SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section
240.14a-12
COVENANT TRANSPORT, INC.
(Name of Registrant as Specified in its Charter)
The Covenant Transport, Inc. Board of Directors
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Price per unit or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: N/A
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(4) Date Filed: N/A
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
------------------------------------
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2002
------------------------------------
To Our Stockholders:
The 2002 Annual Meeting of Stockholders (the "Annual Meeting") of Covenant
Transport, Inc., a Nevada corporation (the "Company"), will be held at the
Company, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at 10:00 a.m.
Eastern Time, on Thursday, May 16, 2002, for the following purposes:
1. To consider and act upon a proposal to elect seven (7) directors of
the Company;
2. To consider and act upon a proposal to ratify the selection of KPMG
LLP as independent public accountants for the Company for 2002;
3. To consider and act upon such other matters as may properly come
before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on March 25, 2002,
as the record date for the determination of Stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournment thereof. Shares
of Common Stock may be voted at the Annual Meeting only if the holder is present
at the Annual Meeting in person or by valid proxy. YOUR VOTE IS IMPORTANT. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO PROMPTLY
DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
Returning your proxy now will not interfere with your right to attend the Annual
Meeting or to vote your shares personally at the Annual Meeting, if you wish to
do so. The prompt return of your proxy may save the Company additional expenses
of solicitation.
All Stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors,
/s/ David R. Parker
David R. Parker
Chairman of the Board
Chattanooga, Tennessee 37419
April 15, 2002
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2002
------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Covenant Transport, Inc., a Nevada
corporation (the "Company"), to be used at the 2002 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), which will be held at the
Company's headquarters, 400 Birmingham Highway, Chattanooga, Tennessee 37419 on
Thursday, May 16, 2002, at 10:00 a.m. Eastern Time, and any adjournment thereof.
All costs of the solicitation will be borne by the Company. The approximate date
of mailing this Proxy Statement and the enclosed form of proxy is April 15,
2002.
The enclosed copy of the Company's annual report for the fiscal year ended
December 31, 2001, is not incorporated into this Proxy Statement and is not to
be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 25, 2002
("Stockholders"), are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. Holders of Class A Common Stock are entitled to one vote for
each share held. Holders of Class B Common Stock are entitled to two votes for
each share held. On March 25, 2002, there were issued and outstanding 11,752,553
shares of Class A Common Stock, par value one cent ($.01), entitled to cast an
aggregate 11,752,553 votes on all matters subject to a vote at the Annual
Meeting, and 2,350,000 shares of Class B Common Stock, par value one cent
($.01), entitled to cast an aggregate 4,700,000 votes on all matters subject to
a vote at the Annual Meeting. The Company has a total of 14,102,553 shares of
Common Stock outstanding, entitled to cast an aggregate 16,452,553 votes on all
matters subject to a vote at the Annual Meeting. The number of issued and
outstanding shares excludes approximately 1,437,567 shares of Class A Common
Stock reserved for issuance under the Company's incentive stock plans, and other
arrangements. Holders of unexercised options are not entitled to vote at the
Annual Meeting. The Company has no other class of stock outstanding.
Stockholders are not entitled to cumulative voting in the election of directors.
All proxies that are properly executed and received by the Company prior to
the Annual Meeting will be voted in accordance with the choices indicated. Any
Stockholder may be represented and may vote at the Annual Meeting by a proxy or
proxies appointed by an instrument in writing. In the event that any such
instrument in writing shall designate two (2) or more persons to act as proxies,
a majority of such persons present at the meeting, or, if only one shall be
present, then that one shall have and may exercise all of the powers conferred
by such written instrument upon all of the persons so designated unless the
instrument shall otherwise provide. No such proxy shall be valid after the
expiration of six (6) months from the date of its execution, unless coupled with
an interest or unless the person executing it specifies therein the length of
time for which it is to continue in force, which in no case shall exceed seven
(7) years from the date of its execution. Any Stockholder giving a proxy may
revoke it at any time prior to its use at the Annual Meeting by filing with the
Secretary of the Company a revocation of the proxy, by delivering to the Company
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person.
Other than the election of Directors, which requires a plurality of the
votes cast, each matter to be submitted to the Stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Proxies marked "Abstain" and broker
non-votes are counted only for purposes of determining whether a quorum is
present at the meeting. If no direction is specified by the Stockholder, the
proxy will be voted "For" the proposals as specified in this notice and, at the
discretion of the proxy holder, upon such other matters as may properly come
before the meeting or any adjournment thereof.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, the Stockholders will elect seven directors to serve
as the Board of Directors until the 2003 Annual Meeting of the Stockholders of
the Company or until their successors are elected and qualified. The Company
currently has seven directors: David R. Parker, Michael W. Miller, R.H. Lovin,
Jr., William T. Alt, Robert E. Bosworth, Hugh O. Maclellan, Jr., and Mark A.
