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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, 2005 and
2004
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2
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Statements
of Changes in Net Assets Available for Benefits for the Years Ended
December 29, 2005 and 2004
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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 the End of Year) –
December 29, 2005
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8
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Consent
of Independent Registered Public Accounting Firm
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COVENANT
TRANSPORT, INC. 401(K)
AND
PROFIT SHARING PLAN
Statements
of Net Assets Available for Benefits
December
29, 2005 and 2004
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2005
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2004
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Assets:
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Cash
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$
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38,880
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$
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9,011
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| Investments, at fair value | 16,666,227 | 16,260,822 | |||||
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Participant
loans
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992,338
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652,509
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Liabilities:
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Excess
contributions
payable
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21,362
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46,644
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Net
assets available for plan benefits
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$
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17,676,083
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$
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16,875,698
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See
accompanying notes to financial statements.
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COVENANT
TRANSPORT, INC. 401(K)
AND
PROFIT SHARING PLAN
Statements
of Changes in Net Assets Available for Benefits
Years
Ended December 29, 2005 and 2004
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Additions:
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2005
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2004
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Investment
income:
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Interest
and dividends
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$
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242,397
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$
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135,223
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Net
appreciation (depreciation) in fair value of investments:
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Mutual
funds
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540,263
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930,755
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Covenant
Transport, Inc. common stock
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(512,906
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)
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112,534
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Net
investment income
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269,754
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1,178,512
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Contributions
from employer
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914,053
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777,245
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Contributions
from participants
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2,898,320
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2,377,347
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Total
additions
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4,082,127
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4,333,104
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Deductions:
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Participants’
benefits
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3,271,092
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3,786,621
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Administrative
fees
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10,650
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14,951
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Net
increase in net assets available for benefits
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800,385
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531,532
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Net
assets available for benefits at beginning of year
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16,875,698
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16,344,166
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Net
assets available for benefits at end of year
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$
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17,676,083
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$
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16,875,698
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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 Covenant Transport, Inc.
401(k)
and Profit Sharing 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, common stock, and common collective
funds are stated at fair value based on quoted market prices or
as
determined by Diversified Investment Advisors (the “Trustee”). 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, 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.
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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 payables is a reasonable
approximation of the fair value due to the short-term nature of
these
investments.
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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 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. During 2004, the Plan changed trustees from SunTrust Bank
to
Diversified Investment Advisors. The Plan Trustee has overall
responsibility for the investment of assets, accounting for financial
transactions, and distributions to participants.
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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
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).
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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 principal,
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. Participants may choose to continue
to
participate in the Plan.
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(e)
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Distributions
to Participants
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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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Under
the terms of the Plan, participants may make hardship withdrawals
from
their accounts upon furnishing proof of hardship as specified in
the Plan.
Participants with a hardship withdrawal are not allowed to make
contributions to the plan for six months after the
withdrawal.
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, 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.
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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. 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
$85,911 and $61,491 in 2005 and 2004, respectively. Forfeitures
of $38,880
were unallocated at December 29, 2005, while the remainder was
used to
reduce Company contributions.
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(h)
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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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(i)
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Reclassification
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Certain
items in the 2004 financial statements have been reclassified to
conform
to the presentation of the 2005 financial statements. Theses
reclassifications had no effect on net assets available for benefits
as
previously reported.
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(3)
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Transactions
with Parties-In-Interest
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At
December 29, 2005 and 2004, the Plan held investments in trust funds
and money market accounts sponsored by the Trustee with current
values of
$14,774,121 and $14,399,273, respectively. The Plan also held investments
in 233,121 and 154,146 shares of Covenant Transport, Inc. common
stock with current values of $1,930,986 and $1,870,560 at
December 29, 2005 and 2004, respectively. The Plan also held
investments in the participants’ loans with interest rates between 5.25%
and 8.25% with a current value of $992,338 and $652,509 as of December
29,
2005 and 2004, respectively. All administrative fees of the Plan
were paid
to parties-in-interest.
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(4)
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Investments
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The
following investments represent 5% or more of the Plan’s net assets at
December 29, 2005 and 2004:
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2005
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2004
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Covenant
Transport 401(k) Unitized Stock Fund
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$
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1,930,986
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$
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1,870,560
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Diversified
Stable Pooled Fund
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5,300,034
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5,484,430
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Diversified
Equity Growth Fund
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2,242,622
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2,389,581
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Diversified
Value Horizon SAF
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2,027,522
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2,011,953
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Diversified
Core Bond Fund
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1,218,814
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1,313,689
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Diversified
Stock Index Fund
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**
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1,054,751
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Diversified
Mid Cap Growth Fund
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**
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974,664
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**
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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 Internal Revenue Code (“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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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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(7)
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Terminated
Participants
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As
of December 29, 2005, Plan assets in the amount of $44,637 are
allocated
to participants that have elected to withdraw from the Plan and
whose
claims have been processed and approved for payment, but have not
been
paid.
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COVENANT
TRANSPORT, INC. 401(K)
AND
PROFIT SHARING PLAN
EIN
88-0320154 Plan No. 001
Schedule
H, Line 4i –
Schedule of Assets (Held at the End of Year)
December
29, 2005
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Identity
of the issue
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Description
of investments
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Current
value
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Mutual
Funds:
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*
Diversified Equity Growth Fund
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109,503
mutual fund units
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$
2,242,622
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*
Diversified Value Horizon SAF
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85,262 mutual fund units
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2,027,522
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*
Diversified Core Bond Fund
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98,769 mutual fund units
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1,218,814
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*
Diversified Stock Index Fund
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84,953 mutual fund units
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829,142
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*
Diversified Mid Cap Growth Fund
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77,038 mutual fund units
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856,659
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*
Diversified International Fund
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33,365 mutual fund units
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532,169
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*
Diversified Special Equity Fund
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10,011 mutual fund units
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249,167
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*
Diversified Intermediate/Long Horizon Fund
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35,119 mutual fund units
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434,074
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*
Diversified Mid Cap Value
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20,789 mutual fund units
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286,468
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*
Diversified Hi Quality Bond
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4,776 mutual fund units
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54,160
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*
Diversified Long Horizon SAF
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30,639 mutual fund units
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332,741
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*
Diversified Intermediate Horizon SAF
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18,408 mutual fund units
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213,170
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*
Diversified Short/Intermediate Horizon SAF
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12,460 mutual fund units
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122,856
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*
Diversified Short Horizon SAF
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3,340 mutual fund units
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35,643
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Common
Collective Fund:
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*
Diversified Stable Pooled Fund
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348,265
collective fund units
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5,300,034
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*
Participant Loans
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Loans
to participants, with interest rates from 5.25% to 8.25%.
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992,338
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*
Investors Bank & Trust Company
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Cash
Reserve Fund
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38,880
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Common
stock:
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*
Covenant Transport 401(K) Unitized Stock Fund
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233,121
shares
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1,930,986
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$17,697,445
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*
Represents parties-in-interest to the
Plan.
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COVENANT
TRANSPORT, INC. 401(K) AND
PROFIT
SHARING PLAN
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COVENANT
TRANSPORT, INC.
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Dated:
June 27, 2006
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By:
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/s/
R.H. Lovin, Jr.
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R.H.
Lovin, Jr., Administrator
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