SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
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[ ] Definitive additional materials
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Navistar International Corporation
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(Name of Registrant as Specified in Its Charter)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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INTERNATIONAL LOGO
NAVISTAR INTERNATIONAL CORPORATION
4201 Winfield Road
P. O. Box 1488
Warrenville, Illinois 60555
NOTICE OF 2002 ANNUAL MEETING OF SHAREOWNERS
TO BE HELD TUESDAY, FEBRUARY 19, 2002
To Our Shareowners:
You are cordially invited to attend Navistar International Corporation's
2002 Annual Meeting of Shareowners. This year's meeting will be held at the
Wyndham Lisle Hotel, 3000 Warrenville Road, Lisle, Illinois on Tuesday, February
19, 2002 at 11:00 a.m. (Central Standard Time).
The purposes of the Annual Meeting are:
- To elect 3 directors; and
- To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Shareowners of record at the close of business on January 4, 2002 are
entitled to notice of and to vote at this meeting.
YOUR VOTE IS IMPORTANT. Whether you plan to attend the meeting or not, we
urge you to vote your shares either by using a toll-free telephone number or by
signing and mailing the enclosed proxy card in the envelope provided.
Instructions regarding both methods of voting are contained on the proxy card.
If you attend the meeting and prefer to vote in person, you may do so.
By Order of the Board of Directors
/s/Robert J. Perna
Robert J. Perna
Secretary
January 17, 2002
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING.................................... COVER
INFORMATION ABOUT THE ANNUAL MEETING........................ 1
INFORMATION ABOUT VOTING.................................... 1
Quorum Requirements.................................... 1
Required Vote.......................................... 2
Other Matters.......................................... 2
ELECTION OF DIRECTORS....................................... 2
BOARD MEETINGS AND COMMITTEES............................... 4
DIRECTORS' COMPENSATION..................................... 5
NAVISTAR COMMON STOCK OWNERSHIP BY DIRECTORS AND OFFICERS... 7
PERSONS OWNING MORE THAN 5% OF NAVISTAR COMMON STOCK........ 8
AUDIT COMMITTEE REPORT...................................... 9
EXECUTIVE COMPENSATION...................................... 10
Committee on Compensation and Governance Executive
Compensation Report................................... 10
Performance Graph...................................... 13
Executive Compensation Tables.......................... 14
Termination Arrangements............................... 16
Retirement Plans....................................... 16
Certain Related Transactions........................... 19
OTHER INFORMATION........................................... 20
Annual Report.......................................... 20
Householding Information............................... 20
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 20
Independent Public Accountants......................... 20
Proxy Solicitation..................................... 21
Shareowner Proposals for the 2003 Annual Meeting....... 21
ii
PROXY STATEMENT
Navistar International Corporation
4201 Winfield Road
Warrenville, Illinois 60611
INFORMATION ABOUT THE ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Navistar International Corporation, a
Delaware corporation, for use at the 2002 Annual Meeting of Shareowners and at
any meeting following postponement or adjournment thereof. The meeting will be
held at the Wyndham Lisle Hotel, 3000 Warrenville Road, Lisle, Illinois on
Tuesday, February 19, 2002 at 11:00 a.m. (Central Standard Time). This Proxy
Statement summarizes information that we are required to provide you under the
rules of the U.S. Securities and Exchange Commission and is designed to assist
you in voting your shares. On or about January 17, 2002, we began sending these
proxy materials to all shareowners of record at the close of business on January
4, 2002.
INFORMATION ABOUT VOTING
Shareowners of record can vote in person at the Annual Meeting or by proxy.
There are two ways to vote by proxy:
-- By Telephone -- If you hold your shares in your own name rather than
through a broker, you can vote by telephone by calling the toll-free
number listed on the proxy card. Please see your proxy card for specific
instructions.
-- By Mail -- You can vote by mail by signing, dating and mailing the
enclosed proxy card.
If you hold your shares through a bank, broker, or other record holder, you
may vote your shares by following the instructions they have provided.
By voting by proxy, you will direct the individuals named on the card (your
"proxies") to vote your shares at the Annual Meeting in the manner you indicate.
The persons named as proxies were selected by the Board of Directors and are
either directors or officers of the Company or both. If you sign and return the
card without indicating your instructions, then the designated proxies will vote
your shares "FOR" the election of all three nominees for director.
You may revoke or change your proxy at any time before it is exercised by
sending a written revocation to the Company's Secretary, by providing a later
dated proxy, by voting by telephone at a later time, or by attending the Annual
Meeting and voting in person.
You may have your votes kept confidential by so indicating in the
designated place on the proxy card or when prompted during telephone voting. If
you are a participant in the Company's 401(k) Retirement Savings Plan, 401(k)
Plan for Represented Employees, or Retirement Accumulation Plan, the proxy card
will represent the number of shares allocated to your account under the Plan and
will serve as a direction to the Plan's trustee as to how the shares in your
account are to be voted.
Holders of record of Navistar's Common Stock at the close of business on
January 4, 2002 are entitled to receive this notice and to vote their shares at
the Annual Meeting. As of that date, there were outstanding 59,917,020 shares of
Common Stock. You are entitled to one vote per share, exercisable in person or
by proxy, with respect to all matters to come before the Annual Meeting.
QUORUM REQUIREMENTS
A quorum is necessary to hold a valid meeting. Under the Company's By-Laws
at least one-third of the Company's Common Stock must be represented at the
Annual Meeting, whether in person or by proxy, to constitute a quorum.
Abstentions and broker non-votes are counted as present for establishing a
1
quorum. A broker "non-vote" occurs when a broker votes on some matter on the
proxy card but not on others because the broker does not have the authority to
do so.
REQUIRED VOTE
Directors are elected by a plurality vote of shares present (in person or
by proxy) at the meeting, meaning that the three nominees for director receiving
the highest number of votes will be elected. Abstentions and broker "non-votes"
are not counted in determining the number of shares voted for or against any
nominee for director.
OTHER MATTERS
The Board of Directors does not know of any other matters that will be
presented at the Annual Meeting other than the proposal discussed in this Proxy
Statement. If any other matter properly comes before the Annual Meeting, your
proxies will vote your shares in accordance with their best judgment.
Discretionary authority to vote on other matters is included in the proxy.
ELECTION OF DIRECTORS
Our Board of Directors currently has 12 members, who are divided into three
classes (Class I, Class II, and Class III). One class is elected at each Annual
Meeting of shareowners to serve for a three-year term.
Three directors will be elected at the Annual Meeting to serve as Class III
directors for a three-year term beginning at this Annual Meeting and expiring at
our Annual Meeting in the year 2005. The Board of Directors has nominated John
D. Correnti, Allen J. Krowe, and William F. Patient for election as Class III
directors. Each nominee is presently a director of the Company. Your proxies
will vote your shares FOR the nominees, unless you instruct otherwise. Each
nominee elected as a director will continue in office until his or her successor
has been elected and qualified, or until his or her death, resignation or
retirement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS.
The Company expects each nominee to be able to serve. If a nominee is
unavailable for election, the Board may choose another nominee and your proxies
will then vote your shares for that nominee or, as an alternative, the Board may
reduce the number of directors to be elected at the Annual Meeting. The Board
has authority under the Company's By-Laws to fill vacancies and to increase and
decrease its size.