Scudder. In the absence of contrary instructions, each proxy will be voted for
the election of the existing directors.
Information Concerning Directors and Executive Officers
Information concerning the names, ages, positions with the Company, tenure
as a director, and business experience of the Company's current directors and
other executive officers is set forth below. All references to experience with
the Company include positions with the Company's operating subsidiary, Covenant
Transport, Inc., a Tennessee corporation. All executive officers are elected
annually by the Board of Directors.
NAME AGE POSITION DIRECTOR SINCE
David R. Parker 44 Chairman of the Board, President, Chief 1985
Executive Officer
Michael W. Miller 44 Executive Vice President, Chief Operating 1995
Officer, Director
R. H. Lovin, Jr. 50 Vice President - Administration, 1994
Secretary, Director
Joey B. Hogan 40 Senior Vice President and Chief Financial -
Officer
Ronald B. Pope 57 Senior Vice President - Sales and Marketing -
William T. Alt(1)(2) 65 Director 1994
Robert E. Bosworth(1)(2) 54 Director 1998
Hugh O. Maclellan, Jr.(1)(2) 62 Director 1994
Mark A. Scudder(2) 39 Director 1994
------------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
David R. Parker has served as President since founding the Company in 1985
and as Chairman of the Board and Chief Executive Officer since 1994. He has
guided the Company's growth from $7.7 million in 1986 to over $547 million in
2001. Mr. Parker was elected to the Board of Directors of the Truckload
Carriers' Association in 1994.
Michael W. Miller has served as the Company's Executive Vice President and
Chief Operating Officer since 1997. He previously served as the Company's Vice
President - Operations from 1993 to 1997 and in various other positions with the
Company from 1987 to 1993. Prior to joining the Company, Mr. Miller operated his
own cartage company from 1982 to 1986, served as a terminal manager for
Interstate Systems from 1979 to 1982, and held the position of traffic manager
for Jackson Manufacturing from 1975 to 1979.
R. H. Lovin, Jr. has served as the Company's Vice President -
Administration since May 1994 and Corporate Secretary since August 1995. Mr.
Lovin previously served as the Company's Chief Financial Officer from 1986 to
1994. Before joining the Company, Mr. Lovin served as a comptroller/accountant
for Perry Smith Company and Olin Chemical Co.
Joey B. Hogan, the Company's Senior Vice President and Chief Financial
Officer, joined Covenant in August 1997. He previously served as the Company's
Treasurer. Prior to joining the Company, Mr. Hogan served as Chief Financial
Officer of The McKenzie Companies in Cleveland, Tennessee, a group of
privately-owned companies. From 1986 to 1996, Mr. Hogan served in various
capacities, including three years as Director of Finance, with Chattem, Inc., a
publicly-held company, headquartered in Chattanooga, Tennessee, involved in the
manufacturing and marketing of over-the-counter pharmaceuticals and toiletries
products.
Ronald B. Pope has served as Covenant's Senior Vice President - Sales and
Marketing since 1998 and was the Company's Vice President - Sales and Marketing
since 1993, having previously served as Covenant's sales manager for the western
region since December 1990. Mr. Pope has over 25 years of sales and marketing
experience in the trucking industry.
William T. Alt has engaged in the private practice of law since 1962 and
has served as outside counsel to the Company since 1986.
Robert E. Bosworth has served as a director of the Company since 1998. He
is the Vice President of Corporate Finance for the Livingston Company, a
merchant bank. From February 1998 until February 2001, Mr. Bosworth was a
business and management consultant to various corporations in the Chattanooga
area. Prior to February 1998, Mr. Bosworth served for
2
more than five years as Executive Vice President and Chief Financial Officer of
Chattem, Inc., a publicly-held company, headquartered in Chattanooga, Tennessee,
involved in the manufacturing and marketing of over-the-counter pharmaceuticals
and toiletries products. Mr. Bosworth is a director of Chattem, Inc.
Hugh O. Maclellan, Jr. is President of the Maclellan Foundation, Inc. and
serves on the Boards of UnumProvident Corporation and SunTrust Bank,
Chattanooga, N.A.
