UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the 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 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Navigant Consulting, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO]
Navigant
Consulting, Inc.
[LOGO]
March 29, 2002
Dear Shareholder:
You are cordially invited to attend the 2002 Annual Meeting of Shareholders
of Navigant Consulting, Inc., which will be held at The Mid-America Club, 80th
Floor, 200 East Randolph Drive, Chicago, Illinois, 60601 on Thursday, April 25,
2002, at 9:00 a.m. Chicago time. I look forward to greeting as many of our
shareholders as possible.
Details of the business to be conducted at the meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. Therefore, I urge you to sign
and date the enclosed proxy card and promptly return it in the enclosed
envelope so that your shares will be represented at the meeting. Alternatively,
you may also vote your shares over the Internet. If you so desire, you may
withdraw your proxy and vote in person at the meeting.
We look forward to meeting those of you who will be able to attend the
meeting.
Sincerely,
/s/ WILLIAM M. GOODYEAR
William M. Goodyear
Chairman of the Board and
Chief Executive Officer
[LOGO]
Navigant
Consulting, Inc.
[LOGO]
615 North Wabash Avenue
Chicago, Illinois 60611
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, APRIL 25, 2002
To the Shareholders of Navigant Consulting, Inc.:
We will hold the Annual Meeting of Shareholders of Navigant Consulting, Inc.
at The Mid-America Club, 80th Floor, 200 East Randolph Drive, Chicago, Illinois
60601 on Thursday, April 25, 2002 at 9:00 a.m. Chicago time. The purposes of
the meeting are to:
1. Elect two directors to our Board of Directors to serve for a term of
three years; and
2. Transact any other business properly brought before the meeting or any
adjournments of the meeting.
If you were a shareholder of record at the close of business on March 11,
2002, you are entitled to notice of and to vote at the annual meeting.
IMPORTANT
Whether or not you expect to attend the meeting, we urge you to sign, date
and otherwise complete the enclosed proxy card and return it promptly in the
envelope provided. No postage is required if mailed in the United States. You
may also vote over the Internet by following the instructions on the enclosed
proxy card. Sending in your proxy will not prevent you from attending and
personally voting your shares at the meeting because you have the right to
revoke your proxy at any time before it is voted.
We have also enclosed Navigant Consulting, Inc.'s 2001 Annual Report to
Shareholders, which includes the Form 10-K and the proxy statement with this
notice of annual meeting.
By order of the Board of Directors,
/s/ PHILLIP S. STEPTOE
[SIGNATURE]
Philip P. Steptoe
Secretary
Chicago, Illinois
March 29, 2002
-----------------
YOUR VOTE IS IMPORTANT.
PLEASE VOTE YOUR PROXY ON THE INTERNET BY VISITING
www.proxyvote.com
OR
MARK, SIGN, DATE AND RETURN YOUR PROXY CARD BY MAIL
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING
Navigant Consulting, Inc.
615 North Wabash Avenue
Chicago, Illinois 60611
-----------------
PROXY STATEMENT
-----------------
General
We have sent you this proxy statement and the enclosed proxy card because
our Board of Directors is soliciting your proxy to vote at the 2002 Annual
Meeting of Shareholders. We will hold the annual meeting on Thursday, April 25,
2002, at 9:00 a.m. Chicago time, at The Mid-America Club, 80th Floor, 200 East
Randolph Drive, Chicago, Illinois 60601. We will begin mailing this proxy
statement and the accompanying proxy card to shareholders beginning on or about
March 29, 2002.
At the annual meeting, our shareholders will consider the election of two
directors to our Board of Directors. The Board of Directors does not know of
any other matters that may properly be brought before the annual meeting. If
other matters should properly come before the annual meeting, the persons named
as proxies in the enclosed proxy intend to vote or otherwise act on those
matters in accordance with their best judgment.
"NAVIGANT" is a service mark of Navigant International, Inc. Navigant
Consulting, Inc. ("NCI") is not affiliated, associated, or in any way connected
with Navigant International, Inc. and NCI's use of "NAVIGANT" is made under
license from Navigant International, Inc.
Proxy Solicitation
We will bear the expenses of this solicitation of proxies, including
expenses of preparing and mailing this proxy statement. In addition to
solicitation by mail, we may solicit proxies in person or by telephone,
telegram or other means of communication by our officers, directors and
employees, who will receive no additional compensation for, but may be
reimbursed for their out-of-pocket expenses incurred in connection with, that
solicitation. We have engaged D.F. King & Co. Inc. to solicit proxies and to
assist us in distributing materials, for a fee estimated at $6,000, plus
reimbursement of out-of-pocket expenses. We will furnish copies of solicitation
materials to brokerage houses, nominees, fiduciaries and custodians to forward
to beneficial owners of shares held in their names and will reimburse brokerage
firms and other persons representing beneficial owners of stock for their
reasonable expenses in forwarding our solicitation materials to beneficial
owners.
Shareholders Entitled to Vote and Voting Information
Only shareholders of record at the close of business on March 11, 2002, the
record date for the annual meeting, are entitled to notice of and to vote at
the annual meeting and any adjournments thereof. Each share of our common
stock, par value $0.001 per share, entitles the record holder to one vote on
each matter to be voted on at the meeting. As of the record date, approximately
39,800,000 shares of our common stock were issued and outstanding. A majority
of the shares of our common stock which are issued and outstanding and entitled
to vote will constitute a quorum at the meeting.