The Board's retirement policy provides for directors' retirement prior to
the first Annual Meeting of shareowners, which is held after the date they
attain age 70. Mr. William F. Andrews, currently a Class III director, will have
attained age 70 prior to the Annual Meeting and will retire from the Board of
Directors. Mr. William F. Patient, currently a Class II director, has been
nominated to serve as a Class III director in Mr. Andrews place. As a result,
effective upon the election of the Class III directors at the Annual Meeting,
the number of directors of the Company will be reduced to 11 and the number of
Class II directors will be reduced to 3. The number of Class I and Class III
directors will remain unchanged. In the event Mr. Patient is not elected as a
Class III director, he will continue to serve the remainder of his current term
as a Class II director, the number of Class II directors will remain fixed at 4,
and the total number of directors of the Company will be reduced to 11.
If you want to recommend a director candidate, you may do so in accordance
with the Company's By-Laws that require advance notice to the Company and
certain other information. If you are interested in recommending a director
candidate, you should request a copy of the By-Laws provisions by writing the
Company's Secretary, 4201 Winfield Road, P.O. Box 1488, Warrenville, Illinois
60555.
2
The following are brief biographies of each of the nominees and the other
directors whose terms of office will continue after the Annual Meeting.
NOMINEES FOR CLASS III DIRECTORS WHOSE TERMS EXPIRE 2005
JOHN D. CORRENTI, 54, director since 1994. He is Chairman of the Board and
Chief Executive Officer of Birmingham Steel Corporation, a manufacturer of steel
and steel products, since 1999. Mr. Correnti served as Chief Executive Officer,
President and Vice Chairman of Nucor Company, a mini mill manufacturer of steel
products, from 1996 to 1999, and as its President and Chief Operating Officer
and as a director from 1991 to 1996. He is a director of Corrections Corporation
of America and the Steel Manufacturers Association. Committees: Audit and
Compensation and Governance.
ALLEN J. KROWE, 69, director since 1997. He retired as Vice Chairman of the
Board of Texaco Inc., a global energy company, in 1997, a position he had held
since 1993. From 1988 to 1995 he served as Chief Financial Officer of Texaco. He
is a director of the University of Maryland Foundation, PPG Industries, Inc. and
IBJ Whitehall Bank and Trust Company. Committees: Audit (Chair), Executive, and
Finance.
WILLIAM F. PATIENT, 67, director since 1996. Mr. Patient is the retired
Chairman of the Board and Chief Executive Officer of The Geon Company, positions
he held from 1993 until his retirement in 1999. The Geon Company manufactures
polyvinyl chloride (PVC) resins and compounds, which are used in a wide variety
of applications, including household appliances, business machines and
construction products. He is Chairman of the Board of the Cleveland State
University Foundation, director of Atlantic Extrusion Corp. and the University
Hospital Health Systems, and a member of the Board of Trustees of Washington
University. Committees: Audit and Compensation and Governance.
CLASS I DIRECTORS WHOSE TERMS EXPIRE 2003
Y. MARC BELTON, 42, director since 1999. He is Senior Vice President of
General Mills, Inc. and President of the "Big G" Division since 1999. General
Mills, Inc. is engaged in the manufacture and marketing of consumer food
products. From 1997 to 1999 he was President of the New Ventures Division. From
1994 to 1997 he was President, Snacks Division. He was named a Vice President of
General Mills in 1991. He serves on the board of directors of Urban Ventures and
the New Union in Minneapolis as well as the Board of Trustees of Northwestern
College. He is also a member of the Executive Leadership Council and Co-Chairman
of the Salvation Army Capital Campaign. Committees: Audit and Compensation and
Governance.
JERRY E. DEMPSEY, 69, director since 1984. He is the retired Chairman of
the Board and Chief Executive Officer of PPG Industries, Inc., a diversified
global manufacturer of glass, protective coatings and chemicals, a position he
had held from 1993 to 1997. He is a director of Eastman Chemical Company and
Birmingham Steel Corporation. He is a member of the Dean's Advisory Board for
Clemson University's School of Engineering, Chairman of the President's Advisory
Council, and Co-Chairman of the Commission on the Future of Clemson University.
He serves as a Trustee of the Pittsburgh Theological Seminary and is a director
of the Greenville Symphony. Committees: Compensation and Governance (Chair),
Executive, and Finance.
DR. ABBIE J. GRIFFIN, 47, director since 1998. She is a Professor of
Business Administration at the University of Illinois, Urbana-Champaign since
1997. She was Associate Professor of Marketing and Production Management from
1993 to 1997 at the University of Chicago, Graduate School of Business.
Committees: Audit and Finance.
ROBERT C. LANNERT, 61, director since 1990. He is Executive Vice President
and Chief Financial Officer of Navistar since 1990. He is a director of DT
Industries, Inc. and President of the Des Plaines Valley Council of the Boy
Scouts of America.
3
CLASS II DIRECTORS WHOSE TERMS EXPIRE 2004
MICHAEL N. HAMMES, 60, director since 1996. He is Chairman of the Board and
Chief Executive Officer of Sunrise Medical Inc., which designs, manufacturers
and markets home medical equipment worldwide, since January, 2000. He was
Chairman of the Board and Chief Executive Officer of the Guide Corporation, an
automotive lighting business, from 1998 to 2000. He was also Chairman of the
Board and Chief Executive Officer of The Coleman Company, Inc., a manufacturer
and distributor of camping and outdoor recreational products and hardware/home
products, from 1993 to 1997. He is a member of the Board of Visitors of
Georgetown University's School of Business. Committees: Compensation and
Governance and Finance.
JOHN R. HORNE, 63, director since 1990. He is Chairman of the Board of
Directors since 1996, and President and Chief Executive Officer of Navistar
since 1995. He was President and Chief Operating Officer of Navistar from 1990
to 1995. Mr. Horne is a director of the National Association of Manufacturers
(NAM), Intermet Corporation, Corrections Corporation of America, and Junior
Achievement of Chicago (Chairman); is a member of the Board of Trustees of
Taylor University in Upland, Indiana and the Manufacturers Alliance/MAPI; serves
on the Mechanical Engineering Industrial Advisory Council for Purdue University;
and is a member of the Conference Board, the Economic Club of Chicago and the
Executives' Club of Chicago. Committee: Executive (Chair).
SOUTHWOOD J. MORCOTT, 63, director since 2000. He retired as Chairman of
the Board of Dana Corporation, a manufacturer and distributor of automotive and
vehicular parts, in April 2000, a position he had held since 1990. He was Chief
Executive Officer from 1989 to 1999 and President from 1986 to 1996 of Dana
Corporation. He is a director of CSX Corporation, Phelps-Dodge Corporation and
Johnson Controls, Inc. Committees: Compensation and Governance and Finance.
ADDITIONAL DIRECTOR
In July 1993, the Company restructured its post-retirement health care and
life insurance benefits pursuant to a settlement agreement, which required,
among other things, the addition of a seat on the Company's Board of Directors.
The director's seat is filled by a person appointed by the United Automobile,
Aerospace & Agricultural Implement Workers of America (the "UAW"). This director
is not part of the classes referred to above and is not standing for election by
shareowners at the Annual Meeting.
DAVID MCALLISTER, 46, director since November, 2001. He is Administrative
Assistant to the UAW's Vice President since 1999. He was Administrative
Assistant and Co-Director from 1998 to 1999, Associate Co-Director from 1996 to
1998 and Program Coordinator from 1989 to 1996, of the UAW-DaimlerChrysler
National Training Center. He is a founding member of the Chelsea Civic
Foundation and a member of the NAACP. Committees: Audit and Finance.