Mark A. Scudder has been an attorney for more than eight years with Scudder
Law Firm, P.C., L.L.O., Lincoln, Nebraska, the Company's outside corporate and
securities counsel. Mr. Scudder is on the board of managers of eScout LLC, a
private limited liability company engaged in the operation of an e-commerce
marketplace for businesses and banks. Mr. Scudder is also a director of Knight
Transportation, Inc., a truckload carrier with common stock traded on the Nasdaq
National Market. Another principal of Scudder Law Firm, P.C., L.L.O. serves as a
director of Swift Transportation Co., Inc., a nationwide truckload carrier with
common stock traded on the Nasdaq National Market.
Meetings and Compensation
Board of Directors. The Board of Directors of the Company held four
regularly scheduled meetings and three special meetings during the fiscal year
ended December 31, 2001. No director attended less than 75% of the meetings of
the Board of Directors or any committee on which he served. Directors who are
not employees of the Company received an annual retainer of $10,000 plus $1,000
per Board of Directors meeting attended in person, $500 per Board of Directors
meeting attended by telephone, and reimbursement of expenses incurred in
attending such Board meetings. Compensation for each of the non-employee
directors in 2001 was $15,500 for each of Messrs. Alt, Bosworth, and Scudder,
and $14,000 for Mr. Maclellan. In May 2001, the Board of Directors granted each
non-employee director an option to purchase 2,500 shares of the Company's Class
A Common Stock, under the Outside Director Stock Option Plan, at $16.79 per
share, the fair market value on the date of the grant. The options immediately
vested and must be exercised within ten (10) years of the date of the grant. The
option grant was in lieu of an increase in cash compensation.
Compensation Committee. The Compensation Committee of the Board of
Directors met twice during 2001. This committee reviews all aspects of
compensation of the Company's executive officers and makes recommendations on
such matters to the full Board of Directors. The Compensation Committee Report
on Executive Compensation for 2001 is set forth below. See "Compensation
Committee Report on Executive Compensation."
Audit Committee and Audit Committee Report. The Audit Committee met five
times during 2001. Messrs, Alt, Bosworth, and Maclellan served as the Audit
Committee. The responsibilities of the Audit Committee are set forth in the
Audit Committee Report, which appears below. All of the members of the Audit
Committee are independent directors, as defined in the NASDAQ Stock Market's
Listing Rule 4200. The Audit Committee has been operated pursuant to a written
charter detailing its duties since May 18, 2000. In performing its duties, the
Audit Committee, as required by applicable Securities and Exchange Commission
rules, issues a report recommending to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on Form
10-K, and certain other matters, including the independence of the Company's
outside public accountants. The 2001 Report of the Audit Committee is set forth
below.
The Audit Committee Report shall not be deemed to be incorporated by
reference into any filing made by the Company under the Securities Act of 1933
or the Securities Exchange Act of 1934, notwithstanding any general statement
contained in any such filings incorporating this Proxy Statement by reference,
except to the extent the Company incorporates such report by specific reference.
Audit Committee Report for 2001
The primary purpose of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities relating to the quality
and integrity of the Company's financial reports and financial reporting
processes and systems of internal controls. Management of the Company has
primary responsibility for the Company's financial statements and the overall
reporting process, including maintenance of the Company's system of internal
controls. The Company retains independent public accountants who are responsible
for conducting an independent audit of the Company's financial statements, in
accordance with generally accepted accounting principles, and issuing a report
thereon. In performing its duties, the Audit Committee has discussed the
Company's financial statements with management and the Company's independent
auditors and, in issuing this report, has relied upon the responses and
information provided to the Audit Committee by management and the independent
public accountants. For the fiscal year ended December 31, 2001, the Audit
Committee (1) reviewed and discussed the audited financial statements with
management and KPMG LLP, the Company's independent auditors; (2) discussed with
the auditors the matters required to be disclosed by Statement on Auditing
Standards No. 61; and (3) received and discussed with the independent auditors
the written disclosures and the letter from the
3
independent auditors required by Independence Standards Board Statement No. 1.
Based on the foregoing reviews and meetings, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K for the year ended December 31, 2001, for filing with
the Securities and Exchange Commission. The Audit Committee also recommended the
appointment of KPMG LLP as the Company's independent auditors for the fiscal
year ending December 31, 2002.
Audit Committee:
William T. Alt
Robert E. Bosworth
Hugh O. Maclellan, Jr.
Nominating Committee. The Board does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation Committee Interlocks and Insider Participation. Messrs. Alt,
Bosworth, Maclellan, and Scudder served as the Compensation Committee in 2001.
None of such individuals has been an officer or employee of the Company. Mr.
