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 29, 2003
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
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Table of Contents
The Covenant Transport, Inc. 401(k) and Profit Sharing Plan (the "Plan") is
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Accordingly, in lieu of the requirements of Items 1 - 3 of Form 11-K,
the Plan is filing financial statements and supplemental schedules prepared in
accordance with the financial reporting requirements of ERISA. The following
financial statements and supplemental schedules are filed as part of this annual
report:
Page
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Plan Benefits as of December 29, 2003 and 2002 2
Statements of Changes in Net Assets Available for Plan Benefits for the Years ended
December 29, 2003 and 2002 3
Notes to Financial Statements 4
Schedule
1 Schedule H, Line 4i - Schedule of Assets (Held at End of Year) - December 29, 2003 9
Exhibit
Exhibit 23 Consent of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Administrator
Covenant Transport, Inc. 401(k) and
Profit Sharing Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Covenant Transport, Inc. 401(k) and Profit Sharing Plan (Plan)
as of December 29, 2003 and 2002, and the related statements of changes in net
assets available for plan benefits for the years ended December 29, 2003 and
2002. 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 Plan as
of December 29, 2003 and 2002, and the changes in 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 supplemental schedule of assets (held
at end of year) as of December 29, 2003 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. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to auditing
procedures applied in the audits 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
Atlanta, Georgia
June 25, 2004
1
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 29, 2003 and 2002
2003 2002
------------------- -------------------
Assets:
Investments, at fair value (notes 3 and 4) $ 16,344,166 $ 14,865,621
Liabilities:
Excess contributions payable -- 28,368
------------------- -------------------
Net assets available for plan benefits $ 16,344,166 $ 14,837,253
=================== ===================
See accompanying notes to financial statements.
2
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 29, 2003 and 2002
2003 2002
---------------- ----------------
Additions:
Investment income (loss):
Interest and dividends $ 354,160 $ 378,967
Net appreciation (depreciation) in fair value of investments:
Mutual funds 1,267,546 (1,442,220)
Covenant Transport, Inc. common stock 184,434 158,643
---------------- ----------------
Net investment income (loss) 1,806,140 (904,610)
Contributions from employer 671,714 845,909
Contributions from participants 2,448,356 2,808,915
---------------- ----------------
Total additions 4,926,210 2,750,214
Deductions:
Participants' benefits 3,412,443 3,205,175
Administrative fees 6,854 7,258
---------------- ----------------
Net increase (decrease) in net assets available for plan benefits 1,506,913 (462,219)
Net assets available for plan benefits at beginning of year 14,837,253 15,299,472
---------------- ----------------
Net assets available for plan benefits at end of year $ 16,344,166 $ 14,837,253
================ ================
See accompanying notes to financial statements.
3
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2003 and 2002
(1) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Plan in preparing its financial statements.
(a) Basis of Presentation
The records of the Plan are maintained on the cash basis of
accounting. The accompanying financial statements of the Covenant
Transport, Inc. 401(k) and Profit Sharing Plan (the Plan) have been
prepared on the accrual basis of accounting and present the net assets
available for plan benefits and changes in those net assets.
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,
liabilities and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
(b) Investments
Investments in mutual funds, common stock, and common collective fund
are stated at fair value based on quoted market prices or as
determined by SunTrust Bank (Trustee). Securities transactions are
accounted for on a trade date basis.
Realized and unrealized investment gains and losses are included in
net appreciation (depreciation) in fair value of investments in the
statements of changes in net assets available for plan benefits.
The Plan's investments include funds which invest in various types of
investment securities and in various companies in various markets.
Investment securities, generally, are exposed to several risks, such
as interest rate, market, and credit risks. Due to the level of risk
associated with the funds, it is reasonably possible that changes in
the values of the funds will occur in the near term and such changes
could materially affect the amounts reported in the financial
statements and supplemental schedule.
