,
165,415 and 106,220 shares, respectively 2,730,993 1,550,817
Covenant Transport 401(k) Unitized Stock Fund,
73,415 and 97,279 shares, respectively 1,312,295 786,541
--------- ---------
$8,212,879 $4,919,547
========== ==========
</TABLE>
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, 1998:
<TABLE>
<CAPTION>
Fund A Fund B Fund C Fund D Fund E Total
<S> <C> <C> <C> <C> <C> <C>
Net appreciation
(depreciation) $66,777 $ 11,307 $(113,555) $219,163 $302,029 $485,721
Dividends - 47,260 234,367 299,726 - 581,353
Contributions:
Employer 178,514 102,067 148,598 234,802 177,123 841,104
Employee 582,749 311,959 474,738 734,839 493,322 2,597,607
Benefit payments (286,250) (134,165) (227,070) (327,277) (267,318) (1,242,080)
Administrative expenses (1,900) - - - (1,188) (3,088)
Transfers 311,505 (6,042) (116,038) (1,876) (187,549) -
------- ------ -------- ------ -------- ----------
Net increase 851,395 332,386 401,040 1,159,377 516,419 3,260,617
Net assets available for
plan benefits:
Beginning of year 1,047,988 505,503 1,031,279 1,571,616 795,876 4,952,262
End of year $1,899,383 $837,889 $1,432,319 $2,730,993 $1,312,295 $8,212,879
</TABLE>
6
<PAGE>
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.
8. FORM 5500
Differences between the Plan's 1998 financial statements and Form 5500
ERISA filing are as follows:
<TABLE>
<CAPTION>
Financial Form
Statements 5500
<S> <C> <C>
Net assets at the beginning of the year $ 4,952,262 $ 4,942,973
Administrative expenses 3,088 -
Investment income 1,067,074 1,073,485
Employer contribution 841,104 840,903
Employee contributions 2,597,607 2,597,598
</TABLE>
The above differences are due to rounding, accrued income and certain
classifications, which were used in the financial statements but not the
Form 5500.
7
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and Profit Sharing Plan
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
b. c. d. e.
<S> <C> <C> <C>
Identity of issuer, Description of investment including Cost Current Value
Borrower, Lessor, maturity date, rate of interest,
or similar party collateral, par or maturity value
SunTrust Bank* Employee Benefit Stable Asset Fund,
72,204 shares $1,589,026 $1,899,383
SunTrust Bank* STI Classic Investment Grade Bond Fund,
78,016 shares 822,299 837,889
SunTrust Bank* STI Classic Value Income Fund,
121,383 shares 1,562,030 1,432,319
SunTrust Bank* STI Classic Capital Growth Fund,
165,415 shares 2,536,001 2,730,993
Covenant Transport, Inc.* Covenant Transport 401(k) Unitized
Stock Fund, 73,415 shares 1,152,306 1,312,295
--------- ---------
$7,661,662 $8,212,879
</TABLE>
*Party-in-interest
NOTE - Column a. is not applicable.
See accompanying Report of Independent Accountants.
8
<PAGE>
COVENANT TRANSPORT, INC.
401(k) and Profit Sharing Plan
Item 27d - Schedule of Reportable Transactions
For the year ended December 31, 1998
1. Single transactions exceeding 5% of total assets as of December 31, 1998.
None
2. Series of transactions involving property other than securities.
None
3. Series of transactions of same issue exceeding 5% of total assets as of
December 31, 1998.
<TABLE>
<CAPTION>
a. b. c. d. g. h. I.
Identity of Party Description of Asset Purchase Selling Cost of Current Net
Involved Price Price Asset Value of Gain or
Asset on (Loss)
Transaction
Date
<S> <C> <C> <C> <C> <C> <C>
SunTrust Bank* Stable Asset Fund $ 742,531 $ - $ 742,531 $ - $ -
SunTrust Bank* Stable Asset Fund - 236,859 233,830 236,859 3,029
SunTrust Bank* Investment Grade Bond Fund 325,766 - 325,766 -
SunTrust Bank* Investment Grade Bond Fund - 107,993 106,336 107,993 1,657
SunTrust Bank* Value Income Fund 635,136 - 635,136 -
SunTrust Bank* Value Income Fund - 223,683 239,376 223,683 (15,693)
SunTrust Bank* Capital Growth Fund 988,566 - 988,566 -
SunTrust Bank* Capital Growth Fund - 308,291 324,584 308,291 (16,293)
SunTrust Bank* 401(k) Unitized Stock Fund 584,361 - 584,361 -
SunTrust Bank* 401(k) Unitized Stock Fund - 380,103 358,276 380,103 21,827
</TABLE>
*Party-in-interest.
NOTE - Information required in columns e. and f. is not
applicable.
4. Transactions in conjunction with same person involved in reportable single
transactions.
None
9
<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: 6/30/99
By: /s/
R.H. Lovin, Jr., Administrator
<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, 1999, on our
audit of the Covenant Transport, Inc. 401(k) and Profit Sharing Plan as of
December 31, 1998, which report is included in this Annual Report of Form 11-K.
By: /s/
PricewaterhouseCoopers LLP
Knoxville, Tennessee
June 25, 1999