Scudder's law firm serves as the Company's corporate and securities counsel and
earned approximately $176,705 in fees for legal services during 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2001, the Company engaged in transactions with Clyde M. Fuller, a holder
of approximately 10.1% of the Company's outstanding Common Stock. He is the
stepfather of David R. Parker and is employed by the Company at a nominal
salary. The terms of all transactions were negotiated by Mr. Fuller and Mr.
Parker. Tenn-Ga Truck Sales, Inc., a corporation wholly owned by Mr. Fuller,
purchased used tractors from the Company for approximately $600,000 during 2001.
The Company believes the price represented fair market value. In February 2000,
the Company sold approximately 2.5 acres of land to Mr. Fuller for $88,000 in
the form of a non-interest-bearing promissory note with an 18-month term. The
note was paid in full in September 2001. J-Mar Truck Lines, Inc. ("J-Mar"), a
corporation wholly owned by Mr. Fuller, had certain equipment repairs made at
the Company's repair facilities. J-Mar was charged $61,210 for the equipment
repairs, an amount representing the Company's cost of such repairs.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
4
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid to the chief executive officer and the four other
named executive officers of the Company (the "Named Officers"), for services in
all capacities to the Company for the fiscal years ended December 31, 2001,
2000, and 1999.
Summary Compensation Table
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Annual Compensation Long Term Compensation
---------------------------------
Awards Payouts
-----------------------------------------------------------------------------------------------------------------------------------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options LTIP All Other
Position Year Salary Bonus(1) Compensation(2) Award(s) (#)(1) Payouts Compensation(3)
-----------------------------------------------------------------------------------------------------------------------------------
David R. Parker 2001 $525,000 - - - 10,000 - $5,987
Chairman, President, and 2000 $509,135 - - - 120,000 - $5,407
Chief Executive Officer 1999 $496,875 $216,176 - - 17,206 - $9,376
-----------------------------------------------------------------------------------------------------------------------------------
Michael W. Miller
Executive Vice President 2001 $245,001 - $27,600 - 10,000 - -
and Chief Operating 2000 $241,250 - $27,600 - 60,000 - -
Officer 1999 $226,912 $ 98,938 - - 13,298 - -
-----------------------------------------------------------------------------------------------------------------------------------
Joey B. Hogan
Senior Vice President 2001 $175,000 - - - 10,000 - -
and Chief Financial 2000 $166,539 - - - 50,000 - -
Officer 1999 $155,770 $ 68,157 - - 12,272 - -
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Ronald B. Pope 2001 $150,001 - - - 7,500 - -
Senior Vice 2000 $145,193 - - - 30,000 - -
President-Sales/Marketing 1999 $124,016 $ 54,656 - - 9,322 - -
-----------------------------------------------------------------------------------------------------------------------------------
R. H. Lovin, Jr. 2001 $118,000 - $13,200 - 7,500 - -
Vice President- 2000 $113,879 - $13,200 - 40,000 - -
Administration 1999 $106,732 $ 47,336 - - 9,078 - -
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-----------------------------------------
(1) No bonus was paid in 2001 or 2000. For prior years, amount reflects cash
portion of bonus earned by the Named Officer during the fiscal year
covered. In 1999, the cash portion is equal to 75% of the bonus earned
under the Named Officers' bonus program. In accordance with the program,
the remaining 25% was paid through issuance of immediately exercisable
stock options at the rate of an option on 100 shares for each $1,000 of
bonus payment foregone. For 1999, the Named Officers received options under
the bonus program to purchase the following number of shares at the $13.125
fair market value on February 29, 2000 (the date of the grant), to purchase
the following number of shares of Class A Common Stock: David Parker -
7,206; Michael Miller - 3,298; Joey Hogan - 2,272; Ronald Pope - 1,822; and
R.H. Lovin, Jr. - 1,578.
(2) For all Named Officers other than Michael W. Miller and R.H. Lovin, Jr.,
other annual compensation did not exceed 10% of such Named Officer's total
salary for any reported year. The amounts listed for Messrs. Miller and
Lovin reflect the amount of the Company car allowance for each.
(3) Reportable portion of premiums paid on split-dollar life insurance
policies.
5
The following table lists stock options granted to the Named Officers during the
fiscal year ended December 31, 2001. The Company has not granted any stock
appreciation rights ("SARs").
