Condensed Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of January 31, 2014 and 2013, and condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the three months ended January 31, 2014 and 2013, and condensed consolidating statements of cash flows for the three months ended January 31, 2014 and 2013.

The information is presented as a result of Navistar, Inc.’s guarantee, exclusive of its subsidiaries, of NIC’s indebtedness under our 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 respective indenture for each of the 8.25% Senior Notes, due 2021, and the 6.5% Tax Exempt Bonds, due 2040, 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 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.



Condensed Consolidating Statement of Operations for the Three Months Ended January 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,424		$	1,729		$	(945	)	$	2,208
Costs of products sold	—			1,425			1,531			(942		)	2,014
Restructuring charges	—			2			1			—			3
Asset impairment charges	—			—			18			—			18
All other operating expenses (income)	36			241			159			(11		)	425
Total costs and expenses	36			1,668			1,709			(953		)	2,460
Equity in income (loss) of affiliates	(212		)	(11		)	(1		)	224			—
Income (loss) before income taxes	(248		)	(255		)	19			232			(252		)
Income tax benefit	—			7			5			—			12
Earnings (loss) from continuing operations	(248		)	(248		)	24			232			(240		)
Income from discontinued operations, net of tax	—			—			1			—			1
Net income (loss)	(248		)	(248		)	25			232			(239		)
Less: Net income attributable to non-controlling interests	—			—			9			—			9
Net income (loss) attributable to Navistar International Corporation	$	(248	)	$	(248	)	$	16		$	232		$	(248	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended January 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(248	)	$	(248	)	$	16		$	232		$	(248	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(62		)	—			(62		)	62			(62		)
Defined benefit plans (net of tax of $0 tax for all entities)	25			25			—			(25		)	25
Total other comprehensive income (loss)	(37		)	25			(62		)	37			(37		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(285	)	$	(223	)	$	(46	)	$	269		$	(285	)



Condensed Consolidating Balance Sheet as of January 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	177		$	40		$	332		$	—		$	549
Marketable securities	317			—			313			—			630
Restricted cash	18			4			93			—			115
Finance and other receivables, net	(1		)	138			2,214			(6		)	2,345
Inventories	—			773			621			(12		)	1,382
Investments in non-consolidated affiliates	(6,375		)	6,586			72			(208		)	75
Property and equipment, net	—			906			790			4			1,700
Goodwill	—			—			170			—			170
Deferred taxes, net	1			13			215			—			229
Other	34			162			267			(4		)	459
Total assets	$	(5,829	)	$	8,622		$	5,087		$	(226	)	$	7,654
Liabilities and stockholders’ equity (deficit)
Debt	$	2,133		$	994		$	1,741		$	(4	)	$	4,864
Postretirement benefits liabilities	—			2,377			243			—			2,620
Amounts due to (from) affiliates	(7,396		)	11,182			(3,871		)	85			—
Other liabilities	3,344			632			147			(76		)	4,047
Total liabilities	(1,919		)	15,185			(1,740		)	5			11,531
Redeemable equity securities	2			—			—			—			2
Stockholders’ equity (deficit) attributable to non-controlling interest	—			—			33			—			33
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(3,912		)	(6,563		)	6,794			(231		)	(3,912		)
Total liabilities and stockholders’ equity (deficit)	$	(5,829	)	$	8,622		$	5,087		$	(226	)	$	7,654



Condensed Consolidating Statement of Cash Flows for the Three Months Ended January 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(446	)	$	(970	)	$	368		$	955		$	(93	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	6			(1		)	(29		)	—			(24		)
Net sales of marketable securities	264			—			(64		)	—			200
Capital expenditures and purchase of equipment leased to others	—			(18		)	(52		)	—			(70		)
Other investing activities	—			1			7			—			8
Net cash provided by (used in) investment activities	270			(18		)	(138		)	—			114
Cash flows from financing activities
Net borrowings (repayments) of debt	1			936			(204		)	(955		)	(222		)
Other financing activities	16			20			(20		)	—			16
Net cash provided by (used in) financing activities	17			956			(224		)	(955		)	(206		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(21		)	—			(21		)
Decrease in cash and cash equivalents	(159		)	(32		)	(15		)	—			(206		)
Cash and cash equivalents at beginning of the period	336			72			347			—			755
Cash and cash equivalents at end of the period	$	177		$	40		$	332		$	—		$	549