Directors are elected by a plurality of the votes cast at a meeting at which
a quorum is present. A plurality means that the nominees with the largest
number of votes are elected as directors up to the maximum number of directors
to be chosen at the meeting. Any other matters voted on at the meeting shall be
determined by a majority of the votes cast.
If you mark "withhold authority" on your proxy card with respect to the
election of the nominee for director, your vote will not count either "for" or
"against" the nominee. If a broker or other person holding shares for you does
not vote on a proposal (broker non-votes), your shares will not be counted in
determining the
number of votes cast. Votes withheld, absentions and broker non-votes will be
counted in determining whether a quorum is present at the meeting.
If you do not give directions on your proxy card and you return the signed
card, the persons named in the proxy card will vote the shares at their
discretion on all matters.
If you vote by proxy, you may revoke that proxy at any time before it is
voted by attending the meeting in person and voting in person, by sending us a
proxy bearing a later date, or by filing with the Secretary of the company a
written revocation at the principal executive offices of Navigant Consulting,
Inc., 615 North Wabash Avenue, Chicago, Illinois 60611.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED AND SIGNED PROXY CARD
PROMPTLY SO YOUR SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE
MEETING IN PERSON.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with a class of
directors elected each year for a three-year term. At this annual meeting two
directors, Mr. William M. Goodyear, and Ms. Valerie B. Jarrett have been
nominated for election to the Board. The directors elected at the annual
meeting will serve for a term of three years and until their successors are
elected and qualified. Such term will expire at our Annual Meeting of
Shareholders to be held in 2005. The persons named as proxies will vote for Mr.
Goodyear and Ms. Jarrett for election to the Board unless the proxy card is
marked otherwise.
If either Mr. Goodyear or Ms. Jarrett becomes unable or unwilling to serve,
proxies will be voted for election of a person designated by the Board. The
Board knows of no reason why either Mr. Goodyear or Ms. Jarrett should be
unable or unwilling to serve.
The Board of Directors recommends that shareholders vote FOR Mr. Goodyear
and Ms. Jarrett.
A listing of the principal occupation, other major affiliations and age of
the continuing directors of the company, including the nominees for election,
is set forth below:
Nominees for Election at this Meeting to a Term Expiring at the Annual Meeting
of Shareholders in 2005:
William M. Goodyear, 53, has served as a director since December 1999. The
Board of Directors elected him Chairman of the Board and Chief Executive
Officer in May 2000 and subsequently elected him President. He is immediate
past chairman and former Chief Executive Officer of Bank of America, Illinois.
In addition, he was President of the Bank of America's Global Private Bank
until January 1999. He was Vice Chairman and a member of the Board of Directors
of Continental Bank, prior to the 1994 merger between Continental Bank
Corporation and BankAmerica Corporation. Mr. Goodyear joined Continental Bank
in 1972 and subsequently held a variety of assignments including corporate
finance, corporate lending, trading and distribution. He was stationed in
London from 1986 to 1991 where he was responsible for European and Asian
Operations. Mr. Goodyear is currently a member of Chicago's Commercial Club,
the Board of Trustees for the Museum of Science and Industry and the finance
council of the Archdiocese of Chicago. He is a member of the Board of Trustees
of the University of Notre Dame and the Chicago Public Library Foundation, and
serves on the Rush-Presbyterian Hospital Board. Mr. Goodyear is a director of
Equity Office Properties Trust, where he is Chairman of its audit committee. He
is an advisory director of Shorebank in Chicago.
2
Valerie B. Jarrett, 45, is the Executive Vice President of The Habitat
Company, a premier developer and manager of residential apartments. The Habitat
Company also provides residential and commercial brokerage services as well as
corporate relocation services. Before joining The Habitat Company, Ms. Jarrett
served eight years in the City of Chicago government, first as Deputy
Corporation Counsel for Finance and Development, then as Deputy Chief of Staff
for Mayor Richard Daley and finally, as Commissioner of the Department of
Planning and Development. Prior to joining City government, Ms. Jarrett
practiced law with two private law firms specializing in the area of commercial
real estate. Ms. Jarrett is Chairman of the Board of Directors of the Chicago
Transit Authority, and Co-Chairman of the Local Initiative Support Corporation
Advisory Board. She also serves as a Director of USG Corporation, The Chicago
Stock Exchange, Harris Insight Funds, The Commercial Club of Chicago, the
Chicagoland Chamber of Commerce, the Regional Transportation Authority, The
Metropolitan Planning Council, The University of Chicago Laboratory Schools,
The Fund for Community Redevelopment and Revitalization and the Southeast
Chicago Commission. Ms. Jarrett is a Trustee of the University of Chicago, The
University of Chicago Hospitals, the Museum of Science and Industry, and Window
To The World Communications, Inc. She serves on the Executive Council of
Chicago Metropolis 2020 and is also a Chairman of the Visiting Committee of the
University of Chicago School of Social Service Administration.
Directors Whose Terms Continue Until the Annual Meeting of Shareholders in 2003:
Thomas A. Gildehaus, 61, has served as a director since October 2000. In
recent years Mr. Gildehaus has served as Chairman of Southwest Supermarkets LLC
of Phoenix, Arizona, Chairman and Chief Executive Officer of Northwestern Steel
and Wire Company of Sterling, Illinois, and President and Chief Executive
Officer of UNR Industries, Inc. of Chicago. Prior to 1992, Mr. Gildehaus served
ten years as Executive Vice President of Deere & Company in Moline, Illinois.
