Condensed Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of July 31, 2012 and October 31, 2011, condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the three and nine months ended July 31, 2012 and 2011, and condensed consolidating statements of cash flows for the nine months ended July 31, 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 the guarantees 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.



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2012
Sales and revenues, net	$	—		$	2,007		$	2,941		$	(1,629	)	$	3,319
Costs of products sold	—			1,951			2,554			(1,629		)	2,876
Restructuring charges	—			3			1			—			4
Impairment of property and equipment and intangible assets	—			—			—			—			—
All other operating expenses	18			329			206			(24		)	529
Total costs and expenses	18			2,283			2,761			(1,653		)	3,409
Equity in income (loss) of affiliates	(30		)	16			(11		)	15			(10		)
Income (loss) before income taxes	(48		)	(260		)	169			39			(100		)
Income tax benefit (expense)	132			229			(187		)	22			196
Net income (loss)	84			(31		)	(18		)	61			96
Less: Net income attributable to non-controlling interests	—			—			12			—			12
Net income (loss) attributable to Navistar International Corporation	$	84		$	(31	)	$	(30	)	$	61		$	84



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended July 31, 2012
Net income (loss) attributable to Navistar International Corporation	$	84		$	(31	)	$	(30	)	$	61		$	84
Other comprehensive income (loss):
Foreign currency translation adjustment	(61		)	—			(60		)	60			(61		)
Defined benefit plans (net of tax of $13, $10, $3, $(13), and $13 respectively)	23			21			1			(22		)	23
Total other comprehensive income (loss)	(38		)	21			(59		)	38			(38		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	46		$	(10	)	$	(89	)	$	99		$	46



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2012
Sales and revenues, net	$	—		$	6,141		$	8,776		$	(5,248	)	$	9,669
Costs of products sold	—			6,151			7,577			(5,210		)	8,518
Restructuring charges	—			23			1			—			24
Impairment of intangible assets	—			—			38			—			38
All other operating expenses	57			1,020			682			(75		)	1,684
Total costs and expenses	57			7,194			8,298			(5,285		)	10,264
Equity in income (loss) of affiliates	(326		)	384			(25		)	(54		)	(21		)
Income (loss) before income taxes	(383		)	(669		)	453			(17		)	(616		)
Income tax benefit (expense)	142			243			—			25			410
Net income (loss)	(241		)	(426		)	453			8			(206		)
Less: Net income attributable to non-controlling interests	—			—			35			—			35
Net income (loss) attributable to Navistar International Corporation	$	(241	)	$	(426	)	$	418		$	8		$	(241	)



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Comprehensive Income for the Nine Months Ended July 31, 2012
Net income (loss) attributable to Navistar International Corporation	$	(241	)	$	(426	)	$	418		$	8		$	(241	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(139		)	—			(138		)	138			(139		)
Defined benefit plans (net of tax of $36, $33, $4, $(37), and $36 respectively)	63			57			6			(63		)	63
Total other comprehensive income (loss)	(76		)	57			(132		)	75			(76		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(317	)	$	(369	)	$	286		$	83		$	(317	)



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Balance Sheet as of July 31, 2012
Assets
Cash and cash equivalents	$	252		$	55		$	240		$	—		$	547
Marketable securities	46			—			113			—			159
Restricted cash and cash equivalents	20			6			253			—			279
Finance and other receivables, net	4			156			3,109			(2		)	3,267
Inventories	—			737			1,172			(32		)	1,877
Investments in non-consolidated affiliates	(2,527		)	6,303			38			(3,768		)	46
Property and equipment, net	—			756			892			(2		)	1,646
Goodwill	—			—			280			—			280
Deferred taxes, net	230			1,878			301			(3		)	2,406
Other	108			160			370			(2		)	636
Total assets	$	(1,867	)	$	10,051		$	6,768		$	(3,809	)	$	11,143
Liabilities and stockholders’ equity (deficit)
Debt	$	1,611		$	418		$	2,617		$	(234	)	$	4,412
Postretirement benefits liabilities	—			2,855			315			—			3,170
Amounts due to (from) affiliates	(5,851		)	9,940			(4,165		)	76			—
Other liabilities	2,775			(296		)	1,604			(164		)	3,919
Total liabilities	(1,465		)	12,917			371			(322		)	11,501
Redeemable equity securities	5			—			—			—			5
Stockholders’ equity attributable to non-controlling interests	—			—			44			—			44
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(407		)	(2,866		)	6,353			(3,487		)	(407		)
Total liabilities and stockholders’ equity (deficit)	$	(1,867	)	$	10,051		$	6,768		$	(3,809	)	$	11,143



