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[X]
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ANNUAL
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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[ ]
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TRANSITION
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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A.
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Full
title of the plan and the address of the plan, if different from
that of
the issuer named below:
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B.
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Name
of issuer of the securities held pursuant to the plan and the address
of
its principal executive office:
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Page
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Report
of Independent Registered Public Accounting Firm
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1
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Statements
of Net Assets Available for Benefits as of December 29, 2006 and
2005
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2
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Statements
of Changes in Net Assets Available for Benefits for the Years ended
December 29, 2006 and 2005
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3
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Notes
to Financial Statements
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4
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Schedule H,
Line 4i – Schedule of Assets (Held at End of Year) –
December 29, 2006
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7
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COVENANT
TRANSPORT, INC. 401(K)
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AND
PROFIT SHARING PLAN
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Statements
of Net Assets Available for Benefits
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December
29, 2006 and 2005
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2006
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2005
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Assets:
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Cash
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$ |
81
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$ |
38,880
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Investments
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18,536,831
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16,594,004
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Participant
loans
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961,450
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992,338
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Total
assets
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19,498,362
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17,625,222
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Liabilities:
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Excess
contributions payable
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23,767
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21,362
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Net
assets available for benefits at fair value
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19,474,595
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17,603,860
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Adjustment
from fair value to contract value for fully benefit-responsive
investment
contracts
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73,635
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72,223
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Net
assets available for benefits
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$ |
19,548,230
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$ |
17,676,083
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See
accompanying notes to financial statements.
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COVENANT
TRANSPORT, INC. 401(K)
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AND
PROFIT SHARING PLAN
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Statements
of Changes in Net Assets Available for Benefits
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Years
ended December 29, 2006 and 2005
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2006
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2005
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Additions:
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Investment
income:
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Interest
and dividends
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$ |
264,955
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$ |
242,397
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Net
appreciation/(depreciation) in fair value of investments:
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Mutual
funds
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1,040,014
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540,263
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Covenant
Transportation Group, Inc. common stock
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(357,249 | ) | (512,906 | ) | ||||
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Net
investment income
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947,720
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269,754
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Contributions
from employer
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964,542
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914,053
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Contributions
from participants
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3,355,667
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2,898,320
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Total
additions
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5,267,929
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4,082,127
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Deductions:
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Participants’
benefits
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3,372,070
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3,271,092
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Administrative
fees
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23,712
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10,650
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Total
deductions
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3,395,782
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3,281,742
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Net
increase in net assets available for benefits
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1,872,147
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800,385
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Net
assets available for benefits at beginning of year
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17,676,083
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16,875,698
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Net
assets available for benefits at end of year
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$ |
19,548,230
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$ |
17,676,083
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See
accompanying notes to financial statements.
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(1)
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Summary
of Significant Accounting Policies
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The
following is a summary of significant accounting policies followed
by the
Plan in preparing its financial
statements.
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(a)
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Basis
of Presentation
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The
records of the Plan are maintained on the cash basis of accounting.
The
accompanying financial statements of the Plan have been prepared
on the
accrual basis of accounting and present the net assets available
for
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.
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(b)
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Investments
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Investments
in money market funds, mutual funds, and common stock are stated
at fair
value based on quoted market prices or as determined by Diversified
Investment Advisors (the “Trustee”). Investments in the Stable
Pooled Fund (a common collective trust) are based upon the current
value
and net investment gain or loss relating to the units as determined
by the
Trustee. The common collective trust primarily invests in the
Wells Fargo Stable Return Fund. Participant loans are valued at
the unpaid principal balance, which approximates fair
value. 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. Purchases
and sales of securities are recorded on a trade date
basis. Dividends are recorded on the ex-dividend
date.
The
Plan’s investments include funds which invest in various types of
investment securities and in various companies in various markets.
Investment securities 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.
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(c)
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Fair
Value of Financial Instruments
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Investments
in securities are stated at fair value. In addition, management of
the
Plan believes that the carrying amount of participant loans and payables
is a reasonable approximation of the fair value due to the short-term
nature of these investments.