BOARD MEETINGS AND COMMITTEES
In fiscal year 2001 the full Board met 10 times, one of which was an
executive session to evaluate the performance of the Board. In addition, the
Board's non-employee directors met 1 time in a regularly scheduled executive
session to evaluate the performance of the Chief Executive Officer. All of the
directors attended at least 75% of all the meetings of the Board and the
committees on which he or she serves.
The Board has 4 standing committees. Committee membership is noted for each
director next to the director's name in the biographical section above.
AUDIT COMMITTEE -- The Audit Committee is composed of 6 directors, none of
whom is an employee of the Company. The Committee oversees the Company's
financial reporting process on behalf of the Board. During 2001, the Committee
reviewed the 2001 audit plans of the Company's independent public accountants
and internal audit staff, reviewed the audit of the Company's accounts with the
independent
4
public accountants and the internal auditors, considered the adequacy of audit
scope and reviewed and discussed with the auditors and management the auditors'
reports. The Committee recommended to the Board the selection of the Company's
independent public accountants. The Committee also reviewed environmental
surveys and compliance activities for the Company's facilities and the expense
accounts of principal executives. In fiscal year 2001, the Committee held 4
meetings.
COMMITTEE ON COMPENSATION AND GOVERNANCE -- The Committee on Compensation
and Governance is composed of 7 directors, none of whom are employees of the
Company. The Committee recommends to the Board the election, responsibilities
and compensation of all executive officers. The Committee also has
responsibilities for the organization of the Board. The Committee reviews and
makes recommendations to the Board concerning nominees for election as
directors. Upon management's recommendation, the Committee also reviews basic
changes to non-represented employees' base compensation and incentive and
benefit plans. The Committee held 8 meetings in fiscal year 2001.
EXECUTIVE COMMITTEE -- The Executive Committee is composed of 4 directors,
three of whom are not employees of the Company. The Committee represents the
Board between meetings for the purpose of consulting with officers, considering
matters of importance and either taking action or making recommendations to the
Board. The Committee held no meetings in fiscal year 2001.
FINANCE COMMITTEE -- The Finance Committee is composed of 7 directors, none
of whom are employees of the Company. The Committee reviews the Company's
financing requirements; custody and management of assets which fund the pension
and retirement savings plans of the Company's subsidiaries; procedures by which
projections and estimates of revenues, expenses, earnings and cash flow are
developed; dividend policy; and operating and capital expenditure budgets. The
Committee also monitors the Company's relationship and communications with its
lenders and its financial disclosure policy. In fiscal year 2001, the Committee
held 5 meetings.
DIRECTORS' COMPENSATION
Directors who are employees of the Company receive no fees for their
service as directors. Directors who are not employees of the Company receive
separate compensation for Board service. That compensation includes:
Annual Retainer: $50,000
Attendance Fees: $1,000 for each Board meeting
$1,000 for each committee meeting
Expenses related to attendance
Committee Chairman Additional $3,000
Retainer:
Stock Options: 4,000 shares annually (The exercise
price of these options is equal to the
fair market value of Navistar's Common
Stock on the first business day after
the date of grant. The options expire
10 years after the grant date.)
At least one-fourth of the annual retainer is paid in the form of restricted
stock.
Under the Company's Non-Employee Directors Deferred Fee Plan, directors may
defer payment of fees in cash or in restricted stock. At the request of the UAW
(the organization which elected Mr. McAllister to the Board), all of the cash
portion of Mr. McAllister's annual retainer and attendance fees (together with a
cash amount equal to the value of the restricted stock which otherwise would be
payable to Mr. McAllister) is contributed to a trust created in 1993 pursuant to
a restructuring of the Company's retiree health care benefits.
5
Until 2002 all non-employee directors participated in the Company's
non-employee Director's Retirement Fee Plan. The Plan provided for the payment
of retirement fees to non-employee directors if they served on the Board for at
least five years. The annual retirement fee was equal to a percentage of the
annual retainer at the time of the director's retirement. Directors who joined
the Board prior to 1994 received 100% of the annual retainer. Directors who
joined the Board after that time received 50% of the annual retainer, which
increased by 10% for each year of service beyond five years, with a maximum
retirement fee of 100% of the annual retainer for ten years of service.
Retirement fees were paid to the director and, upon his or her death, to the
director's spouse. Payment began on the later of the director's retirement or
age 65. Retirement fees continued for a period equal to the number of years the
director served on the Board. However, in the event of the death of the director
(or the director's spouse, if the director is survived by his or her spouse),
retirement fees automatically terminated. A director's right to receive
retirement fees vested automatically in the event of a change in control of the
Company as defined in the retirement agreement.
Effective December 31, 2001, the Board of Directors voted to terminate the
Company's Non-Employee Directors' Retirement Fee Plan for all current and future
directors. Upon termination, participant directors not presently receiving
benefits became fully vested, and directors with less than 10 years of service
were paid a lump sum payment equal to the present value of the accrued
retirement benefits. All other Directors (Mr. Dempsey and Mr. Andrews) were
given an option to have their accrued benefits frozen and retained in the plan
for future payment, or to receive upon retirement a lump sum payment equal to
the present value of the accrued retirement benefits. The right of previously
retired Directors to receive benefits continues according to the Plan.
6
NAVISTAR COMMON STOCK OWNERSHIP BY DIRECTORS AND OFFICERS
This table shows how much Common Stock the executive officers and directors
beneficially own as of November 30, 2001. In general, "beneficial ownership"
includes those shares a director or executive officer has the power to vote or
transfer, and stock options exercisable within 60 days. Except as noted, the
persons named in the table below have the sole voting and investment power with
respect to all shares beneficially owned by them.
NUMBER OF SHARES
--------------------------------------------
OBTAINABLE PERCENT
THROUGH STOCK OF
NAME/GROUP OWNED (1)(2) OPTION EXERCISE TOTAL CLASS
---------- ------------ --------------- ----- -------
William F. Andrews(3)........................... 3,180 12,250 15,430 *
Y. Marc Belton.................................. 1,000 4,500 5,500 *
Robert A. Boardman.............................. 41,282 86,500 127,782 *
John D. Correnti................................ 3,528 13,000 16,528 *
Jerry E. Dempsey................................ 3,080 14,250 17,330 *
Dr. Abbie Griffin............................... 1,280 6,500 7,780 *
Michael N. Hammes............................... 1,860 10,500 12,360 *
John R. Horne................................... 319,985 523,600 843,585 1.4
J. Steven Keate................................. 32,575 105,832 138,407 *
Allen J. Krowe.................................. 14,644 8,500 23,144 *
Robert C. Lannert............................... 110,850(4) 317,407 428,257 *
David McAllister................................ 0 0 0 *
Southwood J. Morcott............................ 2,280 2,500 4,780 *
William F. Patient.............................. 6,311 10,500 16,811 *
Daniel C. Ustian................................ 58,638 117,891 176,529 *
All Directors and Executive Officers as a
Group......................................... 814,469 1,744,418 2,558,887 4.3
---------------
* Percentage of shares beneficially owned does not exceed one percent.
(1) Includes shares over which there is shared voting and investment power as
follows: Mr. Belton -- 560 shares; Directors and Executive Officers as a
Group -- 1,475 shares.
(2) The number of shares shown for each executive officer (and all executive
officers as a group) includes the number of shares of Navistar Common Stock
owned indirectly, as of December 31, 2001, by such executive officers in the
Company's 401(k) Retirement Savings Plan and Retirement Accumulation Plan,
as reported to us by the Plan trustee.
