Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of April 30, 2015 and October 31, 2014, and condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the three and six months ended April 30, 2015 and 2014, and condensed consolidating statements of cash flows for the six months ended April 30, 2015 and 2014.

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 April 30, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	2,009		$	1,943		$	(1,259	)	$	2,693
Costs of products sold	—			1,864			1,735			(1,239		)	2,360
Restructuring charges	—			—			6			—			6
Asset impairment charges	—			1			—			—			1
All other operating expenses (income)	27			282			79			(22		)	366
Total costs and expenses	27			2,147			1,820			(1,261		)	2,733
Equity in income (loss) of affiliates	(37		)	64			—			(26		)	1
Income (loss) before income taxes	(64		)	(74		)	123			(24		)	(39		)
Income tax expense	—			(1		)	(17		)	—			(18		)
Earnings (loss) from continuing operations	(64		)	(75		)	106			(24		)	(57		)
Income from discontinued operations, net of tax	—			—			—			—			—
Net income (loss)	(64		)	(75		)	106			(24		)	(57		)
Less: Net income attributable to non-controlling interests	—			—			7			—			7
Net income (loss) attributable to Navistar International Corporation	$	(64	)	$	(75	)	$	99		$	(24	)	$	(64	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended April 30, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(64	)	$	(75	)	$	99		$	(24	)	$	(64	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(27		)	—			(27		)	27			(27		)
Defined benefit plans (net of tax of $(0), for all entities)	33			31			2			(33		)	33
Total other comprehensive income (loss)	6			31			(25		)	(6		)	6
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(58	)	$	(44	)	$	74		$	(30	)	$	(58	)



Condensed Consolidating Statement of Operations for the Six Months Ended April 30, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	3,619		$	3,711		$	(2,216	)	$	5,114
Costs of products sold	—			3,273			3,305			(2,173		)	4,405
Restructuring charges	—			3			6			—			9
Asset impairment charges	—			8			—			—			8
All other operating expenses (income)	50			546			204			(40		)	760
Total costs and expenses	50			3,830			3,515			(2,213		)	5,182
Equity in income (loss) of affiliates	(56		)	79			1			(21		)	3
Income (loss) before income taxes	(106		)	(132		)	197			(24		)	(65		)
Income tax expense	—			(2		)	(23		)	—			(25		)
Earnings (loss) from continuing operations	(106		)	(134		)	174			(24		)	(90		)
Income from discontinued operations, net of tax	—			—			—			—			—
Net income (loss)	(106		)	(134		)	174			(24		)	(90		)
Less: Net income attributable to non-controlling interests	—			—			16			—			16
Net income (loss) attributable to Navistar International Corporation	$	(106	)	$	(134	)	$	158		$	(24	)	$	(106	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Six Months Ended April 30, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(106	)	$	(134	)	$	158		$	(24	)	$	(106	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(86		)	—			(86		)	86			(86		)
Defined benefit plans (net of tax of $(1), $(0), $(1), $1, and $(1), respectively)	65			62			3			(65		)	65
Total other comprehensive income (loss)	(21		)	62			(83		)	21			(21		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(127	)	$	(72	)	$	75		$	(3	)	$	(127	)



Condensed Consolidating Balance Sheet as of April 30, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	163		$	37		$	383		$	—		$	583
Marketable securities	150			—			123			—			273
Restricted cash	17			6			90			—			113
Finance and other receivables, net	3			132			2,558			(19		)	2,674
Inventories	—			785			475			(15		)	1,245
Investments in non-consolidated affiliates	(7,322		)	6,495			65			830			68
Property and equipment, net	—			768			646			(7		)	1,407
Goodwill	—			—			38			—			38
Deferred taxes, net	5			9			158			—			172
Other	32			141			179			—			352
Total assets	$	(6,952	)	$	8,373		$	4,715		$	789		$	6,925
Liabilities and stockholders’ equity (deficit)
Debt	$	1,965		$	887		$	2,357		$	(6	)	$	5,203
Postretirement benefits liabilities	—			2,639			227			—			2,866
Amounts due to (from) affiliates	(7,749		)	11,963			(4,352		)	138			—
Other liabilities	3,606			249			(182		)	(73		)	3,600
Total liabilities	(2,178		)	15,738			(1,950		)	59			11,669
Redeemable equity securities	1			—			—			—			1
Stockholders’ equity attributable to non-controlling interest	—			—			30			—			30
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(4,775		)	(7,365		)	6,635			730			(4,775		)
Total liabilities and stockholders’ equity (deficit)	$	(6,952	)	$	8,373		$	4,715		$	789		$	6,925



