10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________

Form 10-Q

___________________________________________________

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.        

   Commission file number 1-9618

___________________________________________________

NAVISTAR INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

_______________________________________________

Delaware	36-3359573
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2701 Navistar Drive, Lisle, Illinois	60532
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (331) 332-5000

______________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer	þ	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
(Do not check if a smaller reporting company)		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  þ

As of August 31, 2018, the number of shares outstanding of the registrant’s common stock was98,870,065, net of treasury shares.

NAVISTAR INTERNATIONAL CORPORATION FORM 10-Q

TABLE OF CONTENTS

		Page
PART I—Financial Information
Item 1.	Financial Statements (Unaudited)	5
	Consolidated Statements of Operations for the three and nine months ended July 31, 2018 and 2017	5
	Consolidated Statements of Comprehensive Income for the three and nine months ended July 31, 2018 and 2017	6
	Consolidated Balance Sheets as of July 31, 2018 and October 31, 2017	7
	Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2018 and 2017	8
	Consolidated Statements of Stockholders' Deficit for the nine months ended July 31, 2018 and 2017	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.	Controls and Procedures	57
PART II
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	58
	Signature	59

2

Disclosure Regarding Forward-Looking Statements

Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements only speak as of the date of this report and Navistar International Corporation assumes no obligation to update the information included in this report.

Such forward-looking statements include, but are not limited to, statements concerning:

• estimates we have made in preparing our financial statements;

• our expectations and estimates relating to the impact of the federal Tax Cuts and Jobs Act (the “Tax Act”) on our business and financial condition;

• the implementation of our strategic alliance with TRATON AG (formerly Volkswagen Truck & Bus AG) and certain of its subsidiaries and affiliates ("TRATON Group");

• our development of new products and technologies;

• anticipated sales, volume, demand, markets for our products, and financial performance;

• anticipated performance and benefits of our products and technologies;

• our business strategies relating to, and our ability to meet, federal and state regulatory heavy-duty diesel emissions standards applicable to certain of our engines, including the timing and costs of compliance and consequences of noncompliance with such standards, as well as our ability to meet other federal, state and foreign regulatory requirements;

• our business strategies and long-term goals and activities to accomplish such strategies and goals;

• our ability to implement our strategy focused on growing the Core business, driving operational excellence, pursuing innovative technology solutions, leveraging the TRATON Group strategic alliance, enhancing our winning culture, and improving our financial performance, as well as the results we expect to achieve from the implementation of our strategy;

• our expectations related to new product launches;

• anticipated results from the realignment of our leadership and management structure;

• anticipated benefits from acquisitions, strategic alliances, and joint ventures we complete;

• our expectations and estimates relating to restructuring activities, including restructuring charges and timing of cash payments related thereto, and operational flexibility, savings, and efficiencies from such restructurings;

• our expectations relating to debt refinancing activities;

• our expectations relating to the potential effects of anticipated divestitures and closures of businesses;

• our expectations relating to our cost-reduction actions and actions to reduce discretionary spending;

• our expectations relating to our ability to service our long-term debt;

• our expectations relating to our wholesale and retail finance receivables and revenues;

• our expectations and estimates relating to our used truck inventory;

• liabilities resulting from environmental, health and safety laws and regulations;

• our anticipated capital expenditures;

• our expectations relating to payments of taxes;

• our expectations relating to warranty costs;

• our expectations relating to interest expense;

• our expectations relating to impairment of goodwill and other assets;

• costs relating to litigation and similar matters;

• estimates relating to pension plan contributions and unfunded pension and postretirement benefits;

• our expectations relating to commodity price risk, including the impact of tariff increases or potential new tariffs; and

• anticipated trends, expectations, and outlook relating to matters affecting our financial condition or results of operations.

3

These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our results of operations and could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause or contribute to differences in our future financial results include those discussed in Item 1A, Risk Factors, included within our Annual Report on Form 10-K for the fiscal year ended October 31, 2017 which was filed on December 19, 2017, and our Quarterly Report on Form 10-Q for the quarter ended January 31, 2018, which was filed on March 8, 2018, as well as those factors discussed elsewhere in this report. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.

Available Information

We are subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a result, are obligated to file annual, quarterly, and current reports, proxy statements, and other information with the United States ("U.S.") Securities and Exchange Commission ("SEC"). We make these filings available free of charge on our website (http://www.navistar.com) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Information on our website does not constitute part of this Quarterly Report on Form 10-Q. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC. Any materials we file with, or furnish to, the SEC may also be read and/or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

4

PART I—Financial Information

Item 1. Financial Statements

Navistar International Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended July 31,						Nine Months Ended July 31,
(in millions, except per share data)	2018			2017			2018			2017
Sales and revenues
Sales of manufactured products, net	$	2,566		$	2,178		$	6,815		$	5,870
Finance revenues	40			35			118			102
Sales and revenues, net	2,606			2,213			6,933			5,972
Costs and expenses
Costs of products sold	2,096			1,803			5,615			4,949
Restructuring charges	1			(13		)	(1		)	(4		)
Asset impairment charges	8			6			11			13
Selling, general and administrative expenses	244			233			686			654
Engineering and product development costs	72			61			222			189
Interest expense	82			91			240			262
Other income, net	(77		)	(8		)	(37		)	(7		)
Total costs and expenses	2,426			2,173			6,736			6,056
Equity in income of non-consolidated affiliates	—			1			—			6
Income (loss) from continuing operations before income taxes	180			41			197			(78		)
Income tax expense	(3		)	—			(25		)	(10		)
Income (loss) from continuing operations	177			41			172			(88		)
Income from discontinued operations, net of tax	—			1			—			1
Net income (loss)	177			42			172			(87		)
Less: Net income attributable to non-controlling interests	7			5			20			18
Net income (loss)attributable to Navistar International Corporation	$	170		$	37		$	152		$	(105	)
Amounts attributable to Navistar International Corporation common shareholders:
Income (loss) from continuing operations, net of tax	$	170		$	36		$	152		$	(106	)
Income from discontinued operations, net of tax	—			1			—			1
Net income (loss)	$	170		$	37		$	152		$	(105	)
Income (loss) per share:
Basic:
Continuing operations	$	1.72		$	0.37		$	1.54		$	(1.16	)
Discontinued operations	—			0.01			—			0.01
	$	1.72		$	0.38		$	1.54		$	(1.15	)
Diluted:
Continuing operations	$	1.71		$	0.37		1.53			(1.16		)
Discontinued operations	—			0.01			—			0.01
	$	1.71		$	0.38		$	1.53		$	(1.15	)
Weighted average shares outstanding:
Basic	99.0			98.3			98.8			91.1
Diluted	99.7			98.6			99.6			91.1

See Notes to Consolidated Financial Statements

5

Navistar International Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited) 

(in millions)	Three Months Ended July 31,					Nine Months Ended July 31,
	2018			2017		2018			2017
Net income (loss)	$	177		$	42	$	172		$	(87	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(13		)	42		(19		)	34
Defined benefit plans, net of tax	29			125		92			194
Total other comprehensive income	16			167		73			228
Comprehensive income	193			209		245			141
Less: Net income attributable to non-controlling interests	7			5		20			18
Total comprehensive income attributable to Navistar International Corporation	$	186		$	204	$	225		$	123

See Notes to Consolidated Financial Statements

6

Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets

	July 31, 2018			October 31, 2017
(in millions, except per share data)
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	1,022		$	706
Restricted cash and cash equivalents	148			83
Marketable securities	95			370
Trade and other receivables, net	403			391
Finance receivables, net	1,638			1,565
Inventories, net	1,400			857
Other current assets	199			188
Total current assets	4,905			4,160
Restricted cash	52			51
Trade and other receivables, net	49			13
Finance receivables, net	259			220
Investments in non-consolidated affiliates	53			56
Property and equipment (net of accumulated depreciation and amortization of $2,468 and $2,474, respectively)	1,297			1,326
Goodwill	38			38
Intangible assets (net of accumulated amortization of $139 and $135, respectively)	30			40
Deferred taxes, net	130			129
Other noncurrent assets	111			102
Total assets	$	6,924		$	6,135
LIABILITIES and STOCKHOLDERS’ DEFICIT
Liabilities
Current liabilities
Notes payable and current maturities of long-term debt	$	1,707		$	1,169
Accounts payable	1,527			1,292
Other current liabilities	1,075			1,184
Total current liabilities	4,309			3,645
Long-term debt	3,893			3,889
Postretirement benefits liabilities	2,378			2,497
Other noncurrent liabilities	678			678
Total liabilities	11,258			10,709
Stockholders’ deficit
Series D convertible junior preference stock	2			2
Common stock, $0.10 par value per share (103.1 shares issued and 220 shares authorized at both dates)	10			10
Additional paid-in capital	2,731			2,733
Accumulated deficit	(4,781		)	(4,933		)
Accumulated other comprehensive loss	(2,138		)	(2,211		)
Common stock held in treasury, at cost (4.2 and 4.6 shares, respectively)	(163		)	(179		)
Total stockholders’ deficit attributable to Navistar International Corporation	(4,339		)	(4,578		)
Stockholders’ equity attributable to non-controlling interests	5			4
Total stockholders’ deficit	(4,334		)	(4,574		)
Total liabilities and stockholders’ deficit	$	6,924		$	6,135

See Notes to Consolidated Financial Statements

7

Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended July 31,
(in millions)	2018			2017
Cash flows from operating activities
Net income (loss)	$	172		$	(87	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	107			113
Depreciation of equipment leased to others	53			56
Deferred taxes, including change in valuation allowance	(3		)	(16		)
Asset impairment charges	11			13
Gain on sales of investments and businesses, net	—			(5		)
Amortization of debt issuance costs and discount	23			36
Stock-based compensation	27			19
Provision for doubtful accounts	6			9
Equity in income of non-consolidated affiliates, net of dividends	4			1
Write-off of debt issuance costs and discount	43			4
Other non-cash operating activities	(17		)	(21		)
Changes in other assets and liabilities, exclusive of the effects of businesses disposed	(606		)	(290		)
Net cash used in operating activities	(180		)	(168		)
Cash flows from investing activities
Purchases of marketable securities	(214		)	(619		)
Sales of marketable securities	460			586
Maturities of marketable securities	29			17
Net change in restricted cash and cash equivalents	(66		)	(25		)
Capital expenditures	(79		)	(93		)
Purchases of equipment leased to others	(142		)	(96		)
Proceeds from sales of property and equipment	9			32
Investments in non-consolidated affiliates	—			(2		)
Proceeds from (payments for) sales of affiliates	(3		)	6
Net cash used in investing activities	(6		)	(194		)
Cash flows from financing activities
Proceeds from issuance of securitized debt	32			278
Principal payments on securitized debt	(50		)	(326		)
Net change in secured revolving credit facilities	64			119
Proceeds from issuance of non-securitized debt	3,210			491
Principal payments on non-securitized debt	(2,669		)	(368		)
Net change in notes and debt outstanding under revolving credit facilities	(52		)	23
Principal payments under financing arrangements and capital lease obligations	—			(1		)
Debt issuance costs	(36		)	(22		)
Proceeds from financed lease obligations	48			49
Issuance of common stock	—			256
Stock issuance costs	—			(11		)
Proceeds from exercise of stock options	7			4
Dividends paid by subsidiaries to non-controlling interest	(19		)	(21		)
Other financing activities	(17		)	(3		)
Net cash provided by financing activities	518			468
Effect of exchange rate changes on cash and cash equivalents	(16		)	1
Increase in cash and cash equivalents	316			107
Cash and cash equivalents at beginning of the period	706			804
Cash and cash equivalents at end of the period	$	1,022		$	911

See Notes to Consolidated Financial Statements

8

Navistar International Corporation and Subsidiaries

Consolidated Statements of Stockholders' Deficit

(Unaudited)

(in millions)	Series D Convertible Junior Preference Stock		Common Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Common Stock Held in Treasury, at cost			Stockholders' Equity Attributable to Non-controlling Interests			Total
Balance as of October 31, 2017	$	2	$	10		$	2,733		$	(4,933	)	$	(2,211	)	$	(179	)	$	4		$	(4,574	)
Net income	—		—			—			152			—			—			20			172
Total other comprehensive income	—		—			—			—			73			—			—			73
Stock-based compensation	—		—			9			—			—			—			—			9
Stock ownership programs	—		—			(10		)	—			—			16			—			6
Cash dividends paid to non-controlling interest	—		—			—			—			—			—			(19		)	(19		)
Issuance of common stock	—		—			—			—			—			—			—			—
Stock issuance costs	—		—			—			—			—			—			—			—
Stock deferral and issuance - directors	—		—			(1		)	—			—			—			—			(1		)
Other	—		—			—			—			—			—			—			—
Balance as of July 31, 2018	$	2	$	10		$	2,731		$	(4,781	)	$	(2,138	)	$	(163	)	$	5		$	(4,334	)
Balance as of October 31, 2016	$	2	$	9		$	2,499		$	(4,963	)	$	(2,640	)	$	(205	)	$	5		$	(5,293	)
Net income (loss)	—		—			—			(105		)	—			—			18			(87		)
Total other comprehensive income	—		—			—			—			228			—			—			228
Stock-based compensation	—		—			4			—			—			—			—			4
Stock ownership programs	—		—			(13		)	—			—			15			—			2
Cash dividends paid to non-controlling interest	—		—			—			—			—			—			(21		)	(21		)
Issuance of common stock	—		2			254			—			—			—			—			256
Stock issuance costs	—		—			(11		)	—			—			—			—			(11		)
Stock deferral and issuance - directors	—		—			—			—			—			—			—			—
Other	—		(1		)	—			—			—			—			—			(1		)
Balance as of July 31, 2017	$	2	$	10		$	2,733		$	(5,068	)	$	(2,412	)	$	(190	)	$	2		$	(4,923	)

See Notes to Consolidated Financial Statements

9

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

Organization and Description of the Business

Navistar International Corporation ("NIC"), incorporated under the laws of the State of Delaware in 1993, is a holding company whose principal operating entities are Navistar, Inc. ("NI") and Navistar Financial Corporation ("NFC"). References herein to the "Company," "we," "our," or "us" refer collectively to NIC and its consolidated subsidiaries, including certain variable interest entities ("VIEs") of which we are the primary beneficiary. We operate in four principal industry segments: Truck, Parts, Global Operations (collectively called "Manufacturing operations"), and Financial Services, which consists of NFC and our foreign finance operations (collectively called "Financial Services operations"). These segments are discussed in Note 11, Segment Reporting.

Our fiscal year ends on October 31. As such, all references to 2018, 2017, and other years contained within this Quarterly Report on Form 10-Q relate to the fiscal year, unless otherwise indicated.

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements include the assets, liabilities, and results of operations of our Manufacturing operations and our Financial Services operations, including VIEs of which we are the primary beneficiary. The effects of transactions among consolidated entities have been eliminated to arrive at the consolidated amounts.

We prepared the accompanying unaudited consolidated financial statements in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for comprehensive annual financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting policies described in our Annual Report on Form 10-K for the year ended October 31, 2017, which should be read in conjunction with the disclosures therein. In our opinion, these interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial condition, results of operations, and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.

Variable Interest Entities

We have an interest in several VIEs, primarily joint ventures, established to manufacture or distribute products and enhance our operational capabilities. We have determined for certain of our VIEs that we are the primary beneficiary because we have the power to direct the activities of the VIE that most significantly impact its economic performance and we have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Accordingly, we include in our consolidated financial statements the assets and liabilities and results of operations of those entities, even though we may not own a majority voting interest. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather they represent claims against the specific assets of these VIEs. Assets of these entities are not readily available to satisfy claims against our general assets.

We are the primary beneficiary of our Blue Diamond Parts, LLC ("BDP") joint venture with Ford Motor Company ("Ford"). As a result, our Consolidated Balance Sheets include assets of $43 million and $49 million and liabilities of $6 million and $13 million as of July 31, 2018 and October 31, 2017, respectively, including $2 million and $10 million of cash and cash equivalents, at the respective dates, which are not readily available to satisfy claims against our general assets. The creditors of BDP do not have recourse to our general credit.

Our Financial Services segment consolidates several VIEs. As a result, our Consolidated Balance Sheets include secured assets of $949 million and $869 million as of July 31, 2018 and October 31, 2017, respectively, and liabilities of $812 million and $754 million as of July 31, 2018 and October 31, 2017, respectively, all of which are involved in securitizations that are treated as asset-backed debt. In addition, our Consolidated Balance Sheets include secured assets of $311 million and $278 million as of July 31, 2018 and October 31, 2017, respectively, and corresponding liabilities of $184 million and $194 million, at the respective dates, which are related to other secured transactions that do not qualify for sale accounting treatment, and, therefore, are treated as borrowings secured by operating and finance leases. Investors that hold securitization debt have a priority claim on the cash flows generated by their respective securitized assets to the extent that the related VIEs are required to make principal and interest payments. Investors in securitizations have no recourse to our general credit.

10

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

We also have an interest in other VIEs, which we do not consolidate because we are not the primary beneficiary. Our financial support and maximum loss exposure relating to these non-consolidated VIEs are not material to our financial condition, results of operations, or cash flows.

We use the equity method to account for our investments in entities that we do not control under the voting interest or variable interest models, but where we have the ability to exercise significant influence over operating and financial policies. Equity in income of non-consolidated affiliates includes our share of the net income of these entities.

Related Party Transactions

We have a series of commercial relationships and agreements with TRATON AG (formerly Volkswagen Truck & Bus AG) and certain of its subsidiaries and affiliates ("TRATON Group") for royalties related to use of certain engine technology, contract manufacturing operations performed by us, the sale of engines, the sale and purchase of parts, and a procurement joint venture. We have also entered into development agreements with TRATON Group involving certain engine and transmission projects. This development work is being expensed as incurred. For the three and nine months ended July 31, 2018, revenue recognized was approximately $33 million and $114 million, respectively, compared to $36 million and $78 million in the comparable prior year periods. For the three and nine months ended July 31, 2018, net expenses incurred were $2 million and $21 million, respectively, compared to $2 million and $4 million in the comparable prior year periods, included primarily in Engineering and product development costs on our Consolidated Statements of Operations. Our receivable from TRATON Group was $11 million and $13 millionas of July 31, 2018 and October 31, 2017, respectively. Our payable to TRATON Group was $20 million and $5 million as of July 31, 2018 and October 31, 2017, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value ("NRV"). Cost is principally determined using the first-in, first-out method. Our gross used truck inventory was $191 million at July 31, 2018 compared to $206 million at October 31, 2017, offset by reserves of $48 million and $110 million, respectively.

In valuing our used truck inventory, we are required to make assumptions regarding the level of reserves required to value inventories at their NRV. Our judgments and estimates for used truck inventory are based on an analysis of current and forecasted sales prices, aging of and demand for used trucks, and the mix of sales through various market channels. The NRV is subject to change based on numerous conditions, including age, specifications, mileage, timing of sales, market mix and current and forecasted pricing. While calculations are made after taking these factors into account, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence our judgment and related estimates include general economic conditions in markets where our products are sold, actions of our competitors, and the ability to sell used trucks in a timely manner.

The following table presents the activity in our used truck reserve:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	110		$	208
Additions charged to expense(A)	38			102
Deductions/Other adjustments(B)	(100		)	(136		)
Balance at end of period	$	48		$	174

_________________________

(A) Additions charged to expense reflect the increase of the reserve for inventory on hand. During the second quarter of 2017, we implemented a shift in market mix to include an increase in volume to certain export markets, which had a lower price point as compared to sales through our domestic channels, and to lower domestic pricing to enable higher sales velocity.