Under our Stock Ownership Program executives may defer their cash bonus into
deferred share units ("DSUs"). If an executive officer has elected to defer
cash bonus, the number of shares shown for such executive officer includes
these DSUs. These DSUs vest immediately (but may not settle within 60 days
of December 31, 2001). The number of shares shown for each executive officer
(and all executive officers as a group) also includes premium share units
("PSUs") that were awarded under the Stock Ownership Program. PSUs vest in
equal installments on each of the first three anniversaries of the date on
which they are awarded (but may not settle within 60 days of December 31,
2001).
Under Navistar's Non-Employee Directors Deferred Fee Plan, directors may
defer the portion of their retained fee payable in restricted stock. If a
director has elected to defer this portion of the retained fee into phantom
stock units, these phantom stock units are shown in this column. Under our
Restoration Option Program executives may defer the receipt of shares of
Navistar Common Stock due in connection with a restoration stock option
exercise. If an executive has elected to defer receipt of these shares into
phantom stock units, these phantom stock units are also shown in this
column.
(3) Retires as a director on February 19, 2002.
(4) Amount shown includes 12,502 shares of Common Stock held by Mr. Lannert as
trustee of a trust for the benefit of members of his family.
7
PERSONS OWNING MORE THAN 5% OF NAVISTAR COMMON STOCK
This table indicates, as of November 30, 2001, all persons we know to be
beneficial owners of more than 5% of Company's Common Stock. This information is
based on Schedule 13G reports filed with the U.S. Securities and Exchange
Commission by each of the firms listed in the table below.
TOTAL AMOUNT
AND NATURE OF
BENEFICIAL
NAME AND ADDRESS OWNERSHIP PERCENT OF CLASS
---------------- ------------- ----------------
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109................................. 8,861,770(A) 14.9%
Gabelli Asset Management, Inc.
One Corporate Center
Rye, New York 10580......................................... 5,662,561(B) 9.5%
---------------
(A) As reported in a Schedule 13G, as amended February 14, 2001, filed with the
U.S. Securities and Exchange Commission by FMR Corp. ("FMR"), Edward C.
Johnson, 3d, Chairman of FMR, Abigail P. Johnson, a Director of FMR, and
Fidelity International Limited. It is reported in the Schedule 13G that (1)
FMR has sole dispositive power with respect to 8,861,770 shares and sole
voting power with respect to 2,665,146 shares, (2) Edward C. Johnson, 3d and
Abigail P. Johnson each have sole dispositive power over these shares, and
(3) these shares represented (a) 5,954,924 shares beneficially owned by
Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR, as a result of acting as investment advisor to various
investment companies ("Funds"), (b) 1,784,456 shares beneficially owned by
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR, as a
result of its serving as investment manager of certain institutional
accounts, and (c) 1,122,390 shares beneficially owned by Fidelity
International Limited, a Bermuda joint stock company of which a partnership
controlled by Mr. Johnson and his family members owns approximately 40% of
the voting stock, as a result of acting as investment adviser to various
non-U.S. investment companies and certain institutional investors. The
voting power with respect to the 5,954,924 shares beneficially owned by
Fidelity is held by the Board of Trustees of the various investment
companies of which Fidelity is the investment advisor. FMR, Edward C.
Johnson, 3d, and the Funds each has sole power to dispose of the 5,954,924
shares beneficially owned by Fidelity. Edward C. Johnson, 3d and FMR each
has sole dispositive power over 1,784,456 shares and sole voting power over
1,542,756 shares beneficially owned by Fidelity Management Trust Company.
FIL has sole voting power and sole dispositive power over the 1,122,390
shares owned by it.
(B) As reported in Schedule 13G, as amended, dated September 18, 2001, filed
with the U.S. Securities and Exchange Commission by Gabelli Funds, LLC,
GAMCO Investors, Inc., Gabelli International Limited, Gemini Capital
Management LLC, and Gabelli Securities, Inc. It is reported in the 13G that
these shares represented (a) 1,925,000 shares beneficially owned by Gabelli
Funds, LLC, over which it has sole voting and dispositive power , (b)
3,650,561 shares beneficially owned by GAMCO Investors, Inc., over which it
has sole voting and dispositive power, (c) 1,000 shares beneficially owned
by Gabelli International Limited, over which it has sole voting and
dispositive power, (d) 85,000 shares beneficially owned by Gemini Capital
Management LLC, over which it has sole voting and dispositive power, and (e)
1,000 shares beneficially owned by Gabelli Securities Inc.
8
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (under this heading, the
"Committee") is composed of 6 directors who are neither officers nor employees
of the Company, and who meet the independence requirements of the New York Stock
Exchange. The Committee is governed by a written charter as approved by the
Board of Directors. In accordance with its written charter, the Committee
assists the Board in fulfilling its responsibility for oversight of the quality
and integrity of the accounting, auditing and financial reporting practices of
the Company. During fiscal year 2001, the Committee met 4 times, and the
Committee chair, as representative of the Committee, discussed the interim
financial information contained in quarterly earnings announcements with both
management and the independent auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1 "Independence Discussions with Audit Committees," discussed with
the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The
Committee also discussed with management, the internal auditors and the
independent auditors the quality and adequacy of the Company's internal
controls. The Committee reviewed with both the independent and the internal
auditors their audit plans, audit scope, and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee reviewed the audited consolidated financial statements of the
Company as of and for the fiscal year ended October 31, 2001 with management and
the independent auditors. Management has the responsibility for the preparation
of the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited consolidated financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended October 31, 2001 for filing with the
Securities and Exchange Commission.
Audit Committee
Allen J. Krowe, Chairperson
Y. Marc Belton
John D. Correnti
Abbie J. Griffin
David McAllister
William F. Patient
9
EXECUTIVE COMPENSATION
COMMITTEE ON COMPENSATION AND GOVERNANCE EXECUTIVE COMPENSATION REPORT
INTRODUCTION
The Board's Committee on Compensation and Governance (under this heading,
the "Committee") establishes, administers, and monitors all compensation and
benefit programs under which executive benefits are provided and compensation is
paid or awarded to the Company's executive officers. Specifically the Committee
reviews the performance of executive officers and makes compensation decisions
with respect to the Company's executive officers, given the overall successes of
the individual executives and the organization as a whole.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The executive compensation program is designed to closely align executive
compensation with corporate and individual performance and the total return to
shareowners. The Company has developed an overall compensation philosophy that
is built on a foundation of guiding principles:
- Competitive Positioning: To attract and retain the executive talent
required to achieve the Company's goals through a market competitive
total remuneration package.
- Performance Orientation: Executive compensation has a strong individual
performance-based link, and is designed to promote an alignment of
interests between shareowners and senior executives.
- Equity: Our compensation programs are fair and equitable, and create no
advantage for any one individual or group on the basis of age, service,
or other non-performance related criteria.
- Ownership and Responsibility: The Company has designed a compensation
program that recognizes individual contributions as well as linking
executive and shareowner interests through compensation programs that are
based on common measures of financial success.
MARKET COMPENSATION REVIEW
In 2001 the Committee conducted a comprehensive review of the executive
compensation program to ensure that pay opportunities are competitive with the
current market, and that there is an appropriate link between company and
individual performance, the Company's stated compensation philosophy, and actual
executive compensation. This process included consultation with an independent
compensation and benefits consulting firm throughout the year on such issues as
base salaries, incentive awards, and overall compensation and benefits
philosophy. The Committee reviews executive compensation against peer groups of
companies with which the Company competes for talent. Competitive executive
compensation data was gathered from a custom peer group of 33 companies
reflecting a cross section of aerospace, automobile, and other transportation
companies.
