Condensed Consolidating Guarantor and Non-guarantor Financial Information

The following tables set forth condensed consolidating balance sheets as of July 31, 2017 and October 31, 2016, and condensed consolidating statements of operations and comprehensive income (loss) for the three and nine months ended July 31, 2017 and 2016, and condensed consolidating statements of cash flows for the nine months ended July 31, 2017 and 2016.

The information is presented as a result of NI’s guarantee, exclusive of its subsidiaries, of NIC’s indebtedness under our Senior Notes, and obligations under our Loan Agreement related to the 6.5% Tax Exempt Bonds, due 2040. NI 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 Senior Notes, 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 NI 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, "NI," 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 NI and its U.S. subsidiaries. NI has a tax allocation agreement ("Tax Agreement") with NIC which requires NI 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 NI 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 NI, to utilize current U.S. taxable losses of NI and all other direct or indirect domestic subsidiaries of NIC.



Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2017
(in millions)	NIC		Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—	$	1,524		$	1,562		$	(873	)	$	2,213
Costs of products sold	—		1,328			1,337			(862		)	1,803
Restructuring charges	—		31			(44		)	—			(13		)
Asset impairment charges	—		—			6			—			6
All other operating expenses (income)	36		267			88			(14		)	377
Total costs and expenses	36		1,626			1,387			(876		)	2,173
Equity in income (loss) of affiliates	73		67			—			(139		)	1
Income (loss) before income taxes	37		(35		)	175			(136		)	41
Income tax benefit (expense)	—		35			(35		)	—			—
Income (loss) from continuing operations	37		—			140			(136		)	41
Income from discontinued operations, net of tax	—		—			1			—			1
Net income (loss)	37		—			141			(136		)	42
Less: Net income attributable to non-controlling interests	—		—			5			—			5
Net income (loss) attributable to Navistar International Corporation	$	37	$	—		$	136		$	(136	)	$	37



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended July 31, 2017
(in millions)	NIC		Navistar, Inc.		Non-Guarantor Subsidiaries		Eliminations and Other			Consolidated
Net income (loss)	$	37	$	—	$	141	$	(136	)	$	42
Other comprehensive income (loss):
Foreign currency translation adjustment	42		—		42		(42		)	42
Defined benefit plans, net of tax	125		126		35		(161		)	125
Total other comprehensive income (loss)	167		126		77		(203		)	167
Comprehensive income (loss)	204		126		218		(339		)	209
Less: Net income attributable to non-controlling interests	—		—		5		—			5
Total comprehensive income (loss) attributable to Navistar International Corporation	$	204	$	126	$	213	$	(339	)	$	204



Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2017
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	4,319		$	3,988		$	(2,335	)	$	5,972
Costs of products sold	—			3,813			3,431			(2,295		)	4,949
Restructuring charges	—			33			(37		)	—			(4		)
Asset impairment charges	—			7			6			—			13
All other operating expenses (income)	92			738			307			(39		)	1,098
Total costs and expenses	92			4,591			3,707			(2,334		)	6,056
Equity in income (loss) of affiliates	(13		)	128			3			(112		)	6
Income (loss) before income taxes	(105		)	(144		)	284			(113		)	(78		)
Income tax benefit (expense)	—			35			(45		)	—			(10		)
Income (loss) from continuing operations	(105		)	(109		)	239			(113		)	(88		)
Income from discontinued operations, net of tax	—			—			1			—			1
Net income (loss)	(105		)	(109		)	240			(113		)	(87		)
Less: Net income attributable to non-controlling interests	—			—			18			—			18
Net income (loss) attributable to Navistar International Corporation	$	(105	)	$	(109	)	$	222		$	(113	)	$	(105	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Nine Months Ended July 31, 2017
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries		Eliminations and Other			Consolidated
Net income (loss)	$	(105	)	$	(109	)	$	240	$	(113	)	$	(87	)
Other comprehensive income (loss):
Foreign currency translation adjustment	34			—			34		(34		)	34
Defined benefit plans, net of tax	194			192			38		(230		)	194
Total other comprehensive income (loss)	228			192			72		(264		)	228
Comprehensive income (loss)	123			83			312		(377		)	141
Less: Net income attributable to non-controlling interests	—			—			18		—			18
Total comprehensive income (loss) attributable to Navistar International Corporation	$	123		$	83		$	294	$	(377	)	$	123



