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 [FEE REQUIRED]
For the fiscal year ended December 29, 2002
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
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits as of December 29, 2002 and 2001 2
Statement of Changes in Net Assets Available for Plan Benefits for the Year ended
December 29, 2002 3
Notes to Financial Statements 4
Schedule
1 Schedule H, Line 4i - Schedule of Assets (Held at End of Year) - December 29, 2002 8
Independent Auditors' Report
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, 2002 and 2001, and the related statement of changes in net
assets available for plan benefits for the year ended December 29, 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the changes in net assets available for plan
benefits for the year ended December 29, 2002 in conformity with accounting
principles generally accepted in the United States of America.
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, 2002 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
May 9, 2003
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 29, 2002 and 2001
2002 2001
----------------- -----------------
Assets:
Investments, at fair value (notes 3 and 4) $ 14,865,621 15,311,477
Liabilities:
Excess contributions payable 28,368 12,005
----------------- -----------------
Net assets available for plan benefits $ 14,837,253 15,299,472
================= =================
See accompanying notes to financial statements.
2
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 29, 2002
Additions:
Investment income (loss):
Interest and dividends $ 378,967
Net appreciation (depreciation) in fair value of investments:
Mutual funds (1,442,220)
Covenant Transport, Inc. common stock 158,643
----------------
Net investment loss (904,610)
Contributions from employer 953,502
Contributions from participants 2,808,915
----------------
Total additions 2,857,807
Deductions:
Participants' benefits 3,312,768
Administrative fees 7,258
----------------
Net decrease in net assets available for plan benefits (462,219)
Net assets available for plan benefits at beginning of year 15,299,472
----------------
Net assets available for plan benefits at end of year $ 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, 2002 and 2001
(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 accounting
principles generally accepted in the United States of America 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 depreciation in fair value of investments in the statement 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.
(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.
(a) General
The Plan is a defined contribution plan and covers substantially all
employees of Covenant Transport, Inc. (the Company). The Plan provides
for retirement savings to qualified active participants through both
participant and employer contributions and is subject to certain
provisions
4 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2002 and 2001
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 a maximum of 17% of their annual
compensation subject to certain limitations. The Company 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 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, 2002
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.
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.
5 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2002 and 2001
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.
(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 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 $107,593 in 2002.
(f) Administrative Expenses
The administrative expenses of the Plan are paid primarily by the
Company. These costs include legal, accounting, and certain
administrative fees.
(3) Transactions with Parties-In-Interest
At December 29, 2002 and 2001, the Plan held investments in trust funds and
money market accounts sponsored by the trustee with current values of
$11,520,237 and $11,754,863, respectively. The Plan also held investments
in 112,429 and 135,821 shares of Covenant Transport, Inc. common stock with
current values of $2,015,741 and $2,265,302 at December 29, 2002 and 2001,
respectively.
(4) Investments
The following investments represent 5% or more of the Plan assets at
December 29, 2002 and 2001:
2002 2001
----------- -----------
SunTrust Employee Benefit Stable Asset Fund $ 5,959,384 5,180,456
STI Classic Investment Grade Bond Fund 1,541,314 1,371,432
STI Classic Value Income Fund 1,766,855 2,071,495
STI Classic Capital Appreciation Fund 2,149,726 3,059,408
Vanguard 500 Index Fund 766,743 732,099*
Covenant Transport 401(k) Unitized Stock Fund 2,015,741 2,265,302
*The Vanguard 500 Index Fund did not exceed 5% of net assets at December
31, 2001.
All of the Plan's investments are held by a party-in-interest to the Plan.
6 (Continued)
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Notes to Financial Statements
December 29, 2002 and 2001
(5) Income Tax Status
The Internal Revenue Service made a favorable ruling on the application for
determination of qualification submitted by the Company on February 26,
1996. The Plan has been amended since receiving the determination letter
and the Plan has filed an application for an updated determination letter.
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.
7
Schedule 1
COVENANT TRANSPORT, INC. 401(k)
AND PROFIT SHARING PLAN
Schedule H, Line 4i - Schedule of Assets (Held at the End of Year)
December 29, 2002
Current
Identity of the issue Description of investments value
------------------------------------------------------ --------------------------------------- -------------------
* STI Classic Investment Grade Bond Fund 145,544 mutual fund units $ 1,541,314
* STI Classic Value Income Fund 195,017 mutual fund units 1,766,855
* STI Classic Capital Appreciation Fund 210,345 mutual fund units 2,149,726
* STI Classic International Index Fund 13,302 mutual fund units 102,958
Vanguard 500 Index Fund 9,498 mutual fund units 766,743
Janus Advisor Aggressive Growth Fund 36,504 mutual fund units 562,900
Common Collective Fund:
*SunTrust Employee Benefit Stable Asset Fund 183,933 collective fund units 5,959,384
Common stock:
*Covenant Transport, Inc. 112,429 shares of common stock 2,015,741
-------------------
$ 14,865,621
===================
*SunTrust Bank, Trustee, and Covenant Transport, Inc. are parties-in-interest to
the Plan.
See accompanying independent auditors' report.
8
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 26, 2003 By: /s/ R.H. Lovin, Jr.
-----------------------------------
R.H. Lovin, Jr., Administrator
9