In the 1970s, Mr. Gildehaus was Vice President of Temple, Barker & Sloane, a
consulting firm in Lexington, Massachusetts. He is a director of Northwestern
Steel and Wire Company, Simplicity Manufacturing, Inc., Southwest Supermarkets
LLC and Mercator Partners, LLC. Mr. Gildehaus is a graduate of Yale University
and received a Master of Business Administration, with Distinction, from
Harvard University.
Peter B. Pond, 57, has served as one of our directors since November 1996.
Mr. Pond is the founder and General Partner of Alta Equity Partners, a venture
capital firm. He formerly served as the Midwest Head of Investment Banking for
Donaldson, Lufkin & Jenrette Securities Corporation from June 1991 to March
2000. Mr. Pond is a director of Maximus, Inc., a provider of program management
and consulting services to state, county and local government health and human
services agencies.
Directors Whose Terms Continue Until the Annual Meeting of Shareholders in 2004:
James R. Thompson, 65, has served as a director since August 1998. Governor
Thompson was named Chairman of the Chicago law firm of Winston & Strawn in
January 1993. He joined the firm in January 1991 as Chairman of the Executive
Committee after serving four terms as Governor of the State of Illinois from
1977 until 1991. Prior to his terms as Governor, he served as U.S. Attorney for
the Northern District of Illinois from 1971 to 1975. Governor Thompson served
as the Chief of the Department of Law Enforcement and Public Protection in the
Office of the Attorney General of Illinois, as an Associate Professor at
Northwestern University School of Law, and as an Assistant State's Attorney of
Cook County. He is a former Chairman of the President's Intelligence Oversight
Board. Governor Thompson is currently a member of the Boards of Directors of
Jefferson Smurfit Group, Prime Retail, Inc., The Japan Society (New York),
Prime Group Realty Trust, FMC Technologies, Inc., Maximus, Inc., the Chicago
Board of Trade and Hollinger International, Inc. He serves on the Board of the
Museum of Contemporary Art and the Lyric Opera.
Samuel K. Skinner, 63, has served as a director since December 1999. Mr.
Skinner is Chief Executive Officer of U.S. Freightways Corporation, a
transportation and logistics business. He formerly served as Co-Chairman of
Hopkins & Sutter, a law firm based in Chicago. Mr. Skinner retired as President
of the
3
Commonwealth Edison Company and its holding company, Unicom Corporation. Prior
to joining Commonwealth Edison, he served as Chief of Staff to President George
Bush. Prior to his White House service, Mr. Skinner served in the President's
cabinet for nearly three years as Secretary of Transportation. From 1977 to
1989, Mr. Skinner practiced law as a senior partner in the Chicago law firm of
Sidley & Austin. From 1984 to 1988, while practicing law full time, he also
served as Chairman of the Regional Transportation Authority of northeastern
Illinois and was appointed by President Reagan as Chairman of the President's
Commission on Organized Crime. From 1968 to 1975, Mr. Skinner served in the
office of the United States Attorney for the Northern District of Illinois and
in 1977, President Ford appointed him United States Attorney, one of the few
career prosecutors ever to hold such position. He is currently a member of the
Boards of Directors of U.S. Freightways Corporation, ARRIS Corporation and
Midwest Express Holdings, Inc.
Board and Committee Meetings
The Board met five times in 2001. All directors attended at least 75% of the
meetings of the Board and of the committees on which they served.
The Board of Directors has an Executive Committee, which can act in lieu of
the Board of Directors as necessary. The members of the Executive Committee are
Messrs. Goodyear (Chairman), Skinner and Thompson. The Executive Committee did
not meet in 2001.
The Board of Directors has an Audit Committee which monitors the integrity
of the company's financial reporting process and internal controls regarding
finance, accounting and legal compliance; establishes and monitors the
independence and performance of our independent auditors; provides an avenue of
communication among the independent auditors, management and our Board of
Directors; and monitors significant litigation and financial risk exposure. The
members of the Audit Committee are Messrs. Thompson (Chairman), Skinner and
Gildehaus, each of whom is independent as defined by the listing standards of
the New York Stock Exchange. After considering Governor Thompson's financial
literacy, financial management expertise and the relationship between his law
firm, Winston & Strawn, and the company (see "Certain Relationships and Related
Transactions" below) including the materiality of the relationship to the
company, to the Governor personally, and to Winston & Strawn, the Board
determined in its business judgment that Governor Thompson has the requisite
financial literacy and financial management expertise to serve on the Audit
Committee; and further that Governor Thompson's relationship with Winston &
Strawn will not interfere with his exercise of independent judgment as a member
of the Audit Committee. The Audit Committee met six times during 2001.
The Board of Directors has a Compensation and Organization Committee which
reviews and monitors matters related to management development and succession;
develops and implements executive compensation policies and pay for performance
criteria for the company; reviews and recommends to the Board the initial and
annual base salaries, annual incentive bonus and all long-term incentive awards
of our Chairman of the Board and Chief Executive Officer; reviews and approves
such compensation arrangements for all corporate officers, executive managing
directors and certain other key employees; administers, interprets, applies and
determines benefits and grants stock-related incentives under our stock
incentive and executive compensation plans, and exercises all powers of the
Board of Directors under those plans other than the power to amend or terminate
those plans; reviews and approves material matters concerning our employee
compensation and benefit plans; and carries out such responsibilities as have
been delegated to it under various compensation and benefit plans and such
other responsibilities with respect to our compensation and organization
matters as may be referred to it by our Board of Directors or management. The
members of the Compensation and Organization Committee are Messrs. Skinner
(Chairman), Gildehaus and Pond. The Committee's Report on Executive
Compensation is included under the caption "Compensation Committee Report on
Executive Compensation." The Compensation and Organization Committee met five
times during 2001.
