Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of January 31, 2016 and October 31, 2015, and condensed consolidating statements of operations and comprehensive income (loss) for the three months ended January 31, 2016 and 2015, and condensed consolidating statements of cash flows for the three months ended January 31, 2016 and 2015.

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 indentures 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 January 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,342		$	1,200		$	(777	)	$	1,765
Costs of products sold	—			1,204			1,023			(761		)	1,466
Restructuring charges	—			1			2			—			3
Asset impairment charges	—			—			2			—			2
All other operating expenses (income)	19			213			108			(18		)	322
Total costs and expenses	19			1,418			1,135			(779		)	1,793
Equity in income (loss) of affiliates	(14		)	(13		)	(1		)	27			(1		)
Income (loss) before income taxes	(33		)	(89		)	64			29			(29		)
Income tax benefit (expense)	—			13			(8		)	—			5
Earnings (loss) from continuing operations	(33		)	(76		)	56			29			(24		)
Income (loss) from discontinued operations, net of tax	—			—			—			—			—
Net income (loss)	(33		)	(76		)	56			29			(24		)
Less: Net income attributable to non-controlling interests	—			—			9			—			9
Net income (loss) attributable to Navistar International Corporation	$	(33	)	$	(76	)	$	47		$	29		$	(33	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended January 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss)	$	(33	)	$	(76	)	$	56		$	29		$	(24	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(33		)	—			(33		)	33			(33		)
Defined benefit plans (net of tax of $0 for all entities)	33			32			1			(33		)	33
Total other comprehensive income (loss)	—			32			(32		)	—			—
Comprehensive income (loss)	(33		)	(44		)	24			29			(24		)
Less: Comprehensive income attributable to non-controlling interests	—			—			9			—			9
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(33	)	$	(44	)	$	15		$	29		$	(33	)



Condensed Consolidating Balance Sheet as of January 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	257		$	32		$	290		$	—		$	579
Marketable securities	2			—			150			—			152
Restricted cash	16			6			96			—			118
Finance and other receivables, net	5			89			1,990			(103		)	1,981
Inventories	—			896			386			(13		)	1,269
Investments in non-consolidated affiliates	(7,692		)	6,148			62			1,546			64
Property and equipment, net	—			713			599			(8		)	1,304
Goodwill	—			—			38			—			38
Deferred taxes, net	—			16			141			—			157
Other	31			135			154			(2		)	318
Total assets	$	(7,381	)	$	8,035		$	3,906		$	1,420		$	5,980
Liabilities and stockholders’ equity (deficit)
Debt	$	1,975		$	1,160		$	1,969		$	(5	)	$	5,099
Postretirement benefits liabilities	—			2,880			179			—			3,059
Amounts due to (from) affiliates	(7,856		)	10,544			(2,862		)	174			—
Other liabilities	3,697			71			(687		)	(69		)	3,012
Total liabilities	(2,184		)	14,655			(1,401		)	100			11,170
Stockholders’ equity attributable to non-controlling interest	—			—			7			—			7
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(5,197		)	(6,620		)	5,300			1,320			(5,197		)
Total liabilities and stockholders’ equity (deficit)	$	(7,381	)	$	8,035		$	3,906		$	1,420		$	5,980



Condensed Consolidating Statement of Cash Flows for the Three Months Ended January 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(309	)	$	(332	)	$	226		$	313		$	(102	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			1			(2		)	—			(1		)
Net sales of marketable securities	110			—			(103		)	—			7
Capital expenditures and purchase of equipment leased to others	—			(17		)	(61		)	—			(78		)
Other investing activities	—			—			13			—			13
Net cash provided by (used in) investing activities	110			(16		)	(153		)	—			(59		)
Cash flows from financing activities
Net borrowings (repayments) of debt	—			292			(152		)	(313		)	(173		)
Other financing activities	—			7			(9		)	—			(2		)
Net cash provided by (used in) financing activities	—			299			(161		)	(313		)	(175		)
Effect of exchange rate changes on cash and cash equivalents	—			—			3			—			3
Decrease in cash and cash equivalents	(199		)	(49		)	(85		)	—			(333		)
Cash and cash equivalents at beginning of the period	456			81			375			—			912
Cash and cash equivalents at end of the period	$	257		$	32		$	290		$	—		$	579