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(d)
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Change
in Accounting Principle
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In
December 2005, the Financial Accounting Standards Board (“FASB”) issued a
Staff Position (“FSP”), Reporting of Fully Benefit-Responsive
Investment Contracts Held by Certain Investment Companies Subject
to the
AICPA Investment Company Guide and Defined-Contribution Health and
Welfare
and Pension Plans. This FSP amends the guidance in AICPA
Statement of Position 94-4, Reporting of Investment Contacts Held by
Health and Welfare Benefit Plans and Defined-Contribution Pension
Plans, with respect to the definition of fully benefit-responsive
investment contracts and the presentation and disclosure of fully
benefit-responsive investment contracts in plan financial
statements. The FSP requires that investments in
common/collective trusts that include benefit-responsive investment
contracts be presented at fair value in the statement of net assets
available for benefits and that the amount representing the difference
between fair value and contract value of these investments also be
presented on the face of the statement of net assets available for
benefits. The FSP is effective for financial statements for
annual periods ending after December 15, 2006 and must be applied
retroactively to all prior periods presented. Accordingly, the
Plan has adopted the financial statement presentation and disclosure
requirements effective December 29, 2006, and has restated the 2005
Statement of Net Assets Available for Benefits to present all investments
at fair value, with the adjustment to contract value separately
disclosed. The effect of adopting the FSP had no impact on the
Plan’s net assets available for benefits or changes in net asset available
for benefits, as such investments have historically been presented
at
contract value.
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(e)
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Recently
Issued Accounting Standards
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In
September 2006, the FASB issued Statement No. 157, Fair Value
Measurements (“FAS 157”). This statement defines fair
value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. FAS 157 is effective
for the Plan in the first quarter of 2008. The Plan is
currently evaluating the impact of FAS 157 on its financial
statements.
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(2)
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Description
of the Plan
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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.
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(a)
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General
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The
Plan is a defined contribution plan and covers substantially all
employees
of Covenant Transportation Group, Inc. and certain 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.
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(b)
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Contributions
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Contributions
to the Plan are made by both participants and the Company. Participants
may contribute up to a maximum of 85% of their annual compensation
subject
to the limitations of the Internal Revenue Code (“IRC”)
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 IRC
Section 402(g).
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(c)
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Participant
Accounts
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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 income
and losses. 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.
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(d)
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Participant
Loans
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Other
than the financial conditions listed below, there are no restrictions
on
participants obtaining a loan. Subject to approval, a
participant can secure a loan from the Plan against his/her account
balance for a minimum of $1,000 up to the lesser of 50% of the vested
account balance or $50,000. Loans may generally be repaid over
one to five years. Loans must be repaid through automatic
payroll deductions unless otherwise provided for by the Plan
administrator. A participant may only have one loan outstanding
at a time. The interest rate is the prime rate plus 1% and is
fixed over the life of the loan. Individuals with loans may choose
to
continue to participate in the
Plan.
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(e)
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Payment
of Benefits
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Upon
retirement, death, disability, or termination of service, a participant
(or participant’s beneficiary in the event of death) may elect to receive
a lump-sum distribution equal to the value of the participant’s vested
account balance.
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Benefits
are recorded when paid.
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(f)
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Hardship
Withdrawals
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The
Plan permits distributions in the event of a hardship once a participant
furnishes proof of hardship, as defined in the Plan
agreement. These distributions are taxable and subject to a tax
penalty equal to 10% of the hardship distribution amount if the
participant is younger than 59 ½. Hardship withdrawals are
limited to the participant’s elective account balance. Participants with a
hardship withdrawal are not allowed to make contributions to the
Plan for
six months after the withdrawal.
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(g)
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Vesting
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Participants
are immediately vested in their contributions and the investment
earnings
(losses) thereon. Participants vest in employer
contributions 20% each year and are 100% vested after five years of
credited service.
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(h)
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Forfeited
Amounts
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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 $63,130 and $85,911 in 2006 and
2005. Forfeitures of $81 were unallocated at December 29, 2006,
while the remainder was used to reduce Company
contributions.
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(i)
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Administrative
Expenses
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The
administrative expenses of the Plan are paid primarily by the
Company. These costs include legal, accounting, and certain
administrative fees.
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(j)
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Plan
Termination
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While
it is the Company’s intention to continue the Plan, 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.
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(3)
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Transactions
with Parties-In-Interest
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At
December 29, 2006 and 2005, the Plan held investments in trust funds
and money market accounts sponsored by the Trustee with current values
of
$15,977,683 and $14,701,898, respectively. The Plan also held investments
in 242,464 and 233,121 units of Covenant Transportation Group, Inc.
common stock with current values of $1,641,941 and $1,930,986 at
December 29, 2006 and 2005, respectively. The Plan also
held investments in the participants’ loans with interest rates between
5.25% and 9.25% with a current value of $961,450 and $992,338 as
of
December 29, 2006 and 2005, respectively. All administrative
fees of the Plan were paid to
parties-in-interest.