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2012
Net cash provided by (used in) operations	$	(330	)	$	(362	)	$	458		$	580		$	346
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			3			45			—			48
Net sales of marketable securities	383			—			175			—			558
Capital expenditures and purchase of equipment leased to others	—			(173		)	(126		)	—			(299		)
Other investing activities	—			(117		)	86			—			(31		)
Net cash provided by (used in) investment activities	383			(287		)	180			—			276
Cash flows from financing activities
Net borrowings (repayments) of debt	(47		)	691			(643		)	(488		)	(487		)
Other financing activities	20			—			(48		)	(92		)	(120		)
Net cash provided by (used in) financing activities	(27		)	691			(691		)	(580		)	(607		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(7		)	—			(7		)
Increase (decrease) in cash and cash equivalents	26			42			(60		)	—			8
Cash and cash equivalents at beginning of the period	226			13			300			—			539
Cash and cash equivalents at end of the period	$	252		$	55		$	240		$	—		$	547



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2011
Sales and revenues, net	$	—		$	2,072		$	3,260		$	(1,795	)	$	3,537
Costs of products sold	—			1,940			2,774			(1,784		)	2,930
Restructuring charges	—			4			52			—			56
Impairment of property and equipment and intangible assets	—			—			64			—			64
All other operating expenses (income)	15			302			230			(28		)	519
Total costs and expenses	15			2,246			3,120			(1,812		)	3,569
Equity in income (loss) of affiliates	1,863			(52		)	(9		)	(1,824		)	(22		)
Income (loss) before income taxes	1,848			(226		)	131			(1,807		)	(54		)
Income tax benefit (expense)	(448		)	1,514			(162		)	559			1,463
Net income (loss)	1,400			1,288			(31		)	(1,248		)	1,409
Less: Net income attributable to non-controlling interest	—			—			9			—			9
Net income (loss) attributable to Navistar International Corporation	$	1,400		$	1,288		$	(40	)	$	(1,248	)	$	1,400



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended July 31, 2011
Net income (loss) attributable to Navistar International Corporation	$	1,400		$	1,288		$	(40	)	$	(1,248	)	$	1,400
Other comprehensive income (loss):
Foreign currency translation adjustment	4			—			4			(4		)	4
Defined benefit plans (net of tax of $31, $31, $0 $(31), and $31 respectively)	(14		)	(19		)	29			(10		)	(14		)
Total other comprehensive income (loss)	(10		)	(19		)	33			(14		)	(10		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	1,390		$	1,269		$	(7	)	$	(1,262	)	$	1,390



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2011
Sales and revenues, net	$	—		$	5,903		$	9,079		$	(5,347	)	$	9,635
Costs of products sold	—			5,493			7,620			(5,283		)	7,830
Restructuring charges	—			27			53			—			80
Impairment of property and equipment and intangible assets	—			—			64			—			64
All other operating expenses (income)	56			915			671			(81		)	1,561
Total costs and expenses	56			6,435			8,408			(5,364		)	9,535
Equity in income (loss) of affiliates	1,983			292			(29		)	(2,301		)	(55		)
Income (loss) before income taxes	1,927			(240		)	642			(2,284		)	45
Income tax benefit (expense)	(459		)	1,515			(214		)	616			1,458
Net income (loss)	1,468			1,275			428			(1,668		)	1,503
Less: Net income attributable to non-controlling interest	—			—			35			—			35
Net income (loss) attributable to Navistar International Corporation	$	1,468		$	1,275		$	393		$	(1,668	)	$	1,468



(in millions)	NIC		Navistar, Inc.		Non-Guarantor Subsidiaries		Eliminations and Other			Consolidated
Condensed Consolidating Statement of Comprehensive Income for the Nine Months Ended July 31, 2011
Net income attributable to Navistar International Corporation	$	1,468	$	1,275	$	393	$	(1,668	)	$	1,468
Other comprehensive income:
Foreign currency translation adjustment	65		—		65		(65		)	65
Defined benefit plans (net of tax of $31, $31, $0, $(31), and $31 respectively)	65		51		14		(65		)	65
Total other comprehensive income	130		51		79		(130		)	130
Total comprehensive income attributable to Navistar International Corporation	$	1,598	$	1,326	$	472	$	(1,798	)	$	1,598



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
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



(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2011
Net cash provided by (used in) operations	$	(254	)	$	95		$	448		$	250		$	539
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			2			19			—			21
Net sales (purchases) in marketable securities	81			—			(115		)	—			(34		)
Capital expenditures and purchase of equipment leased to others	—			(168		)	(158		)	—			(326		)
Other investing activities	—			(27		)	(4		)	—			(31		)
Net cash provided by (used in) investment activities	81			(193		)	(258		)	—			(370		)
Cash flows from financing activities
Net borrowings (repayments) of debt	48			161			(258		)	(250		)	(299		)
Other financing activities	25			—			(43		)	—			(18		)
Net cash provided by (used in) financing activities	73			161			(301		)	(250		)	(317		)
Effect of exchange rate changes on cash and cash equivalents	—			—			7			—			7
Increase (decrease) in cash and cash equivalents	(100		)	63			(104		)	—			(141		)
Cash and cash equivalents at beginning of the period	239			22			324			—			585
Cash and cash equivalents at end of the period	$	139		$	85		$	220		$	—		$	444