The Board of Directors has a Finance Committee that, among its other duties,
reviews the company's financial condition, financial structure and short and
long range plans including capital budget and financial
4
planning for consistency with fiscally sound operation and corporate strategy
to build shareholder value; reviews and makes recommendations to the Board
regarding the timing, amount and types of financing, securities repurchase
programs and dividend policies and actions; reviews the company's cash flow,
cash management, risk management policies and similar matters; and reviews the
company's insurance arrangements and certain proposed acquisitions. The members
of the Finance Committee are Messrs. Goodyear (Chairman), Pond and Thompson.
The Finance Committee did not meet during 2001.
Director Compensation
Each non-employee director is paid an annual retainer of $25,000 and a fee
of $1,500 for each Board meeting or Committee meeting attended. Each Committee
Chairman is paid an additional annual retainer of $2,500. All directors are
reimbursed for travel expenses incurred in connection with attending Board and
Committee meetings.
Each non-employee director makes an election to receive his annual retainer
in the form of either cash or non-formula stock options of shares in the
company. The number of stock options received is determined by dividing the
annual retainer ($25,000) by the market price on the last business day of the
year. Such stock options become fully exercisable on the first anniversary of
the grant date.
In addition, each non-employee director elected to serve a three-year term
receives a one-time grant of stock options to purchase 15,000 shares at the
market price immediately following the director's initial election. For
non-employee directors first elected to, or first beginning to serve a term of
less than three years, the initial grant is reduced pro rata. Such stock
options become fully exercisable on the six-month anniversary of the date of
the initial election or first beginning of service. Each non-employee director
receives an annual award of stock options of 5,000 shares at the market price
on January 1st of each year. Such stock options become fully exercisable on the
first anniversary of the grant date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Thompson, one of our directors, is Chairman of the law firm of Winston &
Strawn. Winston & Strawn has provided in the past and may provide us in the
future with legal representation.
5
AUDIT COMMITTEE REPORT
Our Committee has reviewed and discussed the audited financial statements of
the company as of and for the year ended December 31, 2001 (the "Audited
Financial Statements"). In addition, we have discussed with KPMG, LLP, the
independent auditing firm for the company, the matters required by Codification
of Statements on Auditing Standards No. 61. The Committee also has received the
written disclosures and the letter from KPMG, LLP required by Independence
Standards Board Standard No. 1, and we have discussed with that firm its
independence from the company. We also have discussed with the management of
the company and the auditing firm such other matters and received such
assurances from them as we deemed appropriate. Based on the foregoing review
and discussions and relying thereon, we have recommended to the company's Board
of Directors the inclusion of the Audited Financial Statements in the company's
annual report on Form 10-K for the year ended December 31, 2001.1
AUDIT COMMITTEE
James R. Thompson, Chairman
Thomas A. Gildehaus
Samuel K. Skinner
--------
1 Pursuant to regulations promulgated by the Securities and Exchange
Commission, neither the "Audit Committee Report," the "Compensation and
Organization Committee Report on Executive Compensation" nor the material
under the caption "Shareholder Return Performance Graph" shall be deemed to
be soliciting material or to be filed with the Securities and Exchange
Commission for purposes of the Securities Exchange Act of 1934, as amended,
nor shall such report or such material be deemed to be incorporated by
reference in any past or future filing by the company under that Act or the
Securities Act of 1933, as amended.
COMPENSATION AND ORGANIZATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
This report of the Compensation and Organization Committee (the "Committee")
describes the philosophy that underlies the cash and equity-based components of
our executive compensation program. It also describes the details of each
element of the program and the rationale for compensation paid to our Chief
Executive Officer and other officers and key employees in general.
Compensation Philosophy and Objectives
The Committee believes that in the near term the compensation offered to its
Chief Executive Officer, other officers and key employees must be sufficient to
attract, retain and fairly compensate highly qualified individuals in unusually
challenging circumstances. In the longer term, executive compensation should be
competitive and based on overall financial results, individual contributions
and teamwork, with the objective that a fair relationship exist between
executive pay and the creation of shareholder value. The Committee, among other
things, considers the performance of the company's operations, the compensation
of executive officers and key employees of competitors, salary surveys of
industry-related positions or positions at comparably sized companies and the
salary history of the particular individual and other compensation then in
place, including outstanding stock option awards.
The Committee determines compensation by using its subjective judgment and
taking into account both qualitative and quantitative factors. No weights are
assigned to such factors with respect to any compensation component. There is
no singular objective formula by which compensation is determined and the
decisions are ultimately subjective.
6
Annual Compensation
The compensation program has three elements:
. annual base salary;
. annual bonuses, which are based on certain performance objectives; and
. stock option and other awards under the company's incentive plans, which
are based on both company performance and individual performance.
Base Salary. Base salaries for the Chief Executive Officer, other officers
and key employees are established based on the scope of the duties and
responsibilities of each individual's position. The base salary of the Chief
Executive Officer is reviewed annually in accordance with his employment
agreement. Mr. Goodyear's employment agreement is described below in the
section entitled "Management Compensation." Typically, other officers and key
employees also have employment agreements specifying base salaries.