(B) Deductions/Other adjustments reflect reductions of the reserve related to the sale of units and our currency translation adjustments.

Property and Equipment

We report land, buildings, leasehold improvements, machinery and equipment (including tooling and pattern equipment), furniture, fixtures, and equipment, and equipment leased to others at cost, net of depreciation. We initially record assets under capital lease obligations at the lower of their fair value or the present value of the aggregate future minimum lease payments. We depreciate our assets using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets.

11

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

We test for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset or asset group (hereinafter referred to as "asset group") may not be recoverable by comparing the sum of the estimated undiscounted future cash flows expected to result from the operation of the asset group and its eventual disposition to the carrying value. During 2017, we identified a triggering event related to continued economic weakness in Brazil which resulted in the decline in forecasted results for the Brazilian asset group. The Brazilian asset group is included in the Global Operations segment. As a result, we estimated the recoverable amount of the asset group and determined that the sum of the undiscounted future cash flows exceeds the carrying value and the asset group was not impaired. Significant adverse changes to our business environment and future cash flows could cause us to record impairment charges in future periods, which could be material.

Product Warranty Liability

The following table presents accrued product warranty and deferred warranty revenue activity:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	629		$	818
Costs accrued and revenues deferred	139			137
Adjustments to pre-existing warranties(A)	(4		)	(4		)
Payments and revenues recognized	(233		)	(292		)
Balance at end of period	531			659
Less: Current portion	254			340
Noncurrent accrued product warranty and deferred warranty revenue	$	277		$	319

_________________________

(A) Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior fiscal periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.

Extended Warranty Programs

The amount of deferred revenue related to extended warranty programs was $248 million and $271 million at July 31, 2018 and October 31, 2017, respectively. Revenue recognized under our extended warranty programs was $24 million and $80 million for the three and nine months ended July 31, 2018, respectively, and $28 million and $109 million for the three and nine months ended July 31, 2017, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to, pension and other postretirement benefits, allowance for doubtful accounts, income tax contingency accruals and valuation allowances, product warranty accruals, used truck inventory valuations, asbestos and other product liability accruals, asset impairment charges, restructuring charges and litigation-related accruals. Actual results could differ from our estimates.

Concentration Risks

Our financial condition, results of operations, and cash flows are subject to concentration risks related to our significant unionized workforce. As of July 31, 2018, approximately 7,800, or 98%, of our hourly workers and approximately 700, or 13%, of our salaried workers, are represented by labor unions and are covered by collective bargaining agreements. Our current master collective bargaining agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") will expire in October 2018 and we are in negotiations with the UAW to enter into a new collective bargaining agreement. Our future operations may be affected by changes in governmental procurement policies, tax policies, budget considerations, changing national defense requirements, and political, regulatory and economic developments in the U.S. and certain foreign countries (primarily Canada, Mexico, and Brazil).

12

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

Recently Issued Accounting Standards

In March 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118". This ASU updates the income tax accounting in U.S. GAAP to reflect the SEC's interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (H.R.1) (the "Tax Act") was signed into law. For more information regarding the impact of the Tax Act, see Note 8, Income Taxes.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)". This ASU provides guidance on a reclassification from accumulated other comprehensive income to retained earnings for the effect of the tax rate change resulting from the Tax Act. The amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2020. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". This ASU provides a new framework for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This ASU creates an initial screening test that reduces the population of transactions that an entity needs to analyze to determine whether there is an input and substantive processes in the acquisition or disposal. Fewer transactions are expected to involve acquiring or selling a business. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a prospective transition. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but we do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash" (Topic 230). This ASU requires that a statement of cash flows explain the change during the period in the total of cash, and cash equivalents, including amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a retrospective transition. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory” (Topic 740). This ASU update requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a modified retrospective transition. We do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” (Topic 230).This ASU provides guidance on how entities should classify eight specific cash flow transactions for which diversity in practice exists. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a retrospective transition.We do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (Topic 326). This ASU sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Adoption will require a modified retrospective transition. This ASU is effective for us in the first quarter of fiscal 2021. We are currently evaluating the impact of this ASU on our consolidated financial statements.

13

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). This ASU requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. The accounting by lessors will remain largely unchanged. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2020. Adoption will require a modified retrospective transition with an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (Topic 606), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition." This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which postponed the effective date of ASU No. 2014-09 to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted on the original effective date for fiscal years beginning after December 15, 2016. We continue to evaluate the requirements of the standard and its application to our business. During the quarter, we continued analyzing the ASU’s impact on our portfolio of customer contracts which may result in a change in the timing or the amount of revenue recognized in comparison with current guidance. Our ongoing analyses include assessing whether the new ASU will impact transactions previously recorded as borrowings or as leases, gross versus net accounting for certain revenue streams, and the timing and amount of revenue related to certain sales incentives. We are continuing to evaluate and quantify the impact of these changes, if any. We are also evaluating enhanced disclosure requirements and identifying and implementing appropriate changes to our business processes, systems and internal control framework to support recognition and disclosure under the new guidance. We will adopt this ASU in the first quarter of fiscal 2019 on a modified retrospective basis, with the cumulative effect adjustment recognized into Accumulated deficit as of November 1, 2018.

2. Restructurings and Impairments

Restructuring charges are recorded based on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.

Restructuring Liability

The following tables summarize the activity in the restructuring liability, which excludes pension and other postretirement contractual termination benefits:

(in millions)	Balance at October 31, 2017		Additions		Payments			Adjustments			Balance at July 31, 2018
Employee termination charges	$	14	$	3	$	(5	)	$	(4	)	$	8
Lease vacancy	—		—		—			—			—
Other	1		—		—			—			1
Restructuring liability	$	15	$	3	$	(5	)	$	(4	)	$	9

(in millions)	Balance at October 31, 2016		Additions		Payments			Adjustments		Balance at July 31, 2017
Employee termination charges	$	5	$	15	$	(11	)	$	—	$	9
Lease vacancy	1		—		(1		)	—		—
Other	1		—		—			—		1
Restructuring liability	$	7	$	15	$	(12	)	$	—	$	10

Manufacturing Restructuring Activities

We continue to focus on our core Truck and Parts businesses and evaluate our portfolio of assets to validate their strategic and financial fit. This allows us to close or divest non-strategic businesses, and identify opportunities to restructure our business and rationalize our Manufacturing operations in an effort to optimize our cost structure.

14

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

For those areas that fall outside our strategic businesses, we are evaluating alternatives which could result in additional restructuring and other related charges in the future, including but not limited to: (i) impairments, (ii) costs for employee and contractor termination and other related benefits, and (iii) charges for pension and other postretirement contractual benefits and curtailments. These charges could be significant.

Chatham restructuring activities

In the third quarter of 2011, we committed to close our Chatham, Ontario heavy truck plant, which had been idled since June 2009. At that time, we recognized curtailment and contractual termination charges related to postretirement plans. Based on a ruling regarding pension benefits received from the Financial Services Tribunal in Ontario, Canada, in the third quarter of 2014, we recognized an additional charge of $14 million related to the 2011 closure of the Chatham, Ontario plant. Unsuccessful efforts to appeal the ruling in the Ontario court system ended in December 2015. On April 25, 2016, we filed a qualified partial wind-up report for approval by the Financial Services Commission of Ontario ("FSCO"). On January 12, 2017, FSCO issued its approval of the partial wind-up report. On February 27, 2017, we finalized the resolution of statutory severance pay for former employees related to the closure of our Chatham, Ontario plant, resulting in a charge of $6 million in the first quarter of 2017. During the third quarter of 2017, we finalized the Chatham closure agreement. This resulted in the release of $66 million in other post-employment benefit ("OPEB") liabilities. In addition, a pension settlement accounting charge of $23 million was recorded as a result of lump-sum payments made to certain pension plan participants. These charges and benefits were recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations.

Global operations employee separation actions

In the fourth quarter of 2017, we initiated cost-reduction actions impacting our workforce in Brazil. As a result of these actions, we recognized restructuring charges of $6 million in personnel costs for employee separation and related benefits. In the first nine months of 2018, we recognized a benefit of $1 million upon the completion of these separation actions. This benefit was recorded in our Global operations segment within Restructuring charges in our Consolidated Statements of Operations.

Melrose Park Facility restructuring activities

In the third quarter of 2017, we committed to a plan to cease engine production at our plant in Melrose Park, Illinois (“Melrose Park Facility”) in the third quarter of fiscal year 2018. As a result, in the third quarter of 2017, we recognized charges of $41 million in our Truck segment. The charges include $23 million related to pension and OPEB liabilities and $8 million for severance pay recorded in Restructuring charges in our Consolidated Statements of Operations. We also recorded $10 million of inventory reserves and other related charges in Costs of products sold in our Consolidated Statements of Operations. In the first nine months of 2018, we recognized a benefit of $2 million related to the finalized cessation of production agreement. This benefit was recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations. Production at the Melrose Park Facility ceased on May 17, 2018.

Asset Impairments

In the nine months ended July 31, 2018, we concluded that we had triggering events related to the sale of our railcar business in Cherokee, Alabama requiring the impairment of certain long-lived assets. As a result, we recorded a charge of $2 million in our Truck segment. In February 2018, we completed the sale of the business. We also concluded that we had triggering events related to other certain long-lived assets, and recorded additional charges of $6 million in our Truck segment and a charge of $1 million in our Financial Services segment.

In the nine months ended July 31, 2017, we concluded that we had a triggering event in connection with the sale of our fabrication business in Conway, Arkansas requiring the impairment of certain long-lived assets. As a result, we recorded charges of $5 million in our Truck segment.

In the nine months ended July 31, 2018 and 2017, we concluded that we had triggering events related to certain assets under operating leases. As a result, we recorded charges of $2 million and $8 million, respectively, in our Truck segment.

These charges were recorded in Asset impairment charges in our Consolidated Statements of Operations.

See Note 9, Fair Value Measurements, for information on the valuation of impaired operating leases and other assets.

3. Finance Receivables

Finance receivables are receivables of our Financial Services operations. Finance receivables generally consist of wholesale notes and accounts, as well as retail notes, finance leases and accounts. Total finance receivables reported on the Consolidated Balance Sheets are net of an allowance for doubtful accounts. Total assets of our Financial Services operations net of intercompany balances were $2.4 billion and $2.2 billion as of July 31, 2018 and October 31, 2017, respectively.

15

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

Included in total assets of our Financial Services operations were finance receivables of $1.9 billion and $1.8 billion as of July 31, 2018 and October 31, 2017, respectively. We have two portfolio segments of finance receivables that we distinguish based on the type of customer and nature of the financing inherent to each portfolio. The retail portfolio segment represents loans or leases to end-users for the purchase or lease of vehicles. The wholesale portfolio segment represents loans to dealers to finance their inventory.

Our Finance receivables, net in our Consolidated Balance Sheets consist of the following:

(in millions)	July 31, 2018		October 31, 2017
Retail portfolio	$	639	$	559
Wholesale portfolio	1,282		1,246
Total finance receivables	1,921		1,805
Less: Allowance for doubtful accounts	24		20
Total finance receivables, net	1,897		1,785
Less: Current portion, net(A)	1,638		1,565
Noncurrent portion, net	$	259	$	220

_________________________

(A) The current portion of finance receivables is computed based on contractual maturities. Actual cash collections typically vary from the contractual cash flows because of prepayments, extensions, delinquencies, credit losses, and renewals.

Securitizations

Our Financial Services operations transfer wholesale notes, retail accounts receivable, finance leases, and operating leases to special purpose entities ("SPEs"), which generally are only permitted to purchase these assets, issue asset-backed securities, and make payments on the securities issued. In addition to servicing receivables, our continued involvement in the SPEs may include an economic interest in the transferred receivables and, in some cases, managing exposure to interest rate changes on the securities using interest rate swaps or interest rate caps. There were no transfers of finance receivables that qualified for sale accounting treatment as of July 31, 2018 and October 31, 2017, and as a result, the transferred finance receivables are included in our Consolidated Balance Sheets and the related interest earned is included in Finance revenues.

We transfer eligible finance receivables into owner trusts in order to issue asset-backed securities. These trusts are VIEs of which we are determined to be the primary beneficiary, and, therefore, the assets and liabilities of the trusts are included in our Consolidated Balance Sheets. The outstanding balance of finance receivables transferred into these VIEs was $841 million and $797 million as of July 31, 2018 and October 31, 2017, respectively.

Other finance receivables related to secured transactions that do not qualify for sale accounting treatment were $166 million and $163 million as of July 31, 2018 and October 31, 2017, respectively. For more information on assets and liabilities of consolidated VIEs and other securitizations accounted for as secured borrowings by our Financial Services segment, see Note 1, Summary of Significant Accounting Policies.

Finance Revenues

The following table presents the components of our Finance revenues in our Consolidated Statements of Operations:

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions)	2018		2017		2018		2017
Retail notes and finance leases revenue	$	12	$	11	$	36	$	30
Wholesale notes interest	26		28		75		75
Operating lease revenue	19		17		54		50
Retail and wholesale accounts interest	8		6		22		17
Gross finance revenues	65		62		187		172
Less: Intercompany revenues	25		27		69		70
Finance revenues	$	40	$	35	$	118	$	102

16

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

4. Allowance for Doubtful Accounts

Our two finance receivables portfolio segments, retail and wholesale, each consist of one class of receivable based on: (i) initial measurement attributes of the receivables, and (ii) the assessment and monitoring of risk and performance of the receivables. For more information, see Note 3, Finance Receivables.

The following tables present the activity related to our allowance for doubtful accounts for our retail portfolio segment, wholesale portfolio segment, and trade and other receivables:

	Three Months Ended July 31, 2018											Three Months Ended July 31, 2017
(in millions)	Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total			Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables		Total
Allowance for doubtful accounts, at beginning of period	$	19		$	3	$	27		$	49		$	21		$	2	$	28	$	51
Provision for doubtful accounts	2			—		1			3			(1		)	1		1		1
Charge-off of accounts	(1		)	—		—			(1		)	(1		)	—		—		(1		)
Recoveries	1			—		—			1			—			—		—		—
Other(A)	—			—		(2		)	(2		)	1			—		—		1
Allowance for doubtful accounts, at end of period	$	21		$	3	$	26		$	50		$	20		$	3	$	29	$	52

	Nine Months Ended July 31, 2018											Nine Months Ended July 31, 2017
(in millions)	Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total			Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total
Allowance for doubtful accounts, at beginning of period	$	17		$	3	$	28		$	48		$	19		$	2	$	28		$	49
Provision for doubtful accounts	5			—		1			6			5			1		2			8
Charge-off of accounts	(4		)	—		—			(4		)	(5		)	—		(1		)	(6		)
Recoveries	3			—		—			3			—			—		—			—
Other(A)	—			—		(3		)	(3		)	1			—		—			1
Allowance for doubtful accounts, at end of period	$	21		$	3	$	26		$	50		$	20		$	3	$	29		$	52

____________________

(A)    Amounts include impact from currency translation.

The accrual of interest income is discontinued on certain impaired finance receivables. Impaired finance receivables include accounts with specific loss reserves and certain accounts that are on non-accrual status. In certain cases, we continue to collect payments on our impaired finance receivables.

The following table presents information regarding impaired finance receivables:

	July 31, 2018						October 31, 2017
(in millions)	Retail Portfolio		Wholesale Portfolio		Total		Retail Portfolio		Wholesale Portfolio		Total
Impaired finance receivables with specific loss reserves	$	19	$	—	$	19	$	16	$	—	$	16
Impaired finance receivables without specific loss reserves	5		—		5		—		—		—
Specific loss reserves on impaired finance receivables	11		—		11		7		—		7
Finance receivables on non-accrual status	19		—		19		16		—		16

The average balances of the impaired finance receivables in the retail portfolio were $19 million for both periods, during the nine months ended July 31, 2018 and 2017. See Note 9, Fair Value Measurements, for information on the valuation of impaired finance receivables.

17

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

We use the aging of our receivables as well as other inputs when assessing credit quality. The following table presents the aging analysis for finance receivables:

	July 31, 2018						October 31, 2017
(in millions)	Retail Portfolio		Wholesale Portfolio		Total		Retail Portfolio		Wholesale Portfolio		Total
Current, and up to 30 days past due	$	579	$	1,281	$	1,860	$	524	$	1,244	$	1,768
30-90 days past due	44		1		45		21		1		22
Over 90 days past due	16		—		16		14		1		15
Total finance receivables	$	639	$	1,282	$	1,921	$	559	$	1,246	$	1,805

5. Inventories

The following table presents the components of Inventories in our Consolidated Balance Sheets:

(in millions)	July 31, 2018		October 31, 2017
Finished products	$	751	$	584
Work in process	269		33
Raw materials	380		240
Total inventories, net	$	1,400	$	857

18

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

6. Debt

The following tables present the components of Notes payable and current maturities of long-term debt and Long-term debt in our Consolidated Balance Sheets:

(in millions)	July 31, 2018		October 31, 2017
Manufacturing operations
Senior Secured Term Loan Credit Agreement, due 2025, net of unamortized discount of $7 and unamortized debt issuance costs of $12	$	1,573	$	—
Senior Secured Term Loan Credit Facility, as amended, due 2020, net of unamortized discount of $7 and unamortized debt issuance costs of $9	—		1,003
6.625% Senior Notes, due 2026, net of unamortized debt issuance costs of $17	1,083		—
8.25% Senior Notes, due 2022, net of unamortized discount of $13 and unamortized debt issuance costs of $14	—		1,423
4.50% Senior Subordinated Convertible Notes, due 2018, net of unamortized discount of $1 and $5, respectively, and unamortized debt issuance costs of less than $1 and $1, respectively	199		194
4.75% Senior Subordinated Convertible Notes, due 2019, net of unamortized discount of $7 and $14, respectively, and unamortized debt issuance costs of $2 and $3, respectively	402		394
Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040, net of unamortized debt issuance costs of $5 at both dates	220		220
Financed lease obligations	121		130
Other	27		43
Total Manufacturing operations debt	3,625		3,407
Less: Current portion	661		286
Net long-term Manufacturing operations debt	$	2,964	$	3,121

(in millions)	July 31, 2018		October 31, 2017
Financial Services operations
Asset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through 2023, net of unamortized debt issuance costs of $3 and $5, respectively	$	888	$	849
Senior secured NFC Term Loan, due 2025, net of unamortized discount of $2, and unamortized debt issuance costs of $4	394		—
Bank credit facilities, at fixed and variable rates, due dates from 2018 through 2024, net of unamortized debt issuance costs of $1 and $2, respectively	500		616
Commercial paper, at variable rates, program matures in 2022	88		92
Borrowings secured by operating and finance leases, at various rates, due serially through 2024	105		94
Total Financial Services operations debt	1,975		1,651
Less: Current portion	1,046		883
Net long-term Financial Services operations debt	$	929	$	768

Manufacturing Operations

Senior Secured Term Loan Credit Agreement

On November 6, 2017, we signed a definitive credit agreement relating to a seven-year senior secured term loan credit facility in an aggregate principal amount of $1.6 billion ("Term Loan Credit Agreement"), guaranteed by Navistar International Corporation and twelve of its subsidiaries. Under the terms of the Term Loan Credit Agreement, the interest rate on the outstanding loan is based, at our option, on an adjusted Eurodollar Rate, plus a margin of 3.50%, or a Base Rate, plus a margin of 2.50%. The Term Loan Credit Agreement requires quarterly amortization payments of $4 million with the balance due at maturity on November 6, 2024. A portion of the proceeds from the Term Loan Credit Agreement was used to repay all outstanding loans under our previously existing term loan ("Term Loan"), to redeem the remaining portion of the previously outstanding 8.25% Senior Notes and to pay accrued and unpaid interest thereon, and pay certain transaction fees and expenses incurred in connection with the new Term Loan Credit Agreement.

