Condensed consolidating guarantor and non-guarantor financial information

The following tables set forth condensed consolidating balance sheets as of October 31, 2011 and 2010, and condensed consolidating statements of operations and condensed consolidating statements of cash flows for the years ended October 31, 2011, 2010, and 2009. The information is presented as a result of Navistar, Inc.’s guarantee, exclusive of its subsidiaries, of NIC’s indebtedness under its 8.25% Senior Notes due 2021 and obligations under our Loan Agreement related to the 6.5% Tax Exempt Bonds due 2040. Navistar, Inc. is a direct wholly-owned subsidiary of NIC. None of NIC’s other subsidiaries guarantee any of these notes. The guarantees are "full and unconditional", as those terms are used in Regulation S-X Rule 3-10, except that an individual subsidiary's guarantee will be automatically released in certain customary circumstances, such as when the subsidiary is sold or all of the assets of the subsidiary are sold, the capital stock is sold, when the subsidiary is designated as an “unrestricted subsidiary” for purposes of the indenture, upon liquidation or dissolution of the subsidiary or upon legal or covenant defeasance or satisfaction and discharge of the notes. Separate financial statements and other disclosures concerning Navistar, Inc. have not been presented because management believes that such information is not material to investors. Within this disclosure only, “NIC” includes the consolidated financial results of the parent company only, with all of its wholly-owned subsidiaries accounted for under the equity method. Likewise, “Navistar, Inc.,” for purposes of this disclosure only, includes the consolidated financial results of its wholly-owned subsidiaries accounted for under the equity method and its operating units accounted for on a consolidated basis. “Non-Guarantor Subsidiaries” includes the combined financial results of all other non-guarantor subsidiaries. “Eliminations and Other” includes all eliminations and reclassifications to reconcile to the consolidated financial statements. NIC files a consolidated U.S. federal income tax return that includes Navistar, Inc. and its U.S. subsidiaries. Navistar, Inc. has a tax allocation agreement (“Tax Agreement”) with NIC which requires Navistar, Inc. to compute its separate federal income tax liability and remit any resulting tax liability to NIC. Tax benefits that may arise from net operating losses of Navistar, Inc. are not refunded to Navistar, Inc. but may be used to offset future required tax payments under the Tax Agreement. The effect of the Tax Agreement is to allow NIC, the parent company, rather than Navistar, Inc., to utilize current U.S. taxable losses of Navistar, Inc. and all other direct or indirect subsidiaries of NIC.

We have revised our previously reported condensed consolidating balance sheet as of October 31, 2009 to reflect the correction of errors in those statements and the effect of the adoption of new accounting guidance related to the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) and the accounting for non-controlling interests. The 2009 and 2008 impact of these errors, totaling $10 million, was recognized in our 2010 condensed consolidating statements of operations as they were not material to our financial results for 2009 and 2008. The revisions did not impact the condensed consolidating statement of cash flows for the years ended October 31, 2009 and 2008. See Note 1, Summary of significant accounting policies, for further discussion.



	NIC		Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the year Ended October 31, 2011
Sales and revenues, net	$	—	$	8,319		$	13,202		$	(7,563	)	$	13,958
Costs of products sold	—		7,775			10,974			(7,487		)	11,262
Restructuring charges	—		33			59			—			92
Impairment of property and equipment and intangible assets	—		—			64			—			64
All other operating expenses	79		1,263			902			(95		)	2,149
Total costs and expenses	79		9,071			11,999			(7,582		)	13,567
Equity in income (loss) of affiliates	1,759		462			(37		)	(2,255		)	(71		)
Income (loss) before income tax	1,680		(290		)	1,166			(2,236		)	320
Income tax benefit (expense)	43		1,937			(511		)	(11		)	1,458
Net income (loss)	1,723		1,647			655			(2,247		)	1,778
Less: Net income attributable to non-controlling interests	—		—			55			—			55
Net income (loss) attributable to Navistar International Corporation	$	1,723	$	1,647		$	600		$	(2,247	)	$	1,723