Annual Bonuses. The Board has previously approved a compensation program
for executive officers based on certain financial performance criteria,
including revenue growth, profitability and percentage performance of target
goals. Under this policy, which was in effect for calendar year 2001, certain
other officers and key employees were able to earn bonuses from 0% to 125%.
Typically, officers and key employees also have signed employment agreements
with maximum bonus opportunities from 0% to 100% of their respective base
salaries, based on the Committee's review of their performance. Mr. Goodyear's
employment agreement provides that his bonus may exceed 150% of base salary.
After a review of the company's performance, bonuses, if any, are paid in
cash for the calendar year in which they were earned on or before March 1st.
The bonus is forfeited if an individual is not an active employee on the date
bonuses are paid.
Incentive Plan. The Committee believes that stock options and other forms of
equity compensation are an important component of the compensation offered by
the company and promote long-term retention of its key employees, motivate high
levels of performance and recognize a key employee's contributions to the
success of the company. In addition, equity compensation aligns management's
interests with those of our shareholders on a long-term basis. The Committee
recognizes that we conduct our business in an increasingly competitive
environment. In order to remain competitive, we must employ the best and most
talented key employees who possess demonstrated skills and experience. The
Committee believes that stock options and other forms of equity compensation
may give us an advantage in attracting and retaining such employees. The
Committee also believes our long-term incentive plan is an important feature of
our executive compensation package. Under the plan, options and other forms of
equity compensation may be granted to the Chief Executive Officer, other
officers and key employees who are expected to make important contributions to
our future success. In reviewing the size of stock option or other equity
grants, the Committee focuses primarily on our performance and the perceived
role of each person in accomplishing our performance objectives, as well as the
satisfaction of individual performance objectives.
2001 Annual Equity Incentive Program. After considering recommendations from
its outside compensation consultants, the Committee decided to expand upon its
equity compensation philosophy (as fully described in the preceding section
"Incentive Plan") by adopting an annual equity incentive grant program. This
new program provides for competitive annual grants of stock options to key
employees as approved by management and the Committee and commensurate with
individual, business unit and company performance.
Policy on Deductibility of Compensation
Internal Revenue Code Section 162(m) prohibits us from deducting for federal
income tax purposes any amount paid in excess of $1,000,000 to our Chief
Executive Officer or any of our four most highly paid
7
executive officers. Compensation above $1,000,000 may be deducted if it is
"performance-based compensation" within the meaning of the Code. The Committee
believes that our current compensation arrangements, which are primarily based
on performance, are appropriate and in the company's and its shareholders' best
interests, without regard to tax considerations. Thus, if the tax laws or their
interpretation change or other circumstances occur which might make some
portion of the executive compensation non-deductible for federal tax purposes,
the Committee does not plan to make significant changes in the basic philosophy
and practices reflected in our executive compensation program.
Chief Executive Officer's Compensation
The total compensation of Mr. Goodyear was consistent with the Committee's
compensation objectives described above. Mr. Goodyear's total compensation
under his employment agreement, which was approved by the Board on May 19,
2000, and amended in May 2001, and his performance incentive bonus approved by
the Board in February 2002, are also consistent with the Committee's
compensation objectives described above. Mr. Goodyear's employment agreement is
described in detail in the section below entitled "Management Compensation".
COMPENSATION AND ORGANIZATION
COMMITTEE
Samuel K. Skinner, Chairman
Thomas A. Gildehaus
Peter B. Pond
8
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on our common stock against the New York Stock Exchange
Market Index (the "NYSE Index"), the NASDAQ Stock Market U.S. Index (the
"NASDAQ Index"), the Peer Group and the peer group reported in our last proxy
statement (the "Old Peer Group"). The graph assumes that $100 was invested on
October 4, 1996 (the effective date of our initial public offering) at the
initial public offering price of $10.67 per share, in each of our common stock,
the NYSE Index, the NASDAQ Index, the Old Peer Group and the Peer Group. The
graph also assumes that all dividends, if paid, were reinvested.
Note: The stock price performance shown below is not necessarily indicative
of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG NAVIGANT CONSULTING, INC., NYSE
MARKET INDEX, NASDAQ MARKET INDEX AND PEER GROUP INDICES
[CHART]
NAVIGANT OLD PEER NYSE PEER NASDAQ
CONSULTING, INC. PEER GROUP MARKET GROUP MARKET
1996 100.00 100.00 100.00 100.00 100.00
1997 126.38 92.15 131.56 92.15 122.32
1998 229.90 80.67 156.55 86.52 172.52
1999 51.35 63.77 171.42 76.34 304.29
2000 18.01 31.14 175.51 58.88 191.25
2001 25.97 40.92 159.87 72.53 152.46
[PERFORMANCE GRAPH]
ASSUMES $100 INVESTED ON OCT. 04, 1996.
ASSUMES DIVIDEND RE-INVESTED
FISCAL YEAR ENDED DECEMBER 31, 2001
Navigant
NYSE Nasdaq Peer Old Peer Consulting,
Measured Period Index Index Group Group Inc.
--------------- ------- ------- ------- -------- -----------
Measurement Point--10/4/96 $100.00 $100.00 $100.00 $100.00 $100.00
FYE 12/31/97.............. $131.56 $122.32 $ 92.15 $ 92.15 $126.38
FYE 12/31/98.............. $156.55 $172.52 $ 86.52 $ 80.67 $229.90
FYE 12/31/99.............. $171.42 $304.29 $ 76.34 $ 63.77 $ 51.35
FYE 12/31/00.............. $175.51 $191.25 $ 58.88 $ 31.14 $ 18.01
FYE 12/31/01.............. $159.87 $152.46 $ 72.53 $ 40.92 $ 25.97
--------
Notes:
(a) The Peer Group consists of the following companies: American Management
Systems, ChoicePoint, Inc., Charles River Associates, Inc., FTI Consulting,
Inc., Gartner Group, Inc., META Group, Inc. and Nextera
9
Enterprises, Inc. The Peer Group is weighted by market capitalization. We
deleted one company, Cambridge Technology Partners, which was acquired in
2001, from the Old Peer Group and added one new company, ChoicePoint, Inc.