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(4)
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Investments
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The
following investments represent 5% or more of the Plan’s net assets at
December 29, 2006 and 2005:
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2006
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2005
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Covenant
Transportation Group, Inc. 401(k) Unitized Stock Fund
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$1,641,941
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$1,930,986
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Diversified
Stable Pooled Fund
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5,121,337
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5,227,811
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Diversified
Value & Income Fund
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2,528,073
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**
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Diversified
Equity Growth Fund
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2,162,051
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2,242,622
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Diversified
Core Bond Fund
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1,253,735
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1,218,814
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Diversified
Stock Index Fund
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1,052,238
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**
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Diversified
Value Horizon SAF
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**
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2,027,522
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**
Investment does not represent 5% or more of the Plan’s net assets for the
respective year.
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(5)
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Income
Tax Status
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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 IRC, and under which the Plan would be
subject to tax under present income tax law. Subsequent to the
issuance of the determination letter, the Plan was
amended. Once qualified, the Plan is required to operate in
conformity with the IRC to maintain its qualifications. The
Plan administrator believes the Plan is being operated in compliance
with
the applicable requirements of the IRC and, therefore believes that
the
Plan, as amended, is qualified and the related trust is tax
exempt.
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(6)
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Terminated
Participants
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As
of December 29, 2006, Plan assets in the amount of $1,222 are allocated
to
participants that have elected to withdraw from the Plan and whose
claims
have been processed and approved for payment, but have not been
paid.
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COVENANT
TRANSPORT, INC. 401(K)
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AND
PROFIT SHARING PLAN
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EIN
88-0320154 Plan No. 001
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Schedule
H, Line 4i – Schedule of Assets (Held at the End of
Year)
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December
29, 2006
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Current
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Identity
of the issue
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Description
of investments
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Value
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Mutual
Funds:
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*
Diversified Investors Funds
Group
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Equity
Growth Fund
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$ 2,162,051
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*
Diversified Investors Funds
Group
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Value
& Income Fund
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2,528,073
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*
Diversified Investors Funds
Group
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Core
Bond Fund
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1,253,735
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*
Diversified Investors Funds
Group
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Stock
Index Fund
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1,052,238
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*
Diversified Investors Funds
Group
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Mid
Cap Growth Fund
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855,518
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Europacific
Growth Fund
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Europacific
Growth Fund R3
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749,713
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*
Diversified Investors Funds
Group
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Special
Equity Fund
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304,581
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*
Diversified Investors Funds
Group
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Intermediate/Long
Horizon Fund
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706,144
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*
Diversified Investors Funds
Group
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Mid
Cap Value Fund
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471,361
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*
Diversified Investors Funds
Group
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Long
Horizon SAF
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702,853
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*
Diversified Investors Funds
Group
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Intermediate
Horizon SAF
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641,702
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*
Diversified Investors Funds
Group
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Short/Intermediate
Horizon SAF
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92,889
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*
Diversified Investors Funds
Group
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Short
Horizon SAF
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85,120
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American
Century Capital Portfolios, Inc.
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Real
Estate Investment Fund
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167,575
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Common
Collective Fund:
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* Diversified
Investors Advisors Coll. Trust
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Stable
Pooled Fund
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5,121,337
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*
Participant Loans
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Loans
to participants, with interest rates from 5.25% to
9.25%.
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961,450
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Common
stock:
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*
Covenant Transportation
Group, Inc.
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401(K)
Unitized Stock Fund
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1,641,941
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$ 19,498,281
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*
Represents parties-in-interest to the Plan.
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See
accompanying report of independent registered public accounting
firm.
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COVENANT
TRANSPORT, INC. 401(K) AND PROFIT SHARING PLAN
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COVENANT
TRANSPORTATION GROUP, INC.
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Dated:
June 27, 2007
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By:
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/s/
M. David Hughes
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M.
David Hughes, Senior Vice President and
Treasurer
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Exhibit
Number
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Description
of Exhibit
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|
23
|
Consent
of Independent Registered Public Accounting
Firm
|