The Committee believes that the market in which the Company competes for
talent is growing in breadth and scope. Therefore, we feel it is relevant to
include in our compensation review not only some of those companies that make up
the Standard and Poor's Heavy Duty Truck & Parts Index, which appears in the
Performance Graph in this Proxy Statement, but also those organizations that we
view as a relevant source for executive talent.
The Company has established and communicated to executives a policy of
targeting base salaries at the 50th percentile of the competitive market. Our
incentive compensation is targeted to reward executives with total compensation
at the 50th percentile of the market for target corporate performance, and at
the 75th percentile for distinguished corporate performance. This philosophy was
adhered to in setting base salaries.
10
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of The Internal Revenue Code of 1986 provides that a public
company generally may not deduct the amount of annual compensation paid to
certain executive officers that is more than $1 million. The provision does not
apply to certain performance-based compensation that meets the requirements
contained in IRS regulations. Performance based compensation can include income
from stock options, restricted stock, and certain formula driven compensation
that meets the IRS requirements. The Committee has considered the effect of this
Internal Revenue Code limitation, and has concluded that the limitation will not
have any significant effect on the Company's income tax liability.
ELEMENTS OF EXECUTIVE COMPENSATION
The elements of the Company's executive compensation program include base
salary, an annual incentive program, and long-term incentives. Although each
decision relative to these compensation programs has to be undertaken
separately, the Committee considers the total compensation and benefits package
(including salary, incentives, stock options, pension benefits, supplemental
retirement benefits, insurance and other benefits) when making any compensation
decision. Also, in considering the individual performance of the executives
named in this Proxy Statement, the Committee takes into consideration the
opinions and recommendations of Mr. Horne, the Chief Executive Officer, for
positions other than his own.
BASE SALARY
Base salaries for executive officers are determined initially by evaluating
and comparing the responsibilities of their positions and experiences and by
reference to the competitive marketplace for executive talent. Salary
adjustments are determined by evaluating the performance of the Company and of
each executive. In addition, the market is surveyed to determine average year
over year industry changes in executive pay.
Based on the competitive survey conducted by the outside consultants and a
subjective review of individual performance, the Committee increased base pay of
the executives named in the Summary Compensation Table by an average of 10.5% in
2001. These increases in base pay resulted in the group of executive officers
being paid, on average, at the median of the competitive market.
ANNUAL INCENTIVE
A substantial portion of the Company's executive compensation package is
contingent upon the Company's attaining financial and non-financial performance
goals established by the Committee prior to the beginning of each fiscal year.
Approximately 500 participants are eligible for annual incentive payments. The
target annual incentive varies by organization level, from 25% of base salary
for senior managers to 110% of base salary for the Chief Executive Officer. In
1997, the Committee established a performance goal based on the Company's return
on equity.
LONG-TERM INCENTIVES
In recent years, the Company has delivered long-term incentive compensation
entirely in annual stock option grants to all executives. Option grants are made
to executives at the fair market value price on the date of grant and expire on
the 10th anniversary of the grant. In 2001, one-third of the options granted
become exercisable on each of the first, second and third anniversaries of the
grant.
When determining the size of the option grants made to executives, the
Committee again considered the results of a competitive compensation survey
conducted by an outside consulting firm.
The Company feels strongly that it is important to encourage senior
executives to hold significant amounts of Navistar stock, thereby tying their
long-term economic interest directly to that of the shareowners. To achieve this
goal, the Company has implemented stock ownership guidelines for those
executives. The Company's stock ownership targets apply to approximately 36
executives, the majority of
11
whom hold the title of staff vice president and above. Executives are expected
to attain their respective ownership level within five years. These executives
have ownership requirements that range from 75% to 300% as a percent of base
salary. Currently, the average number of shares owned by these executives
exceeds the required number of shares.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Horne's 2000 base salary was below the median base salary for
comparable positions, according to the compensation survey conducted that same
year. As a result of this below market competitive pay level and due to his
achievement of aggressive non-financial performance goals, his 2001 salary was
increased by $100,000 to $1,100,000, which, according to the compensation
survey, was within competitive levels at 5% below the 50th percentile of the
Company's competitive market.
Mr. Horne's 2001 annual cash incentive payment would have been awarded on
the achievement of a very challenging return on equity goal for the Company
established by the Committee, as well as the achievement of various
non-financial goals of each business unit. These non-financial goals include,
but are not limited to, leadership development, strategies/growth and product
development. Because these aggressive financial goals were not met, Mr. Horne
did not receive an annual incentive payment again for 2001.
In fiscal year 2001, Mr. Horne was also granted an option to purchase
223,200 shares of Common Stock. This award is both competitive and commensurate
with market practice given the recent Company and individual performance.
It is the Committee's view that the Company's executive compensation
programs and awards provide a significant link between individual and corporate
performance and compensation paid. We also believe that the programs are
appropriate in the current competitive market and in the shareowners' interests.
Committee on Compensation and
Governance
Jerry E. Dempsey, Chairperson
William F. Andrews
Y. Marc Belton
John D. Correnti
Michael N. Hammes
Southwood J. Morcott
William F. Patient
12
PERFORMANCE GRAPH
This graph shows the yearly percentage change in the Company's cumulative
total shareowner return on Navistar's Common Stock during the last five fiscal
years ended October 31, 2001. The graph also shows the cumulative total returns
of the S&P 500 Index and the S&P Truck and Parts Index.
The comparison assumes $100 was invested on October 31, 1996 in Navistar
Common Stock and in each of the indices shown and assumes reinvestment of
dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
NAVISTAR COMMON STOCK, S&P 500 INDEX AND S&P TRUCKS & PARTS INDEX
FISCAL YEAR ENDING OCTOBER 31
[PERFORMANCE GRAPH]
1996 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------------------------
Navistar 100.0 247.3 222.7 448.0 352.7 320.0
S&P 500 100.0 129.7 155.8 193.2 202.7 150.2
S&P Trucks & Parts 100.0 169.6 140.5 193.8 156.6 169.3
[PERFORMANCE GRAPH]
13
EXECUTIVE COMPENSATION TABLES
This table provides compensation information for the fiscal years 1999,
2000 and 2001 for the Company's Chief Executive Officer and the four next most
highly compensated executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
-------------------------- AWARDS OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(2)(3) SARS (#) ($)(4)
--------------------------- ---- ---------- ------------ ---------- ---------- ------------
John R. Horne................. 2001 1,083,333 0 0 223,200 32,175
Chairman, President and 2000 975,000 0 0 342,636(5) 24,492
Chief Executive Officer 1999 833,333 1,700,000 0 142,000 19,500
Robert C. Lannert............. 2001 475,000 0 0 75,100 10,341
Executive Vice President 2000 450,000 0 0 62,800 7,182
and Chief Financial Officer 1999 450,000 488,750 0 48,000 7,966
Daniel C. Ustian.............. 2001 466,667 0 0 56,500 4,540
President, Engine 2000 412,500 0 0 72,754 3,307
and Foundry Group 1999 333,333 600,000 0 32,000 2,847
J. Steven Keate............... 2001 421,667 0 0 56,500 3,331
President, Truck Group 2000 375,000 0 13,921 44,100 2,163
1999 282,500 300,000 10,064 53,000 1,432
Robert A. Boardman............ 2001 353,333 0 0 39,000 4,428
Senior Vice President and 2000 316,667 0 0 25,200 3,112
General Counsel 1999 293,333 297,500 0 21,000 3,038
---------------
(1) The amounts shown include the dollar value of bonuses earned in fiscal year
1999 but deferred into deferred share units under the Company's Stock
Ownership Program at the election of the named executive officer.