19

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

The remainder of the proceeds of the Term Loan Credit Agreement will be used for ongoing working capital purposes and general corporate purposes. In the first quarter of 2018, we recorded approximately $16 million of charges related to the extinguishment of unamortized debt issuance costs associated with the Term Loan, included in Other expense (income), net on our Consolidated Statements of Operations.

6.625% Senior Notes

On November 6, 2017, we issued $1.1 billion in aggregate principal amount of 6.625% senior notes, due 2026 ("6.625% Senior Notes"). Interest is payable on the 6.625% Senior Notes on May 1 and November 1 of each year beginning on May 1, 2018 until the maturity date of November 1, 2025. In connection with the retiring of our 8.25% Senior Notes, we also commenced a cash tender offer ("Tender Offer"), which resulted in the purchase of $1,051 million aggregate principal amount, or 72.50% of the total outstanding 8.25% Senior Notes at a purchase price of $1,003.80 per $1,000 principal amount, plus accrued and unpaid interest. The proceeds from the 6.625% Senior Notes offering were used to repurchase a portion of our previously existing 8.25% Senior Notes under the Tender Offer, to pay accrued and unpaid interest thereon, and pay the associated prepayment premiums, certain transaction fees and expenses incurred in connection with the new 6.625% Senior Notes. In the first quarter of 2018, we recorded approximately $30 million of charges related to the extinguishment of unamortized debt issuance costs and tender premiums associated with the Senior Notes, included in Other expense (income), net on our Consolidated Statements of Operations.

Tax Exempt Bond Amendments

On November 6, 2017, the Company entered into the First Amendment to Loan Agreement with The County of Cook, Illinois and the First Amendment to Loan Agreement with the Illinois Finance Authority ("Tax Exempt Bond Amendments") to adjust various covenants included in the loan agreements relating to the Recovery Zone Facility Revenue Bonds (the "Tax Exempt Bonds"), including to permit the Company to incur secured debt of up to $1.7 billion, in exchange for a coupon increase from 6.50% to 6.75% and the grant of a junior priority lien on certain collateral securing the Company's previously existing senior secured Term Loan and the Term Loan Credit Agreement.

Financial Services Operations

Asset-backed Debt

In December 2017, the maturity date of our variable funding notes ("VFN") facility was extended from May 2018 to December 2018, and the maximum capacity was reduced from $425 million to $350 million. The VFN facility is secured by assets of the wholesale note owner trust.

In January 2018, the maturity date of our $100 million Truck Retail Accounts Corporation ("TRAC") funding facility was extended from April 2018 to January 2019. Borrowings under this facility are secured by eligible retail accounts receivable.

Term Loan

In July 2018, NFC entered into a $400 million seven-year senior secured term loan facility ("NFC Term Loan"). The NFC Term Loan is secured by a first-priority security interest in certain assets of NFC and ranks equal to that of NFC's bank credit facility. The initial funding interest rate is LIBOR plus a margin of 3.75%. NFC has the option to use a defined alternate base rate. Debt issuance costs and the original issuance discount of $4 million and $2 million, respectively, were recorded as a direct deduction from the carrying amount and will amortize through Interest expense over the life of the loan. The NFC Term Loan requires quarterly principal amortization payments of $1 million, with the balance due at maturity.

Bank Credit Facilities

On June 1, 2018, in accordance with the terms of the May 2016 amended and extended bank credit facility of NFC, the term loan portion was paid in full and the revolving portion capacity was reduced from $275 million to $269 million. On June 12, 2018, certain leverage covenants and baskets under the NFC bank credit facility were amended to allow for a larger term loan replacement facility.

7. Postretirement Benefits

Defined Benefit Plans

We provide postretirement benefits to a substantial portion of our employees and retirees. Costs associated with postretirement benefits include pension and postretirement health care expenses for employees, retirees, surviving spouses and dependents.

Generally, the pension plans are non-contributory. Our policy is to fund the pension plans in accordance with applicable U.S. and Canadian government regulations and to make additional contributions from time to time.

20

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

For the three and nine months ended July 31, 2018, we contributed $25 million and $78 million, respectively, and for the three and nine months ended July 31, 2017, we contributed $21 million and $67 million, respectively, to our pension plans to meet regulatory funding requirements. We expect to contribute approximately $54 million to our pension plans during the remainder of 2018.

We primarily fund OPEB obligations, such as retiree medical, in accordance with the 1993 Settlement Agreement (the "1993 Settlement Agreement"), which requires us to fund a portion of the plans' annual service cost to a retiree benefit trust (the "Base Trust"). The 1993 Settlement Agreement resolved a class action lawsuit originally filed in 1992 regarding the restructuring of our then applicable retiree health care and life insurance benefits. Contributions for the three and nine months ended July 31, 2018 and 2017, as well as anticipated contributions for the remainder of 2018, are not material.

Components of Net Periodic Benefit Expense

Net periodic benefit expense included in our Consolidated Statements of Operations, and other amounts recognized in our Consolidated Statements of Stockholders' Deficit, for the three and nine months ended July 31, 2018 and 2017 are comprised of the following:

	Three Months Ended July 31,												Nine Months Ended July 31,
	Pension Benefits						Health and Life Insurance Benefits						Pension Benefits						Health and Life Insurance Benefits
(in millions)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost for benefits earned during the period	$	1		$	2		$	1		$	1		$	5		$	6		$	3		$	4
Interest on obligation	27			27			10			11			81			80			32			35
Amortization of cumulative loss	26			30			3			6			79			89			7			17
Settlements	—			23			—			—			9			23			—			—
Contractual termination benefits	—			9			—			4			—			10			—			4
Curtailments and other	—			—			—			(58		)	—			—			—			(58		)
Premiums on pension insurance	1			4			—			—			3			12			—			—
Expected return on assets	(40		)	(40		)	(5		)	(5		)	(121		)	(119		)	(17		)	(17		)
Net periodic benefit expense	$	15		$	55		$	9		$	(41	)	$	56		$	101		$	25		$	(15	)

In the nine months ended July 31, 2018, we purchased a group annuity contract for certain retired pension plan participants resulting in a plan remeasurement. As a result, a net actuarial loss of $2 million was recognized as a component of Accumulated other comprehensive loss and a pension settlement accounting expense of $9 million was recognized in SG&A expenses in our Consolidated Statements of Operations.

In April 2016, we filed a qualified partial wind-up report for approval by FSCO related to the 2011 closure of our Chatham, Ontario plant. FSCO provided formal approval in January 2017. As a result of an ongoing administration review ordered in conjunction with the partial wind-up, we recognized $1 million of contractual termination charges in the first quarter of 2017. During the third quarter of 2017, we finalized the Chatham closure agreement. This resulted in the release of $66 million in OPEB liabilities. In addition, a pension settlement accounting charge of $23 million was recorded as a result of lump-sum payments made to certain pension plan participants. These charges and benefits were recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations. See Note 2, Restructurings and Impairments for further discussion. As a result of the pension and OPEB plan remeasurements in connection with the finalization of the Chatham closure agreement, net actuarial gains of $21 million were recognized as a component of Accumulated other comprehensive loss in the third quarter of 2017.

In the third quarter of 2017, we committed to a plan to cease engine production at our Melrose Park Facility in the second quarter of fiscal year 2018. As a result, in the third quarter of 2017, we recognized $9 million of pension and $4 million of OPEB contractual termination benefits charges and $10 million of OPEB curtailment charges. These charges were recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations. See Note 2, Restructurings and Impairments for further discussion.A pension curtailment gain of $2 million and net actuarial gains of $91 million resulting from pension and OPEB remeasurements in connection with our Melrose Park Facility announcement were recognized as a component of Accumulated other comprehensive loss in the third quarter of 2017.

21

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

Also, in the third quarter of 2017, in accordance with the intraperiod tax allocation rules, we recorded a net benefit of $35 million related to domestic continuing operations in Income tax expense in our Consolidated Statements of Operations, and an offsetting reduction in Other comprehensive income due to the remeasurement of certain pension and OPEB plans.

Defined Contribution Plans and Other Contractual Arrangements

Our defined contribution plans cover a substantial portion of domestic salaried employees and certain domestic represented employees. The defined contribution plans contain a 401(k) feature and provide most participants with a matching contribution from the Company. We deposit the matching contribution annually. Many participants covered by the plans receive annual Company contributions to their retirement accounts based on an age-weighted percentage of the participant's eligible compensation for the calendar year. Defined contribution expense pursuant to these plans was $7 million and $25 million in the three and nine months ended July 31, 2018, respectively, and $7 million and $22 million in the three and nine months ended July 31, 2017, respectively.

In accordance with the 1993 Settlement Agreement, an independent Retiree Supplemental Benefit Trust (the "Supplemental Trust") was established. The Supplemental Trust, and the benefits it provides to certain retirees pursuant to a certain Retiree Supplemental Benefit Program under the 1993 Settlement Agreement ("Supplemental Benefit Program"), is not part of our consolidated financial statements.

Our contingent profit sharing obligations under a certain Supplemental Benefit Trust Profit Sharing Plan ("Supplemental Benefit Trust Profit Sharing Plan") will continue until certain funding targets defined by the 1993 Settlement Agreement are met. We record profit sharing accruals based on the operating performance of the entities that are included in the determination of qualifying profits. For more information on pending arbitration regarding the Supplemental Benefit Trust Profit Sharing Plan, see Note 10, Commitments and Contingencies.

8. Income Taxes

We compute, on a quarterly basis, an estimated annual effective tax rate considering ordinary income and related income tax expense. Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. Ordinary income refers to income (loss) before income tax expense excluding significant unusual or infrequently occurring items. The tax effect of a significant unusual or infrequently occurring item is recorded in the interim period in which the item occurs. Items included in income tax expense in the periods in which they occur include the tax effects of cumulative changes in tax laws or rates, foreign exchange gains and losses, adjustments to uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment regarding the ability to realize deferred tax assets in future years.

On December 22, 2017, the Tax Act was signed into U.S. law. The Tax Act reduces the statutory corporate income tax rate from 35% to 21%, effective January 1, 2018. This rate reduction requires us to remeasure our deferred taxes as of the date the Tax Act was enacted. Our U.S. deferred tax assets, net of deferred tax liabilities, were remeasured and reduced by $1.0 billion, entirely offset by a valuation allowance reduction. As a result, the remeasurement of our deferred tax assets, net of deferred tax liabilities, including the valuation allowance, did not impact our income tax expense or net loss.

The Tax Act imposes a tax on the mandatory deemed repatriation of earnings of the Company’s foreign subsidiaries and results in a one-time transition tax. We have provisionally determined that any additional foreign earnings included in taxable income due to deemed repatriation and related income taxes will be offset with existing deferred tax assets. The deferred tax impact has a valuation allowance offset, resulting in no impact on our income tax expense or net income. Our estimates related to the deemed repatriation may change as the Company determines the effect of foreign earnings, foreign cash balances and any regulatory guidance.

The Tax Act also adds many new provisions, including changes to limits on the deductions for executive compensation and interest expense, a tax on global intangible low‐taxed income (“GILTI”), the base erosion anti‐abuse tax (“BEAT”) and a deduction for foreign derived intangible income (“FDII”). We are still evaluating the impact of these provisions of the Tax Act, which do not apply until our taxable year beginning November 1, 2018. Companies can either account for taxes on GILTI as incurred or recognize deferred taxes when basis differences exist that are expected to affect the amount of the GILTI inclusion upon reversal. The Company is electing to account for taxes on GILTI as incurred.

We have not completed our accounting for the income tax effects of the Tax Act. However, we have computed estimates or “provisional” amounts as permitted by the SEC’s Staff Accounting Bulletin No. 118 (“SAB”) issued on December 22, 2017. Under the SAB companies are allowed a measurement period of up to one year from the date of enactment to complete the accounting for the effects of the Tax Act. We will continue to evaluate the Tax Act’s impact, which may change as a result of additional Treasury guidance, federal or state legislative actions, or changes in accounting standards or related interpretations. The Company’s analyses performed to date are sufficient to calculate a reasonable estimate of the impacts of the Tax Act.

22

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

We have evaluated the need to maintain a valuation allowance for deferred tax assets based on our assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. We continue to maintain a valuation allowance on the majority of our U.S. deferred tax assets as well as certain foreign deferred tax assets that we believe, on a more-likely-than-not basis, will not be realized based on our analysis of the relevant facts and circumstances. For all remaining deferred tax assets, while we believe that it is more likely than not that they will be realized, we believe that it is reasonably possible that additional deferred tax asset valuation allowances could be required in the next twelve months.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of July 31, 2018, the amount of liability for uncertain tax positions was $30 million. The liability at July 31, 2018 has a recorded offsetting tax benefit associated with various issues that total $9 million. If the unrecognized tax benefits are recognized, all would impact our effective tax rate. However, to the extent we continue to maintain a full valuation allowance against certain deferred tax assets, the effect may be in the form of an increase in the deferred tax asset related to our net operating loss carryforward, which would be offset by a full valuation allowance.

We recognize interest and penalties related to uncertain tax positions as part of income tax expense. Total interest and penalties related to our uncertain tax positions resulted in an income tax benefit of $1 million for the three and nine months ended July 31, 2018 and an income tax expense of less than $1 million and $1 million for the three and nine months ended July 31, 2017.

We have tax years open for examination going back to 2001 with various significant taxing jurisdictions, including the U.S., Canada, Mexico, and Brazil. In connection with the examination of tax returns, contingencies may arise that generally result from differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues or expenses in taxable income, or the sustainability of tax credits to reduce income taxes payable. We believe we have sufficient accruals for our contingent tax liabilities. Annual tax provisions include amounts considered sufficient to pay assessments that may result from examinations of prior year tax returns, although actual results may differ. While it is probable that the liability for unrecognized tax benefits may increase or decrease during the next twelve months, we do not expect any such change would have a material effect on our financial condition, results of operations, or cash flows.

9. Fair Value Measurements

For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect our assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, we classify each fair value measurement as follows:

• Level 1—based upon quoted prices for identical instruments in active markets,

• Level 2—based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations, all of whose significant inputs are observable, and

• Level 3—based upon one or more significant unobservable inputs.

The following section describes key inputs and assumptions in our valuation methodologies:

Cash Equivalents and Restricted Cash Equivalents—We classify as cash equivalents and restricted cash equivalents highly liquid investments, with an original maturity of 90 days or less, which may include U.S. government and federal agency securities, commercial paper, and other highly liquid investments. The carrying amounts of cash and cash equivalents and restricted cash approximate fair value because of the short-term maturity and highly liquid nature of these instruments.

Marketable Securities—Our marketable securities portfolios are classified as available-for-sale and may include investments in U.S. government and federal agency securities, commercial paper and other investments with an original maturity greater than 90 days. We use quoted prices from active markets to determine fair value.

Derivative Assets and Liabilities—We measure the fair value of derivatives assuming that the unit of account is an individual derivative transaction and that each derivative could be sold or transferred on a stand-alone basis. We classify within Level 2 our derivatives that are traded over-the-counter and valued using internal models based on observable market inputs. In certain cases, market data is not available and we estimate inputs such as in situations where trading in a particular commodity is not active. Measurements based upon these unobservable inputs are classified within Level 3.

23

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

Guarantees—We provide certain guarantees of payments and residual values, to which losses are generally capped, to specific counterparties. The fair value of these guarantees includes a contingent component and a non-contingent component that are based upon internally developed models using unobservable inputs. We classify these liabilities within Level 3. For more information regarding guarantees, see Note 10, Commitments and Contingencies.

Impaired Finance Receivables and Impaired Assets Under Operating Leases—Fair values of the underlying collateral are determined by current and forecasted sales prices, aging of and demand for used trucks, and the mix of sales through various market channels. For more information regarding impaired finance receivables, see Note 4, Allowance for Doubtful Accounts, and for more information regarding impaired assets under operating leases, see Note 2, Restructurings and Impairments.

Impaired Property, Plant and Equipment—We measure the fair value by discounting future cash flows expected to be received from the operation of, or disposition of, the asset or asset group that has been determined to be impaired. For more information regarding the impairment of property, plant and equipment, see Note 2, Restructurings and Impairments.

The following table presents the financial instruments measured at fair value on a recurring basis:

	As of July 31, 2018								As of October 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Marketable securities:
U.S. government and federal agency securities	$	95	$	—	$	—	$	95	$	370	$	—	$	—	$	370
Derivative financial instruments:
Commodity forward contracts(A)	—		5		—		5		—		3		—		3
Foreign currency contracts(A)	—		1		—		1		—		3		—		3
Interest rate caps(B)	—		1		—		1		—		1		—		1
Total assets	$	95	$	7	$	—	$	102	$	370	$	7	$	—	$	377
Liabilities
Derivative financial instruments:
Commodity forward contracts(C)	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1
Foreign currency contracts(C)	—		1		—		1		—		1		—		1
Guarantees	—		—		20		20		—		—		21		21
Total liabilities	$	—	$	1	$	20	$	21	$	—	$	2	$	21	$	23

_________________________

(A) The asset value of commodity forward contracts and foreign currency contracts is included in Other current assets in the accompanying Consolidated Balance Sheets.

(B) The asset value of interest rate caps is included in Other noncurrent assets in the accompanying Consolidated Balance Sheets.

(C) The liability value of commodity forward contracts and foreign currency contracts is included in Other current liabilities in the accompanying Consolidated Balance Sheets.

The following table presents the changes for those financial instruments classified within Level 3 of the valuation hierarchy:

	Three Months Ended July 31,						Nine Months Ended July 31,
(in millions)	2018			2017			2018			2017
Guarantees, at beginning of period	$	(27	)	$	(19	)	$	(21	)	$	(23	)
Transfers out of (into) Level 3	—			—			—			—
Net terminations (issuances)	7			—			(1		)	1
Settlements	—			—			2			3
Guarantees, at end of period	$	(20	)	$	(19	)	$	(20	)	$	(19	)

In addition to the methods and assumptions we use for the financial instruments recorded at fair value as discussed above, we use the following methods and assumptions to estimate the fair value for our other financial instruments that are not marked to market on a recurring basis. The carrying amounts of Cash and cash equivalents, Restricted cash, and Accounts payable approximate fair values because of the short-term maturity and highly liquid nature of these instruments. Finance receivables generally consist of retail and wholesale accounts and retail and wholesale notes.

24

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

The carrying amounts of Trade and other receivables and retail and wholesale accounts approximate fair values as a result of the short-term nature of the receivables. The carrying amounts of wholesale notes approximate fair values as a result of the short-term nature of the wholesale notes and their variable interest rate terms. Due to the nature of the aforementioned financial instruments, they have been excluded from the fair value amounts presented in the table below.

The fair values of our retail notes are estimated by discounting expected cash flows at estimated current market rates. The fair values of our retail notes are classified as Level 3 financial instruments.