(c) Fair Value of Financial Instruments
Investments in securities are stated at fair value. In addition,
management of the Plan believes that the carrying amount of payables
is a reasonable approximation of the fair value due to the short-term
nature of these instruments.
(d) Reclassifications
Certain reclassifications were made to the 2002 accounts to conform to
classifications adopted in 2003.
(2) Description of the Plan
The following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
4 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2003 and 2002
(a) General
The Plan is a defined contribution plan and covers substantially all
employees of Covenant Transport, Inc. and subsidiaries (the Company).
The Plan provides for retirement savings to qualified active
participants through both participant and employer contributions and
is subject to certain provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Employees are eligible to participate in
the Plan at the beginning of a calendar month after the completion of
six months of service. The Plan is administered by SunTrust Bank
Trust, the Plan trustee, who has overall responsibility for the
investment of assets, accounting for financial transactions, and
distributions to participants.
(b) Contributions
Contributions to the Plan are made by both participants and the
Company. Participants may contribute up to a maximum of 100% of their
annual compensation subject to the limitations of the Internal Revenue
Code Section 415(c)(3). The Company may make discretionary matching
contributions to the Plan not to exceed 6% of an employee's
compensation and may make other types of discretionary contributions.
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 the Company, cannot exceed certain levels established
under the Internal Revenue Code Section 402(g).
(c) Participant Accounts
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.
Participant accounts may be invested in one or more of the investment
funds available under the Plan at the direction of the participant.
The Plan provides for monthly valuation of accounts. Current
investment funds available within the Plan at December 29, 2003
include the following:
o 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 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 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 STI Classic Capital Appreciation 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.
5 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2003 and 2002
o Covenant Transport 401(k) Unitized Stock Fund - This fund
invests in the stock of Covenant Transport, Inc.
o Vanguard 500 Index Fund - This fund is managed by the
Vanguard Group. This fund invests in the stocks included in
the S&P 500 Index.
o Janus Advisor Aggressive Growth Fund - This fund is managed
by Janus. This fund invests primarily in common stocks.
o STI Classic International Equity Index Fund - This fund is
managed by SunTrust Bank. This fund is a stock fund, which
invests in foreign stocks.
o American Century Ultra Advisor Fund - This fund is managed
by American Century Investments. This fund seeks capital
growth. The fund invests in equities selected for their
appreciation potential with the majority being common stocks
that meet standard for earnings and revenue growth.
o Federated Kaufmann Fund - This fund is managed by Federated.
The fund seeks capital appreciation by investing in small
and mid-cap growth companies.
o Templeton Foreign Fund - This fund is managed by Franklin
Templeton Investments. This fund seeks long-term capital
growth. The fund invests primarily in stocks and debt
securities in companies and governments outside the United
States.
o STI Classic Small Cap Value Equity Fund - This fund is
managed by SunTrust Bank. The fund invests in a diversified
portfolio of equity securities issued by what management
considers undervalued companies.
o STI Classic Life Vision Growth and Income Fund - This fund
is managed by SunTrust Bank. This fund seeks long-term
capital appreciation and current income is secondary. The
fund primarily invests in equity securities and fixed income
securities.
o STI Classic Life Vision Moderate Growth Fund - This fund is
managed by SunTrust Bank. The fund seeks capital
appreciation and current income. The fund primarily invests
in equity securities and fixed income securities.
(d) Distributions to Participants
Upon termination of employment, the participant's account shall be
distributed in a lump-sum cash payment as soon as administratively
practicable.
Under the terms of the Plan, participants may make hardship
withdrawals from their accounts upon furnishing proof of hardship as
specified in the Plan.
(e) Vesting
Participants are immediately vested in their contributions and the
investment earnings (losses) thereon.
6 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2003 and 2002
Participants vest in employer contributions 20% each year and are 100%
vested after five years of credited service. Amounts forfeited by
participants who terminate from the Plan prior to being 100% vested
are applied to reduce subsequent Company contributions to the Plan.