Condensed Consolidating Balance Sheet as of July 31, 2017
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	652		$	23		$	236		$	—		$	911
Marketable securities	44			—			18			—			62
Restricted cash	16			5			116			—			137
Finance and other receivables, net	8			202			1,997			(90		)	2,117
Inventories	—			585			399			(5		)	979
Investments in non-consolidated affiliates	(7,215		)	6,372			52			846			55
Property and equipment, net	—			796			544			(7		)	1,333
Goodwill	—			—			38			—			38
Deferred taxes, net	—			10			132			(1		)	141
Other	3			127			178			(1		)	307
Total assets	$	(6,492	)	$	8,120		$	3,710		$	742		$	6,080
Liabilities and stockholders’ equity (deficit)
Debt	$	2,227		$	1,192		$	1,801		$	—		$	5,220
Postretirement benefits liabilities	—			2,690			134			—			2,824
Amounts due to (from) affiliates	(7,738		)	10,947			(3,261		)	52			—
Other liabilities	3,944			(244		)	(677		)	(64		)	2,959
Total liabilities	(1,567		)	14,585			(2,003		)	(12		)	11,003
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(4,925		)	(6,465		)	5,711			754			(4,925		)
Stockholders’ equity attributable to non-controlling interest	—			—			2			—			2
Total liabilities and stockholders’ equity (deficit)	$	(6,492	)	$	8,120		$	3,710		$	742		$	6,080



Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2017
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operating activities	$	(307	)	$	(401	)	$	(126	)	$	666		$	(168	)
Cash flows from investing activities
Net change in restricted cash and cash equivalents	—			2			(27		)	—			(25		)
Net sales (purchases) of marketable securities	(16		)	—			—			—			(16		)
Capital expenditures and purchase of equipment leased to others	—			(132		)	(57		)	—			(189		)
Other investing activities	(250		)	6			30			250			36
Net cash provided by (used in) investing activities	(266		)	(124		)	(54		)	250			(194		)
Cash flows from financing activities
Net borrowings (repayments) of debt	542			384			(58		)	(674		)	194
Issuance of common stock, net of issuance costs	245			—			250			(250		)	245
Other financing activities	3			47			(29		)	8			29
Net cash provided by (used in) financing activities	790			431			163			(916		)	468
Effect of exchange rate changes on cash and cash equivalents	—			—			1			—			1
Increase (decrease) in cash and cash equivalents	217			(94		)	(16		)	—			107
Cash and cash equivalents at beginning of the period	435			117			252			—			804
Cash and cash equivalents at end of the period	$	652		$	23		$	236		$	—		$	911



Condensed Consolidating Statement of Operations for the Three Months Ended July 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	1,411		$	1,432		$	(757	)	$	2,086
Costs of products sold	—			1,276			1,216			(735		)	1,757
Restructuring charges	—			(1		)	6			—			5
Asset impairment charges	—			—			12			—			12
All other operating expenses (income)	18			197			131			(18		)	328
Total costs and expenses	18			1,472			1,365			(753		)	2,102
Equity in income (loss) of affiliates	(16		)	63			1			(46		)	2
Income (loss) before income taxes	(34		)	2			68			(50		)	(14		)
Income tax expense	—			(1		)	(13		)	—			(14		)
Net income (loss)	(34		)	1			55			(50		)	(28		)
Less: Net income attributable to non-controlling interests	—			—			6			—			6
Net income (loss) attributable to Navistar International Corporation	$	(34	)	$	1		$	49		$	(50	)	$	(34	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Three Months Ended July 31, 2016
(in millions)	NIC			Navistar, Inc.		Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss)	$	(34	)	$	1	$	55		$	(50	)	$	(28	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(10		)	—		(10		)	10			(10		)
Defined benefit plans, net of tax	34			33		1			(34		)	34
Total other comprehensive income (loss)	24			33		(9		)	(24		)	24
Comprehensive income (loss)	(10		)	34		46			(74		)	(4		)
Less: Net income attributable to non-controlling interests	—			—		6			—			6
Total comprehensive income (loss) attributable to Navistar International Corporation	$	(10	)	$	34	$	40		$	(74	)	$	(10	)



