Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of October 31, 2014 and 2013, and condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the years ended October 31, 2014, 2013, and 2012, and condensed consolidating statements of cash flows for the years ended October 31, 2014, 2013, and 2012.

The information is presented as a result of Navistar, Inc.’s guarantee, exclusive of its subsidiaries, of NIC’s indebtedness under our Senior Notes and obligations under our Loan Agreement related to the Tax Exempt Bonds. 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 Year ended October 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	7,269		$	8,196		$	(4,659	)	$	10,806
Costs of products sold	—			6,794			7,337			(4,597		)	9,534
Restructuring charges	—			8			34			—			42
Asset impairment charges	—			16			167			—			183
All other operating expenses (income)	(48		)	1,003			541			116			1,612
Total costs and expenses	(48		)	7,821			8,079			(4,481		)	11,371
Equity in income (loss) of affiliates	(680		)	(169		)	5			853			9
Income (loss) before income taxes	(632		)	(721		)	122			675			(556		)
Income tax expense	13			25			(64		)	—			(26		)
Earnings (loss) from continuing operations	(619		)	(696		)	58			675			(582		)
Income from discontinued operations, net of tax	—			—			3			—			3
Net income (loss)	(619		)	(696		)	61			675			(579		)
Less: Net income attributable to non-controlling interests	—			—			40			—			40
Net income (loss) attributable to Navistar International Corporation	$	(619	)	$	(696	)	$	21		$	675		$	(619	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Year ended October 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(619	)	$	(696	)	$	21		$	675		$	(619	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(52		)	—			(52		)	52			(52		)
Unrealized gain on marketable securities	1			—			1			(1		)	1
Defined benefit plans (net of tax of $(2), $0, $(2), $2 and, $(2), respectively)	(388		)	(397		)	9			388			(388		)
Total other comprehensive income (loss)	(439		)	(397		)	(42		)	439			(439		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(1,058	)	$	(1,093	)	$	(21	)	$	1,114		$	(1,058	)



Condensed Consolidating Balance Sheet as of October 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	101		$	53		$	343		$	—		$	497
Marketable securities	379			—			226			—			605
Restricted cash	19			4			148			—			171
Finance and other receivables, net	—			124			2,504			(12		)	2,616
Inventories	—			792			539			(12		)	1,319
Investments in non-consolidated affiliates	(7,245		)	6,410			71			837			73
Property and equipment, net	—			827			740			(5		)	1,562
Goodwill	—			—			38			—			38
Deferred taxes, net	5			9			185			1			200
Other	34			137			194			(3		)	362
Total assets	$	(6,707	)	$	8,356		$	4,988		$	806		$	7,443
Liabilities and stockholders’ equity (deficit)
Debt	$	1,958		$	937		$	2,336		$	(7	)	$	5,224
Postretirement benefits liabilities	—			2,712			243			—			2,955
Amounts due to (from) affiliates	(7,618		)	11,739			(4,267		)	146			—
Other liabilities	3,605			370			(22		)	(71		)	3,882
Total liabilities	(2,055		)	15,758			(1,710		)	68			12,061
Redeemable equity securities	2			—			—			—			2
Stockholders’ equity attributable to non-controlling interest	—			—			34			—			34
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(4,654		)	(7,402		)	6,664			738			(4,654		)
Total liabilities and stockholders’ equity (deficit)	$	(6,707	)	$	8,356		$	4,988		$	806		$	7,443



Condensed Consolidating Statement of Cash Flows for the Year ended October 31, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(285	)	$	(1,287	)	$	(112	)	$	1,348		$	(336	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	5			(1		)	(84		)	—			(80		)
Net sales of marketable securities	203			—			22			—			225
Capital expenditures and purchase of equipment leased to others	—			(114		)	(163		)	—			(277		)
Other investing activities	—			17			40			—			57
Net cash provided by (used in) investment activities	208			(98		)	(185		)	—			(75		)
Cash flows from financing activities
Net borrowings (repayments) of debt	(176		)	1,306			409			(1,389		)	150
Other financing activities	18			60			(90		)	41			29
Net cash provided by (used in) financing activities	(158		)	1,366			319			(1,348		)	179
Effect of exchange rate changes on cash and cash equivalents	—			—			(26		)	—			(26		)
Decrease in cash and cash equivalents	(235		)	(19		)	(4		)	—			(258		)
Cash and cash equivalents at beginning of the year	336			72			347			—			755
Cash and cash equivalents at end of the year	$	101		$	53		$	343		$	—		$	497