Condensed Consolidating Statement of Operations for the Three Months Ended January 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,609		$	2,258		$	(1,230	)	$	2,637
Costs of products sold	—			1,595			1,909			(1,218		)	2,286
Restructuring charges	—			—			2			—			2
Asset impairment charges	—			—			—			—			—
All other operating expenses (income)	21			231			192			(12		)	432
Total costs and expenses	21			1,826			2,103			(1,230		)	2,720
Equity in income (loss) of affiliates	(102		)	54			(2		)	49			(1		)
Income (loss) before income taxes	(123		)	(163		)	153			49			(84		)
Income tax expense	—			(11		)	(4		)	—			(15		)
Earnings (loss) from continuing operations	(123		)	(174		)	149			49			(99		)
Loss from discontinued operations, net of tax	—			—			(9		)	—			(9		)
Net income (loss)	(123		)	(174		)	140			49			(108		)
Less: Net income attributable to non-controlling interests	—			—			15			—			15
Net income (loss) attributable to Navistar International Corporation	$	(123	)	$	(174	)	$	125		$	49		$	(123	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended January 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries		Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(123	)	$	(174	)	$	125	$	49		$	(123	)
Other comprehensive income (loss):
Foreign currency translation adjustment	17			—			17		(17		)	17
Defined benefit plans (net of tax of no tax for all entities)	38			35			3		(38		)	38
Total other comprehensive income (loss)	55			35			20		(55		)	55
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(68	)	$	(139	)	$	145	$	(6	)	$	(68	)



Condensed Consolidating Balance Sheet as of October 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	336		$	72		$	347		$	—		$	755
Marketable securities	581			1			248			—			830
Restricted cash	23			3			65			—			91
Finance and other receivables, net	3			148			2,561			(11		)	2,701
Inventories	—			621			608			(19		)	1,210
Investments in non-consolidated affiliates	(6,123		)	6,600			73			(473		)	77
Property and equipment, net	—			937			807			(3		)	1,741
Goodwill	—			—			184			—			184
Deferred taxes, net	—			13			219			(1		)	231
Other	36			156			304			(1		)	495
Total assets	$	(5,144	)	$	8,551		$	5,416		$	(508	)	$	8,315
Liabilities and stockholders’ equity (deficit)
Debt	$	2,125		$	1,002		$	1,960		$	(2	)	$	5,085
Postretirement benefits liabilities	—			2,407			245			—			2,652
Amounts due to (from) affiliates	(6,988		)	10,846			(3,932		)	74			—
Other liabilities	3,362			646			250			(79		)	4,179
Total liabilities	(1,501		)	14,901			(1,477		)	(7		)	11,916
Redeemable equity securities	4			—			—			—			4
Stockholders’ equity (deficit) attributable to non-controlling interest	—			—			44			—			44
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(3,647		)	(6,350		)	6,849			(501		)	(3,649		)
Total liabilities and stockholders’ equity (deficit)	$	(5,144	)	$	8,551		$	5,416		$	(508	)	$	8,315



Condensed Consolidating Statement of Cash Flows for the Three Months Ended January 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(342	)	$	(531	)	$	297		$	642		$	66
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			(1		)	60			—			59
Net sales of marketable securities	(242		)	—			(63		)	—			(305		)
Capital expenditures and purchase of equipment leased to others	—			(62		)	(42		)	—			(104		)
Other investing activities	—			—			3			—			3
Net cash used in investment activities	(242		)	(63		)	(42		)	—			(347		)
Cash flows from financing activities
Net borrowings (repayments) of debt	21			589			(273		)	(642		)	(305		)
Other financing activities	15			—			(13		)	—			2
Net cash provided by (used in) financing activities	36			589			(286		)	(642		)	(303		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(6		)	—			(6		)
Decrease in cash and cash equivalents	(548		)	(5		)	(37		)	—			(590		)
Cash and cash equivalents at beginning of the period	702			55			330			—			1,087
Cash and cash equivalents at end of the period	$	154		$	50		$	293		$	—		$	497