Condensed Consolidating Statement of Operations for the Nine Months Ended July 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Sales and revenues, net	$	—		$	4,455		$	4,055		$	(2,462	)	$	6,048
Costs of products sold	—			4,028			3,447			(2,407		)	5,068
Restructuring charges	—			3			8			—			11
Asset impairment charges	—			2			15			—			17
All other operating expenses (income)	75			643			305			(54		)	969
Total costs and expenses	75			4,676			3,775			(2,461		)	6,065
Equity in income (loss) of affiliates	12			118			—			(127		)	3
Income (loss) before income taxes	(63		)	(103		)	280			(128		)	(14		)
Income tax benefit (expense)	—			10			(35		)	—			(25		)
Net income (loss)	(63		)	(93		)	245			(128		)	(39		)
Less: Net income attributable to non-controlling interests	—			—			24			—			24
Net income (loss) attributable to Navistar International Corporation	$	(63	)	$	(93	)	$	221		$	(128	)	$	(63	)



Condensed Consolidating Statement of Comprehensive Income (Loss) for the Nine Months Ended July 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net income (loss)	$	(63	)	$	(93	)	$	245		$	(128	)	$	(39	)
Other comprehensive income (loss):
Foreign currency translation adjustment	7			—			7			(7		)	7
Defined benefit plans, net of tax	82			96			(14		)	(82		)	82
Total other comprehensive income (loss)	89			96			(7		)	(89		)	89
Comprehensive income (loss)	26			3			238			(217		)	50
Less: Net income attributable to non-controlling interests	—			—			24			—			24
Total comprehensive income (loss) attributable to Navistar International Corporation	$	26		$	3		$	214		$	(217	)	$	26



Condensed Consolidating Balance Sheet as of October 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Assets
Cash and cash equivalents	$	435		$	117		$	252		$	—		$	804
Marketable securities	27			—			19			—			46
Restricted cash	16			6			90			—			112
Finance and other receivables, net	(1		)	171			1,883			(84		)	1,969
Inventories	—			639			313			(8		)	944
Investments in non-consolidated affiliates	(7,714		)	6,253			57			1,457			53
Property and equipment, net	—			669			580			(8		)	1,241
Goodwill	—			—			38			—			38
Deferred taxes, net	—			10			150			1			161
Other	2			110			175			(2		)	285
Total assets	$	(7,235	)	$	7,975		$	3,557		$	1,356		$	5,653
Liabilities and stockholders’ equity (deficit)
Debt	$	1,965		$	1,100		$	1,841		$	(2	)	$	4,904
Postretirement benefits liabilities	—			2,865			233			—			3,098
Amounts due to (from) affiliates	(7,724		)	10,709			(3,040		)	55			—
Other liabilities	3,822			(152		)	(665		)	(61		)	2,944
Total liabilities	(1,937		)	14,522			(1,631		)	(8		)	10,946
Stockholders’ equity (deficit) attributable to Navistar International Corporation	(5,298		)	(6,547		)	5,183			1,364			(5,298		)
Stockholders’ equity attributable to non-controlling interest	—			—			5			—			5
Total liabilities and stockholders’ equity (deficit)	$	(7,235	)	$	7,975		$	3,557		$	1,356		$	5,653



Condensed Consolidating Statement of Cash Flows for the Nine Months Ended July 31, 2016
(in millions)	NIC			Navistar, Inc.			Non-Guarantor Subsidiaries			Eliminations and Other			Consolidated
Net cash provided by (used in) operations	$	(372	)	$	(225	)	$	344		$	239		$	(14	)
Cash flows from investment activities
Net change in restricted cash and cash equivalents	—			4			(68		)	—			(64		)
Net sales (purchases) of marketable securities	113			—			(94		)	—			19
Capital expenditures and purchase of equipment leased to others	—			(56		)	(121		)	—			(177		)
Other investing activities	—			—			55			—			55
Net cash provided by (used in) investing activities	113			(52		)	(228		)	—			(167		)
Cash flows from financing activities
Net borrowings (repayments) of debt	—			263			(151		)	(319		)	(207		)
Other financing activities	—			18			(108		)	80			(10		)
Net cash provided by (used in) financing activities	—			281			(259		)	(239		)	(217		)
Effect of exchange rate changes on cash and cash equivalents	—			—			33			—			33
Increase (decrease) in cash and cash equivalents	(259		)	4			(110		)	—			(365		)
Cash and cash equivalents at beginning of the period	456			81			375			—			912
Cash and cash equivalents at end of the period	$	197		$	85		$	265		$	—		$	547