(2) The amounts shown include the dollar value of premium share units
representing shares of Common Stock awarded in fiscal years 1999 and 2000 to
Mr. Keate under the Company's Stock Ownership Program based on (a) the
attainment of certain stock ownership thresholds by Mr. Keate and/or (b) the
election by Mr. Keate to defer a portion of his future cash bonus into
deferred share units.
(3) The number and value of the aggregate premium share units ("PSUs") on
October 31, 2001 for each of the persons named above is as follows: Mr.
Horne 167,179 PSUs with an aggregate value of $5,015,370; Mr. Lannert 16,250
PSUs with an aggregate value of $487,500; Mr. Ustian 25,126 PSUs with an
aggregate value of $753,780; Mr. Keate 5,931 PSUs with an aggregate value of
$177,930; and Mr. Boardman 6,377 PSUs with an aggregate value of $191,310.
The PSUs vest in equal installments on each of the first three anniversaries
of the date on which they are awarded. Holders of PSUs receive dividends at
the same time and at the same rate as other Common Stock owners.
(4) The amounts shown represent life insurance premiums paid by the Company for
the persons named in the Summary Compensation Table.
(5) Includes 175,036 restoration options received by Mr. Horne to purchase a
number of shares equal to the number of previously owned shares of Navistar
Common Stock surrendered in payment of the exercise price of options.
14
This table sets forth certain information regarding options granted during
fiscal year 2001 under the Company's Performance Incentive Plan to the
individuals named in the Summary Compensation Table.
OPTION/SAR GRANTS IN FISCAL YEAR 2001
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES IN OR BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SH)(3) DATE VALUE ($)(4)
---- ------------ ------------ ------------- ---------- ------------
John R. Horne..................... 4,713(1) .37 21.22 12-12-10 36,667
218,487(2) 16.94 21.22 12-13-10 1,699,829
Robert C. Lannert................. 4,713(1) .37 21.22 12-12-10 36,667
70,387(2) 5.46 21.22 12-13-10 547,611
Daniel C. Ustian.................. 4,713(1) .37 21.22 12-12-10 36,667
51,787(2) 4.02 21.22 12-13-10 402,903
J. Steven Keate................... 4,713(1) .37 21.22 12-12-10 36,667
51,787(2) 4.02 21.22 12-13-10 402,903
Robert A. Boardman................ 4,713(1) .37 21.22 12-12-10 36,667
34,287(2) 2.66 21.22 12-13-10 266,753
---------------
(1) Incentive Stock Options
(2) Non-Qualified Options
(3) All options become exercisable under the following schedule: one-third on
the first anniversary of the grant, one-third on the second anniversary, and
one-third on the third anniversary. In the event an optionee exercises a
non-qualified option with already-owned shares, he or she may be eligible to
receive restoration options. Restoration options contain the same expiration
dates and other terms as the options they replace except that they have an
exercise price per share equal to the fair market value of the Common Stock
on the date the restoration option is granted and become exercisable in full
six months after they are granted or, if sooner, one month before the end of
the remaining term of the options they replace.
(4) The Black-Scholes model was used to calculate the grant date present value
of the options granted. The following assumptions were used to estimate the
value of options: a 4.0 year expected life of the options; a dividend yield
of 0%; expected volatility for Navistar Common Stock of 39.1%; and a risk-
free rate of return of 5.4%. The actual value, if any, the named executive
officers may realize from these options will depend solely on the gain in
stock price over the exercise price when the options are exercised.
15
This table sets forth certain information regarding exercises of options
during fiscal year 2001, and total options held at year end by the individuals
named in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES DURING FISCAL YEAR 2001
AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-
OPTIONS/SARS MONEY
2001 FISCAL YEAR OPTIONS/SARS
END (#) 2001 FISCAL YEAR END($)
SHARES ---------------- -----------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
------------ ------------ ---------------- -----------------------
John R. Horne.................... 0 0 405,057/326,396 562,474/2,215,810
Robert C. Lannert................ 0 0 278,373/112,034 3,124,094/ 745,876
Daniel C. Ustian................. 0 0 90,561/ 81,866 160,798/ 555,180
J. Steven Keate.................. 0 0 79,998/ 88,866 227,380/ 539,233
Robert A. Boardman............... 0 0 66,500/ 54,400 275,426/ 381,645
TERMINATION ARRANGEMENTS
To assure stability and continuity of management, the Company has entered
into executive termination agreements with each of its executive officers. The
agreements provide that if the officer's employment is terminated by the Company
for any reason other than for cause, as defined in the agreement, the officer
will receive a lump sum payment varying in amounts from 200% of his or her
annual base salary plus annual target bonus (for the Chief Executive Officer) to
150% of his or her annual base salary plus annual target bonus (for the other
executive officers). However, if the officer's employment is terminated by the
Company within 3 years after a "change in control" or prior thereto in
anticipation of a change in control, the officer will receive a lump sum payment
equal to the greater of: (i) three times the officer's current annual base
salary plus annual target bonus; and (ii) 295% of the officer's average annual
compensation during the previous five years. The agreements' definition of a
"change in control" includes the acquisition by any person or group of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities. Each agreement expires June 30,
2002 and is then renewed automatically for successive one-year periods unless
the Board, six months prior to the renewal date, elects not to renew it.
RETIREMENT PLANS
The International Truck and Engine Corporation Retirement Plan for Salaried
Employees ("RPSE"), which covers substantially all of the salaried employees of
the Company first hired before January 1, 1996, provides annual retirement
benefits based upon age, credited service and "final average annual earnings"
computed on the basis of the individual's highest consecutive five years of base
salary out of the ten years immediately preceding retirement, reduced by a
portion of the social security benefits to which it is estimated the participant
will be entitled. Benefits accrue at a lower rate for service after December 31,
1988, than for service prior to that date. Maximum benefits which may be
provided to an employee under the RPSE are subject to the annual pension
limitation ($160,000 in 2002, indexed for inflation) imposed for qualified plans
under The Employee Retirement Income Security Act ("ERISA"). In addition, these
benefits are subject to a requirement that annual compensation in excess of an
annual limit ($200,000 in 2002, indexed for inflation) is not taken into
account. Employees who are first hired on or after January 1, 1996 are not
eligible to participate in the RPSE.
With respect to eligible upper level employees who retire at or after age
55 with at least 10 years of credited service, the Company also has a Managerial
Retirement Objective ("MRO") Plan. The MRO
16
Plan currently provides a retirement benefit objective based upon age, credited
service and "final average annual earnings" computed on the basis of the
individual's highest consecutive five years of base salary plus certain amounts
of short-term incentive compensation out of the ten years immediately preceding
retirement. Benefits accrue at a lower rate for service after December 31, 1988,
than for service prior to that date. If the annual retirement benefits of any
eligible employee from all sources from both the Company contributions and
employee contributions (including benefits under the RPSE and a portion of the
social security benefits to which it is estimated the individual will be
entitled, but not including the International Truck and Engine Corporation
401(k) Retirement Savings Plan or any individual deferred compensation
agreements) do not equal the retirement benefit objective under the MRO Plan,
the Company will pay the difference to the employee. Employees who are first
hired on or after January 1, 1996 are not eligible to participate in the MRO
Plan.