Option/SAR Grants in Last Fiscal Year
---------------------------------------------------------------------------------------------------------------------------
Potential realizable
value at assumed annual
rates of stock price
appreciation for option
Individual Grants term
---------------------------------------------------------------------------------------------------------------------------
Number of
securities Percent of total Exercise
underlying options/SARs granted or base
options to employees in fiscal price Expiration
Name granted (#) year ($/Sh) Date 5% ($) 10% ($)
---------------------------------------------------------------------------------------------------------------------------
David R. Parker 10,000 4.0% 16.79 05/17/2011 105,591 267,589
---------------------------------------------------------------------------------------------------------------------------
Michael W. Miller 10,000 4.0% 16.79 05/17/2011 105,591 267,589
---------------------------------------------------------------------------------------------------------------------------
Joey B. Hogan 10,000 4.0% 16.79 05/17/2011 105,591 267,589
---------------------------------------------------------------------------------------------------------------------------
Ronald B. Pope 7,500 3.0% 16.79 05/17/2011 79,194 200,692
---------------------------------------------------------------------------------------------------------------------------
R.H. Lovin, Jr. 7,500 3.0% 16.79 05/17/2011 79,194 200,692
---------------------------------------------------------------------------------------------------------------------------
The following table demonstrates the options under the Plan that were
exercised during the fiscal year ended December 31, 2001, by the Named Officers.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
--------------------------------------------------------------------------------------------------------------------------
Number of Securities
Shares Underlying Unexercised Option Value of Unexercised
Acquired Value at Fiscal Year End In-the-Money
on Exercise Realized (#) Options at Fiscal Year End(1) ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------------------------
David R. Parker -0- -0- 205,874 93,332 471,561 618,744
---------------------------------------------------------------------------------------------------------------------------
Michael W. Miller -0- -0- 88,966 53,332 221,681 300,344
---------------------------------------------------------------------------------------------------------------------------
Joey B. Hogan -0- -0- 55,607 51,665 180,742 247,275
---------------------------------------------------------------------------------------------------------------------------
Ronald B. Pope 5,000 24,165 41,822 30,000 111,622 145,663
---------------------------------------------------------------------------------------------------------------------------
R. H. Lovin, Jr. 9,078 38,786 57,334 36,666 118,932 198,724
---------------------------------------------------------------------------------------------------------------------------
-----------------------------
(1) Based on the $15.96 closing price of the Company's Class A Common Stock on
December 31, 2001.
The Company does not have a long-term incentive plan or a defined benefit
or actuarial plan and has never issued any stock appreciation rights.
Employment Agreements
The Company currently does not have any employment, severance, or
change-in-control agreements with any of its executive officers. However, under
certain circumstances in which there is a change of control, holders of
outstanding stock options granted under the Plan may be entitled to exercise
such options notwithstanding that such options may otherwise not have been fully
exercisable. The Board of Directors has the authority to extend similar rights
to holders of additional awards under the Plan.
6
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors prepared the following
report on executive compensation.
The approach to determining executive compensation generally consists of
three elements: base salary, annual stock option grants, and an annual bonus.
For 2001, the Chief Executive Officer participated in the same program as the
other executive officers and was evaluated on the same basis as the other
executive officers. The Compensation Committee believes that the annual bonus
program directly links corporate performance to executive compensation. The
Compensation Committee also believes that the annual stock option grants and the
stock-based component of the annual bonus indirectly link executive compensation
to corporate performance to the extent corporate performance is reflected in the
Company's stock price.
The Compensation Committee has reviewed the base salaries of its executive
officers and believes such salaries are generally comparable to those earned by
similarly-situated executives. Under the executive compensation program,
increases in base salaries are intended to slow after executives reach target
salaries identified by the Compensation Committee. The Compensation Committee
may adjust the targets as executives assume additional responsibilities. In
2001, the Company continued to move Mr. Hogan toward his target salary. Mr.
Parker's salary, which was increased to $525,000 in May of 2000, remained the
same for 2001. In view of financial results for the Company that were below
expectations, the Company's other executives received minimal raises.
The annual stock option element of the compensation program provides that
each executive will be granted an annual stock option to purchase up to 10,000
shares of the Company's Class A Common Stock at the market price on the date of
the annual meeting under the Company's incentive stock plan for key employees.
Stock options granted since July of 2000 vest ratably over three years and
expire ten years from the date of grant. Certain options granted prior to 1998
vest ratably over five years and expire ten years from the date of grant. The
Compensation Committee believes that a multi-year granting and vesting schedule
will encourage the executives to remain with the Company.
The annual bonus element of the compensation program permits the executives
to earn a percentage of their salary based upon the achievement of individual
and corporate goals for that year. For senior management, 60% to 75% of the
bonus is based upon attaining or exceeding the earnings per share target
established at the beginning of the year. The remainder of the bonus is based
upon achieving certain individual goals that are established at the beginning of
each year. The Board of Directors establishes the goals for the Chief Executive
Officer, and the Chief Executive Officer establishes the goals for the rest of
the executives.