The fair values of our debt instruments classified as Level 1 were determined using quoted market prices. The 6.75% Tax Exempt Bonds, due 2040, are traded, but the trading market is illiquid, and as a result, the Loan Agreement underlying the Tax Exempt Bonds is classified as Level 2. The fair values of our Level 3 debt instruments are generally determined using internally developed valuation techniques such as discounted cash flow modeling. Inputs such as discount rates and credit spreads reflect our estimates of assumptions that market participants would use in pricing the instrument and may be unobservable.

The following tables present the carrying values and estimated fair values of financial instruments:

	As of July 31, 2018
	Estimated Fair Value								Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Retail notes	$	—	$	—	$	190	$	190	$	194
Liabilities
Debt:
Manufacturing operations
Senior Secured Term Loan Credit Agreement, due 2025	—		—		1,596		1,596		1,573
6.625% Senior Notes, due 2026	—		1,149		—		1,149		1,083
4.50% Senior Subordinated Convertible Notes, due 2018(A)	201		—		—		201		199
4.75% Senior Subordinated Convertible Notes, due 2019(A)	428		—		—		428		402
Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040	—		238		—		238		220
Financed lease obligations	—		—		121		121		121
Other	—		—		25		25		25
Financial Services operations
Asset-backed debt issued by consolidated SPEs, due serially through 2023	—		—		889		889		888
Senior secured NFC Term Loan, due 2025	—		—		398		398		394
Bank credit facilities, due dates from 2018 through 2024	—		—		477		477		500
Commercial paper, program matures in 2022	88		—		—		88		88
Borrowings secured by operating and finance leases, due serially through 2024	—		—		104		104		105

25

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

	As of October 31, 2017
	Estimated Fair Value								Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Retail notes	$	—	$	—	$	153	$	153	$	161
Liabilities
Debt:
Manufacturing operations
Senior Secured Term Loan Credit Facility, as Amended, due 2020	—		—		1,019		1,019		1,003
8.25% Senior Notes, due 2022	1,450		—		—		1,450		1,423
4.50% Senior Subordinated Convertible Notes, due 2018(A)	208		—		—		208		194
4.75% Senior Subordinated Convertible Notes, due 2019(A)	446		—		—		446		394
Loan Agreement related to 6.50% Tax Exempt Bonds, due 2040	—		243		—		243		220
Financed lease obligations	—		—		130		130		130
Other	—		—		23		23		39
Financial Services operations
Asset-backed debt issued by consolidated SPEs, at various rates, due serially through 2023	—		—		851		851		849
Bank credit facilities, at fixed and variable rates, due dates from 2018 through 2023	—		—		592		592		616
Commercial paper, at variable rates, program matures in 2022	92		—		—		92		92
Borrowings secured by operating and finance leases, at various rates, due serially through 2024	—		—		94		94		94

_________________________

(A) The carrying value represents the consolidated financial statement amount of the debt which excludes the allocation of the conversion feature to equity, while the estimated fair value is derived from quoted prices in active markets which include the equity feature.

10. Commitments and Contingencies

Guarantees

We occasionally provide guarantees that could obligate us to make future payments if the primary entity fails to perform under its contractual obligations. We have recognized liabilities for some of these guarantees in our Consolidated Balance Sheets as they meet the recognition and measurement provisions of U.S. GAAP. In addition to the liabilities that have been recognized, we are contingently liable for other potential losses under various guarantees. We do not believe that claims that may be made under such guarantees would have a material effect on our financial condition, results of operations, or cash flows.

Under the terms of the Navistar Capital Operating Agreement, BMO Financial Group and its wholly-owned subsidiary BMO Harris Bank N.A. (together "BMO") is our third-party preferred source of retail customer financing for equipment offered by us and our dealers in the U.S. We refer to this alliance as "Navistar Capital." The Navistar Capital Operating Agreement contains a loss sharing arrangement for certain credit losses. Under the loss sharing arrangement, as amended, we generally reimburse BMO for credit losses in excess of the first 10% of the financed value of a contract; for certain leases we reimburse BMO for credit losses up to a maximum of the first 9.5% of the financed value of those lease contracts. Our exposure to loss is mitigated because contracts under the Navistar Capital Operating Agreement are secured by the financed equipment. There was $1.4 billion of outstanding loan principal and operating lease payments receivable at both July 31, 2018 and October 31, 2017, financed through the Navistar Capital Operating Agreement and subject to the loss sharing arrangements in the U.S. The related financed values of these outstanding contracts were $2.5 billion and $2.4 billion at July 31, 2018 and October 31, 2017, respectively. Generally, we do not carry the contracts under the Navistar Capital Operating Agreement on our Consolidated Balance Sheets. However, for certain Navistar Capital financed contracts which we have accounted for as borrowings, we have recognized equipment leased to others of $105 million and $116 million and financed lease obligations of $121 million and $129 million, in our Consolidated Balance Sheets as of July 31, 2018 and October 31, 2017, respectively.

26

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

We also have issued a limited number of residual value guarantees, for which losses are generally capped. If substantial risk of loss has not transferred, we account for these arrangements as operating leases and revenue is recognized on a straight-line basis over the term of the lease. If substantial risk of loss has transferred, revenue is recognized upon sale and the amounts of the guarantees are estimated and recorded. Our guarantees are contingent upon the fair value of the leased assets at the end of the lease term. We have recognized liabilities for some of these guarantees in our Consolidated Balance Sheets as they meet recognition and measurement provisions. In addition to the liabilities that have been recognized, we are contingently liable for other potential losses under various guarantees that are not recognized in our Consolidated Balance Sheets. We do not believe claims that may be made under such guarantees would have a material effect on our financial condition, results of operations, or cash flows.

We obtain certain stand-by letters of credit and surety bonds from third-party financial institutions in the ordinary course of business when required under contracts or to satisfy insurance-related requirements. As of July 31, 2018, the amount of stand-by letters of credit and surety bonds was $119 million.

In addition, as of July 31, 2018, we have $70 million of outstanding purchase commitments and contracts with $18 million of cancellation fees with expiration dates through 2025. We have entered into industrial participation agreements, commonly known as offset agreements, with customers outside of the U.S. to facilitate economic value back to entities within the foreign nations as the result of their procurement of goods and services from us. These commitments may be satisfied by our placement of supply contracts to established companies within the foreign nations, providing capabilities to the foreign nations, or the creation of joint ventures that generate profits and hire nationals from within the foreign nations. In certain cases, penalties could be imposed if we do not meet our industrial participation commitments. As of July 31, 2018, we have outstanding industrial participation agreements totaling $228 million that extend through 2025. Purchase order commitments associated with fulfilling the industrial participation agreements are included in the purchase commitments amount above.

In the ordinary course of business, we also provide routine indemnifications and other guarantees, the terms of which range in duration and often are not explicitly defined. We do not believe these will result in claims that would have a material impact on our financial condition, results of operations, or cash flows.

Environmental Liabilities

We have been named a potentially responsible party ("PRP"), in conjunction with other parties, in a number of cases arising under an environmental protection law, the Comprehensive Environmental Response, Compensation, and Liability Act, popularly known as the "Superfund" law. These cases involve sites that allegedly received wastes from current or former Company locations. Based on information available to us which, in most cases, consists of data related to quantities and characteristics of material generated at current or former Company locations, material allegedly shipped by us to these disposal sites, as well as cost estimates from PRPs and/or federal or state regulatory agencies for the cleanup of these sites, a reasonable estimate is calculated of our share of the probable costs, if any, and accruals are recorded in our consolidated financial statements. These accruals are generally recognized no later than upon completion of the remedial feasibility study and are not discounted to their present value. We review all accruals on a regular basis and believe that, based on these calculations, our share of the potential additional costs for the cleanup of each site will not have a material effect on our financial condition, results of operations, or cash flows.

In addition, other sites formerly owned by us or where we are currently operating have been identified as having soil and groundwater contamination. While investigations and cleanup activities continue at these sites, we believe that we have appropriate accruals to cover costs to complete the cleanup of all sites.

We have accrued $18 million for these and other environmental matters, which are included within Other current liabilities and Other noncurrent liabilities, as of July 31, 2018. The majority of these accrued liabilities are expected to be paid subsequent to 2019.

Along with other vehicle manufacturers, we have been subject to an increased number of asbestos-related claims in recent years. In general, these claims relate to illnesses alleged to have resulted from asbestos exposure from component parts found in older vehicles, although some cases relate to the alleged presence of asbestos in our facilities. In these claims, we are generally not the sole defendant, and the claims name as defendants numerous manufacturers and suppliers of a wide variety of products allegedly containing asbestos. We have strongly disputed these claims, and it has been our policy to defend against them vigorously. Historically, the actual damages paid out to claimants have not been material in any year to our financial condition, results of operations, or cash flows. It is possible that the number of these claims will continue to grow, and that the costs for resolving asbestos related claims could become significant in the future.

27

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

Legal Proceedings

Overview

We are subject to various claims arising in the ordinary course of business and are party to various legal proceedings that constitute ordinary, routine litigation incidental to our business. The majority of these claims and proceedings relate to commercial, product liability, and warranty matters. In addition, from time to time we are subject to various claims and legal proceedings related to employee compensation, benefits, and benefits administration including, but not limited to, compliance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Department of Labor requirements.

In our opinion, apart from the actions set forth below, the disposition of these proceedings and claims, after taking into account recorded accruals and the availability and limits of our insurance coverage, will not have a material adverse effect on our business or our financial condition, results of operations, or cash flows.

Profit Sharing Disputes

Pursuant to the 1993 Settlement Agreement, the program administrator and named fiduciary of the Supplemental Benefit Program is the Supplemental Benefit Program Committee (the "Committee"), composed of individuals not appointed by NI or NIC. In August 2013, the Committee filed a motion for leave to amend its February 2013 complaint (which sought injunctive relief for the Company to provide certain information to which it was allegedly entitled under the Supplemental Benefit Trust Profit Sharing Plan) and a proposed amended complaint (the "Profit Sharing Complaint") in the U.S. District Court for the Southern District of Ohio (the "Court"). Leave to file the Profit Sharing Complaint was granted by the Court in October 2013. In its Profit Sharing Complaint, the Committee alleged the Company breached the 1993 Settlement Agreement and violated ERISA by failing to properly calculate profit sharing contributions due under the Supplemental Benefit Trust Profit Sharing Plan. The Committee seeks damages in excess of $50 million, injunctive relief and reimbursement of attorneys' fees and costs. Following the resolution of a procedural dispute by the U.S. Court of Appeals for the 6th Circuit, in May 2015, the Court ordered that the claims in the Profit Sharing Complaint be arbitrated pursuant to the dispute resolution procedures in the Supplemental Benefit Trust Profit Sharing Plan. In November 2015, the Company and the Committee selected an arbitrator and the discovery process commenced. On August 1, 2016, the parties submitted briefs on issues related to the scope of the arbitration. On June 29, 2017, the arbitrator ruled, among other things, that the arbitration will include Supplemental Benefit Trust Profit Sharing Plan calculations for the years ending October 31, 2001 through October 31, 2014. On May 2, 2018, the Committee submitted to the arbitrator a proposed schedule for the presentation of the issues to be addressed in the arbitration. On May 30, 2018, the Company submitted to the arbitrator a response in opposition to the Committee’s proposal and proposed a different schedule for the presentation of the issues in the arbitration. As noted under “Retiree Health Care Litigation” below, on August 14, 2018, the Company filed a motion to schedule a status hearing, in which the Company requested an in-person hearing to discuss global resolution of various disputes under the 1993 Settlement Agreement, including the pending Profit Sharing Complaint.

In addition, various local bargaining units of the UAW have filed separate grievances pursuant to the profit sharing plans under various collective bargaining agreements in effect between the Company and the UAW that may have similar legal and factual issues as the Profit Sharing Complaint. On August 28, 2018, the court scheduled an in-person status conference for October 12, 2018.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

Retiree Health Care Litigation

On October 21, 2016, two lawsuits were filed in the U.S. District Court for the Southern District of Ohio relating to postretirement healthcare and life insurance obligations under the 1993 Settlement Agreement. The first lawsuit (the “Committee’s Complaint”) was filed by the Supplemental Benefit Program Committee. 

The Committee’s Complaint was filed against NIC, NI, NFC and a former affiliate, all of which are parties to the 1993 Settlement Agreement. Since January 1, 2012, the Navistar, Inc. Retiree Health Benefit Trust, created pursuant to the 1993 Settlement Agreement (the “Base Trust”), has received certain Medicare Part D subsidies from the federal Centers for Medicare and Medicaid Services that were made available for prescription drug benefits provided to Medicare-eligible seniors pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and has also received certain Medicare Part D coverage-gap discounts from prescription drug manufacturers that were made available to eligible seniors pursuant to the Patient Protection and Affordable Care Act (collectively, the “Subsidies”). 

28

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

The Committee alleges, among other things, that the defendants breached the 1993 Settlement Agreement since January 1, 2012 by causing the Base Trust to allocate the Subsidies in a manner that improperly decreased the defendants’ contributions to the Base Trust and increased retiree contributions. The Committee seeks damages, attorneys’ fees and costs for all alleged violations of the 1993 Settlement Agreement, including approximately $26 million which the Committee alleges is the eligible retirees’ “fair share” of the Subsidies that were allegedly misappropriated by the defendants from January, 2012 through April, 2015. 

The second lawsuit was filed by two individual members of the Committee (the “Committee Members”) who are retirees and participants in the Navistar, Inc. Health Benefit and Life Insurance Plan (the “Plan”) created pursuant to the 1993 Settlement Agreement. The Committee Members’ complaint (the “Committee Members’ Complaint”) was filed against NIC, NI, NFC and certain other former or current affiliates, all of which are parties or employers as defined in the 1993 Settlement Agreement. The Committee Members allege, among other things, that the Company violated the terms of the Plan, breached a fiduciary duty under ERISA, and engaged in ERISA-prohibited transactions by improperly using the Plan’s assets (a portion of the Subsidies) for the Company’s benefit. 

The Committee Members request that the court order the defendants to restore all losses to the Base Trust, including approximately $26 million, which the Committee Members allege is the Plan participants’ “fair share” of the Subsidies that were allegedly misappropriated by the defendants from January 2012 through April 2015. The Committee Members also request that the court enjoin the defendants from alleged future violations of the Plan and ERISA with respect to treatment of the Subsidies, order the defendants to remedy all alleged ERISA-prohibited transactions and pay the Committee Members’ attorneys’ fees and costs.

The defendants filed motions to dismiss each respective complaint on January 10, 2017. On May 10, 2017, the court dismissed the Committee's Complaint with prejudice, stating that the Committee lacked standing to bring its claims. With respect to the Committee Members’ Complaint, the court declined to dismiss the complaint, but ordered the parties to conduct discovery regarding whether the Committee Members’ Complaint is barred by the applicable statute of limitations and to file a motion for summary judgment thereafter on that issue of timeliness. The defendants filed their motion for summary judgment on September 21, 2017, the Committee Members’ filed their opposition on November 2, 2017, and the defendants filed their reply on November 22, 2017. On June 26, 2018, the court conditionally overruled the defendants’ motion for summary judgment. The court bifurcated the case and will first conduct a trial on the issue of whether the Committee Members’ Complaint is barred by the applicable statute of limitations in September 2018.

On August 14, 2018, under the original Shy et. al. v. Navistar International Corporation, Civil Action No. 3:92-CV-333 (S.D. Ohio 1992), we filed a motion to schedule a status hearing to request an in-person hearing to discuss global resolution of various disputes under the 1993 Settlement Agreement, including but not limited to resolving the pending Profit Sharing Complaint and Committee Members’ Complaint described above. On August 28, 2018, the court scheduled an in-person status conference for October 12, 2018.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

FATMA Notice

International Indústria Automotiva da América do Sul Ltda. ("IIAA"), formerly known as Maxion International Motores S/A ("Maxion"), now a wholly owned subsidiary of the Company, received a notice (the “FATMA Notice”) in July 2010 from the State of Santa Catarina Environmental Protection Agency ("FATMA") in Brazil. The FATMA Notice alleged that Maxion sent waste to a facility owned and operated by a company known as Natureza (the “Natureza Facility”) and that soil and groundwater contamination had occurred at the Natureza Facility.

The FATMA Notice asserted liability against Maxion and assessed an initial penalty in the amount of R$2 million (the equivalent of approximately less than US$1 million at July 31, 2018), which is not due and final until all administrative appeals are exhausted. Maxion was one of numerous companies that received similar notices. IIAA filed an administrative defense in August 2010 and has not yet received a decision following that filing.

In addition to the matter described above, there is a suit pending in the federal court of Brazil in which the federal district attorney has sued (a) FATMA, for claims related to FATMA’s actions in connection with licensing and inspection procedures related to the Natureza Facility, and (b) Selamix, as the current owner of the Natureza Facility. In this federal suit, Selamix was found liable for the contamination at the Natureza Facility due to it being the successor owner of the facility. However, the federal court’s decision does not prohibit Selamix from seeking to recover its damages from third parties that contributed to the contamination at the Natureza Facility.

29

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

In connection with the FATMA Notice, IIAA presented a motion to the district attorney of the State of Santa Catarina (the “SC District Attorney”) to set forth its defenses and correct inaccuracies in the FATMA Notice in August 2017. In September 2017, the SC District Attorney informed IIAA that it intended to present a Consent Agreement to all of the companies that sent waste to Natureza to determine the allocation of the liability for generating the waste which led to the contamination of the Natureza Facility. IIAA then filed a motion requesting that the SC District Attorney consider certain facts and circumstances prior to presenting the Consent Agreement.

In January 2018, the SC District Attorney, local and state authorities, Selamix, IIAA and the 14 other companies that are alleged to have significantly contributed to the contamination met to discuss the matter. Selamix then presented three proposals for conducting a preliminary environmental assessment in the area to determine the allocation of liability among the companies. In March 2018, Selamix informed the SC District Attorney that it would voluntarily conduct a preliminary environmental study at the Natureza Facility in an attempt to determine and allocate the liability for the contamination pursuant to an agreement with all of the companies after the study is completed. The SC District Attorney agreed to suspend further inquiry into the matter until Selamix’s study had been completed. The other companies involved in the matter have expressed an interest in having an independent environmental study conducted. The SC District Attorney has indicated that it may consider requiring an independent environmental study after Selamix’s environmental study is completed.

In June 2018, Selamix presented its Environmental Preliminary Assessment Report to the SC District Attorney and the other companies alleged to have contributed to the contamination and the report indicated that the entire property should be subject to further studies to confirm the type and extent of the contamination due to signs of buried residues in several areas. Selamix also presented commercial proposals from two additional different companies specializing in environmental studies to perform the next steps of the technical work. The SC District Attorney then requested a third commercial proposal which will be presented and paid for by Selamix.

IIAA continues to dispute the allegations in the FATMA Notice and intends to continue to vigorously defend itself. Currently, no demands or offers are outstanding.

Sao Paulo Groundwater Notice

In March 2014, IIAA, along with other nearby companies, received from the Sao Paulo District Attorney (the "District Attorney") a notice and proposed Consent Agreement relating to alleged neighborhood-wide groundwater contamination at or around its Sao Paulo manufacturing facility. The proposed Consent Agreement sought certain groundwater investigations and other technical relief and proposed sanctions in the amount of R$3 million (the equivalent of approximately less than US$1 million at July 31, 2018). In November 2014, IIAA extended a settlement offer. The parties remained in discussions and IIAA’s settlement offer was never accepted, rejected or countered by the District Attorney.