A substantial portion of the salaried employees of the Company, who are
first hired on or after January 1, 1996, are covered by the International Truck
and Engine Corporation Retirement Accumulation Plan ("RAP"), or by a comparable
plan of a subsidiary company. The RAP is a defined contribution plan that
provides for an annual contribution to be allocated to each participant's
retirement account based on an age-weighted percentage of the participant's
eligible compensation for the calendar year. The RAP also contains a 401(k)
feature and provides for a company match, currently 50% of the first 6% of
pretax salary reduction contributions made on behalf of the participant.
The Company also has a Supplemental Executive Retirement Plan ("SERP"). The
SERP covers certain executive officers who have attained age 55, and provides
annual retirement income objectives to such executive officers who have at least
five years of credited service, based upon age, credited service and "final
average earnings" (as defined above for purposes of the MRO Plan). SERP
objectives range from 30% to 50% of "final average earnings", and are reduced by
benefits, if any, under the RPSE and the MRO Plan, by the actuarial equivalent
of the executive's retirement account (but not the 401(k) or Company match
accounts) under the RAP, by 50% of the participant's social security benefit and
by retirement benefits from prior employers. It is estimated that the annual
benefits payable under the SERP upon normal retirement (at age 65) to Mr. Keate,
would be approximately 4% of his individual "final average earnings" and to Mr.
Boardman, would be approximately 11% of his individual "final average earnings."
It is estimated that Messrs. Horne, Lannert and Ustian would derive no benefit
from the SERP. Payments under the SERP in fiscal 2001 were $288,524.
In the event of a termination of employment by the Company following a
"change in control," certain benefits under the MRO Plan and the SERP will
become contractual rights and not subject to change without the consent of those
affected employees who have accrued at least five years of credited service as
of the date of such termination.
17
PENSION PLAN TABLES
ESTIMATED ANNUAL RETIREMENT BENEFIT OBJECTIVE
UPON NORMAL RETIREMENT AT AGE 65
(ASSUMING ALL SERVICE IS EARNED PRIOR TO JANUARY 1, 1989)
FINAL
AVERAGE YEARS OF SERVICE
ANNUAL ---------------------------------------------------------------
EARNINGS 15 20 25 30 35 AND OVER
-------- ---------- ---------- ---------- ---------- -----------
$ 200,000 $ 72,000 $ 96,000 $ 120,000 $ 120,000 $ 120,000
300,000 108,000 144,000 180,000 180,000 180,000
400,000 144,000 192,000 240,000 240,000 240,000
500,000 180,000 240,000 300,000 300,000 300,000
600,000 216,000 288,000 360,000 360,000 360,000
700,000 252,000 336,000 420,000 420,000 420,000
800,000 288,000 384,000 480,000 480,000 480,000
900,000 324,000 432,000 540,000 540,000 540,000
1,000,000 360,000 480,000 600,000 600,000 600,000
1,500,000 540,000 720,000 900,000 900,000 900,000
2,000,000 720,000 960,000 1,200,000 1,200,000 1,200,000
2,500,000 900,000 1,200,000 1,500,000 1,500,000 1,500,000
3,000,000 1,080,000 1,440,000 1,800,000 1,800,000 1,800,000
ESTIMATED ANNUAL RETIREMENT BENEFIT OBJECTIVE
UPON NORMAL RETIREMENT AT AGE 65
(ASSUMING ALL SERVICE IS EARNED AFTER DECEMBER 31, 1988)
FINAL
AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------------------------------
EARNINGS 15 20 25 30 35 AND OVER
-------- -------- ---------- ---------- ---------- -----------
$ 200,000 $ 51,000 $ 68,000 $ 85,000 $ 102,000 $ 120,000
300,000 76,500 102,000 127,500 153,000 180,000
400,000 102,000 136,000 170,000 204,000 240,000
500,000 127,500 170,000 212,500 255,000 300,000
600,000 153,000 204,000 255,000 306,000 360,000
700,000 178,500 238,000 297,500 357,000 420,000
800,000 204,000 272,000 340,000 408,000 480,000
900,000 229,500 306,000 382,500 459,000 540,000
1,000,000 255,000 340,000 425,000 510,000 600,000
1,500,000 382,500 510,000 637,500 765,000 900,000
2,000,000 510,000 680,000 850,000 1,020,000 1,200,000
2,500,000 637,500 850,000 1,062,500 1,275,000 1,500,000
3,000,000 765,000 1,020,000 1,275,000 1,530,000 1,800,000
The number of years of credited service as of October 31, 2001 for Mr.
Horne is 35.3; Mr. Lannert is 38.6; Mr. Keate is 7.0; Mr. Ustian is 28.7; and
Mr. Boardman is 12.0.
18
CERTAIN RELATED TRANSACTIONS
The Company established the Navistar International Corporation Stock
Ownership Program in 1997 to more closely align the interests of shareowners and
the Company's senior management. Under the Program all executive officers and
certain senior managers of the Company are required to purchase and hold a
specified amount of Navistar's Common Stock equal to a multiple of his or her
annual base salary. During 1999, 2000 and 2001 certain executive officers
received full-recourse loans for the purchase price of the Common Stock they
purchased from the Company. The loans accrue interest at the applicable federal
rate (as determined by Section 1274(d) of the Internal Revenue Code) on the
purchase date for loans of stated maturity, compounded annually. The loans are
unsecured. In April 2001, the program was amended to extend the term of the loan
from five years to nine years and to allow participants to refinance any
outstanding loans at the applicable federal rate on the refinance date.
Accordingly, on May 31, 2001, all the executive officer loans outstanding under
the program were refinanced for a nine-year term.
Principal and interest is due at maturity in a balloon payment. The payment
of the loan will be accelerated if a participant's employment is terminated for
cause or for certain other reasons prior to or following a change of control. In
the event of retirement, there is no loan acceleration. The loan may be prepaid
at any time at the participant's option.
The following executive officers of the Company have outstanding loans
under the Program. The table indicates the largest amount of the indebtedness
outstanding during fiscal year 2001, the interest rate charged, and the
aggregate outstanding balance as of December 31, 2001:
MAXIMUM AGGREGATE
INDEBTEDNESS OUTSTANDING INTEREST
DURING BALANCE AS OF RATE
NAME FISCAL YEAR 2001($) DECEMBER 31, 2001($) (%)
---- ------------------- -------------------- --------
Robert A. Boardman.................... 403,980 407,137 4.77
John R. Horne......................... 1,454,764 1,466,134 4.77
Thomas M. Hough....................... 112,407 113,286 4.77
David J. Johanneson................... 368,212 170,766 4.77
J. Steven Keate....................... 107,358 108,197 4.77
Robert C. Lannert..................... 1,321,970 1,332,302 4.77
Mark T. Schwetschenau................. 148,986 150,150 4.77
Daniel C. Ustian...................... 280,746 282,940 4.77
Dennis W. Webb........................ 175,379 176,750 4.77
Brian B. Whalen....................... 262,552 264,604 4.77
19
OTHER INFORMATION
ANNUAL REPORT
A copy of our Annual Report, which includes our Consolidated Financial
Statements for the three years ended October 31, 2001, is being mailed to all
shareowners of record as of January 4, 2002 together with this Proxy Statement.