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Balance Sheet as of October 31, 2011
Assets
Cash and cash equivalents	$	226		$	13		$	300		$	—		$	539
Marketable securities	429			1			288			—			718
Restricted cash and cash equivalents	20			9			298			—			327
Finance and other receivables, net	3			154			4,070			27			4,254
Inventories	—			650			1,113			(49		)	1,714
Investments in non-consolidated affiliates	(2,094		)	5,818			54			(3,718		)	60
Property and equipment, net	—			600			972			(2		)	1,570
Goodwill	—			—			319			—			319
Deferred taxes, net	31			1,912			114			—			2,057
Other	168			152			416			(3		)	733
Total Assets	$	(1,217	)	$	9,309		$	7,944		$	(3,745	)	$	12,291
Liabilities and Stockholders’ Equity (Deficit)
Debt	$	1,689		$	156		$	3,242		$	(231	)	$	4,856
Postretirement benefits liabilities	—			2,981			335			—			3,316
Amounts due to (from) affiliates	(5,574		)	9,055			(3,595		)	114			—
Other liabilities	2,690			(194		)	1,717			(122		)	4,091
Total Liabilities	(1,195		)	11,998			1,699			(239		)	12,263
Redeemable equity securities	5			—			—			—			5
Stockholders’ equity attributable to non-controlling interests	—			—			52			(2		)	50
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(27		)	(2,689		)	6,193			(3,504		)	(27		)
Total Liabilities and Stockholders’ Equity (Deficit)	$	(1,217	)	$	9,309		$	7,944		$	(3,745	)	$	12,291



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Cash Flows for the Year Ended October 31, 2011
Net cash provided by (used in) operations	$	(44	)	$	(66	)	$	556		$	434		$	880
Cash flow from investment activities
Net change in restricted cash and cash equivalents	—			—			(147		)	—			(147		)
Net sales (purchases) of marketable securities	(55		)	—			(77		)	—			(132		)
Capital expenditures	—			(264		)	(236		)	—			(500		)
Other investing activities	—			(12		)	(32		)	—			(44		)
Net cash provided by (used in) investment activities	(55		)	(276		)	(492		)	—			(823		)
Cash flow from financing activities
Net borrowings (repayments) of debt	91			333			48			(434		)	38
Other financing activities	(5		)	—			(133		)	—			(138		)
Net cash provided by (used in) financing activities	86			333			(85		)	(434		)	(100		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(3		)	—			(3		)
Increase (decrease) in cash and cash equivalents	(13		)	(9		)	(24		)	—			(46		)
Cash and cash equivalents at beginning of the year	239			22			324			—			585
Cash and cash equivalents at end of the year	$	226		$	13		$	300		$	—		$	539



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Year Ended October 31, 2010
Sales and revenues, net	$	—		$	6,751		$	11,278		$	(5,884	)	$	12,145
Costs of products sold	(1		)	6,303			9,245			(5,806		)	9,741
Restructuring charges	—			(13		)	(2		)	—			(15		)
All other operating expenses (income)	61			1,349			763			(94		)	2,079
Total costs and expenses	60			7,639			10,006			(5,900		)	11,805
Equity in income (loss) of affiliates	283			895			(17		)	(1,211		)	(50		)
Income (loss) before income tax	223			7			1,255			(1,195		)	290
Income tax benefit (expense)	—			55			(78		)	—			(23		)
Net income (loss)	223			62			1,177			(1,195		)	267
Less: Net income attributable to non-controlling interest	—			—			44			—			44
Net income (loss) attributable to Navistar International Corporation	$	223		$	62		$	1,133		$	(1,195	)	$	223



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Balance Sheet as of October 31, 2010
Assets
Cash and cash equivalents	$	239		$	22		$	324		$	—		$	585
Marketable securities	375			—			211			—			586
Restricted cash and cash equivalents	20			9			151			—			180
Finance and other receivables, net	9			222			3,730			(15		)	3,946
Inventories	—			644			974			(50		)	1,568
Goodwill	—			—			324			—			324
Property and equipment, net	—			443			1,003			(4		)	1,442
Investments in non-consolidated affiliates	(3,006		)	5,290			60			(2,241		)	103
Deferred taxes, net	1			1			146			(2		)	146
Other	266			118			467			(1		)	850
Total Assets	$	(2,096	)	$	6,749		$	7,390		$	(2,313	)	$	9,730
Liabilities and Stockholders’ Equity (Deficit)
Debt	$	1,666		$	213		$	3,220		$	(229	)	$	4,870
Postretirement benefits liabilities	—			1,907			272			—			2,179
Amounts due to (from) affiliates	(5,058		)	8,111			(3,140		)	87			—
Other liabilities	2,269			112			1,369			(145		)	3,605
Total Liabilities	(1,123		)	10,343			1,721			(287		)	10,654
Redeemable equity securities	8			—			—			—			8
Stockholders’ equity attributable to non-controlling interest	—			—			49			—			49
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(981		)	(3,594		)	5,620			(2,026		)	(981		)
Total Liabilities and Stockholders’ Equity (Deficit)	$	(2,096	)	$	6,749		$	7,390		$	(2,313	)	$	9,730



