Condensed Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of April 30, 2012 and October 31, 2011, and condensed consolidating statements of operations, condensed consolidating statement of comprehensive income (loss), and condensed consolidating statements of cash flows for the six months ended April 30, 2012 and 2011. 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 or bonds. 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.



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Three Months Ended April 30, 2012
Sales and revenues, net	$	—		$	2,172		$	3,011		$	(1,885	)	$	3,298
Costs of products sold	—			2,205			2,599			(1,860		)	2,944
Restructuring charges	—			19			1			—			20
Impairment of intangible assets	—			—			38			—			38
All other operating expenses	14			357			241			(25		)	587
Total costs and expenses	14			2,581			2,879			(1,885		)	3,589
Equity in income (loss) of affiliates	(96		)	271			(6		)	(173		)	(4		)
Income (loss) before income taxes	(110		)	(138		)	126			(173		)	(295		)
Income tax benefit (expense)	(62		)	(63		)	221			37			133
Net income (loss)	(172		)	(201		)	347			(136		)	(162		)
Less: Net income attributable to non-controlling interests	—			—			10			—			10
Net income (loss) attributable to Navistar International Corporation	$	(172	)	$	(201	)	$	337		$	(136	)	$	(172	)



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended April 30, 2012
Net income (loss) attributable to Navistar International Corporation	$	(172	)	$	(201	)	$	337		$	(136	)	$	(172	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(65		)	—			(65		)	65			(65		)
Defined benefit plans (net of tax of $12, $12, $–, $(12) and $12, respectively)	17			16			2			(18		)	17
Total other comprehensive income (loss)	(48		)	16			(63		)	47			(48		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(220	)	$	(185	)	$	274		$	(89	)	$	(220	)



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Six Months Ended April 30, 2012
Sales and revenues, net	$	—		$	4,134		$	5,835		$	(3,619	)	$	6,350
Costs of products sold	—			4,200			5,023			(3,581		)	5,642
Restructuring charges	—			20			—			—			20
Impairment of intangible assets	—			—			38			—			38
All other operating expenses	39			690			477			(51		)	1,155
Total costs and expenses	39			4,910			5,538			(3,632		)	6,855
Equity in income (loss) of affiliates	(296		)	366			(13		)	(68		)	(11		)
Income (loss) before income taxes	(335		)	(410		)	284			(55		)	(516		)
Income tax benefit	10			14			187			3			214
Net income (loss)	(325		)	(396		)	471			(52		)	(302		)
Less: Net income attributable to non-controlling interests	—			—			23			—			23
Net income (loss) attributable to Navistar International Corporation	$	(325	)	$	(396	)	$	448		$	(52	)	$	(325	)



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Comprehensive Income for the Six Months Ended April 30, 2012
Net income (loss) attributable to Navistar International Corporation	$	(325	)	$	(396	)	$	448		$	(52	)	$	(325	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(78		)	—			(78		)	78			(78		)
Defined benefit plans (net of tax of $24, $23, $1, $(24) and $24, respectively)	40			36			5			(41		)	40
Total other comprehensive income (loss)	(38		)	36			(73		)	37			(38		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(363	)	$	(360	)	$	375		$	(15	)	$	(363	)



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Balance Sheet as of April 30, 2012
Assets
Cash and cash equivalents	$	112		$	48		$	240		$	—		$	400
Marketable securities	55			—			282			—			337
Restricted cash and cash equivalents	13			8			124			—			145
Finance and other receivables, net	5			139			3,453			2			3,599
Inventories	—			761			1,240			(53		)	1,948
Investments in non-consolidated affiliates	(2,459		)	6,286			51			(3,820		)	58
Property and equipment, net	—			739			953			(2		)	1,690
Goodwill	—			—			295			—			295
Deferred taxes, net	44			1,887			306			1			2,238
Other	115			167			394			(2		)	674
Total assets	$	(2,115	)	$	10,035		$	7,338		$	(3,874	)	$	11,384
Liabilities and stockholders’ equity (deficit)
Debt	$	1,604		$	295		$	2,832		$	(234	)	$	4,497
Postretirement benefits liabilities	—			2,893			321			—			3,214
Amounts due to (from) affiliates	(5,996		)	9,753			(3,837		)	80			—
Other liabilities	2,727			(49		)	1,537			(135		)	4,080
Total liabilities	(1,665		)	12,892			853			(289		)	11,791
Redeemable equity securities	5			—			—			—			5
Stockholders’ equity attributable to non-controlling interests	—			—			43			—			43
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(455		)	(2,857		)	6,442			(3,585		)	(455		)
Total liabilities and stockholders’ equity (deficit)	$	(2,115	)	$	10,035		$	7,338		$	(3,874	)	$	11,384