On August 31, 2016, the District Attorney filed civil actions against IIAA and other companies in the Central Forum of the capital of the State of São Paulo seeking soil and groundwater investigation and remediation, together with monetary payment in an unspecified amount. IIAA filed its defense to the civil action on January 26, 2017, alleging that IIAA has made all necessary investigations and has taken remedial measures to address the contamination and that Companhia Ambiental do Estado de São Paulo ("CETESB"), the environmental agency of São Paulo State, has agreed to the remedial measures taken by IIAA. On June 20, 2017, IIAA presented a petition requesting a 90-day suspension of the lawsuit. IIAA has since held and is currently engaged in discussions with the District Attorney regarding settlement of this matter. The District Attorney agreed to an initial suspension on June 30, 2017 and a subsequent suspension for an additional 90 days which ended on July 9, 2018.

A new district attorney (the “New District Attorney”) assumed responsibility for the case in February 2018. The New District Attorney would like the companies involved to try to reach a settlement agreement as to the remediation efforts to be taken after having discussions and negotiations with the New District Attorney’s technical experts. IIAA attempted to schedule a meeting with the New District Attorney’s technical experts. IIAA met with the New District Attorney on July 25, 2018. The New District Attorney has indicated that he will request information related to the status of the current remediation needs from CETESB. After receiving that information, the New District Attorney has indicated that he will schedule a meeting with IIAA to discuss the proposed terms of a potential settlement agreement and granted a third suspension on August 14, 2018 which ends on November 14, 2018.

There are no current demands or offers outstanding.

30

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

MaxxForce Engine EGR Warranty Litigation

On June 24, 2014, N&C Transportation Ltd. ("N&C") filed a putative class action lawsuit against NIC, NI, Navistar Canada Inc., and Harbour International Trucks in Canada in the Supreme Court of British Columbia (the "N&C Action"). Subsequently, seven additional, similar putative class action lawsuits have been filed in Canada (together with the N&C Action, the "Canadian Actions").

From June 13-17, 2016, the court conducted a certification hearing in the N&C Action. On November 16, 2016, the court certified a Canada-wide class comprised of persons who purchased heavy-duty trucks equipped with Advanced EGR MaxxForce 11, MaxxForce 13, and MaxxForce 15 engines designed to meet 2010 EPA regulations. The court in the N&C Action denied certification to persons who operated but did not buy the trucks in question. On November 2, 2017, NIC, NI, Navistar Canada Inc. and Harbour International Trucks filed a notice of appeal. On December 8, 2017, the plaintiff filed a notice of cross-appeal. Both the appeal and cross-appeal were heard by the British Columbia Court of Appeal on February 9, 2018. On August 1, 2018, the appellate court denied Navistar's appeal and granted, in part, N&C's cross-appeal and as such certified three narrow issues on whether misrepresentations were made in Navistar's advertising materials. The next step will be an attendance before the case management judge regarding the details of the notice of certification to be given to the class. No date for this attendance has been set.

On June 5, 2017, a hearing was held in the Quebec putative class action lawsuit captioned 4037308 Canada Inc. v. Navistar Canada Inc., NI, and NIC. At that hearing, the court ruled on certain motions regarding evidence related to certification but deferred a ruling on plaintiff’s proposed amendment to narrow the proposed class to Quebec-only purchasers and lessees of model year 2010-13 vehicles containing MaxxForce 11, 13, and 15 liter engines. On November 23, 2017, we filed a motion to stay the Quebec case until the British Columbia Court of Appeal rules on the certification order in the N&C Action. The stay motion was filed on November 23, 2017 and was granted on December 7, 2017. The decision of the British Columbia Court of Appeal was provided to the Quebec court.  The decision triggered a 30 day period within which the defendants must agree with class counsel on the presentation of its outstanding motions or on a date for the hearing of the motion to authorize proceeding as a class. An agreement has not yet been reached on the presentation of the outstanding motions nor have any hearing dates been set.

In the Manitoba putative class action lawsuit captioned Vern Brown v. Navistar International Corporation and Navistar Canada, Inc., the Court held a case management conference on June 29, 2018, after the plaintiff failed to file a complete certification record by the previously court-ordered due date. The plaintiff advised that it expected to file its remaining certification affidavits by August 31, 2018, and the court suspended certification scheduling in the interim. The plaintiff filed an additional affidavit on July 5, 2018. A new certification schedule is expected to be ordered at the next case management conference on September 6, 2018. There are no certification or other hearings scheduled in any of the other Canadian Actions at this time.

On July 7, 2014, Par 4 Transport, LLC filed a putative class action lawsuit against NI in the United States District Court for the Northern District of Illinois (the "Par 4 Action"). Subsequently, seventeen additional putative class action lawsuits were filed in various United States district courts, including the Northern District of Illinois, the Eastern District of Wisconsin, the Southern District of Florida, the Middle District of Pennsylvania, the Southern District of Texas, the Western District of Kentucky, the District of Minnesota, the Northern District of Alabama, and the District of New Jersey (together with the Par 4 Action, the "U.S. Actions"). Some of the U.S. Actions name both NIC and NI, and allege matters substantially similar to the Canadian Actions. More specifically, the Canadian Actions and the U.S. Actions (collectively, the "EGR Class Actions") seek to certify a class of persons or entities in Canada or the United States who purchased and/or leased a ProStar or other Navistar vehicle equipped with a model year 2008-2013 MaxxForce Advanced EGR engine.

In substance, the EGR Class Actions allege that the MaxxForce Advanced EGR engines are defective and that the Company and NI failed to disclose and correct the alleged defect. The EGR Class Actions assert claims based on theories of contract, breach of warranty, consumer fraud, unfair competition, misrepresentation and negligence. The EGR Class Actions seek relief in the form of monetary damages, punitive damages, declaratory relief, interest, fees, and costs.

On October 3, 2014, NIC and NI filed a motion before the United States Judicial Panel on Multidistrict Litigation (the "MDL Panel") seeking to transfer and consolidate before Judge Joan B. Gottschall of the United States District Court for the Northern District of Illinois all of the then-pending U.S. Actions, as well as certain non-class action MaxxForce Advanced EGR engine lawsuits pending in various federal district courts.

On December 17, 2014, Navistar's motion to consolidate the U.S. Actions and certain other non-class action lawsuits was granted. The MDL Panel issued an order consolidating all of the U.S. Actions that were pending on the date of Navistar’s motion before Judge Gottschall in the United States District Court for the Northern District of Illinois (the "MDL Action").

31

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

The MDL Panel also consolidated into the MDL Action certain non-class action MaxxForce Advanced EGR engine lawsuits pending in the various federal district courts. Non-class federal lawsuits presenting pre-trial issues similar to the MDL Action continue to be transferred to the MDL Action. Approximately 24 such actions are currently pending.

At the request of the various law firms representing the plaintiffs in the MDL Action, on March 5, 2015, Judge Gottschall entered an order in the MDL Action appointing interim lead counsel and interim liaison counsel for the plaintiffs. On May 11, 2015, lead counsel for the plaintiffs filed a First Master Consolidated Class Action Complaint ("Consolidated Complaint"). The parties to the MDL Action exchanged initial disclosures on May 29, 2015. The Company answered the Consolidated Complaint on July 13, 2015. On September 22, 2016, lead counsel for the plaintiffs filed a First Amended Consolidated Class Action Complaint (the “Amended Consolidated Complaint”). The Amended Consolidated Complaint added twenty-five additional named plaintiffs. NI and NIC answered the Amended Consolidated Complaint on October 20, 2016.

On May 27, 2016, Judge Gottschall entered a Case Management Order setting a July 13, 2017 date for plaintiffs' class certification motion. On November 30, 2016, the court entered an order referring discovery matters to a magistrate judge for supervision. Pursuant to the magistrate’s order, the parties jointly filed a new proposed case management order on January 25, 2017, which extended the fact discovery deadline to November 22, 2017. On January 31, 2017, the parties filed a joint motion with Judge Gottschall requesting adjustment of the class action briefing schedule to April 24, 2018. On February 2, 2017, Judge Gottschall granted the parties' motion extending the deadline to complete the class certification briefing to April 24, 2018. On February 6, 2017, the magistrate approved the parties' schedule set forth in the case management order jointly filed on January 25, 2017. In September 2017, the plaintiffs filed a motion to further extend the case deadlines. On October 5, 2017, Judge Gottschall entered an Agreed Order Extending the Discovery Cutoff ordering that fact discovery relevant to class certification be completed by March 13, 2018 and that the class certification briefing be completed by July 31, 2018. On March 5, 2018, Judge Gottschall extended the fact discovery deadline to be completed by May 25, 2018 and ordered that the class certification briefing be completed by October 22, 2018. Fact discovery relevant to class certification is now substantially complete. On June 19, 2018, Judge Gottschall extended the deadline for completion of a class certification briefing to November 30, 2018.

On October 13, 2017, lead counsel for the plaintiffs filed a Motion for Leave to File a Second Amended Consolidated Class Action Complaint, as well as a Motion for Voluntary Dismissal of Claims without Prejudice relating to 15 previously named plaintiffs. On January 4, 2018, Judge Gottschall granted both motions. On January 9, 2018, the plaintiffs filed a Second Amended Consolidated Class Action Complaint. The Second Amended Consolidated Class Action Complaint removed 15 named plaintiffs and substituted in eight new named plaintiffs. As a result, the total number of named plaintiffs is now 37 and three class action cases were dismissed entirely without prejudice because there were no longer any remaining plaintiffs in those cases. On August 16, 2018, Judge Gotschall entereda minute order setting a status hearing for September 26, 2018 in light of the ongoing settlement efforts of the parties. 

On November 11, 2017, seven plaintiffs (the “Direct Action Plaintiffs”) in the MDL moved for a separate trial and discovery schedule independent of the class action schedule. On January 2, 2018, Judge Gottschall granted in part and denied in part the Direct Action Plaintiffs’ motion, allowing two of the Direct Action Plaintiffs to begin limited discovery on plaintiff-specific issues. The parties submitted competing proposed discovery schedules. In a minute order dated January 26, 2018, Judge Gottschall declined to enter either schedule but ordered the parties to confer on a schedule for prioritizing the plaintiff-specific discovery after the close of fact discovery relevant to class certification issues. The parties are currently engaged in discovery.

There are also non-class action MaxxForce Advanced EGR engine lawsuits filed against the Company in various state courts. A number of non-class action lawsuits have been resolved in favor of the Company prior to or at trial or settled for immaterial amounts. Approximately 40 state court non-class actions are pending at this time. One of the non-class action lawsuits ("Milan"), alleging violations of the Tennessee Consumer Protection Act and fraud and involving approximately 235 trucks, was tried in Tennessee state court in August 2017. On August 10, 2017, the Milan jury returned a verdict of approximately $31 million against the Company, including $20 million in punitive damages. On October 2, 2017, the Company filed various motions in the trial court challenging the verdict, including a Motion for Judgment Notwithstanding the Verdict or, in the Alternative, a New Trial and Motion to Disapprove of the Award of Punitive Damages. The hearing on these motions was held on December 1, 2017 and the court denied our motions, denied Milan’s motion for pre-judgment interest and granted Milan $1.4 million in fees and costs. On January 11, 2018, the Company filed a Notice of Appeal in the Tennessee Court of Appeals challenging the verdict. Briefing on the appeal is currently scheduled to be completed by October 22, 2018. In the third quarter of 2017, we recorded $31 million of charges in SG&A expenses in our Consolidated Statements of Operations.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

32

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

EPA Clean Air Act Litigation

In February 2012, NI received a Notice of Violation ("NOV") from the United States Environmental Protection Agency (the "EPA") pertaining to certain heavy-duty diesel engines which, according to the EPA, were not completely assembled by NI until calendar year 2010 and, therefore, were not covered by NI's model year 2009 certificates of conformity. The NOV concluded that NI's introduction into commerce of each of these engines violated the Federal Clean Air Act.

On July 14, 2015, the Department of Justice ("DOJ"), on behalf of the EPA, filed a lawsuit against NIC and NI in the U.S. District Court for the Northern District of Illinois. Similar to the NOV, the lawsuit alleges that NIC and NI introduced into commerce approximately 7,749 heavy-duty diesel engines that were not covered by model year 2009 certificates of conformity because those engines were not completely assembled until calendar year 2010, resulting in violations of the Federal Clean Air Act. On July 16, 2015, the DOJ filed an Amended Complaint clarifying the amount of civil penalties being sought. The lawsuit requests injunctive relief and the assessment of civil penalties of up to $37,500 for each violation. On September 14, 2015, NIC and NI each filed an Answer and Affirmative Defenses to the Amended Complaint. We dispute the allegations in the lawsuit.

Discovery in the matter is proceeding in two phases. Fact discovery for the liability phase commenced on December 9, 2015. Pursuant to the court's Minute Order entered on July 12, 2017, the Phase I liability fact discovery was completed as of November 9, 2017.

On May 13, 2016, the DOJ, on behalf of the EPA, filed a motion for summary judgment on liability. On June 30, 2016, NIC and NI opposed the EPA's motion for summary judgment, and NIC cross-moved for summary judgment against the EPA. On March 1, 2017, the court entered a Memorandum Opinion and Order (i) granting the DOJ’s motion for summary judgment on the issue of liability with respect to NI, (ii) denying the DOJ’s motion for summary judgment on the issue of liability with respect to NIC, and (iii) denying NIC’s motion for summary judgment.

On April 3, 2018, the parties jointly filed a stipulation of dismissal with prejudice for NIC only. The stipulation with prejudice has no effect on the claims made against NI. With the dismissal of NIC, the matter moved to the remedy phase with respect to NI. The court entered a scheduling order on May 3, 2018, setting a discovery deadline of May 22, 2019, expert report and deposition deadlines through November 7, 2019, and a deadline for submission of dispositive motions of December 9, 2019.

Based on our assessment of the facts underlying the complaint above, potential charges to the Consolidated Statements of Operations and cash outlays in future periods could range from $2 million to $291 million related to the resolution of this matter. Other than the aforementioned, we are unable to provide further meaningful quantification of how the final resolution of this matter may impact our future consolidated financial condition, results of operations or cash flows.

American Intermodal Container Manufacturing

In 2014, NI began negotiating a contract manufacturing agreement (the “Manufacturing Agreement”) with American Intermodal Container Manufacturing, Inc. and American Intermodal Container Manufacturing Co., LLC (together, “AICM”), pursuant to which NI agreed to manufacture freight containers on AICM’s behalf for J.B. Hunt. Before the negotiations were completed, the members of AICM’s board became involved in a dispute regarding the ownership and control of AICM which resulted in a majority of the AICM board members acting to remove two of the other board members (the “Removed Directors”).

NI and its subsidiary, International Truck and Engine Investments Corporation (“ITEIC”), subsequently entered into the Manufacturing Agreement with AICM. On October 1, 2014, the Removed Directors filed a suit against AICM and its remaining board members (together, the “AICM Defendants”) in the Supreme Court of New York in New York County, alleging that the AICM Defendants had improperly (a) removed the Removed Directors and (b) taken control of AICM. The suit alleged: (i) breach of contract (relating to the ownership and control of AICM); (ii) promissory estoppel; (iii) tortious interference with contract; (iv) breach of fiduciary duty; (v) aiding and abetting breach of fiduciary duty; (vi) tortious interference with prospective business relations; and (vii) declaratory judgment. The Removed Directors claimed damages of not less than $50 million.

On September 29, 2016, the Removed Directors filed a Motion for Leave to Amend Complaint to add NI, ITEIC and J.B. Hunt as defendants, alleging that NI and ITEIC personnel allied and conspired with the AICM Defendants to (a) support the AICM Defendants in breaching the ownership contract of the Removed Defendants, (b) remove the Removed Directors, and (c) wrongfully interfere with certain AICM fundraising efforts. NI filed its opposition to this motion on November 9, 2016 and the Removed Directors replied on November 18, 2016. On February 7, 2018, the court issued an order granting the Removed Directors’ Motion for Leave to Amend Complaint to add claims against NI, ITEIC and J.B. Hunt for (i) tortious interference with contract and (ii) aiding and abetting breach of fiduciary duty.

33

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

The court denied the Removed Directors’ request to add a claim for tortious interference with prospective business relations against NI, ITEIC and J.B. Hunt. The Removed Directors claim damages against NI, ITEIC and J.B. Hunt of not less than $50 million.

On February 27, 2018, the Removed Directors filed an amended complaint (the “Amended Complaint”) in conformance with the court’s February 7, 2018 order. On April 30, 2018, NI and ITEIC filed an answer to the Amended Complaint denying liability and asserting affirmative defenses and counterclaims and including counterclaims against AICM for indemnification and breach of contract (seeking to recover amounts due to NI) under the Manufacturing Agreement. NI and ITEIC intend to vigorously defend their position that they are not liable for the claims asserted by the Removed Directors.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

Brazil Truck Dealer Disputes

In January 2014, IIAA initiated an arbitration proceeding under the International Chamber of Commerce rules seeking payment for goods sold and unpaid, in the amount of R$64 million (approximately US$17 million as of July 31, 2018), including penalties and interest, from a group of affiliated truck dealers in Brazil. The truck dealers are affiliated with each other, but not with us, and are collectively referred to as Navitrucks. In the proceeding, IIAA also seeks a declaration of fault against Navitrucks related to the termination of the truck dealer agreements between IIAA and Navitrucks. Navitrucks responded in part by submitting counterclaims against IIAA seeking the amount of R$128 million (approximately US$34 million as of July 31, 2018) for damages related to alleged unfulfilled promises and injury to Navitrucks’ reputation. In October 2014, Navitrucks amended their counterclaims by increasing the amount of damages. During a preliminary hearing before the arbitral tribunal on March 24, 2015, the parties agreed to submit all of the pending claims between the parties to the exclusive jurisdiction of the arbitral tribunal. Pursuant to the timetable issued in the arbitration proceeding, IIAA presented its complaint in July 2015, Navitrucks filed its answer and counterclaims on August 24, 2015, and IIAA filed its rebuttal and answer to Navitrucks’ counterclaims on October 22, 2015. On December 7, 2015, Navitrucks filed its rebuttal to IIAA’s answer to counterclaims. On June 13-15, 2016, the arbitral tribunal held hearings on the parties presenting witnesses and evidence.

On July 18, 2016, IIAA and Navitrucks presented additional documents and information related to the hearing held on June 13-15, 2016. On September 30, 2016, the parties presented their final allegations. On April 20, 2017, the arbitral tribunal issued a partial award (the "Initial Award") granting a portion of the relief sought by each of the parties. Specifically, the arbitral tribunal's Initial Award held that: (a) Navitrucks failed to pay certain amounts to IIAA for the purchase of vehicles under its agreements with IIAA, thereby breaching its contractual obligations; and (b) IIAA breached its contractual obligations under its agreements with Navitrucks due to its failure to fulfill its promises to invest in products, infrastructure, and a dealership network.Furthermore, the arbitral tribunal held that, due to the mutual breach of the agreements between IIAA and Navitrucks, the agreements should be deemed terminated.

On June 3, 2017, IIAA and Navitrucks filed an application to clarify certain interpretations of the Initial Award and to correct clerical errors in the Initial Award. IIAA also requested an award to (a) set the indisputable amount of the Initial Award, and (2) order Navitrucks to promptly pay such amount. On June 8, 2017, the arbitral tribunal invited IIAA and Navitrucks to present their respective comments on each other’s applications on or before June 27, 2017. On June 3, 2017 and June 27, 2017, IIAA and Navitrucks, respectively, filed their comments. On September 29, 2017, the arbitral tribunal issued a decision on the applications filed by both parties in which it rejected all of the requests made in the applications of both parties. On October 31, 2017, the arbitral tribunal issued a decision relating to the timeline for the production of technical evidence to be used in the calculation phase in which the actual monetary amount of the damages owed by each party to the other will be definitively determined.