Condensed Consolidating Statement of Operations for the Three Months Ended January 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,610		$	1,768		$	(957	)	$	2,421
Costs of products sold	—			1,409			1,570			(934		)	2,045
Restructuring charges	—			3			—			—			3
Asset impairment charges	—			7			—			—			7
All other operating expenses (income)	23			264			125			(18		)	394
Total costs and expenses	23			1,683			1,695			(952		)	2,449
Equity in income (loss) of affiliates	(19		)	15			1			5			2
Income (loss) before income taxes	(42		)	(58		)	74			—			(26		)
Income tax expense	—			(1		)	(6		)	—			(7		)
Earnings (loss) from continuing operations	(42		)	(59		)	68			—			(33		)
Income (loss) from discontinued operations, net of tax	—			—			—			—			—
Net income (loss)	(42		)	(59		)	68			—			(33		)
Less: Net income attributable to non-controlling interests	—			—			9			—			9
Net income (loss) attributable to Navistar International Corporation	$	(42	)	$	(59	)	$	59		$	—		$	(42	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended January 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries		Eliminations and Other			Consolidated
Net income (loss)	$	(42	)	$	(59	)	$	68	$	—		$	(33	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(59		)	—			59		(59		)	(59		)
Defined benefit plans (net of tax of $(1), $0, $(1), $1, and $(1), respectively)	32			31			1		(32		)	32
Total other comprehensive income (loss)	(27		)	31			60		(91		)	(27		)
Comprehensive income (loss)	(69		)	(28		)	128		(91		)	(60		)
Less: Comprehensive income attributable to non-controlling interests	—			—			9		—			9
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(69	)	$	(28	)	$	119	$	(91	)	$	(69	)



Condensed Consolidating Balance Sheet as of October 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	456		$	81		$	375		$	—		$	912
Marketable securities	112			—			47			—			159
Restricted cash	16			7			98			—			121
Finance and other receivables, net	1			99			2,440			(103		)	2,437
Inventories	—			809			342			(16		)	1,135
Investments in non-consolidated affiliates	(7,679		)	6,204			64			1,477			66
Property and equipment, net	—			737			616			(8		)	1,345
Goodwill	—			—			38			—			38
Deferred taxes, net	7			20			137			—			164
Other	33			128			155			(1		)	315
Total assets	$	(7,054	)	$	8,085		$	4,312		$	1,349		$	6,692
Liabilities and stockholders’ equity (deficit)
Debt	$	1,971		$	1,180		$	2,151		$	(4	)	$	5,298
Postretirement benefits liabilities	—			2,909			179			—			3,088
Amounts due to (from) affiliates	(7,574		)	10,280			(2,879		)	173			—
Other liabilities	3,716			207			(388		)	(69		)	3,466
Total liabilities	(1,887		)	14,576			(937		)	100			11,852
Stockholders’ equity attributable to non-controlling interest	—			—			7			—			7
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(5,167		)	(6,491		)	5,242			1,249			(5,167		)
Total liabilities and stockholders’ equity (deficit)	$	(7,054	)	$	8,085		$	4,312		$	1,349		$	6,692



Condensed Consolidating Statement of Cash Flows for the Three Months Ended January 31, 2015
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(194	)	$	(46	)	$	(112	)	$	141		$	(211	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			(3		)	56			—			53
Net sales of marketable securities	278			—			152			—			430
Capital expenditures and purchase of equipment leased to others	—			(8		)	(19		)	—			(27		)
Other investing activities	—			—			1			—			1
Net cash provided by (used in) investing activities	278			(11		)	190			—			457
Cash flows from financing activities
Net borrowings (repayments) of debt	—			34			(80		)	(61		)	(107		)
Other financing activities	—			10			68			(80		)	(2		)
Net cash provided by (used in) financing activities	—			44			(12		)	(141		)	(109		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(14		)	—			(14		)
Increase (decrease) in cash and cash equivalents	84			(13		)	52			—			123
Cash and cash equivalents at beginning of the period	101			53			343			—			497
Cash and cash equivalents at end of the period	$	185		$	40		$	395		$	—		$	620