The initial bonus amounts for the executives are adjusted up or down based
upon the Company's ranking among its peer group of companies in the following
performance measures: revenue growth, earnings per share growth, pretax margin,
and return on average equity. The peer group identified by the Compensation
Committee consists of Swift Transportation, Werner Enterprises, USA Truck, Inc.,
U.S. Xpress Enterprises, and Transport Corp. of America. The annual bonus for
senior management is limited to 75% of the executive's base salary. The Company
must achieve its earnings per share goal for any individual bonus to be paid.
There is an exception for individual goal bonuses to be paid if the Company
achieves at least a threshold percentage of the earnings per share goal and
ranks first or second in its peer group.
The executives currently must accept at least 25% of their annual bonus in
the form of stock-based compensation and may choose to receive up to 100% of the
bonus in the form of stock-based compensation. The Compensation Committee
believes that this bonus program provides incentives to grow earnings per share,
achieve individual goals, and perform at or above the level of peer companies.
For 2001, the Company was ranked fourth of six by the Compensation Committee
among its peer group in the designated performance measures and each of the
Named Officer executives met at least 75% of his established personal goals.
However, the Company did not achieve the designated percentage of its earnings
per share goal. Accordingly, no bonuses were earned for 2001.
Compensation Committee
William T. Alt
Robert E. Bosworth
Hugh O. Maclellan, Jr.
Mark A. Scudder
The Compensation Committee Report on executive compensation, and the performance
graph appearing later in this Proxy Statement shall not be deemed to be
incorporated by reference into any filing made by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding
any general statement contained in any filing incorporating this proxy statement
by reference, except to the extent the Company incorporates this report and
graph by specific reference.
7
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth, as of March 20, 2002, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Officer of the Company, and by all directors and
executive officers of the Company as a group.
------------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
------------------------------------------------------------------------------------------------------------------------------
Amount & Nature
of Beneficial
Title of Class Name of Beneficial Owner(1) Ownership(2) Percent of Class
------------------------------------------------------------------------------------------------------------------------------
35.74% of Class A
Class A & Class B David R. Parker & 100.0% of Class B
Common Jacqueline F. Parker 6,626,357(3) 46.29% of Total
------------------------------------------------------------------------------------------------------------------------------
Class A Common Michael W. Miller 95,633 *
------------------------------------------------------------------------------------------------------------------------------
Class A Common R. H. Lovin, Jr. 58,834
------------------------------------------------------------------------------------------------------------------------------
Class A Common Joey B. Hogan(4) 72,608 *
------------------------------------------------------------------------------------------------------------------------------
Class A Common Ronald B. Pope 47,369 *
------------------------------------------------------------------------------------------------------------------------------
William T. Alt
300 Forest Avenue
Class A Common Chattanooga, TN 37405 10,500 *
------------------------------------------------------------------------------------------------------------------------------
Hugh O. Maclellan, Jr.
501 Provident Building
Class A Common Chattanooga, TN 37402 26,000 *
------------------------------------------------------------------------------------------------------------------------------
Class A Common Mark A. Scudder(5) 15,150 *
------------------------------------------------------------------------------------------------------------------------------
Robert E. Bosworth(6)
174 Meadow Pond Run
Class A Common Lookout Mountain, GA 30750 24,500 *
------------------------------------------------------------------------------------------------------------------------------
12.05% of Class A
Class A Common Clyde M. Fuller(7) 1,416,667 10.05% of Total
------------------------------------------------------------------------------------------------------------------------------
9.15% of Class A
Class A Common Dimensional Fund Advisors Inc.(8) 1,074,900 7.62% of Total
------------------------------------------------------------------------------------------------------------------------------
5.77% of Class A
Class A Common Rutabaga Capital Management(9) 675,500 4.79% of Total
------------------------------------------------------------------------------------------------------------------------------
Class A & Class B All directors and executive officers as a group
Common (9 persons) 6,976,951 47.70% of Total
------------------------------------------------------------------------------------------------------------------------------
------------------------------------
* Less than one percent (1%).
(1) The business address of Mr. and Mrs. Parker, Mr. Lovin, Mr. Hogan, Mr.
Pope, Mr. Miller, and Mr. Fuller is 400 Birmingham Highway, Chattanooga, TN
37419.
(2) In accordance with applicable rules under the Securities Exchange Act of
1934, as amended, the number of shares of Class A Common Stock beneficially
owned includes the following shares underlying stock options that are
exercisable or will become exercisable within 60 days following March 20,
2002: Mr. Parker - 212,541; Mr. Miller - 95,633; Mr. Lovin - 58,834; Mr.