Condensed Consolidating Statement of Operations for the Year ended October 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	6,426		$	8,979		$	(4,630	)	$	10,775
Costs of products sold	—			6,629			7,720			(4,588		)	9,761
Restructuring charges	—			15			10			—			25
Asset impairment charges	—			81			16			—			97
All other operating expenses (income)	(208		)	1,180			659			246			1,877
Total costs and expenses	(208		)	7,905			8,405			(4,342		)	11,760
Equity in income (loss) of affiliates	(1,108		)	161			4			954			11
Income (loss) before income taxes	(900		)	(1,318		)	578			666			(974		)
Income tax benefit (expense)	2			244			(75		)	—			171
Earnings (loss) from continuing operations	(898		)	(1,074		)	503			666			(803		)
Loss from discontinued operations, net of tax	—			—			(41		)	—			(41		)
Net income (loss)	(898		)	(1,074		)	462			666			(844		)
Less: Net income attributable to non-controlling interests	—			—			54			—			54
Net income (loss) attributable to Navistar International Corporation	$	(898	)	$	(1,074	)	$	408		$	666		$	(898	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Year ended October 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(898	)	$	(1,074	)	$	408		$	666		$	(898	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(51		)	—			(51		)	51			(51		)
Defined benefit plans (net of tax of $(21), $5, $(26), $21, and, $(21), respectively)	552			687			74			(761		)	552
Total other comprehensive income (loss)	501			687			23			(710		)	501
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(397	)	$	(387	)	$	431		$	(44	)	$	(397	)



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 Year ended October 31, 2013
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(669	)	$	(355	)	$	401		$	723		$	100
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			5			65			—			70
Net purchases of marketable securities	(267		)	—			(97		)	—			(364		)
Capital expenditures and purchase of equipment leased to others	—			(422		)	(177		)	—			(599		)
Other investing activities	—			87			(4		)	—			83
Net cash used in investment activities	(267		)	(330		)	(213		)	—			(810		)
Cash flows from financing activities
Net borrowings (repayments) of debt	540			409			(40		)	(793		)	116
Other financing activities	30			293			(116		)	70			277
Net cash provided by (used in) financing activities	570			702			(156		)	(723		)	393
Effect of exchange rate changes on cash and cash equivalents	—			—			(15		)	—			(15		)
Increase (decrease) in cash and cash equivalents	(366		)	17			17			—			(332		)
Cash and cash equivalents at beginning of the year	702			55			330			—			1,087
Cash and cash equivalents at end of the year	$	336		$	72		$	347		$	—		$	755



Condensed Consolidating Statement of Operations for the Year ended October 31, 2012
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	7,924		$	11,413		$	(6,642	)	$	12,695
Costs of products sold	—			8,188			9,798			(6,585		)	11,401
Restructuring charges	—			86			21			—			107
Asset impairment charges	—			2			14			—			16
All other operating expenses (income)	(249		)	1,297			968			237			2,253
Total costs and expenses	(249		)	9,573			10,801			(6,348		)	13,777
Equity in income (loss) of affiliates	(3,258		)	536			(34		)	2,727			(29		)
Income (loss) before income taxes	(3,009		)	(1,113		)	578			2,433			(1,111		)
Income tax benefit (expense)	(1		)	(1,987		)	209			(1		)	(1,780		)
Earnings (loss) from continuing operations	(3,010		)	(3,100		)	787			2,432			(2,891		)
Income from discontinued operations, net of tax	—			—			(71		)	—			(71		)
Net income (loss)	(3,010		)	(3,100		)	716			2,432			(2,962		)
Less: Net income attributable to non-controlling interests	—			—			48			—			48
Net income (loss) attributable to Navistar International Corporation	$	(3,010	)	$	(3,100	)	$	668		$	2,432		$	(3,010	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Year ended October 31, 2012
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other		Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(3,010	)	$	(3,100	)	$	668		$	2,432	$	(3,010	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(125		)	—			(125		)	125		(125		)
Defined benefit plans (net of tax of $14, $0, $14, $(14), and, $14, respectively)	(256		)	(225		)	(31		)	256		(256		)
Total other comprehensive income (loss)	(381		)	(225		)	(156		)	381		(381		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(3,391	)	$	(3,325	)	$	512		$	2,813	$	(3,391	)



Condensed Consolidating Statement of Cash Flows for the Year ended October 31, 2012
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	350		$	(183	)	$	901		$	(458	)	$	610
Cash flows from investment activities
Net change in restricted cash and cash equivalents	(4		)	1			168			—			165
Net purchases of marketable securities	115			—			137			—			252
Capital expenditures and purchase of equipment leased to others	—			(213		)	(157		)	—			(370		)
Other investing activities	—			(157		)	108			—			(49		)
Net cash provided by (used in) investment activities	111			(369		)	256			—			(2		)
Cash flows from financing activities
Net borrowings (repayments) of debt	171			594			(1,245		)	549			69
Other financing activities	(156		)	—			115			(91		)	(132		)
Net cash provided by (used in) financing activities	15			594			(1,130		)	458			(63		)
Effect of exchange rate changes on cash and cash equivalents	—			—			3			—			3
Increase in cash and cash equivalents	476			42			30			—			548
Cash and cash equivalents at beginning of the year	226			13			300			—			539
Cash and cash equivalents at end of the year	$	702		$	55		$	330		$	—		$	1,087