As determined by the arbitral tribunal, IIAA (a) designated its expert assistant and disclosed the questions to be answered by the arbitral expert (official expert designated by the arbitral tribunal); (b) presented a summary of the amount that Navitrucks owes to IIAA in accordance with the previous calculation and related award issued on April 20, 2017; and (c) presented its replies to the Navitrucks' petitions.

On May 11, 2018, the arbitral tribunal issued a decision allowing the calculation to be made by the parties’ experts and scheduled the calculation phase hearing for August 16, 2018. On July 6, 2018, each party’s experts presented their reports indicating the calculation of the total amount due from each party to the other party. On August 6, 2018, the parties jointly filed a petition informing the arbitral tribunal that they reached an agreement as to the total amount due from each party to the other party. Pursuant to the agreement, Navitrucks agreed that it owes IIAA the total amount of R$107 million (approximately US$28 million as of July 31, 2018) after deducting the agreed amount of Navitrucks' claim against IIAA.

34

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

In addition, the parties requested: (a) the cancellation of the hearing scheduled for August 16, 2018; (b) a 15 day period for the parties to present their respective costs incurred with the arbitral proceeding; and (c) the closure of the calculation phase with the final ruling of merits.

On August 13, 2018, the arbitral tribunal issued a decision canceling the hearing scheduled for August 16, 2018 and directing the parties to prove their respective costs incurred with the arbitral proceeding and to specify whether there is any additional production of evidence or considerations by August 23, 2018. Thereafter, we expect that the arbitral tribunal’s final decision on the merits will be issued.

In addition, another truck dealer and two truck fleet owners in Brazil have separate adversarial proceedings pending against IIAA that may have similar legal and factual issues as the Navitrucks claim. These other claims are not material either individually or in the aggregate.

Other

U.S. Department of Defense Matter

In the third quarter of 2016, Navistar Defense, LLC ("ND") received a subpoena from the United States Department of Defense Inspector General (the "DOD IG"). The subpoena requested documents relating to ND's sale of its independent suspension systems ("ISS") for military vehicles to the government for the period from January 1, 2009 through December 31, 2010. On June 3, 2016, ND met with government representatives, including representatives from the DOD IG and the DOJ to discuss the matter.

Since then, ND has been in ongoing discussions with the DOD IG and the DOJ. ND made submissions of documents responsive to the subpoena in June and August 2016 and has completed its subpoena response. On May 1, 2017, ND met with government representatives, including representatives from the DOD IG and the DOJ, to further discuss the matter, including assertions that ND may have overcharged the United States for the ISS components. ND agreed to provide additional information relating to the pricing of the ISS components. The parties met again on June 13, 2017. In August 2017, ND received a letter from the DOJ claiming that ND made false and misleading statements during the course of price negotiations and during the Defense Contract Audit Agency audit which resulted in ND overcharging the United States for the ISS components by approximately $88 million and asking for treble damages and penalties for a total demand of approximately $264 million. ND has responded to the DOJ’s demand letter explaining its position that it has no liability in this matter and outlining the bases for such position, and that ND intends to vigorously defend its position. ND and the DOJ communicated between October 5, 2017 and December 8, 2017 to discuss their respective positions on both liability and damages. The parties have engaged in discussions related to mediation, but there is currently no written agreement or schedule for mediation.

On December 8, 2017, ND received another subpoena from the DOD IG which requested documents relating to ND's pricing of the Mine Resistant Ambush Protected (“MRAP”) vehicle and its sale of parts to the government for the period from January 1, 2006 through December 31, 2013. ND is responding to the subpoena and made four productions of responsive documents. At this time, we are unable to predict the outcome of these matters, including whether a settlement will be reached, or provide meaningful quantification of how the final resolution of this matter may impact our future consolidated financial condition, results of operations or cash flows.

On July 10, 2018, ND received another subpoena from the DOD IG requesting additional custodian emails and documents related to the MRAP and ISS components. ND is responding to the subpoena and has made one production of responsive documents. Additionally, in August 2018, the DOJ indicated that it would like to interview certain current and/or former employees.   

Deepwater Horizon Settlement Program

On June 3, 2018, we concluded the settlement of a business economic loss claim relating to our Alabama engine manufacturing facility. We will receive a gross amount of $85 million with a net present value of $70 million, net of our fees and costs, from the Deepwater Horizon Settlement Program. The cash proceeds will be received in installments in 2019 and 2020. The net present value of the settlement was recorded in our third quarter 2018 financial results in Other Income in our Consolidated Statements of Operations, and Other current and Other non-current assets in our Consolidated Balance Sheets.

11. Segment Reporting

The following is a description of our four reporting segments:

• Our Truck segment manufactures and distributes Class 4 through 8 trucks, buses, and military vehicles under the International and IC Bus ("IC") brands, and produces engines under our proprietary brand name and parts required to support the military truck lines.

35

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

This segment sells its products in the U.S., Canada, and Mexico markets, as well as through our export truck business. In an effort to strengthen and maintain our dealer network, this segment occasionally acquires and operates dealer locations for the purpose of transitioning ownership.

• Our Parts segment provides customers with proprietary products needed to support the International commercial truck, IC Bus, proprietary engine lines, and export parts business, as well as our other product lines. Our Parts segment also provides a wide selection of other standard truck, trailer, and engine aftermarket parts. Also included in the Parts segment are the operating results of BDP, which manages the sourcing, merchandising, and distribution of certain service parts we sell to Ford in North America.

• Our Global Operations segment primarily consists of Brazil engine operations which produce diesel engines under contract manufacturing arrangements, as well as under the MWM brand, for sale to original equipment manufacturers (OEMs) in South America. In addition, our Global Operations segment includes the operating results of our joint venture in China with Anhui Jianghuai Automobile Co ("JAC").

• Our Financial Services segment provides retail, wholesale, and lease financing of products sold by the Truck and Parts segments and their dealers within the U.S. and Mexico, as well as financing for wholesale accounts and selected retail accounts receivable. This segment also facilitates financing relationships in other countries to support our Manufacturing Operations.

Corporate contains those items that are not included in our four segments.

Segment Profit (Loss)

We define segment profit (loss) as net income (loss) attributable to NIC, excluding income tax benefit (expense). Selected financial information from our Consolidated Statements of Operations and our Consolidated Balance Sheets is as follows:

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2018
External sales and revenues, net	$	1,894	$	603	$	68		$	40	$	1		$	2,606
Intersegment sales and revenues	22		2		21			25		(70		)	—
Total sales and revenues, net	$	1,916	$	605	$	89		$	65	$	(69	)	$	2,606
Income (loss) from continuing operations attributable to NIC, net of tax	$	165	$	144	$	4		$	23	$	(166	)	$	170
Income tax expense	—		—		—			—		(3		)	(3		)
Segment profit (loss)	$	165	$	144	$	4		$	23	$	(163	)	$	173
Depreciation and amortization	$	31	$	2	$	3		$	14	$	1		$	51
Interest expense	—		—		—			22		60			82
Equity in income (loss) of non-consolidated affiliates	1		1		(2		)	—		—			—
Capital expenditures(B)	19		—		1			1		5			26

36

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2017
External sales and revenues, net	$	1,521	$	580	$	74		$	35	$	3		$	2,213
Intersegment sales and revenues	10		6		10			27		(53		)	—
Total sales and revenues, net	$	1,531	$	586	$	84		$	62	$	(50	)	$	2,213
Income (loss) from continuing operations attributable to NIC, net of tax	$	7	$	157	$	3		$	23	$	(154	)	$	36
Income tax expense	—		—		—			—		—			—
Segment profit (loss)	$	7	$	157	$	3		$	23	$	(154	)	$	36
Depreciation and amortization	$	35	$	3	$	3		$	13	$	3		$	57
Interest expense	—		—		—			24		67			91
Equity in income (loss) of non-consolidated affiliates	1		1		(1		)	—		—			1
Capital expenditures(B)	21		1		2			—		3			27

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2018
External sales and revenues, net	$	4,810	$	1,768	$	229		$	118	$	8		$	6,933
Intersegment sales and revenues	61		6		38			69		(174		)	—
Total sales and revenues, net	$	4,871	$	1,774	$	267		$	187	$	(166	)	$	6,933
Income (loss) from continuing operations attributable to NIC, net of tax	$	200	$	413	$	(2	)	$	62	$	(521	)	$	152
Income tax expense	—		—		—			—		(25		)	(25		)
Segment profit (loss)	$	200	$	413	$	(2	)	$	62	$	(496	)	$	177
Depreciation and amortization	$	100	$	5	$	8		$	41	$	6		$	160
Interest expense	—		—		—			64		176			240
Equity in income (loss) of non-consolidated affiliates	2		2		(4		)	—		—			—
Capital expenditures(B)	74		1		2			1		1			79

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2017
External sales and revenues, net	$	3,929		$	1,747	$	186		$	102	$	8		$	5,972
Intersegment sales and revenues	27			19		18			70		(134		)	—
Total sales and revenues, net	$	3,956		$	1,766	$	204		$	172	$	(126	)	$	5,972
Income (loss) from continuing operations attributable to NIC, net of tax	$	(118	)	$	459	$	(8	)	$	51	$	(490	)	$	(106	)
Income tax expense	—			—		—			—		(10		)	(10		)
Segment profit (loss)	$	(118	)	$	459	$	(8	)	$	51	$	(480	)	$	(96	)
Depreciation and amortization	$	103		$	9	$	10		$	38	$	9		$	169
Interest expense	—			—		—			65		197			262
Equity in income of non-consolidated affiliates	3			3		—			—		—			6
Capital expenditures(B)	78			2		5			1		7			93

37

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

(in millions)	Truck		Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
July 31, 2018	$	2,264	$	645	$	335	$	2,407	$	1,273	$	6,924
October 31, 2017	1,621		632		378		2,207		1,297		6,135

_________________________

(A) Total sales and revenues in the Financial Services segment include interest revenues of $46 million and $131 million for the three and nine months ended July 31, 2018, respectively, and $45 million and $121 million for the three and nine months ended July 31, 2017, respectively.

(B) Exclusive of purchases of equipment leased to others.

12. Stockholders' Deficit

Accumulated Other Comprehensive Loss

The following table presents changes in Accumulated other comprehensive loss, net of tax, included in our Consolidated Statements of Stockholders' Deficit:

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of April 30, 2018	$	—	$	(289	)	$	(1,865	)	$	(2,154	)
Other comprehensive loss before reclassifications	—		(13		)	—			(13		)
Amounts reclassified out of accumulated other comprehensive loss	—		—			29			29
Net current-period other comprehensive income (loss)	—		(13		)	29			16
Balance as of July 31, 2018	$	—	$	(302	)	$	(1,836	)	$	(2,138	)

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of October 31, 2017	$	—	$	(283	)	$	(1,928	)	$	(2,211	)
Other comprehensive loss before reclassifications	—		(19		)	(2		)	(21		)
Amounts reclassified out of accumulated other comprehensive loss	—		—			94			94
Net current-period other comprehensive income (loss)	—		(19		)	92			73
Balance as of July 31, 2018	$	—	$	(302	)	$	(1,836	)	$	(2,138	)

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of April 30, 2017	$	1	$	(288	)	$	(2,292	)	$	(2,579	)
Other comprehensive income before reclassifications(A)	—		42			72			114
Amounts reclassified out of accumulated other comprehensive loss	—		—			53			53
Net current-period other comprehensive income	—		42			125			167
Balance as of July 31, 2017	$	1	$	(246	)	$	(2,167	)	$	(2,412	)

____________________

(A) Other comprehensive income before reclassifications for Defined Benefit Plans includes $111 million of remeasurement gains and $2 million of curtailment gains, partially offset by a $35 million intraperiod tax allocation and $6 million of deferred tax assets during the third quarter of 2017.

38

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of October 31, 2016	$	1	$	(280	)	$	(2,361	)	$	(2,640	)
Other comprehensive income before reclassifications(A)	—		34			72			106
Amounts reclassified out of accumulated other comprehensive loss	—		—			122			122
Net current-period other comprehensive income	—		34			194			228
Balance as of July 31, 2017	$	1	$	(246	)	$	(2,167	)	$	(2,412	)

____________________

(A) Other comprehensive income before reclassifications for Defined Benefit Plans includes $111 million of remeasurement gains and $2 million of curtailment gains, partially offset by a $35 million intraperiod tax allocation and $6 million of deferred tax assets during the third quarter of 2017.

The following table presents the amounts reclassified from Accumulated other comprehensive loss and the affected line item in our Consolidated Statements of Operations:

		Three Months Ended July 31,					Nine Months Ended July 31,
	Location in Consolidated Statements of Operations	2018		2017			2018			2017
Defined benefit plans
Amortization of actuarial loss	Selling, general and administrative expenses	$	29	$	36		$	86		$	106
Settlements	Selling, general and administrative expenses	—		—			9			—
Settlements	Restructuring charges	—		23			—			23
	Total before tax	29		59			95			129
	Tax expense	—		(6		)	(1		)	(7		)
Total reclassifications for the period, net of tax		$	29	$	53		$	94		$	122

39

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

13. Earnings (Loss) Per Share Attributable to Navistar International Corporation

The following table presents the information used in the calculation of our basic and diluted earnings (loss) per share all attributable to NIC in our Consolidated Statements of Operations:

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions, except per share data)	2018		2017		2018		2017
Numerator:
Amounts attributable to Navistar International Corporation common stockholders:
Income (loss) from continuing operations, net of tax	$	170	$	36	$	152	$	(106	)
Income from discontinued operations, net of tax	—		1		—		1
Net income (loss)	$	170	$	37	$	152	$	(105	)
Denominator:
Weighted average shares outstanding:
Basic	99.0		98.3		98.8		91.1
Effect of dilutive securities	0.7		0.3		0.8		—
Diluted	99.7		98.6		99.6		91.1
Earnings (loss) per share attributable to Navistar International Corporation:
Basic:
Continuing operations	$	1.72	$	0.37	$	1.54	$	(1.16	)
Discontinued operations	—		0.01		—		0.01
	$	1.72	$	0.38	$	1.54	$	(1.15	)
Diluted:
Continuing operations	$	1.71	$	0.37	$	1.53	$	(1.16	)
Discontinued operations	—		0.01		—		0.01
	$	1.71	$	0.38	$	1.53	$	(1.15	)

The conversion rate on our 4.5% Senior Subordinated Convertible Notes due 2018 (the "2018 Convertible Notes") is 17.1233 shares of common stock per $1,000 principal amount of 2018 Convertible Notes, equivalent to an initial conversion price of approximately $58.40 per share of common stock. The 2018 Convertible Notes have an anti-dilutive effect when calculating diluted earnings per share when our average stock price is less than $58.40.

The conversion rate on our 4.75% Senior Subordinated Convertible Notes due 2019 (the “2019 Convertible Notes”) is 18.4946 shares of common stock per $1,000 principal amount of 2019 Convertible Notes, equivalent to an initial conversion price of approximately $54.07 per share of common stock. The 2019 Convertible Notes have an anti-dilutive effect when calculating diluted earnings per share when our average stock price is less than $54.07.

In February 2017, we consummated our previously announced strategic alliance with TRATON Group, which included an equity investment in the Company by TRATON Group pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement"), a License and Supply Framework Agreement and a Procurement JV Framework Agreement.

Pursuant to the Stock Purchase Agreement, on February 28, 2017 we issued and TRATON Group purchased 16.2 million shares of our common stock for an aggregate purchase price of $256 million at $15.76 per share (a 19.9% stake (16.6% on a fully-diluted basis) in the Company), excluding stock issuance costs.

The computation of diluted earnings per share also excludes outstanding options and other common stock equivalents in periods where inclusion of such potential common stock instruments would be anti-dilutive.

For the nine months ended July 31, 2018, certain securities have been excluded from the computation of earnings per share, as our average stock price during the period was less than their respective exercise prices. For the nine months ended July 31, 2018, the aggregate shares not included were 13.3 million.

40

Navistar International Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

(Unaudited)

For the nine months ended July 31, 2017, no dilutive securities were included in the computation of diluted earnings per share because they would have been anti-dilutive due to the net loss attributable to NIC. Additionally, certain securities have been excluded from the computation of earnings per share, as our average stock price during the period was less than their respective exercise prices. For the nine months ended July 31, 2017, the aggregate shares not included were 14.7 million.

For both the three months ended July 31, 2018 and 2017, certain securities have been excluded from the computation of earnings per share, as our average stock price during the period was less than their respective exercise prices. For the three months ended July 31, 2018 and 2017, the aggregate shares not included were 13.2 million and 14.6 million, respectively.

For both the three and nine months ended July 31, 2018 and 2017, the aggregate shares not included in the computation of earnings per share were primarily comprised of 3.4 million shares related to the 2018 Convertible Notes and 7.6 million sharesrelated to the 2019 Convertible Notes.

41

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide information that is supplemental to, and should be read together with, our consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended October 31, 2017. Information in MD&A is intended to assist the reader in obtaining an understanding of (i) our consolidated financial statements, (ii) the changes in certain key items within those financial statements from year-to-year, (iii) the primary factors that contributed to those changes, (iv) any changes in known trends or uncertainties from items disclosed within the MD&A of our Annual Report on Form 10-K for the year ended October 31, 2017 that we are aware of and that may have a material effect on our future performance, and (v) how certain accounting principles affect our consolidated financial statements. In addition, MD&A provides information about our business segments and how the results of those segments impact our results of operations and financial condition as a whole. Operating results for interim reporting periods are not necessarily indicative of annual operating results.

Executive Overview

Navistar is an international manufacturer of International^® brand commercial and military trucks, proprietary brand diesel engines, and IC Bus^TM ("IC") brand school and commercial buses, as well as a provider of service parts for trucks and diesel engines. Our core business is conducted in the North American truck and parts markets, where we principally participate in the U.S. and Canada school bus and Class 6 through 8 medium and heavy truck markets (our "Core" markets). We also provide retail, wholesale, and lease financing services for our trucks and parts.

Third Quarter Summary

During the third quarter of 2018, we continued to take actions that we believe will improve our performance. The focus of our strategy includes: growing business in our Core markets, driving operational excellence with enhanced focus on quality and reliability, pursuing innovative technology solutions, leveraging the TRATON Group strategic alliance, enhancing our winning culture and improving our financial performance. We believe our strategy will enable us to improve sales and market share by offering more value to our customers.

In July 2018, NFC entered into a new agreement whereby NFC borrowed an aggregate principal amount of $400 million under a new seven-year senior secured term loan facility (the "NFC Term Loan"). The proceeds of the NFC Term Loan were used to pay certain fees and expenses in connection with the NFC Term Loan and to make an intercompany loan to our Manufacturing operations. The remainder of the proceeds of the NFC Term Loan will be used for other general NFC purposes.

We continue to drive operational excellence by focusing on business in our Core markets. We remain committed to product investment to increase customer value and to focus on our Core markets. By the end of 2018, we expect our entire portfolio will consist of newly designed trucks.

Financial Summary

Continuing Operations Results — In the third quarter of 2018, our consolidated net sales and revenues were $2.6 billion, an 18% increase compared to the prior year quarter. In the first nine months of 2018, our consolidated net sales and revenues were $6.9 billion, a 16% increase compared to the first nine months of 2017. The increase for both periods reflects higher volumes from our Truck segment.