(b) Since July 27, 1999, the company's common stock has traded on the New York
Stock Exchange. Prior to that date, it traded on the NASDAQ market.
Accordingly, the company has changed the broad equity market index from the
NASDAQ Index to the NYSE Index and has included both indices in the chart
and table above.
MANAGEMENT COMPENSATION
General
The following table sets forth compensation awarded or earned by the Chief
Executive Officer and two other executive officers who earned more than
$100,000 for 2001 (collectively, the "Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
---------------------------- --------------------------
Restricted
Other Annual Stock Securities All Other
Salary Bonus Compensation Award(s) Underlying/SARs Compensation
Name and Principal Position Year ($) ($) ($)(4) ($)(5) Options (#) ($)(6)
--------------------------- ---- ------- ------- ------------ ---------- --------------- ------------
William M. Goodyear....... 2001 490,385 325,000 5,100 277,000 60,000 338,716
Chairman, Chief 2000 270,000 650,000 5,100 0 378,750 113,152
Executive Officer and 1999 35,000 -- -- -- 9,000 --
President(1)
Ben W. Perks.............. 2001 350,000 85,000 5,100 172,312 30,000 159,048
Executive Vice 2000 166,923 265,000 5,008 0 225,000 53,274
President and Chief
Financial Officer(2)
Philip P. Steptoe......... 2001 250,000 50,000 5,100 38,750 15,000 94,302
Vice President, General.. 2000 225,000 125,000 5,100 0 125,000 31,575
Counsel and
Secretary(3)
--------
(1) Mr. Goodyear was elected to his positions in May 2000. He was elected a
Director in December 1999. See also discussion of Mr. Goodyear's employment
agreement under "Employment Agreements" below.
(2) Mr. Perks was elected to his positions in July 2000. See also discussion of
Mr. Perks' employment agreement under "Employment Agreements" below.
(3) Mr. Steptoe was elected to his positions in February 2000. See also
discussion of Mr. Steptoe's employment agreement under "Employment
Agreements" below.
(4) Represents matching payments under applicable 401(k).
(5) For each of the Executive Officers, the restricted stock awards vest over a
3-year period on September 1, 2001, September 1, 2002, and September 1,
2003. Mr. Goodyear was awarded 71,500 restricted shares, which were valued
at $393,250 at December 31, 2001; Mr. Perks was awarded 30,000 restricted
shares which, together with 10,000 shares of restricted stock described in
the following sentence, were valued at $220,000 at December 31, 2001; and
Mr. Steptoe was awarded 10,000 restricted shares, which were valued at
$55,000 at December 31, 2001. Mr. Perks was also awarded 10,000 shares of
restricted stock as a signing bonus, 5,000 shares of which vested on
January 4, 2001, and 5,000 of which vested on July 4, 2001.
(6) Represents payments made under the company's retention program and earnings
associated with group term life insurance. For Mr. Goodyear, the retention
payment was $337,500 and the earnings from the group term life insurance
was $1,216; for Mr. Perks, the retention payment was $157,500 and the
earnings from the group term life insurance was $1,548; for Mr. Steptoe,
the retention payment was $93,750 and the earnings from the group term life
insurance was $552.
10
Executive Option Grants
The following table sets forth the stock option grants we made to each of
the Executive Officers in 2001.
Options Grants in 2001
Individual Grants
Percent of
Total
Number of Options/SARs
Securities Granted to Exercise Grant
Underlying Employees in Price Date
Options/SARs Fiscal Year Per Expiration Present
Name Granted(#)(1) 2001 Share Date Value(2)
---- ------------- ------------ -------- ---------- --------
William M. Goodyear 60,000 3.13% $ 3.73 11/19/11 $186,324
Ben W. Perks....... 30,000 1.57% $ 3.73 11/19/11 $ 93,162
Philip P. Steptoe.. 15,000 .78% $ 3.73 11/19/11 $ 46,581
--------
(1) The options were granted on November 19, 2001 at the fair market value of
common stock on that date in accordance with the Annual Equity Incentive
Program. 50% of the options vested on February 1, 2002 and 50% will vest on
November 19, 2002.
(2) The fair value of the option grant is estimated as of the date of grant
using the Black-Scholes option pricing model. The following assumptions
were used:
Expected Volatility.... 80%
Risk-free interest rate 5.2%
Dividend yield......... 0%
Expected life.......... 9.6 years
Option Exercises and Holdings
The following table sets forth the exercise of options during 2001 by the
Executive Officers and the number of options and approximate values for
in-the-money options at December 31, 2001.