Condensed Consolidating Statement of Cash Flows for the Six Months Ended April 30, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(168	)	$	41		$	(188	)	$	78		$	(237	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	1			(2		)	54			—			53
Net sales of marketable securities	229			—			103			—			332
Capital expenditures and purchase of equipment leased to others	—			(30		)	(35		)	—			(65		)
Other investing activities	—			7			5			—			12
Net cash provided by (used in) investment activities	230			(25		)	127			—			332
Cash flows from financing activities
Net borrowings (repayments) of debt	—			(52		)	66			2			16
Other financing activities	—			20			61			(80		)	1
Net cash provided by (used in) financing activities	—			(32		)	127			(78		)	17
Effect of exchange rate changes on cash and cash equivalents	—			—			(26		)	—			(26		)
Increase (decrease) in cash and cash equivalents	62			(16		)	40			—			86
Cash and cash equivalents at beginning of the period	101			53			343			—			497
Cash and cash equivalents at end of the period	$	163		$	37		$	383		$	—		$	583



Condensed Consolidating Statement of Operations for the Three Months Ended April 30, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,893		$	2,061		$	(1,208	)	$	2,746
Costs of products sold	—			1,797			1,862			(1,191		)	2,468
Restructuring charges	—			8			—			—			8
Asset impairment charges	—			—			153			(2		)	151
All other operating expenses (income)	41			273			89			(17		)	386
Total costs and expenses	41			2,078			2,104			(1,210		)	3,013
Equity in income (loss) of affiliates	(269		)	(141		)	2			411			3
Income (loss) before income taxes	(310		)	(326		)	(41		)	413			(264		)
Income tax benefit (expense)	13			(8		)	(28		)	—			(23		)
Earnings (loss) from continuing operations	(297		)	(334		)	(69		)	413			(287		)
Income from discontinued operations, net of tax	—			—			1			—			1
Net income (loss)	(297		)	(334		)	(68		)	413			(286		)
Less: Net income attributable to non-controlling interests	—			—			11			—			11
Net income (loss) attributable to Navistar International Corporation	$	(297	)	$	(334	)	$	(79	)	$	413		$	(297	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended April 30, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(297	)	$	(334	)	$	(79	)	$	413		$	(297	)
Other comprehensive income (loss):
Foreign currency translation adjustment	48			—			48			(48		)	48
Defined benefit plans (net of tax of $0, for all entities)	25			25			—			(25		)	25
Total other comprehensive income (loss)	73			25			48			(73		)	73
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(224	)	$	(309	)	$	(31	)	$	340		$	(224	)



Condensed Consolidating Statement of Operations for the Six Months Ended April 30, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	3,317		$	3,790		$	(2,153	)	$	4,954
Costs of products sold	—			3,222			3,393			(2,133		)	4,482
Restructuring charges	—			10			1			—			11
Asset impairment charges	—			—			171			(2		)	169
All other operating expenses (income)	77			514			248			(28		)	811
Total costs and expenses	77			3,746			3,813			(2,163		)	5,473
Equity in income (loss) of affiliates	(481		)	(152		)	1			635			3
Income (loss) before income taxes	(558		)	(581		)	(22		)	645			(516		)
Income tax benefit (expense)	13			(1		)	(23		)	—			(11		)
Earnings (loss) from continuing operations	(545		)	(582		)	(45		)	645			(527		)
Income from discontinued operations, net of tax	—			—			2			—			2
Net income (loss)	(545		)	(582		)	(43		)	645			(525		)
Less: Net income attributable to non-controlling interests	—			—			20			—			20
Net income (loss) attributable to Navistar International Corporation	$	(545	)	$	(582	)	$	(63	)	$	645		$	(545	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Six Months Ended April 30, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(545	)	$	(582	)	$	(63	)	$	645		$	(545	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(14		)	—			(14		)	14			(14		)
Defined benefit plans (net of tax of $(1) $0, $(1), $1, and $(1), respectively)	50			50			—			(50		)	50
Total other comprehensive income (loss)	36			50			(14		)	(36		)	36
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(509	)	$	(532	)	$	(77	)	$	609		$	(509	)



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 Six Months Ended April 30, 2014
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(458	)	$	(961	)	$	85		$	1,008		$	(326	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	5			(1		)	(25		)	—			(21		)
Net sales of marketable securities	389			—			(93		)	—			296
Capital expenditures and purchase of equipment leased to others	—			(67		)	(91		)	—			(158		)
Other investing activities	—			8			17			—			25
Net cash provided by (used in) investment activities	394			(60		)	(192		)	—			142
Cash flows from financing activities
Net borrowings (repayments) of debt	(10		)	959			68			(1,006		)	11
Other financing activities	18			34			(30		)	—			22
Net cash provided by (used in) financing activities	8			993			38			(1,006		)	33
Effect of exchange rate changes on cash and cash equivalents	—			—			(8		)	(2		)	(10		)
Decrease in cash and cash equivalents	(56		)	(28		)	(77		)	—			(161		)
Cash and cash equivalents at beginning of the period	336			72			347			—			755
Cash and cash equivalents at end of the period	$	280		$	44		$	270		$	—		$	594