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Cash Flows for the Six Months Ended April 30, 2012
Net cash provided by (used in) operations	$	(463	)	$	(267	)	$	248		$	531		$	49
Cash flows from investment activities
Net change in restricted cash and cash equivalents	6			2			174			—			182
Net sales of marketable securities	374			—			7			—			381
Capital expenditures and purchase of equipment leased to others	—			(115		)	(89		)	—			(204		)
Other investing activities	—			(104		)	70			—			(34		)
Net cash provided by (used in) investment activities	380			(217		)	162			—			325
Cash flows from financing activities
Net borrowings (repayments) of debt	(50		)	519			(429		)	(440		)	(400		)
Other financing activities	19			—			(38		)	(91		)	(110		)
Net cash provided by (used in) financing activities	(31		)	519			(467		)	(531		)	(510		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(3		)	—			(3		)
Increase (decrease) in cash and cash equivalents	(114		)	35			(60		)	—			(139		)
Cash and cash equivalents at beginning of the period	226			13			300			—			539
Cash and cash equivalents at end of the period	$	112		$	48		$	240		$	—		$	400



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Three Months Ended April 30, 2011
Sales and revenues, net	$	—		$	2,144		$	3,238		$	(2,027	)	$	3,355
Costs of products sold	17			1,987			2,681			(1,984		)	2,701
Restructuring charges	—			2			—			—			2
All other operating expenses (income)	17			338			217			(29		)	543
Total costs and expenses	34			2,327			2,898			(2,013		)	3,246
Equity in income (loss) of affiliates	120			219			(10		)	(345		)	(16		)
Income (loss) before income taxes	86			36			330			(359		)	93
Income tax benefit (expense)	(12		)	(5		)	(36		)	48			(5		)
Net income (loss)	74			31			294			(311		)	88
Less: Net income attributable to non-controlling interest	—			—			14			—			14
Net income (loss) attributable to Navistar International Corporation	$	74		$	31		$	280		$	(311	)	$	74



	NIC		Navistar, Inc.		Non-Guarantor Subsidiaries		Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended April 30, 2011
Net income (loss) attributable to Navistar International Corporation	$	74	$	31	$	280	$	(311	)	$	74
Other comprehensive income (loss):
Foreign currency translation adjustment	46		—		46		(46		)	46
Defined benefit plans (net of tax of $– for all subsidiaries presented)	16		12		4		(16		)	16
Total other comprehensive income (loss)	62		12		50		(62		)	62
Total comprehensive income (loss) attributable to Navistar International Corporation	$	136	$	43	$	330	$	(373	)	$	136



	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Operations for the Six Months Ended April 30, 2011
Sales and revenues, net	$	—		$	3,831		$	5,819		$	(3,552	)	$	6,098
Costs of products sold	—			3,553			4,846			(3,499		)	4,900
Restructuring charges	—			23			1			—			24
All other operating expenses (income)	41			613			441			(53		)	1,042
Total costs and expenses	41			4,189			5,288			(3,552		)	5,966
Equity in income (loss) of affiliates	120			344			(20		)	(477		)	(33		)
Income (loss) before income taxes	79			(14		)	511			(477		)	99
Income tax benefit (expense)	(11		)	1			(52		)	57			(5		)
Net income (loss)	68			(13		)	459			(420		)	94
Less: Net income attributable to non-controlling interest	—			—			26			—			26
Net income (loss) attributable to Navistar International Corporation	$	68		$	(13	)	$	433		$	(420	)	$	68



	NIC		Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
(in millions)
Condensed Consolidating Statement of Comprehensive Income for the Six Months Ended April 30, 2011
Net income (loss) attributable to Navistar International Corporation	$	68	$	(13	)	$	433		$	(420	)	$	68
Other comprehensive income (loss):
Foreign currency translation adjustment	61		—			61			(61		)	61
Defined benefit plans (net of tax of $– for all subsidiaries presented)	79		70			(15		)	(55		)	79
Total other comprehensive income (loss)	140		70			46			(116		)	140
Total comprehensive income (loss) attributable to Navistar International Corporation	$	208	$	57		$	479		$	(536	)	$	208



	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 (deficit) attributable to non-controlling interest	—			—			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 Six Months Ended April 30, 2011
Net cash provided by (used in) operations	$	(84	)	$	61		$	142		$	107		$	226
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			—			(8		)	—			(8		)
Net purchases in marketable securities	(34		)	—			(118		)	—			(152		)
Capital expenditures and purchase of equipment leased to others	—			(104		)	(104		)	—			(208		)
Other investing activities	—			(20		)	14			—			(6		)
Net cash used in investment activities	(34		)	(124		)	(216		)	—			(374		)
Cash flows from financing activities
Net borrowings (repayments) of debt	27			62			(36		)	(107		)	(54		)
Other financing activities	28			—			(32		)	—			(4		)
Net cash provided by (used in) financing activities	55			62			(68		)	(107		)	(58		)
Effect of exchange rate changes on cash and cash equivalents	—			(1		)	12			—			11
Decrease in cash and cash equivalents	(63		)	(2		)	(130		)	—			(195		)
Cash and cash equivalents at beginning of the period	239			22			324			—			585
Cash and cash equivalents at end of the period	$	176		$	20		$	194		$	—		$	390