Aggregated Option Exercises in 2001 and
Year End Option Values
Number of Shares Value of Unexercised
Shares Underlying Unexercised In-The-Money Options
Acquired Options at Year End(#) at Year End($)
on Value ------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
William M. Goodyear 0 0 268,562 179,188 197,753 287,744
Ben W. Perks....... 0 0 176,250 78,750 116,016 129,272
Philip P. Steptoe.. 0 0 83,750 56,250 13,672 51,941
11
Employment Agreements
Employment Agreement with Mr. Goodyear. The company has an employment
agreement with its Chairman and Chief Executive Officer, Mr. Goodyear, with a
term ending December 31, 2002. The employment agreement provides for a base
salary of $500,000, and further provides that his bonus may exceed 150% of base
salary. The agreement provides, among other things, that if the company
terminates the executive for other than good cause (as defined in the
agreement) or Mr. Goodyear terminates his employment for good reason (as
defined in the agreement), then the company will pay to Mr. Goodyear an amount
equal to the sum of two times his base salary and two times the annual bonus
most recently paid to him. However, if Mr. Goodyear terminates his own
employment other than for good reason, the company would have no further
obligation to Mr. Goodyear other than the obligation to pay him his base salary
through the date of termination and any other compensation and benefits then
due. In the event of Mr. Goodyear's termination of employment following a
change in control for any reason other than for cause or by Mr. Goodyear for
good reason, the company shall pay him 334% of his base salary in a lump sum
cash payment.
Other Employment Agreements with Executive Officers. The company has
employment agreements with other of its Executive Officers. The employment
agreement with Mr. Perks, our Executive Vice President and Chief Financial
Officer, is for a rolling two-year period, such that the remainder of the term
shall always be two full years, and provides for an annual base salary of
$350,000, with annual increases at the discretion of the Compensation and
Organization Committee, and a maximum annual bonus opportunity of 100% of base
salary and a target payment of 65% of the base salary. In the event of a change
in control or if the company terminates Mr. Perks other than for cause (as
defined in the agreement) or if he terminates his employment for good reason
(as defined in the agreement), then the company will pay to Mr. Perks an amount
equal to (a) 1.5 times his then-current base salary plus the annual bonus most
recently paid to him, plus (b) a pro rata bonus for the calendar year of
termination at the target bonus level. If a payment or benefit received by Mr.
Perks would be subject to excise tax as a result of Section 280G of the
Internal Revenue Code, the agreement provides for a reduction of the
post-termination payments to him if, as a result of the excise tax, the net
amount of post-termination payments retained by him (taking into account income
and excise taxes) are increased by the reduction.
The employment agreement with Mr. Steptoe, our Vice President, General
Counsel and Secretary, provides for an annual base salary of $250,000 and a
maximum annual bonus opportunity of 50% of base salary. The agreement provides
that if the company terminates Mr. Steptoe's employment without cause (as
defined in the agreement), the company will continue his base salary for six
months.
12
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of common stock as of March 11, 2002 by: (i) each person we know to
own beneficially more than 5% of the outstanding shares of common stock; (ii)
each of our directors and nominees; (iii) each of the named executive officers;
and (iv) all of our directors and executive officers as a group. We believe
that each person named below has sole voting and investment power with respect
to all shares of common stock shown as beneficially owned by such holder,
subject to community property laws where applicable. Except where noted
otherwise, the address of each person named below is in care of our principal
executive offices.
Shares Beneficially
Owned(1)
-------------------
Officers, Directors and 5% Shareholders Number Percent
--------------------------------------- --------- -------
Heartland Advisors, Inc. (2)....................................... 4,876,500 12.3
Liberty Wanger Asset Management, L.P. (3).......................... 3,190,000 8.0
William M. Goodyear (4)............................................ 513,349 1.3
Ben W. Perks (5)................................................... 244,500 *
Philip P. Steptoe (6).............................................. 166,025 *
Thomas A. Gildehaus (7)............................................ 23,000 *
Peter B. Pond (8).................................................. 100,250 *
Samuel K. Skinner (9).............................................. 36,000 *
Carl S. Spetzler (10).............................................. 20,000 *
James R. Thompson (11)............................................. 88,250 *
All current directors and executive officers as a group (8 persons) 1,191,374 2.9
--------
* less than 1%
(1) Applicable percentage of ownership as of March 11, 2002 is based upon
approximately 39,800,000 shares of common stock outstanding. Beneficial
ownership is a technical term determined in accordance with the rules of
the Securities and Exchange Commission. Beneficial ownership generally
means that a shareholder has sole or shared power to vote or sell the stock
either directly or indirectly.
(2) Based on information provided in the Schedule 13G filed by Heartland
Advisors, Inc. and William J. Nasgovitz (its President and principal
shareholder) with the Securities and Exchange Commission on January 31,
2002. Of the 4,876,500 shares reported on the Schedule 13G, Heartland
reported sole voting power with respect to 1,126,500 shares and sole
dispositive power with respect to all 4,876,500 shares and Mr. Nasgovitz
reported sole voting power with respect to 3,335,200 shares. The address of
Heartland Advisors, Inc. and Mr. Nasgovitz is 789 North Water Street,
Milwaukee, Wisconsin 53202.
(3) Based on information provided in the Schedule 13G filed by Liberty Wanger
Asset Management, L.P. ("LWAM"), WAM Acquisition GP, Inc. ("WAMGP") and
Liberty Acorn Trust ("Acorn") with the Securities and Exchange Commission
on February 13, 2002. Of the 3,190,000 shares reported on Schedule 13G,
LWAM and WAMGP reported shared voting and dispositive power with respect to
all of the shares and Acorn reported shared voting and dispositive power
with respect to 2,200,000 of the shares. The address of LWAM, WAMGP and
Acorn is 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606.