Pope - 46,822; Mr. Hogan - 67,274; Mr. Alt - 10,500; Mr. Maclellan -
10,500; Mr. Scudder - 10,500; and Mr. Bosworth - 10,500. The beneficial
ownership also includes the following shares held by the Named Officer in
the Company's 401(k) Plan: Mr. Parker - 8,816; Mr. Miller - 0; Mr. Lovin -
0; Mr. Hogan - 1,934; and Mr. Pope - 447.
(3) Includes 4,055,000 shares of Class A Common Stock and 2,350,000 shares of
Class B Common Stock, of which are all owned by Mr. and Mrs. Parker as
Joint Tenants with Rights of Survivorship, except 200,000 shares of Class A
Common Stock owned by the Parker Family Limited Partnership, of which Mr.
and Mrs. Parker are general partners. Also includes 212,541 shares of Class
A Common Stock underlying stock options granted to
8
Mr. Parker that are exercisable or will become exercisable within 60 days
following March 20, 2002, and 8,816 shares held by Mr. Parker in the
Company's 401(k) Plan.
(4) Includes 3,400 shares of Class A Common Stock owned by Joey B. Hogan and
Melinda J. Hogan, as joint tenants. Also includes 67,274 shares of Class A
Common Stock underlying stock options granted to Mr. Hogan that are
exercisable or will become exercisable within 60 days following March 20,
2002.
(5) Mr. Scudder's business address is 411 S. 13th Street, Suite 200, Lincoln,
NE 68508. His holdings include 300 shares of Class A Common Stock held as
custodian for a minor child under the Uniform Gifts to Minors Act, as to
which beneficial ownership is disclaimed. Also includes 10,500 shares of
Class A Common Stock underlying stock options granted to Mr. Scudder that
are exercisable or will become exercisable within 60 days of March 20,
2002.
(6) Mr. Bosworth's holdings include 11,000 shares of Class A Common Stock held
by Hamico, Inc., a charitable foundation for which Mr. Bosworth serves as
director and executive officer. Mr. Bosworth disclaims beneficial ownership
of all such shares held by Hamico, Inc. Also includes 10,500 shares of
Class A Common Stock underlying stock options granted to Mr. Bosworth that
are exercisable or will become exercisable within 60 days of March 20,
2002.
(7) Includes 1,377,500 shares of Class A Common Stock and 39,167 shares of
Class A Common Stock underlying exercisable stock options.
(8) As reported on Form 13G/A filed with the SEC February 12, 2002. The
business address of Dimensional Fund Advisors Inc., a Delaware corporation,
is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(9) As reported on Form 13G filed with the SEC December 18, 2001. The business
address of Rutabaga Capital Management, a Massachusetts entity, is 64 Broad
Street, 3rd Floor, Boston, MA 02109.
9
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR COVENANT TRANSPORT, INC.
The following graph compares the cumulative total stockholder return of the
Company's Class A Common Stock with the cumulative total stockholder return of
the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking &
Transportation Stocks commencing December 31, 1996, and ending December 31,
2001.
GRAPH WAS CENTERED HERE
IN PRINTED FORM
Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business, The University of Chicago. Used with
permission. All rights reserved.
The stock performance graph assumes $100 was invested on December 31, 1996.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
The CRSP Index for Nasdaq Trucking & Transportation Stocks includes all publicly
held truckload motor carriers traded on the Nasdaq Stock Market, as well as all
Nasdaq companies within the Standard Industrial Code Classifications 3700-3799,
4200-4299, 4400-4599, and 4700-4799 US & Foreign. The Company will provide the
names of all companies in such index upon request.
10
SECTION 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely upon a review of the copies of such forms
furnished to the Company, the Company believes that its officers, directors, and
greater than 10% beneficial owners complied with all Section 16(a) filing
requirements applicable to them during the Company's preceding fiscal year.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP as independent public
accountants for the Company for the fiscal year ending December 31, 2002. KPMG
LLP has served as independent public accountants for the Company since
September, 2001. Representatives of KPMG LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement, if they desire
to do so, and to respond to appropriate questions.
Effective September 12, 2001, the Company's Board of Directors, with the
approval of the audit committee, approved a change in the Company's independent
accountants for the fiscal year ended December 31, 2001 from
PricewaterhouseCoopers LLP to KPMG LLP, and dismissed PricewaterhouseCoopers LLP
as independent accountants. The Company solicited and received formal proposals
for accounting and tax services from several accounting firms during the two
months prior to the change.