In the third quarter and first nine months of 2018, we earned income from continuing operations before income taxes of $180 million and $197 million, respectively, compared to income of $41 million and a loss of $78 million in the respective prior year periods. Our gross margin increased by $100 million and $295 million in the third quarter and first nine months of 2018, respectively, primarily due to the impact of higher volumes and a decrease in used truck losses. In the third quarter of 2018, we recorded a gain of $70 million representing the net present value from the Deepwater Horizon Settlement Program.

In the third quarter and first nine months of 2018, we recognized income tax expense of $3 million and $25 million, compared to zero and $10 million in the respective prior year periods. Income tax expense in both periods is impacted by earnings, geographical mix and certain discrete items. The change in income tax expense is also impacted by a $35 million intraperiod allocation benefit in domestic continuing operations due to certain post retirement plan remeasurements recorded in thethirdquarter of 2017.

In the third quarter and first nine months of 2018, after income taxes, we had net income from continuing operations attributable to NIC of $170 million and $152 million, or $1.71 and $1.53 per diluted share for continuing operations, compared to net income of $36 million or $0.37 per diluted share for continuing operations, and a net loss $106 million or $1.16 per diluted share, in the prior year periods.

42

In the third quarter and first nine months of 2018, consolidated net income attributable to Navistar International Corporation ("NIC"), before manufacturing interest, taxes, depreciation and amortization expenses (“EBITDA”) was $284 million and $513 million, respectively, compared to $160 million and $270 million in the comparable prior year periods. Excluding certain net impacts, adjusted EBITDA ("Adjusted EBITDA") in the third quarter of 2018 was $218 million compared to $194 million in the comparable prior year period. In the first nine months of 2018, Adjusted EBITDA was $504 million compared to $314 million in the comparable prior year period. EBITDA and Adjusted EBITDA are not determined in accordance with U.S. GAAP, nor are they presented as alternatives to U.S. GAAP measures. For more information regarding this non-GAAP financial information, see Consolidated EBITDA and Adjusted EBITDA.

We ended the third quarter of 2018 with $1,117 million of consolidated cash, cash equivalents and marketable securities, compared to $1,076 million as of October 31, 2017. The increase in consolidated cash, cash equivalents and marketable securities was primarily attributable to higher net income, an increase in accounts payable, proceeds from financed lease obligations and the issuance of long-term debt partially offset by increases in accounts and finance receivables, inventory and other current and noncurrent assets, a decrease in other current liabilities, capital expenditures and purchases of equipment leased to others.

43

Results of Operations

The following information summarizes our Consolidated Statements of Operations and illustrates the key financial indicators used to assess our consolidated financial results.

Results of Operations for the quarter ended July 31, 2018 as compared to the quarter ended July 31, 2017

	Three Months Ended July 31,											Nine Months Ended July 31,
(in millions, except per share data and % change)	2018			2017			Change			% Change		2018			2017			Change			% Change
Sales and revenues, net	$	2,606		$	2,213		$	393		18	%	$	6,933		$	5,972		$	961		16	%
Costs of products sold	2,096			1,803			293			16	%	5,615			4,949			666			13	%
Restructuring charges	1			(13		)	14			(108	)%	(1		)	(4		)	3			(75	)%
Asset impairment charges	8			6			2			33	%	11			13			(2		)	(15	)%
Selling, general and administrative expenses	244			233			11			5	%	686			654			32			5	%
Engineering and product development costs	72			61			11			18	%	222			189			33			17	%
Interest expense	82			91			(9		)	(10	)%	240			262			(22		)	(8	)%
Other income, net	(77		)	(8		)	(69		)	863	%	(37		)	(7		)	(30		)	429	%
Total costs and expenses	2,426			2,173			253			12	%	6,736			6,056			680			11	%
Equity in income of non-consolidated affiliates	—			1			(1		)	(100	)%	—			6			(6		)	(100	)%
Income (loss) from continuing operations before income taxes	180			41			139			339	%	197			(78		)	275			(353	)%
Income tax expense	(3		)	—			(3		)	—	%	(25		)	(10		)	(15		)	150	%
Income (loss) from continuing operations	177			41			136			332	%	172			(88		)	260			(295	)%
Less: Net income attributable to non-controlling interests	7			5			2			40	%	20			18			2			11	%
Income (loss) from continuing operations, net of tax(A)	170			36			134			372	%	152			(106		)	258			(243	)%
Income from discontinued operations, net of tax	—			1			(1		)	(100	)%	—			1			(1		)	(100	)%
Net income (loss)(A)	$	170		$	37		$	133		359	%	$	152		$	(105	)	$	257		(245	)%
Diluted income (loss) per share(A)
Continuing operations	$	1.71		$	0.37		$	1.34		362	%	$	1.53		$	(1.16	)	$	2.69		(232	)%
Discontinued operations	—			0.01			(0.01		)	(100	)%	—			0.01			(0.01		)	(100	)%
	$	1.71		$	0.38		$	1.33		350	%	$	1.53		$	(1.15	)	$	2.68		(233	)%
Diluted weighted average shares outstanding	99.7			98.6			1.1			1	%	99.6			91.1			8.5			9	%

_________________________

(A) Amounts attributable to NIC.

44

Sales and revenues, net    

Our sales and revenues, net, are principally generated via sales of products and services. Sales and revenues, net in our Consolidated Statements of Operations, by reporting segment were as follows:

	Three Months Ended July 31,											Nine Months Ended July 31,
(in millions, except % change)	2018			2017			Change			% Change		2018			2017			Change			% Change
Truck	$	1,916		$	1,531		$	385		25	%	$	4,871		$	3,956		$	915		23	%
Parts	605			586			19			3	%	1,774			1,766			8			—	%
Global Operations	89			84			5			6	%	267			204			63			31	%
Financial Services	65			62			3			5	%	187			172			15			9	%
Corporate and Eliminations	(69		)	(50		)	(19		)	38	%	(166		)	(126		)	(40		)	32	%
Total	$	2,606		$	2,213		$	393		18	%	$	6,933		$	5,972		$	961		16	%

In the third quarter and first nine months of 2018, our Truck segment net sales increased by $385 million and $915 million, or 25% and 23%, respectively. The increase is primarily due to higher volumes in our Core markets, an increase in military sales, and a shift in model mix, partially offset by a decline in Mexico truck volumes. In the third quarter and first nine months of 2018, truck chargeouts from our Core markets increased by 26% and 22%, respectively.

In the third quarter and first nine months of 2018, our Parts segment net sales increased by $19 million and $8 million, respectively. The increase is primarily due to higher overall volumes and parts sales related to the Fleetrite™ brand, partially offset by lower BDP sales.

In the third quarter and first nine months of 2018, our Global Operations segment net sales increased by $5 million and $63 million, or 6% and 31%, respectively. The increase was primarily driven by higher engine volumes in our South America engine operations due to the improving Brazilian economy, partially offset by the depreciation of the Brazilian real against the U.S. dollar as the average conversion rate has weakened by 14% and 6%, respectively, compared with the prior year period.

In the third quarter and first nine months of 2018, our Financial Services segment net revenues increased by $3 million and $15 million, or 5% and 9%, respectively. The increase is primarily driven by higher average portfolio balances in the U.S. and Mexico.

Costs of products sold

In the third quarter and first nine months of 2018, Costs of products sold increased by $293 million and $666 million, respectively, primarily driven by the impact of higher volumes in our Core markets. The first nine months of 2018 were also impacted by a decrease in used truck losses.

In the third quarter and first nine months of 2018, we recorded a charge in our Truck segment for our used truck reserve of $16 million and $38 million, respectively, compared to a charge of $14 million and $102 million in the respective prior year periods. In the third quarter and first nine months of 2018, we recorded a benefit for adjustments to pre-existing warranties of $4 million, for both periods, compared to a charge of $6 million and a benefit of $4 million in the respective prior year periods. We have a benefit primarily due to the decrease in claim frequency across both the Medium Duty and Big Bore engine families in our Truck segment. The impact decreased the reserve for our standard warranty obligations as well as the loss positions related to our Big Bore extended service contracts.

Restructuring charges

In the third quarter and first nine months of 2018, Restructuring charges increased by $14 million and $3 million compared to the third quarter and first nine months of 2017. In the third quarter of 2017, we recorded postretirement net benefits of $43 million related to the execution of the closure agreement for our Chatham, Ontario plant, partially offset by postretirement and severance charges of $31 million related to our plan to cease production at our Melrose Park Facility. For more information, see Note 2, Restructuring and Impairments, to the accompanying consolidated financial statements.

Selling, general and administrative ("SG&A") expenses

In the third quarter and first nine months of 2018, SG&A expenses increased by $11 million and $32 million, respectively. The increase is primarily due to employee compensation expenses, expenses related to growth initiatives, and profit sharing accruals related to supplemental benefits for certain retirees, partially offset by the impact of charges related to the MaxxForce engine EGR product litigation recorded during the third quarter of 2017.

45

Engineering and product development costs

In the third quarter and first nine months of 2018, Engineering and product development costs increased by $11 million and $33 million, respectively. This is primarily due to our development agreements with TRATON Group involving the expense of certain engine and transmission development costs.

Other income, net

In the third quarter and first nine months of 2018, Other income increased by $69 million and $30 million, respectively. The increase was primarily driven by a settlement of a business economic loss claim relating to our Alabama engine manufacturing facility in which we recorded a gain of $70 million representing the net present value from the Deepwater Horizon Settlement Program. This increase was partially offset by $46 million of charges related to the extinguishment of unamortized debt issuance costs, discounts and tender premium payments associated with the repurchase of our 8.25% Senior Notes and refinancing of our previous Term Loan. For more information on the business economic loss settlement, see Note 10, Commitments and Contingencies, to the accompanying consolidated financial statements.

Income tax expense

In the third quarter and first nine months of 2018, our income tax expense increased by $3 million and $15 million, respectively. The change in income tax expense in both periods is impacted by earnings, geographical mix and certain discrete items. The change in income tax expense is also impacted by a $35 million intraperiod allocation benefit in domestic continuing operations due to certain post retirement plan remeasurements recorded in thethirdquarter of 2017.

Net income attributable to non-controlling interests

Net income attributable to non-controlling interests is the result of our consolidation of subsidiaries that we do not wholly own. Substantially all of the net income attributable to non-controlling interests in 2018 and 2017 relates to Ford Motor Company's non-controlling interest in BDP.

Segment Results of Operations

We define segment profit (loss) as net income (loss) attributable to NIC excluding income tax benefit (expense). The following sections analyze operating results as they relate to our four segments and do not include intersegment eliminations. For additional information concerning our segments, see Note 11, Segment Reporting, to the accompanying consolidated financial statements.

Truck Segment

	Three Months Ended July 31,								Nine Months Ended July 31,
(in millions, except % change)	2018		2017		Change		% Change		2018		2017			Change		% Change
Truck segment sales, net	$	1,916	$	1,531	$	385	25	%	$	4,871	$	3,956		$	915	23	%
Truck segment profit (loss)	165		7		158		N.M.		200		(118		)	318		269	%

Segment sales

In the third quarter and first nine months of 2018, our Truck segment net sales increased by $385 million and $915 million, or 25% and 23%, respectively. The increase is primarily due to higher volumes in our Core markets, an increase in military sales, and a shift in model mix, partially offset by a decline in Mexico truck volumes.

In the third quarter of 2018, chargeouts from our Core markets increased by 26% compared to the third quarter of 2017, which is reflective of an improvement in Class 8 industry volumes. The improvement represents a 71% increase in Class 8 heavy trucks, a 31% increase in medium trucks, partially offset by a 14% decrease in Class 8 severe service trucks and a 5% decrease in school buses.

In the first nine months of 2018, chargeouts from our Core markets increased by 22% compared to the first nine months of 2017 which is reflective of an improvement in Class 8 industry volumes. The improvement represents a 67% increase in Class 8 heavy trucks, an 11% increase in medium trucks, a 2% increase in Class 8 severe service trucks, and a 1% increase in school buses.

46

Segment results

In the third quarter and first nine months of 2018, our Truck segment profit improved by $158 million and $318 million, respectively. The improvement is primarily driven by the impact of higher volumes in our Core markets, higher Other Income and charges related to the MaxxForce engine EGR product litigation recorded in the third quarter of 2017. The first nine months of 2018 were also impacted by a decline in used truck losses.

In the third quarter of 2018, we recorded a $70 million gain related to the settlement of a business economic loss claim which was recognized in Other income, net in our Consolidated Statements of Operations.

In the third quarter and first nine months of 2018, we recorded charges in our Truck segment for our used truck reserve of $16 million and $38 million compared to charges of $14 million and $102 million in the respective prior year periods. During the second quarter of 2017, we implemented a shift in market mix for our used trucks to include an increase in volume to certain export markets, which had a lower price point as compared to sales through our domestic channels, and to lower domestic pricing to enable higher sales velocity of our used trucks. In the third quarter and first nine months of 2018, we recorded a benefit of$4 million, for both periods, in our Truck segment for adjustments to pre-existing warranties compared to a charge of $6 million and a benefit of $4 million in the respective prior year periods. We have a benefit primarily due to the decrease in claim frequency across both the Medium Duty and Big Bore engine families. The impact decreased the reserve for our standard warranty obligations as well as the loss positions related to our Big Bore extended service contracts.

Parts Segment

	Three Months Ended July 31,									Nine Months Ended July 31,
(in millions, except % change)	2018		2017		Change			% Change		2018		2017		Change			% Change
Parts segment sales, net	$	605	$	586	$	19		3	%	$	1,774	$	1,766	$	8		—	%
Parts segment profit	144		157		(13		)	(8	)%	413		459		(46		)	(10	)%

Segment sales

In the third quarter and first nine months of 2018, our Parts segment net sales increased by $19 million and $8 million, respectively. The increase is primarily due to higher overall volumes and parts sales related to the Fleetrite™ brand, partially offset by lower BDP sales.

Segment profit

In the third quarter and first nine months of 2018, our Parts segment profit decreased by $13 million and $46 million, or 8% and 10%, respectively, primarily due to lower U.S. margins, higher freight-related expenses, and intercompany access fees. Access fees are allocated to our Parts segment from our Truck segment, primarily for the development of new products, and consist of certain engineering and product development costs, depreciation expense, and SG&A expenses.

Global Operations Segment

	Three Months Ended July 31,								Nine Months Ended July 31,
(in millions, except % change)	2018		2017		Change		% Change		2018			2017			Change		% Change
Global Operations segment sales, net	$	89	$	84	$	5	6	%	$	267		$	204		$	63	31	%
Global Operations segment profit (loss)	4		3		1		33	%	(2		)	(8		)	6		75	%

Segment sales

In the third quarter and first nine months of 2018, our Global Operations segment net sales increased by $5 million and $63 million, or 6% and 31%, respectively. The increase was primarily driven by higher engine volumes in our South America engine operations due to the improving Brazilian economy, partially offset by the depreciation of the Brazilian real against the U.S. dollar as the average conversion rate has weakened by 14% and 6%, respectively, compared with the prior year period.

Segment results

In the third quarter of 2018, our Global Operations segment results were comparable to the prior year period while in the first nine months of 2018, the segment results improved by $6 million, or 75%. The improvement was driven by the impact of higher engine volumes, partially offset by the impact of higher other income of $6 million related to the sale of machinery and equipment recorded in 2017. In the first nine months of 2017, our Global Operations segment loss was mitigated by a one-time benefit of $9 million recognized as an adjustment to pre-existing warranties.

47

Financial Services Segment

	Three Months Ended July 31,								Nine Months Ended July 31,
(in millions, except % change)	2018		2017		Change		% Change		2018		2017		Change		% Change
Financial Services segment revenues, net	$	65	$	62	$	3	5	%	$	187	$	172	$	15	9	%
Financial Services segment profit	23		23		—		—	%	62		51		11		22	%

Segment revenues

In the third quarter and first nine months of 2018, our Financial Services segment net revenues increased by $3 million and $15 million, or 5% and 9%, respectively. The increase is primarily driven by higher average portfolio balances in the U.S. and Mexico.

Segment profit

In the third quarter of 2018, our Financial Services segment profit was comparable to the prior year period while in the first nine months of 2018, segment profit increased by $11 million, or 22%. The increase is primarily driven by higher interest margins partially offset by an increase in the provision for loan losses in Mexico and asset impairment charges.

Supplemental Information

The following tables provide additional information on truck industry retail units, market share data, order units, backlog units, and chargeout units. These tables present key metrics and trends that provide quantitative measures of our performance.

Truck Industry Retail Deliveries

The following table summarizes approximate industry retail deliveries for our Core markets, categorized by relevant class, according to Wards Communications and R.L. Polk & Co. ("Polk") and our Core retail deliveries:

	Three Months Ended July 31,						Nine Months Ended July 31,
(in units)	2018	2017	Change		% Change		2018	2017	Change		% Change
Core markets (U.S. and Canada)
School buses(A)	6,500	6,900	(400	)	(6	)%	17,400	19,500	(2,100	)	(11	)%
Class 6 and 7 medium trucks	24,600	20,800	3,800		18	%	73,500	64,600	8,900		14	%
Class 8 heavy trucks	52,800	39,300	13,500		34	%	142,300	101,600	40,700		40	%
Class 8 severe service trucks	18,300	16,500	1,800		11	%	52,700	45,100	7,600		17	%
Total Core markets	102,200	83,500	18,700		22	%	285,900	230,800	55,100		24	%
Combined class 8 trucks	71,100	55,800	15,300		27	%	195,000	146,700	48,300		33	%
Navistar Core retail deliveries	15,900	12,800	3,100		24	%	45,500	37,300	8,200		22	%

_________________________

(A) The School bus retail market deliveries include buses classified as B, C, and D and are being reported on a one-month lag.

Truck Retail Delivery Market Share

The following table summarizes our approximate retail delivery market share percentages for the Class 6 through 8 U.S. and Canada truck markets, based on market-wide information from Wards Communications and Polk:

	Three Months Ended
	July 31, 2018		April 30, 2018		January 31, 2018		October 31, 2017		July 31, 2017
Core markets (U.S. and Canada)
Class 6 and 7 medium trucks	22	%	26	%	20	%	23	%	25	%
Class 8 heavy trucks	13	%	13	%	11	%	14	%	10	%
Class 8 severe service trucks	11	%	12	%	12	%	16	%	12	%
Combined class 8 trucks	12	%	13	%	11	%	15	%	11	%

48

Truck Orders, net

We define orders as written commitments received from customers and dealers during the year to purchase trucks. Net orders represent new orders received during the year less cancellations of orders made during the same year. Orders do not represent guarantees of purchases by customers or dealers and are subject to cancellation. Orders may be either sold orders, which will be built for specific customers, or stock orders, which will generally be built for dealer inventory for eventual sale to customers. These orders may be placed at our assembly plants in the U.S. and Mexico for destinations anywhere in the world and include trucks and buses. Historically, we have had an increase in net orders for stock inventory from our dealers at the end of the year due to a combination of demand and, from time to time, incentives to the dealers. Increases in stock orders typically translate to higher future chargeouts. The following table summarizes our approximate net orders for Core units:

	Three Months Ended July 31,					Nine Months Ended July 31,
(in units)	2018	2017	Change	% Change		2018	2017	Change	% Change
Core markets (U.S. and Canada)
School buses	3,900	3,300	600	18	%	11,000	9,100	1,900	21	%
Class 6 and 7 medium trucks	7,800	4,700	3,100	66	%	23,900	15,900	8,000	50	%
Class 8 heavy trucks	12,800	4,600	8,200	178	%	31,800	12,700	19,100	150	%
Class 8 severe service trucks	3,800	2,300	1,500	65	%	9,800	6,500	3,300	51	%
Total Core markets	28,300	14,900	13,400	90	%	76,500	44,200	32,300	73	%
Combined class 8 trucks	16,600	6,900	9,700	141	%	41,600	19,200	22,400	117	%

Truck Backlogs

We define order backlogs ("backlogs") as orders yet to be built as of the end of the period. Our backlogs do not represent guarantees of purchases by customers or dealers and are subject to cancellation. Although backlogs are one of many indicators of market demand, other factors such as changes in production rates, internal and supplier available capacity, new product introductions, and competitive pricing actions may affect point-in-time comparisons. Backlogs exclude units in inventory awaiting additional modifications or delivery to the end customer. The following table summarizes our approximate backlog for Core units:

	As of July 31,
(in units)	2018	2017	Change	% Change
Core markets (U.S. and Canada)
School buses(A)	3,900	2,500	1,400	56	%
Class 6 and 7 medium trucks	10,700	4,300	6,400	149	%
Class 8 heavy trucks	18,700	6,700	12,000	179	%
Class 8 severe service trucks	5,700	2,600	3,100	119	%
Total Core markets	39,000	16,100	22,900	142	%
Combined class 8 trucks	24,400	9,300	15,100	162	%

_______________________

(A) The School bus backlogs include buses classified as B, C, and D and are being reported on a one-month lag.