(4) Includes 307,500 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
(5) Includes 195,000 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
(6) Includes 117,500 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
(7) Includes 14,000 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
(8) Includes 100,250 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
13
(9) Includes 26,000 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
(10) Includes 20,000 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
(11) Includes 88,250 shares of common stock subject to options that are or
become exercisable within 60 days of March 11, 2002.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and any persons who beneficially own more than 10% of
our common stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of common stock. To
our knowledge, based solely on a review of the copies of such reports sent to
us, we believe that during the year ended December 31, 2001, our directors,
officers and 10% shareholders complied with their Section 16(a) filing
requirements.
SHAREHOLDER PROPOSALS FOR THE 2002 PROXY STATEMENT
If you wish to submit a proposal to be included in the proxy statement for
our Annual Meeting of Shareholders in 2003, you must submit the proposal in
writing to the Secretary, Navigant Consulting, Inc., at 615 North Wabash
Avenue, Chicago, Illinois 60611. We must receive a proposal by December 3, 2002
in order to consider it for inclusion in the proxy statement for the 2003
Annual Meeting of Shareholders.
In addition, our by-laws provide that for business to be properly brought
before an annual meeting by a shareholder, the shareholder must deliver written
notice to, or mail such written notice so that it is received by, the Secretary
of the company, at the principal executive offices of the company, not less
than one hundred twenty nor more than one hundred fifty days prior to the first
anniversary of the date of our proxy statement released to shareholders in
connection with the previous year's election of directors or meeting of
shareholders, except that if no annual meeting of shareholders or election by
consent was held in the previous year, a proposal must be received by the
company within ten days after the company has publicly disclosed the date of
the meeting in the manner provided in our by-laws. Our by-laws provide that
nominations by shareholders for persons for election as directors must be made
by written notice delivered to, or mailed and received by, the Secretary of the
company at the principal executive offices of the company not less than one
hundred twenty nor more than one hundred fifty days prior to the meeting,
except that if the company has not publicly disclosed in the manner provided in
the by-laws the date of the meeting at least seventy days prior to the meeting
date, notice may be given by a shareholder if received by the Secretary of the
company not later than the close of business on the tenth day following the day
on which the company publicly disclosed the meeting date. The by-laws contain
provisions regarding information that must be set forth in the shareholder's
notice or otherwise provided in connection with shareholder nominations or
other business to be brought by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG, LLP, independent public accountants, audited our financial statements
as of and for the year ended December 31, 2001. We expect representatives of
KPMG, LLP to be present at the meeting and to be available to respond to
appropriate questions. The KPMG, LLP representatives will be given an
opportunity to make a statement if they desire.
14
Audit Fees
KPMG, LLP billed the company approximately $425,000 in 2001 for the audit of
the company's financial statements and review of its quarterly financial
statements.
Financial Information System Design and Implementation Fees
KMPG LLP did not render professional services relating to financial
information system design and implementation in 2001.
All Other Fees
KPMG, LLP, billed the company approximately $30,000 for tax fees and SEC
filings in 2001. The Audit Committee reviewed the provision of the services
provided by KPMG, LLP with respect to such fees and concluded that such
services were compatible with maintaining KPMG, LLP's independence.
OTHER INFORMATION
If you would like a copy of our Annual Report on Form 10-K that we filed
with the Securities and Exchange Commission as of and for the year ended
December 31, 2001 (excluding exhibits), we will send you one without charge.
Please write to:
Ms. Mary E. Rosinski
Investor Relations Manager
Navigant Consulting, Inc.
615 North Wabash Avenue
Chicago, Illinois 60611
15
NAVIGANT CONSULTING, INC.
c/o PROXY SERVICES
P.O. BOX 9142
FARMINGDALE, NY 11735
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number (located
below) to obtain your records and to create an electronic voting instruction
form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number (located below) and then follow the simple instructions the Vote
Voice provides you.
VOTE BY MAIL -
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Navigant Consulting, Inc., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: NAVCON KEEP THIS PORTION FOR YOUR RECORDS
---------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NAVIGANT CONSULTING, INC.
Vote On Directors
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEM 1 For Withhold For All To withhold authority to vote, mark
All All Except "For All Except" and write the nominee's
1. Proposal to elect (01) William M. Goodyear and [_] [_] [_] number on the line below.
(02) Valerie B. Jarrett to the Board of Directors ________________________________________
for a term of three years.
The shares represented by this proxy, when properly executed, will be voted in
the manner directed herein by the undersigned Shareholder(s). If no direction is
made, this proxy will be voted FOR item 1. If any other matters properly come
before the meeting, the person named in this proxy will vote in his/her
discretion.
If you plan to attend the meeting, please check the box
to the right. [_]
____________________________________________ ______________________________________
____________________________________________ ______________________________________
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
--------------------------------------------------------------------------------
NAVIGANT CONSULTING, INC.
Annual Meeting of Shareholders - April 25, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Navigant Consulting, Inc., a Delaware
Corporation, hereby acknowledge(s) receipt of the Proxy Statement dated March
29, 2002, and hereby appoint(s) Ben W. Perks and Philip Steptoe, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
Annual Meeting of Shareholders of Navigant Consulting, Inc., to be held
Thursday, April 25, 2002 at 9:00 a.m., Chicago Time, at The Mid-America Club,
80th Floor, 200 East Randolph Drive, Chicago, Illinois 60601, and at any
adjournment or adjournments thereof, and to vote all shares of common stock
which the undersigned would be entitled to vote if then and there personally
present, on all matters set forth on the reverse side.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
(Continued, and to be signed and dated, on the reverse side.)