In connection with the audits of the two fiscal years ended December 31,
2000, and during the subsequent interim period through September 12, 2001, there
were no disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to their satisfaction,
would have caused them to make reference to such matter in their accountant's
report on the financial statements for such years. No reportable event as
described in paragraph (a)(1)(v) of Item 304 of Regulation S-K has occurred
within the Company's two fiscal years ended December 31, 2000, or the interim
period through September 12, 2001.
The audit reports of PricewaterhouseCoopers LLP on the consolidated
financial statements of the Company as of and for the two fiscal years ended
December 31, 2000, did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the two fiscal years ended December 31, 2000, and the subsequent
interim period through September 12, 2001, the Company did not consult with KPMG
LLP on any matter which was the subject of any disagreement or any reportable
event as defined in Regulation S-K Item 304 (a)(1)(iv) and Regulation S-K Item
304 (a)(1)(v), respectively, or on the application of generally accepted
accounting principles to a specific transaction, either proposed or completed,
or the type of audit opinion that might be rendered on the Company's
consolidated financial statements relating to which either a written report was
provided to the Company or oral advice was provided that KPMG LLP concluded was
an important factor considered by the Company in reaching a decision as to any
accounting, auditing, or financial reporting issue.
Fiscal Year 2001 Audit Fee Summary
During fiscal year 2001, KPMG LLP provided services in the following
categories to the Company in the following amounts: \
Audit fees $115,500
Financial information systems design & implementation fees $ 0
All other fees:
Audit related fees $ 36,500
Other non-audit services (principally tax
compliance and tax consulting services) $160,500
--------
Total all other fees $197,000
The Audit Committee considers the provision of non-audit services by the
Company's auditor to be compatible in maintaining auditor independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
PROPOSAL 2 TO RATIFY THE SELECTION OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE COMPANY.
11
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2003 Annual Meeting
of the Stockholders of the Company must be received by the Corporate Secretary
of the Company at the Company's principal executive offices on or before
December 10, 2002, to be included in the Company's proxy material related to
that meeting.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
Covenant Transport, Inc.
/s/ David R. Parker
David R. Parker
Chairman of the Board
April 15, 2002
12
PROXY
COVENANT TRANSPORT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 16, 2002
Solicited on Behalf of the Board of Directors of the Company
The undersigned holder(s) of Class A and/or Class B Common Stock
(individually or together referred to as "Common Stock") of Covenant Transport,
Inc., a Nevada corporation (the "Company"), hereby appoint(s) David R. Parker,
R.H. Lovin, Jr., and Joey B. Hogan, and each or any of them, attorneys and
proxies of the undersigned, with power of substitution, to vote all of the
Common Stock which the undersigned is (are) entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the Company's Corporate
Headquarters at 400 Birmingham Highway, Chattanooga, Tennessee, on Thursday, May
16, 2002, at 10:00 a.m., Eastern Time, and at any adjournment thereof, as
follows:
1. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees listed below
contrary below)
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name below.
David R. Parker Michael W. Miller R.H. Lovin, Jr. Mark A. Scudder
William T. Alt Hugh O. Maclellan,Jr. Robert E. Bosworth
2. Approval of the appointment of KPMG LLP as independent public accountants of
the Company for the year ending December 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the attorneys and proxies are authorized to vote upon
such other matters as may properly come before the meeting or any adjournment
thereof.
[ ] GRANT AUTHORITY [ ] WITHHOLD AUTHORITY
to vote to vote
(Continued and to be signed on reverse side)
(Continued from other side)
A vote FOR Proposals 1 and 2, and granting the proxies discretionary
authority is recommended by the Board of Directors of the Company. When properly
executed, this proxy will be voted in the manner directed by the undersigned
stockholder(s). If no direction is given, this proxy will be voted FOR proposals
1 and 2, and, at the discretion of the proxy holder, upon such other matters as
may properly come before the meeting or any adjournment thereof. Proxies marked
"Abstain" and broker non-votes are counted only for purposes of determining
whether a quorum is present at the meeting.
The undersigned acknowledges receipt of the Notice and Proxy Statement for the
2002 Annual Meeting of Stockholders and the Annual Report to Stockholders for
the year ended December 31, 2001.
Dated _______________________, 2002
____________________________________________
____________________________________________
Signature(s)
Stockholders should date this proxy and sign here exactly as
name appears at left. If proxy is held jointly, both owners
should sign this proxy. Executors, administrators, trustees,
guardians, and others signing in a representative capacity
should indicate the capacity in which they sign.