The Annual Report is not to be regarded as proxy soliciting materials.
HOUSEHOLDING INFORMATION
Some banks, brokers and other record holders may be participating in the
practice of "householding" proxy statements and annual reports. This means that
you and other holders of the Company's Common Stock in your household may not
receive separate copies of our Proxy Statement or Annual Report. We will
promptly deliver an additional copy of either document to you if you call or
write us at the following address or phone number: Investor Relations, Navistar
International Corporation, 4201 Winfield Road, P.O. Box 1488, Warrenville,
Illinois 60555, (630) 753-2143.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers and persons who own beneficially more than ten percent of
a registered class of our equity securities to file reports of holdings and
transfers of Navistar stock with the U.S. Securities and Exchange Commission and
the New York Stock Exchange and to provide copies of those reports to the
Company. Based solely on our review of copies of those reports received by the
Company or written representations that all such reports were timely filed, we
believe that in 2001 our directors, executive officers and greater than ten
beneficial percent shareowners made all required filings on time.
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board has reappointed
the firm of Deloitte & Touche LLP, Two Prudential Plaza, 180 N. Stetson Avenue,
Chicago, Illinois 60601, to examine the financial statements of the Company for
the current fiscal year ending October 31, 2002. Representatives of Deloitte &
Touche LLP will be present at the Annual Meeting, will have the opportunity to
make a statement if they desire, and will also be available to respond to
appropriate questions.
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates ("Deloitte") for
professional services rendered for the audit of the Company's consolidated
financial statements for the fiscal year ended October 31, 2001, including
foreign and other statutory audit requirements, employee benefit plan audits,
and for reviews of the consolidated financial statements included in the
Company's Quarterly Reports on Form 10-Q for that fiscal year were $1.5 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not incur any fees to Deloitte for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended October 31, 2000.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" for the fiscal year ended
October 31, 2001 were $4.1 million.
20
In making its recommendation to appoint Deloitte as the Company's
independent public accountants for the fiscal year ending October 31, 2002, the
Audit Committee has considered whether the provision of the non-audit services
rendered by Deloitte is compatible with maintaining that firm's independence.
PROXY SOLICITATION
The cost of this proxy solicitation will be borne by the Company. Corporate
Investor Communications, Inc. ("CIC"), 111 Commerce Road, Carlstadt, New Jersey
07072-2586, has been retained to assist in the solicitation of proxies and will
receive a fee not to exceed $10,500 plus expenses. Directors, officers and
employees of the Company at no additional cost may also solicit proxies. Banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the proxy materials to the beneficial owners of the Common
Stock and will be reimbursed for their reasonable expenses incurred in
forwarding such matters.
SHAREOWNER PROPOSALS FOR THE 2003 ANNUAL MEETING
Under the rules of the U.S Securities and Exchange Commission, proposals of
shareowners intended to be presented at the Company's 2003 Annual Meeting must
be received by the Company's Secretary no later than the close of business on
September 19, 2002 for the proposal to be considered for inclusion in our proxy
material for that meeting. To otherwise bring a proposal before the Company's
2003 Annual Meeting, you must comply with our By-Laws. One of the procedural
requirements of our By-Laws, as now in effect, is that you must notify the
Company's Secretary in writing not later than 120 days nor earlier than the 180
days in advance of the meeting of your intent to present a proposal. The address
of the Company's Secretary is 4201 Winfield Road, P.O. Box 1488, Warrenville,
Illinois 60555. A copy of our By-Laws may be obtained from the Company's
Secretary by written request to the same address.
By Order of the Board of Directors,
/s/ Robert J. Perna
Robert J. Perna
Secretary
January 17, 2002
21
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Please mark
your votes as
indicated in [X]
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED.
FOR
all nominees WITHHOLD
listed to the AUTHORITY
left (except to vote for all
as marked to nominees
the contrary) listed to the left
Election of Directors -
01 John D. Correnti [ ] [ ] MARK HERE TO HAVE YOUR [ ]
02 Allen J. Krowe VOTE REMAIN CONFIDENTIAL.
03 William F. Patient
By checking the box to the right, I consent to [ ]
WITHHELD FOR: (write the nominee's name in the space provided below) future delivery of annual reports, proxy
statements, prospectuses and other materials
--------------------------------------------------------------------- and shareholder communications electronically
via the Internet at a webpage which will be
disclosed to me. I understand that the Company
may no longer distribute printed materials to
me from any future shareholder meeting until
such consent is revoked. I understand that I
may revoke my consent at any time by
contacting the Company's transfer agent,
Mellon Investor Services LLC, Ridgefield Park,
NJ and that costs normally associated with
electronic delivery, such as usage and
telephone charges as well as any costs I may
incur in printing documents, will be my
responsibility.
SIGNATURE SIGNATURE DATE
----------------------------------------------- ------------------------------------------- -----------------
NOTE: Please sign exactly as name appears hereon. For joint accounts both owners should sign. When signing as attorney, executor,
administrator, trustee or guardian, etc., please sign your full title.
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/\ FOLD AND DETACH HERE /\
VOTE BY TELEPHONE
QUICK ***** EASY ***** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch-tone telephone
24 hours per day, 7 days per week.
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
LISTED. To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. To WITHHOLD FOR AN INDIVIDUAL nominee, press 0
and listen to the instructions.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
If you wish to indicate Confidential Voting or your consent to
future delivery of annual reports, proxy statements, and other
materials and shareholder communications electronically, please
follow the recorded directions.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1 - THANK YOU FOR VOTING
If you vote by telephone, DO NOT mail back your proxy
OR
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly
in the enclosed envelope.
--------------------------------------------------------------------------------
PROXY
NAVISTAR INTERNATIONAL CORPORATION
PROXY FOR ANNUAL MEETING TO BE HELD FEBRUARY 19, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS JOHN R. HORNE, ROBERT C. LANNERT, AND
ROBERT A. BOARDMAN, AND EACH OF THEM, PROXIES, WITH POWER OF SUBSTITUTION, TO
VOTE ALL STOCK OF THE UNDERSIGNED, AT THE ANNUAL MEETING OF NAVISTAR
INTERNATIONAL CORPORATION TO BE HELD FEBRUARY 19, 2002, AND AT ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF, ON ANY BUSINESS THAT MAY PROPERLY COME BEFORE THE
MEETING. IN THEIR DISCRETION, THE PROXIES ARE HEREBY AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATION MADE. IF NO
CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL DIRECTOR NOMINEES.
---
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
Dear Shareowner:
On the reverse side of this card are instructions on how to vote for each
proposal by telephone. Please consider voting by telephone. Your vote is
recorded as if you mailed in your proxy card. We believe voting this way is
convenient and it also saves the Company money.
We also ask that you provide your consent to access future Annual Reports
and Proxy Statements electronically via the Internet by checking the box on the
reverse side. If you do so the Company can save money by reducing the number of
Annual Reports and Proxy Statements it must print to mail.
Thank you for your attention to these matters.
Registered shareholders may view their shareholdings
through the Transfer Agent, Mellon Investor
Services' website
You can view and transact the following information via a
Secured Internet site at your convenience
(**)Your account profile information(**)
(**)Your certificate detail(**)
(**)Change your address(**)
www.melloninvestor.com/isd
--------------------------
INVESTOR SERVICEDIRECT
AVAILABLE 24 HOURS PER DAY, 7 DAYS PER WEEK
OR
Contact Mellon Investor Services at
1-888-884-9359
SM-1T
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