Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of July 31, 2015 and October 31, 2014, and condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the three and nine months ended July 31, 2015 and 2014, and condensed consolidating statements of cash flows for the nine months ended July 31, 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 July 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,892		$	1,875		$	(1,229	)	$	2,538
Costs of products sold	—			1,752			1,627			(1,207		)	2,172
Restructuring charges	—			5			8			—			13
Asset impairment charges	—			—			7			—			7
All other operating expenses (income)	12			262			102			(16		)	360
Total costs and expenses	12			2,019			1,744			(1,223		)	2,552
Equity in income (loss) of affiliates	(16		)	76			2			(59		)	3
Income (loss) before income taxes	(28		)	(51		)	133			(65		)	(11		)
Income tax expense	—			(1		)	(11		)	—			(12		)
Earnings (loss) from continuing operations	(28		)	(52		)	122			(65		)	(23		)
Income from discontinued operations, net of tax	—			—			2			—			2
Net income (loss)	(28		)	(52		)	124			(65		)	(21		)
Less: Net income attributable to non-controlling interests	—			—			7			—			7
Net income (loss) attributable to Navistar International Corporation	$	(28	)	$	(52	)	$	117		$	(65	)	$	(28	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended July 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(28	)	$	(52	)	$	117		$	(65	)	$	(28	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(47		)	—			(47		)	47			(47		)
Defined benefit plans (net of tax of $0, for all entities)	33			8			25			(33		)	33
Total other comprehensive income (loss)	(14		)	8			(22		)	14			(14		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(42	)	$	(44	)	$	95		$	(51	)	$	(42	)



Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	5,511		$	5,586		$	(3,445	)	$	7,652
Costs of products sold	—			5,025			4,932			(3,380		)	6,577
Restructuring charges	—			8			14			—			22
Asset impairment charges	—			8			7			—			15
All other operating expenses (income)	62			808			306			(56		)	1,120
Total costs and expenses	62			5,849			5,259			(3,436		)	7,734
Equity in income (loss) of affiliates	(72		)	155			3			(80		)	6
Income (loss) before income taxes	(134		)	(183		)	330			(89		)	(76		)
Income tax expense	—			(3		)	(34		)	—			(37		)
Earnings (loss) from continuing operations	(134		)	(186		)	296			(89		)	(113		)
Income from discontinued operations, net of tax	—			—			2			—			2
Net income (loss)	(134		)	(186		)	298			(89		)	(111		)
Less: Net income attributable to non-controlling interests	—			—			23			—			23
Net income (loss) attributable to Navistar International Corporation	$	(134	)	$	(186	)	$	275		$	(89	)	$	(134	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Nine Months Ended July 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss) attributable to Navistar International Corporation	$	(134	)	$	(186	)	$	275		$	(89	)	$	(134	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(133		)	—			(133		)	133			(133		)
Defined benefit plans (net of tax of $(1), $14, $(15), $1, and $(1), respectively)	98			70			28			(98		)	98
Total other comprehensive income (loss)	(35		)	70			(105		)	35			(35		)
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(169	)	$	(116	)	$	170		$	(54	)	$	(169	)



Condensed Consolidating Balance Sheet as of July 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	226		$	44		$	277		$	—		$	547
Marketable securities	149			—			144			—			293
Restricted cash	17			3			337			—			357
Finance and other receivables, net	3			142			2,271			(22		)	2,394
Inventories	—			731			481			(13		)	1,199
Investments in non-consolidated affiliates	(7,352		)	6,570			67			786			71
Property and equipment, net	—			751			633			(9		)	1,375
Goodwill	—			—			38			—			38
Deferred taxes, net ^(A)	5			9			149			—			163
Other	35			133			166			(2		)	332
Total assets	$	(6,917	)	$	8,383		$	4,563		$	740		$	6,769
Liabilities and stockholders’ equity (deficit)
Debt	$	1,968		$	872		$	2,449		$	(3	)	$	5,286
Postretirement benefits liabilities ^(A)	—			2,651			189			—			2,840
Amounts due to (from) affiliates	(7,669		)	12,082			(4,590		)	177			—
Other liabilities	3,600			202			(275		)	(75		)	3,452
Total liabilities	(2,101		)	15,807			(2,227		)	99			11,578
Redeemable equity securities	1			—			—			—			1
Stockholders’ equity attributable to non-controlling interest	—			—			7			—			7
Stockholders’ equity (deficit) attributable to Navistar International Corporation ^(A)	(4,817		)	(7,424		)	6,783			641			(4,817		)
Total liabilities and stockholders’ equity (deficit)	$	(6,917	)	$	8,383		$	4,563		$	740		$	6,769



Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(106	)	$	282		$	62		$	(252	)	$	(14	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	1			1			(194		)	—			(192		)
Net sales of marketable securities	230			—			82			—			312
Capital expenditures and purchase of equipment leased to others	—			(52		)	(78		)	—			(130		)
Other investing activities	—			3			12			—			15
Net cash provided by (used in) investment activities	231			(48		)	(178		)	—			5
Cash flows from financing activities
Net borrowings (repayments) of debt	—			(189		)	176			126			113
Other financing activities	—			(54		)	(99		)	126			(27		)
Net cash provided by (used in) financing activities	—			(243		)	77			252			86
Effect of exchange rate changes on cash and cash equivalents	—			—			(27		)	—			(27		)
Increase (decrease) in cash and cash equivalents	125			(9		)	(66		)	—			50
Cash and cash equivalents at beginning of the period	101			53			343			—			497
Cash and cash equivalents at end of the period	$	226		$	44		$	277		$	—		$	547



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 (income)	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 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 ^(A)	5			25			169			1			200
Other	34			137			194			(3		)	362
Total assets	$	(6,707	)	$	8,372		$	4,972		$	806		$	7,443
Liabilities and stockholders’ equity (deficit)
Debt	$	1,958		$	937		$	2,336		$	(7	)	$	5,224
Postretirement benefits liabilities ^(A)	—			2,752			203			—			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		)	15,798			(1,750		)	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 ^(A)	(4,654		)	(7,426		)	6,688			738			(4,654		)
Total liabilities and stockholders’ equity (deficit)	$	(6,707	)	$	8,372		$	4,972		$	806		$	7,443

_________________________

(A)

During the third quarter of 2015, it was determined that multiemployer plan accounting should have been applied in recording postretirement benefits related to our Financial Services segment, which provides that assets and liabilities of a plan are recorded only on the parent company and that periodic contributions to the plan made by the participating subsidiary are charged to expense for the purposes of the subsidiary's financial statements. As a result, we have reclassified $40 million of postretirement benefits, and related deferred taxes and Accumulated Other Comprehensive Income impact, between NIC and Non-Guarantor Subsidiaries. This reclassification did not impact the consolidated financial position for the year-ended October 31, 2014.



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