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Cash Flows for the Year Ended October 31, 2010
Net cash provided by (used in) operations	$	(174	)	$	(421	)	$	1,041		$	661		$	1,107
Cash flow from investment activities
Net change in restricted cash and cash equivalents	—			—			515			—			515
Net purchases in marketable securities	(374		)	—			(212		)	—			(586		)
Capital expenditures	—			(107		)	(172		)	—			(279		)
Other investing activities	(20		)	(84		)	(13		)	33			(84		)
Net cash provided by (used in) investment activities	(394		)	(191		)	118			33			(434		)
Cash flow from financing activities
Net borrowings (repayments) of debt	(20		)	598			(1,195		)	(661		)	(1,278		)
Other financing activities	35			—			(24		)	(33		)	(22		)
Net cash provided by (used in) financing activities	15			598			(1,219		)	(694		)	(1,300		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			—			—
Decrease in cash and cash equivalents	(553		)	(14		)	(60		)	—			(627		)
Cash and cash equivalents at beginning of the year	792			36			384			—			1,212
Cash and cash equivalents at end of the year	$	239		$	22		$	324		$	—		$	585



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Year Ended October 31, 2009
Sales and revenues, net	$	—		$	6,210		$	11,013		$	(5,654	)	$	11,569
Costs of products sold	6			5,859			9,139			(5,638		)	9,366
Impairment of property and equipment	—			(1		)	32			—			31
Restructuring charges	—			59			—			—			59
All other operating expenses (income)	(7		)	1,139			778			(110		)	1,800
Total costs and expenses	(1		)	7,056			9,949			(5,748		)	11,256
Equity in income (loss) of affiliates	320			983			51			(1,308		)	46
Income (loss) before income tax and extraordinary gain	321			137			1,115			(1,214		)	359
Income tax benefit (expense)	(1		)	48			(84		)	—			(37		)
Income (loss) before extraordinary gain	320			185			1,031			(1,214		)	322
Extraordinary gain, net of tax	—			—			23			—			23
Net income (loss)	320			185			1,054			(1,214		)	345
Less: Net income attributable to non-controlling interests	—			—			25			—			25
Net income (loss) attributable to Navistar International Corporation	$	320		$	185		$	1,029		$	(1,214	)	$	320



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Cash Flows for the Year Ended October 31, 2009
Net cash provided by (used in) operations	$	165		$	(55	)	$	894		$	234		$	1,238
Cash flow from investment activities
Net change in restricted cash and cash equivalents	(19		)	(4		)	94			—			71
Net sales of marketable securities	1			—			1			—			2
Capital expenditures	—			(46		)	(151		)	—			(197		)
Other investing activities	—			(71		)	(78		)	61			(88		)
Net cash provided by (used in) investment activities	(18		)	(121		)	(134		)	61			(212		)
Cash flow from financing activities
Net borrowings (repayments) of debt	166			185			(807		)	(234		)	(690		)
Other financing activities	(53		)	—			40			(61		)	(74		)
Net cash provided by (used in) financing activities	113			185			(767		)	(295		)	(764		)
Effect of exchange rate changes on cash and cash equivalents	—			—			9			—			9
Increase in cash and cash equivalents	260			9			2			—			271
Increase in cash and cash equivalents upon consolidation of BDP and BDT	—			—			80			—			80
Cash and cash equivalents at beginning of the year	532			27			302			—			861
Cash and cash equivalents at end of the year	$	792		$	36		$	384		$	—		$	1,212