Forfeitures totaled $162,376 and $107,593 in 2003 and 2002,
respectively, and reduced Company contributions by the same amounts.
(f) Administrative Expenses
The administrative expenses of the Plan are paid primarily by the
Company. The Company paid $49,137 and $58,019 of administrative fees
in 2003 and 2002, respectively. These costs include legal, accounting,
and certain administrative fees.
(3) Transactions with Parties-In-Interest
At December 29, 2003 and 2002, the Plan held investments in trust funds and
money market accounts sponsored by the trustee with current values of
$12,396,474 and $11,520,237, respectively. The Plan also held investments
in 96,250 and 112,429 shares of Covenant Transport, Inc. common stock with
current values of $1,901,644 and $2,015,741 at December 29, 2003 and 2002,
respectively.
(4) Investments
The following investments represent 5% or more of the Plan assets at
December 29, 2003 and 2002:
2003 2002
----------- -----------
SunTrust Employee Benefit Stable Asset Fund $ 6,088,638 $ 5,959,384
STI Classic Investment Grade Bond Fund 1,350,567 1,541,314
STI Classic Value Income Fund 2,131,204 1,766,855
STI Classic Capital Appreciation Fund 2,464,125 2,149,726
Vanguard 500 Index Fund 1,101,674 766,743
Covenant Transport 401(k) Unitized Stock Fund 1,901,644 2,015,741
Federated Kaufmann Fund 846,540 *
*The Federated Kaufmann Fund did not exceed 5% of net assets at December
31, 2002.
All of the Plan's investments are held by a party-in-interest to the Plan.
7 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2003 and 2002
(5) Income Tax Status
The Internal Revenue Service made a favorable ruling on the application for
determination of qualification submitted by the Company on September 8,
2003. The plan administrator is not aware of any course of action or series
of events that might adversely affect the Plan's qualification under
Section 401(a) of the Internal Revenue Code, and under which the Plan would
be subject to tax under present income tax law.
(6) Plan Termination
While it is the Company's intention to continue the Plan indefinitely, 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 and
the Plan agreement. In the event of Plan termination, participants will
become 100% vested in their accounts.
8
Schedule I
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Schedule H, Line 4i - Schedule of Assets (Held at the End of Year)
December 29, 2003
Current
Identity of the issue Description of investments value
-------------------------------------------------------------- --------------------------------------- -------------------
Mutual Funds:
* STI Classic Investment Grade Bond Fund 127,532 mutual fund units $ 1,350,567
* STI Classic Value Income Fund 192,000 mutual fund units 2,131,204
* STI Classic Capital Appreciation Fund 203,311 mutual fund units 2,464,125
* STI Classic International Equity Index Fund 18,312 mutual fund units 196,852
Vanguard 500 Index Fund 10,754 mutual fund units 1,101,674
Janus Advisor Aggressive Growth Fund 16 mutual fund units 326
Federated Kaufmann Fund 171,018 mutual fund units 846,540
* STI Classic Small Cap Value Equity Fund 8,220 mutual fund units 144,339
Templeton Foreign Fund 5,356 mutual fund units 56,296
American Century Ultra Advisor Fund 1,562 mutual fund units 41,212
* STI Classic Life Vision Growth and Income Fund 1,345 mutual fund units 14,252
* STI Classic Life Vision Moderate Growth Fund 651 mutual fund units 6,497
Common Collective Fund:
* SunTrust Employee Benefit Stable Asset Fund 180,238 collective fund units 6,088,638
Common stock:
* Covenant Transport, Inc. 96,250 shares of common stock 1,901,644
-------------------
$ 16,344,166
===================
*SunTrust Bank, Trustee, and Covenant Transport, Inc. are parties-in-interest to the Plan.
See accompanying report of independent registered public accounting firm.
9
SIGNATURES
The Plan. 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.
Dated: June 25, 2004 By: /s/ R.H. Lovin, Jr.
-----------------------------------
R.H. Lovin, Jr., Administrator
10