Earnings (Loss) Per Share Attributable to Navistar International Corporation

The following table presents the information used in the calculation of our basic and diluted income (loss) per share for continuing operations, discontinued operations, and net loss, all attributable to Navistar International Corporation:



	Three Months Ended July 31,						Nine Months Ended July 31,
(in millions, except per share data)	2014			2013			2014			2013
Numerator:
Amounts attributable to Navistar International Corporation common stockholders:
Loss from continuing operations, net of tax	$	(3	)	$	(237	)	$	(550	)	$	(704	)
Income (loss) from discontinued operations, net of tax	1			(10		)	3			(40		)
Net loss	$	(2	)	$	(247	)	$	(547	)	$	(744	)

Denominator:
Weighted average shares outstanding:
Basic	81.4			80.6			81.3			80.4
Effect of dilutive securities	—			—			—			—
Diluted	81.4			80.6			81.3			80.4

Earnings (loss) per share attributable to Navistar International Corporation:
Basic:
Continuing operations	$	(0.04	)	$	(2.94	)	$	(6.77	)	$	(8.76	)
Discontinued operations	0.02			(0.12		)	0.04			(0.49		)
Net loss	$	(0.02	)	$	(3.06	)	$	(6.73	)	$	(9.25	)
Diluted:
Continuing operations	$	(0.04	)	$	(2.94	)	$	(6.77	)	$	(8.76	)
Discontinued operations	0.02			(0.12		)	0.04			(0.49		)
Net loss	$	(0.02	)	$	(3.06	)	$	(6.73	)	$	(9.25	)

The conversion rate on our 2014 Convertible Notes is 19.891 shares of common stock per $1,000 principal amount of 2014 Convertible Notes, equivalent to an initial conversion price of $50.27 per share of common stock. In connection with the sale of the 2014 Convertible Notes, we sold warrants to various counterparties to purchase shares of our common stock from us at an exercise price of $60.14 per share. The 2014 Convertible Notes and warrants are anti-dilutive when calculating diluted earnings per share when our average stock price is less than $50.27 and $60.14, respectively. During the second quarter of 2014, the Company unwound warrants representing 6.5 million shares associated with the repurchased 2014 Convertible Notes.

We also purchased call options in connection with the sale of the 2014 Convertible Notes, covering 11.3 million shares at an exercise price of $50.27 per share, which are intended to minimize share dilution associated with the 2014 Convertible Notes; however under accounting guidance, these call options cannot be utilized to offset the dilution of the 2014 Convertible Notes for determining diluted earnings per share as they are anti-dilutive. During the second quarter of 2014, call options representing 8.0 million shares expired or were unwound by the Company.

The conversion rate on our 4.50% Senior Subordinated Convertible Notes, due 2018 (the "2018 Convertible Notes"), is 17.1233 shares of common stock per $1,000 principal amount of 2018 Convertible Notes, equivalent to an initial conversion price of approximately $58.40 per share of common stock. The 2018 Convertible Notes are anti-dilutive when calculating diluted earnings per share when our average stock price is less than $58.40.

The conversion rate on our 2019 Convertible Notes is 18.4946 shares of common stock per $1,000 principal amount of 2019 Convertible Notes, equivalent to an initial conversion price of approximately $54.07 per share of common stock. The 2019 Convertible Notes are anti-dilutive when calculating diluted earnings per share when our average stock price is less than $54.07.

The computation of diluted earnings per share also excludes outstanding options and other common stock equivalents in periods where inclusion of such potential common stock instruments would be anti-dilutive.

For the three and nine months ended July 31, 2014 and 2013, no dilutive securities were included in the computation of diluted loss per share since they would have been anti-dilutive due to the net loss attributable to Navistar International Corporation. Additionally, certain securities would have been excluded from the computation of earnings per share, as our average stock price was less than their respective exercise prices. For the three and nine months ended July 31, 2014 the aggregate shares not included were 23.8 million and 26.2 million, respectively. For the three and nine months ended July 31, 2013, the aggregate shares not included were 29.5 million and 28.9 million, respectively.

For the three months ended July 31, 2014, the aggregate shares not included in the computation of earnings per share were primarily comprised of 4.8 million shares related to warrants, 3.3 million shares related to the 2014 Convertible Notes, 3.4 million shares related to the 2018 Convertible Notes, and 7.6 million shares related to the 2019 Convertible Notes.

For the nine months ended July 31, 2014, the aggregate shares not included in the computation of earnings per share were primarily comprised of 7.0 million shares related to the warrants, 6.0 million shares related to the 2014 Convertible Notes, 3.4 million shares related to the 2018 Convertible Notes, and 5.1 million shares related to the 2019 Convertible Notes.

For both the three and nine months ended July 31, 2013, the aggregate shares not included in the computation of earnings per share were primarily comprised of 11.3 million shares related to the warrants and 11.3 million shares related to the 2014 Convertible Notes.