Condensed Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of July 31, 2014 and October 31, 2013, condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the three and nine months ended July 31, 2014 and 2013, and condensed consolidating statements of cash flows for the nine months ended July 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 or bonds. 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 July 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,962		$	2,181		$	(1,299	)	$	2,844
Costs of products sold	—			1,761			1,938			(1,282		)	2,417
Restructuring charges	—			(1		)	17			—			16
Asset impairment charges	—			13			(11		)	2			4
All other operating expenses (income)	17			246			141			(16		)	388
Total costs and expenses	17			2,019			2,085			(1,296		)	2,825
Equity in income (loss) of affiliates	15			17			1			(31		)	2
Income (loss) before income taxes	(2		)	(40		)	97			(34		)	21
Income tax expense	—			(2		)	(12		)	—			(14		)
Earnings (loss) from continuing operations	(2		)	(42		)	85			(34		)	7
Income from discontinued operations, net of tax	—			—			1			—			1
Net income (loss)	(2		)	(42		)	86			(34		)	8
Less: Net income attributable to non-controlling interests	—			—			10			—			10
Net income (loss) attributable to Navistar International Corporation	$	(2	)	$	(42	)	$	76		$	(34	)	$	(2	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended July 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(2	)	$	(42	)	$	76		$	(34	)	$	(2	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(3		)	—			(3		)	3			(3		)
Defined benefit plans (net of tax of$(3),$0,$(3), $3, and, $(3), respectively)	33			23			10			(33		)	33
Total other comprehensive income (loss)	30			23			7			(30		)	30
Total comprehensive income (loss) attributable to Navistar International Corporation	$	28		$	(19	)	$	83		$	(64	)	$	28



Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	5,279		$	5,971		$	(3,452	)	$	7,798
Costs of products sold	—			4,983			5,331			(3,415		)	6,899
Restructuring charges	—			9			18			—			27
Asset impairment charges	—			13			160			—			173
All other operating expenses	94			760			389			(44		)	1,199
Total costs and expenses	94			5,765			5,898			(3,459		)	8,298
Equity in income (loss) of affiliates	(466		)	(135		)	2			604			5
Income (loss) before income taxes	(560		)	(621		)	75			611			(495		)
Income tax benefit (expense)	13			(3		)	(35		)	—			(25		)
Earnings (loss) from continuing operations	(547		)	(624		)	40			611			(520		)
Income from discontinued operations, net of tax	—			—			3			—			3
Net income (loss)	(547		)	(624		)	43			611			(517		)
Less: Net income attributable to non-controlling interests	—			—			30			—			30
Net income (loss) attributable to Navistar International Corporation	$	(547	)	$	(624	)	$	13		$	611		$	(547	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Nine Months Ended July 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(547	)	$	(624	)	$	13		$	611		$	(547	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(17		)	—			(17		)	17			(17		)
Defined benefit plans (net of tax of $(4), $0, $(4), $4, and, $(4), respectively)	83			73			10			(83		)	83
Total other comprehensive income (loss)	66			73			(7		)	(66		)	66
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(481	)	$	(551	)	$	6		$	545		$	(481	)



Condensed Consolidating Balance Sheet as of July 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	136		$	38		$	373		$	—		$	547
Marketable securities	266			—			352			—			618
Restricted cash	18			3			100			—			121
Finance and other receivables, net	3			125			2,490			(15		)	2,603
Inventories	—			815			659			(12		)	1,462
Investments in non-consolidated affiliates	(6,526		)	6,450			68			80			72
Property and equipment, net	—			871			783			3			1,657
Goodwill	—			—			38			—			38
Deferred taxes, net	1			13			178			—			192
Other	36			148			211			(3		)	392
Total assets	$	(6,066	)	$	8,463		$	5,252		$	53		$	7,702
Liabilities and stockholders’ equity (deficit)
Debt	$	2,119		$	948		$	2,142		$	(5	)	$	5,204
Postretirement benefits liabilities	—			2,298			231			—			2,529
Amounts due to (from) affiliates	(7,472		)	11,620			(4,292		)	144			—
Other liabilities	3,367			478			248			(78		)	4,015
Total liabilities	(1,986		)	15,344			(1,671		)	61			11,748
Redeemable equity securities	2			—			—			—			2
Stockholders’ equity attributable to non-controlling interest	—			—			34			—			34
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(4,082		)	(6,881		)	6,889			(8		)	(4,082		)
Total liabilities and stockholders’ equity (deficit)	$	(6,066	)	$	8,463		$	5,252		$	53		$	7,702



Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(528	)	$	(1,078	)	$	156		$	1,106		$	(344	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	6			—			(36		)	—			(30		)
Net sales of marketable securities	315			—			(103		)	—			212
Capital expenditures and purchase of equipment leased to others	—			(89		)	(125		)	—			(214		)
Other investing activities	—			22			24			—			46
Net cash provided by (used in) investment activities	321			(67		)	(240		)	—			14
Cash flows from financing activities
Net borrowings (repayments) of debt	(11		)	1,067			192			(1,136		)	112
Other financing activities	18			44			(70		)	30			22
Net cash provided by (used in) financing activities	7			1,111			122			(1,106		)	134
Effect of exchange rate changes on cash and cash equivalents	—			—			(12		)	—			(12		)
Increase (decrease) in cash and cash equivalents	(200		)	(34		)	26			—			(208		)
Cash and cash equivalents at beginning of the period	336			72			347			—			755
Cash and cash equivalents at end of the period	$	136		$	38		$	373		$	—		$	547



Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,690		$	2,300		$	(1,129	)	$	2,861
Costs of products sold	—			1,669			1,996			(1,118		)	2,547
Restructuring charges	—			1			5			—			6
Asset impairment charges	—			14			3			—			17
All other operating expenses (income)	28			295			203			(21		)	505
Total costs and expenses	28			1,979			2,207			(1,139		)	3,075
Equity in income (loss) of affiliates	(219		)	13			3			206			3
Income (loss) before income taxes	(247		)	(276		)	96			216			(211		)
Income tax expense	—			(2		)	(14		)	—			(16		)
Earnings (loss) from continuing operations	(247		)	(278		)	82			216			(227		)
Loss from discontinued operations, net of tax	—			—			(10		)	—			(10		)
Net income (loss)	(247		)	(278		)	72			216			(237		)
Less: Net income attributable to non-controlling interests	—			—			10			—			10
Net income (loss) attributable to Navistar International Corporation	$	(247	)	$	(278	)	$	62		$	216		$	(247	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended July 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(247	)	$	(278	)	$	62		$	216		$	(247	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(91		)	—			(91		)	91			(91		)
Defined benefit plans (net of tax of $1, $0, $1, $(1) and, $1, respectively)	39			35			4			(39		)	39
Total other comprehensive income (loss)	(52		)	35			(87		)	52			(52		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(299	)	$	(243	)	$	(25	)	$	268		$	(299	)



Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	4,792		$	6,851		$	(3,619	)	$	8,024
Costs of products sold	—			4,886			5,892			(3,582		)	7,196
Restructuring charges	—			5			9			—			14
Asset impairment charges	—			14			3			—			17
All other operating expenses	1			875			520			24			1,420
Total costs and expenses	1			5,780			6,424			(3,558		)	8,647
Equity in income (loss) of affiliates	(743		)	117			2			630			6
Income (loss) before income taxes	(744		)	(871		)	429			569			(617		)
Income tax expense	—			(14		)	(39		)	—			(53		)
Earnings (loss) from continuing operations	(744		)	(885		)	390			569			(670		)
Loss from discontinued operations, net of tax	—			—			(40		)	—			(40		)
Net income (loss)	(744		)	(885		)	350			569			(710		)
Less: Net income attributable to non-controlling interests	—			—			34			—			34
Net income (loss) attributable to Navistar International Corporation	$	(744	)	$	(885	)	$	316		$	569		$	(744	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Nine Months Ended July 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(744	)	$	(885	)	$	316		$	569		$	(744	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(71		)	—			(71		)	71			(71		)
Defined benefit plans (net of tax of $2, $0, $2, $(2), and, $2, respectively)	117			105			12			(117		)	117
Total other comprehensive income (loss)	46			105			(59		)	(46		)	46
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(698	)	$	(780	)	$	257		$	523		$	(698	)



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 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 Nine Months Ended July 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(771	)	$	(639	)	$	382		$	1,062		$	34
Cash flows from investment activities
Net change in restricted cash and cash equivalents	(1		)	2			(10		)	—			(9		)
Net purchases of marketable securities	(147		)	—			(95		)	—			(242		)
Capital expenditures and purchase of equipment leased to others	—			(347		)	(140		)	—			(487		)
Other investing activities	—			10			37			—			47
Net cash used in investment activities	(148		)	(335		)	(208		)	—			(691		)
Cash flows from financing activities
Net borrowings (repayments) of debt	340			688			(220		)	(1,062		)	(254		)
Other financing activities	26			277			(35		)	—			268
Net cash provided by (used in) financing activities	366			965			(255		)	(1,062		)	14
Effect of exchange rate changes on cash and cash equivalents	—			—			(19		)	—			(19		)
Decrease in cash and cash equivalents	(553		)	(9		)	(100		)	—			(662		)
Cash and cash equivalents at beginning of the period	702			55			330			—			1,087
Cash and cash equivalents at end of the period	$	149		$	46		$	230		$	—		$	425