49

Truck Chargeouts

We define chargeouts as trucks that have been invoiced to customers. The units held in dealer inventory represent the principal difference between retail deliveries and chargeouts. The following table summarizes our approximate worldwide chargeouts:

	Three Months Ended July 31,						Nine Months Ended July 31,
(in units)	2018	2017	Change		% Change		2018	2017	Change		% Change
Core markets (U.S. and Canada)
School buses(A)	3,700	3,900	(200	)	(5	)%	8,500	8,400	100		1	%
Class 6 and 7 medium trucks	6,300	4,800	1,500		31	%	17,500	15,700	1,800		11	%
Class 8 heavy trucks	7,200	4,200	3,000		71	%	17,200	10,300	6,900		67	%
Class 8 severe service trucks	1,900	2,200	(300	)	(14	)%	6,000	5,900	100		2	%
Total Core markets	19,100	15,100	4,000		26	%	49,200	40,300	8,900		22	%
Non "Core" military	100	200	(100	)	(50	)%	500	500	—		—	%
Other markets(B)	2,500	2,900	(400	)	(14	)%	5,900	6,900	(1,000	)	(14	)%
Total worldwide units	21,700	18,200	3,500		19	%	55,600	47,700	7,900		17	%
Combined class 8 trucks	9,100	6,400	2,700		42	%	23,200	16,200	7,000		43	%

_____________________________

(A) The School bus chargeouts include buses classified as B, C, and D and are being reported on a one-month lag.

(B) Other markets primarily consist of Export Truck and Mexico.

Liquidity and Capital Resources

Consolidated cash, cash equivalents, and marketable securities

	As of
(in millions)	July 31, 2018		October 31, 2017
Consolidated cash and cash equivalents	$	1,022	$	706
Consolidated marketable securities	95		370
Consolidated cash, cash equivalents, and marketable securities	$	1,117	$	1,076

	As of
(in millions)	July 31, 2018		October 31, 2017
Manufacturing operations	$	1,084	$	1,036
Financial Services operations	33		40
Consolidated cash, cash equivalents, and marketable securities	$	1,117	$	1,076

Manufacturing and Financial Services cash, cash equivalents, and marketable securities

Manufacturing cash, cash equivalents, and marketable securities, and Financial Services cash, cash equivalents and marketable securities are not presented in accordance with, and should not be viewed as an alternative to, U.S. GAAP. This non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. However, we believe that non-GAAP reporting provides meaningful information and therefore we use it to supplement our U.S. GAAP reporting by identifying items that may not be related to the core manufacturing business. We provide this information for an additional analysis of our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations. Manufacturing cash, cash equivalents, and marketable securities represent our consolidated cash, cash equivalents, and marketable securities, which excludes cash, cash equivalents, and marketable securities of our Financial Services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature.

Consolidated cash, cash equivalents, and marketable securities totaled $1.1 billion at July 31, 2018, which includes an immaterial amount of cash and cash equivalents primarily attributable to BDP that is generally not available to satisfy our obligations. For additional information on the consolidation of BDP, see Note 1, Summary of Significant Accounting Policies, to the accompanying consolidated financial statements.

50

Cash Requirements

Our primary sources of liquidity are cash provided by operating activities, including cash flow from the sale of trucks, buses, diesel engines, and parts, as well as from product financing provided to our dealers and retail customers by our Financial Services operations. It is our opinion that, in the absence of significant extraordinary cash demands, our: (i) level of cash, cash equivalents, and marketable securities, (ii) current and forecasted cash flow from our Manufacturing operations and Financial Services operations, (iii) availability under various funding facilities, (iv) current and forecasted availability from various funding alliances, and (v) access to capital in the capital markets, will provide sufficient funds to meet operating requirements, capital expenditures, investments, and financial obligations on both a short-term and long-term basis. Future Manufacturing operations debt obligations are expected to be met through a combination of cash generation from operations and refinancing activities. We also believe the quality of our underlying portfolio of receivables will ensure the ongoing funding from various sources and alliance partners and will permit our Financial Services operations to meet the financing requirements of Navistar, our dealers, and retail customers.

We have generally financed our Manufacturing operations with cash, funding from our Financial Services operations, equity, and access to the capital markets. We also have a $125 million Amended and Restated Asset-Based Credit Facility. Our borrowing capacity under this facility is subject to a $13 million liquidity block. As of July 31, 2018, we have issued certain letters of credit but have no borrowings. We maintain availability to borrow under the Amended and Restated Asset-Based Credit Facility. Also, we have capacity under our various debt arrangements to incur incremental debt. Additionally, the covenants in all of our debt agreements permit us to refinance existing debt instruments as they mature.

Our Manufacturing operations sold $5.9 billion of wholesale notes and accounts receivable to our Financial Services operations during the nine months ended July 31, 2018. The total outstanding balance of wholesale notes and accounts receivable purchased was $1.5 billion as of July 31, 2018. Our Financial Services operations also make loans and provide dividends, return of capital and tax upstreams to our Manufacturing operations. Total loans outstanding from our Financial Services operations to our Manufacturing operations were $241 million at July 31, 2018.

Included in loans made from Financial Services operations to Manufacturing operations is an intercompany financing from NFC that is secured by a first priority lien on used truck inventory, and certain related assets, (the "Intercompany Used Truck Loan"). As of July 31, 2018 and October 31, 2017, our borrowings under the Intercompany Used Truck Loan were $29 million. Our Manufacturing operations also have an intercompany revolving loan agreement (the "Intercompany Revolving Loan") with our captive insurance company under our Financial Services segment. During the nine months ended July 31, 2018, our borrowings under the Intercompany Revolving Loan agreement remained at$7 million.During the nine months ended July 31, 2018, our Financial Services operations made an intercompany loan of $150 million to our Manufacturing operations (the "Intercompany Loan"), utilizing existing credit facilities. 

Our Financial Services operations in Mexico extend working capital loans to our Manufacturing operations in Mexico for orders received. As of July 31, 2018 and October 31, 2017, the borrowings of our Manufacturing operations in Mexico under these loan agreements were $55 million.

Our Financial Services operations have traditionally relied upon secured borrowings on finance receivables, short and long-term bank borrowings, medium and long-term debt, and commercial paper in Mexico to fund products sold or leased by Navistar, our dealers, and retail customers. We use a number of special purpose entities ("SPEs") to securitize receivables. Navistar Financial Securities Corporation ("NFSC") finances wholesale notes, International Truck Leasing Corporation finances operating leases and some finance leases, and Truck Retail Accounts Corporation ("TRAC") finances retail accounts. Our Financial Services operations in Mexico provide vehicle financing, leasing and insurance brokerage services to our dealers and retail customers in Mexico.

As of July 31, 2018, the aggregate amount available to fund finance receivables under our Financial Services facilities was $517 million. Included under our Financial Services facilities is the NFC bank credit facility. The revolving portion of the facility matures in September 2021 and the term loan portion of the facility matured in June 2018. Availability under the NFC bank credit facility totaled $231 million as of July 31, 2018.

In November 2017, we issued $1.1 billion aggregate principal amount of 6.625% Senior Notes and signed a $1.6 billion Term Loan Credit Agreement. The proceeds from the offering of our 6.625% Senior Notes were used to purchase a portion of our previously existing 8.25% Senior Notes and to pay accrued and unpaid interest thereon, and pay the associated prepayment premiums, certain transaction fees and expenses incurred in connection with the 6.625% Senior Notes. A portion of the proceeds from our Term Loan Credit Agreement were used to repay all outstanding loans under our previously existing Term Loan, to pay accrued and unpaid interest thereon, and pay certain transaction fees and expenses incurred in connection with the new Term Loan Credit Agreement, and to repurchase the remaining outstanding 8.25% Senior Notes and associated accrued but unpaid interest thereon. The remainder of the proceeds of the Term Loan Credit Agreement will be used for ongoing working capital purposes and general corporate purposes.

51

In November 2017, we entered into Tax Exempt Bond Amendments to adjust various restrictive covenants included in the loan agreements relating to the Tax Exempt Bonds, including to permit the Company to incur secured debt of up to $1.7 billion, in exchange for a coupon increase from 6.50% to 6.75% and the grant of a junior priority lien on certain collateral securing our previously existing Term Loan and the new Term Loan Credit Agreement.

In December 2017, the maturity date of the variable funding notes ("VFN") facility was extended from May 2018 to December 2018, and the maximum capacity was reduced from $425 million to $350 million.

In January 2018, the maturity date of the $100 million TRAC funding facility was extended from April 2018 to January 2019.

In July 2018, NFC entered into a new agreement whereby NFC borrowed an aggregate principal amount of $400 million under a new seven-year senior secured term loan facility (the "NFC Term Loan"). The proceeds of the NFC Term Loan were used to pay certain fees and expenses in connection with the NFC Term Loan and to make the Intercompany Loan to our Manufacturing operations. The remainder of the proceeds of the NFC Term Loan will be used for other general NFC purposes.

At maturity in October 2018, our Manufacturing operations expect to repay our 4.50% Senior Subordinated Convertible Notes utilizing cash on hand. Additionally, NFSC intends to enter into a new facility to replace the $300 million of investor notes maturing in September 2018.

Cash Flow Overview

	Nine Months Ended July 31, 2018
(in millions)	Manufacturing Operations(A)			Financial Services Operations and Adjustments(A)			Condensed Consolidated Statement of Cash Flows
Net cash used in operating activities	$	(154	)	$	(26	)	$	(180	)
Net cash provided by (used in) investing activities	129			(135		)	(6		)
Net cash provided by financing activities	363			155			518
Effect of exchange rate changes on cash and cash equivalents	(15		)	(1		)	(16		)
Increase (decrease) in cash and cash equivalents	323			(7		)	316
Cash and cash equivalents at beginning of the period	666			40			706
Cash and cash equivalents at end of the period	$	989		$	33		$	1,022

	Nine Months Ended July 31, 2017
(in millions)	Manufacturing Operations(A)			Financial Services Operations and Adjustments(A)			Condensed Consolidated Statement of Cash Flows
Net cash provided by (used in) operating activities	$	(180	)	$	12		$	(168	)
Net cash used in investing activities	(143		)	(51		)	(194		)
Net cash provided by financing activities	428			40			468
Effect of exchange rate changes on cash and cash equivalents	2			(1		)	1
Increase in cash and cash equivalents	107			—			107
Cash and cash equivalents at beginning of the period	761			43			804
Cash and cash equivalents at end of the period	$	868		$	43		$	911

_________________________

(A) Manufacturing operations cash flows and Financial Services operations cash flows are not presented in accordance with, and should not be viewed as an alternative to, U.S. GAAP. This non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. However, we believe that non-GAAP reporting provides meaningful information and therefore we use it to supplement our U.S. GAAP reporting by identifying items that may not be related to the core manufacturing business. Management often uses this information to assess and measure the performance and liquidity of our operating segments. Our Manufacturing operations, for this purpose, include our Truck segment, Global Operations segment, Parts segment, and Corporate items which include certain eliminations. The reconciling differences between these non-GAAP financial measures and our U.S. GAAP consolidated financial statements in Item 1, Financial Statements and Supplementary Data, are our Financial Services operations and adjustments required to eliminate certain intercompany transactions between Manufacturing operations and Financial Services operations. Our Financial Services operations cash flows are presented consistent with their treatment in our Condensed Consolidated Statements of Cash Flows and may not be consistent with how they would be treated on a stand-alone basis. We have chosen to provide this supplemental information to allow additional analysis, to illustrate the respective cash flows giving effect to the equity basis cash flow shown above, and to provide an additional measure of performance and liquidity.

52

Manufacturing Operations

Manufacturing Operations Cash Flow from Operating Activities

Cash used in operating activities was $154 million and $180 million in the nine months ended July 31, 2018 and 2017, respectively. The lower use of cash from operating activities in 2018 compared to 2017 was primarily attributable to higher net income, an increase in net payables with our Financial Services operations, an increase in accounts payable, and an increase in other noncurrent liabilities, partially offset by a decrease in the collection of accounts receivable, higher inventories and a decrease in other current liabilities.

Cash paid for interest, net of amounts capitalized, was $181 million and $188 million in the nine months ended July 31, 2018 and 2017, respectively.

Manufacturing Operations Cash Flow from Investing Activities

Cash provided by investing activities was $129 million in the nine months ended July 31, 2018, compared to cash used in investing activities of $143 million in the nine months ended July 31, 2017. The net increase in cash flow from investing activities in 2018 compared to 2017 was primarily attributable to lower purchases and higher maturities of marketable securities and a decrease in capital expenditures, partially offset by a decrease in the sale of marketable securities, an increase in the amount of restricted cash, lower proceeds from sales of property and equipment and lower proceeds from the sales of non-consolidated affiliates.

Manufacturing Operations Cash Flow from Financing Activities

Cash provided by financing activities was $363 million and $428 million in the nine months ended July 31, 2018 and 2017, respectively. The net decrease in cash flow from financing activities in 2018 compared to 2017 was primarily attributable to higher principal repayments of long-term debt, a decrease in the amount of proceeds received from the issuance of common stock and higher debt issuance costs, partially offset by higher proceeds from the issuance of long-term debt, a decrease in the amount of stock issuance costs, higher proceeds received from the exercise of stock options and funding under the Intercompany Loan.

Financial Services Operations

Financial Services Operations and Adjustments to Cash Flow from Operating Activities

Cash used in operating activities was $26 million in the nine months ended July 31, 2018 compared to cash provided by operating activities of $12 million in the nine months ended July 31, 2017. The decrease in cash provided by operating activities compared to 2017 was primarily due to an increase in net receivables with our Manufacturing operations, partially offset by higher Financial Services income.

Cash paid for interest, net of amounts capitalized, was $55 million and $53 million for the nine months ended July 31, 2018 and 2017, respectively.

Financial Services Operations and Adjustments to Cash Flow from Investing Activities

Cash used in investing activities was $135 million and $51 million in the nine months ended July 31, 2018 and 2017, respectively. Changes in restricted cash levels required under our secured borrowings, along with purchases of equipment leased to others, were the primary sources and uses of cash from investing activities in 2018 and 2017. The increase in cash used in investing activities was primarily due to an increase in restricted cash levels required for the maturity and repayment of investor notes in September 2018, and an increase in purchases of equipment leased to others.

Financial Services Operations and Adjustments to Cash Flow from Financing Activities

Cash provided by financing activities was $155 million and $40 million in the nine months ended July 31, 2018 and 2017, respectively. The increase in cash provided by financing activities compared to 2017 was primarily due to the increase in borrowing levels used to fund the increase in investing activities and the increase in net receivables with our Manufacturing operations.

Consolidated EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA, which exclude certain identified items that we do not consider to be part of our ongoing business, are not in accordance with, and should not be viewed as an alternative to, U.S. GAAP. This non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP.

We believe EBITDA provides meaningful information about the performance of our business and therefore we use it to supplement our U.S. GAAP reporting.

53

We believe that Adjusted EBITDA improves the comparability of year-to-year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. We have chosen to provide this supplemental information for an additional analysis of our operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliations, and to provide an additional measure of performance.

EBITDA reconciliation:

	Three Months Ended July 31,					Nine Months Ended July 31,
(in millions)	2018			2017		2018			2017
Income (loss) from continuing operations attributable to NIC, net of tax	$	170		$	36	$	152		$	(106	)
Plus:
Depreciation and amortization expense	51			57		160			169
Manufacturing interest expense(A)	60			67		176			197
Adjusted for:
Income tax expense	(3		)	—		(25		)	(10		)
EBITDA	$	284		$	160	$	513		$	270

______________________

(A) Manufacturing interest expense is the net interest expense primarily generated for borrowings that support the Manufacturing and Corporate operations, adjusted to eliminate intercompany interest expense with our Financial Services segment. The following table reconciles Manufacturing interest expense to the consolidated interest expense.

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions)	2018		2017		2018		2017
Interest expense	$	82	$	91	$	240	$	262
Less: Financial services interest expense	22		24		64		65
Manufacturing interest expense	$	60	$	67	$	176	$	197

Adjusted EBITDA Reconciliation:

	Three Months Ended July 31,						Nine Months Ended July 31,
(in millions)	2018			2017			2018			2017
EBITDA (reconciled above)	$	284		$	160		$	513		$	270
Adjusted for significant items of:
Adjustments to pre-existing warranties(A)	(4		)	6			(4		)	(4		)
Asset impairment charges(B)	8			6			11			13
Restructuring of manufacturing operations(C)	1			(3		)	(1		)	6
EGR product litigation(D)	—			31			1			31
Gain on sale(E)	—			(6		)	—			(6		)
Debt refinancing charges(F)	—			—			46			4
Pension settlement(G)	—			—			9			—
Settlement gain(H)	(71		)	—			(71		)	—
Total adjustments	(66		)	34			(9		)	44
Adjusted EBITDA	$	218		$	194		$	504		$	314

_____________________

(A) Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.

(B) In the third quarter and first nine months of 2018, we recorded $8 million and $11 million, respectively, of impairment charges related to the sale of our railcar business in Cherokee, Alabama, certain long-lived assets and certain assets under operating leases in our Truck and Financial Services segments. In the third quarter and first nine months of 2017, we recorded $6 million and $13 million, respectively, of asset impairment charges relating to assets held for the sale of our Conway, Arkansas fabrication business and for certain assets under operating leases in our Truck segment.

54

(C) In the third quarter and first nine months of 2018, we recorded a charge of $1 million and a benefit of $1 million, respectively, related to adjustments for restructuring in our Truck, Global Operations and Corporate segments. In the third quarter and first nine months of 2017, we recorded a benefit of $3 million and a charge of $6 million for restructuringin our Truck segment. In the third quarter of 2017, we recorded $41 million of charges related to our plan to cease production at our Melrose Park Facility, a net benefit of $43 million related to the resolution of the closing agreement for our Chatham, Ontario plant, and the release of $1 million in OPEB liabilities in connection with the sale of our fabrication business in Conway, Arkansas. The first nine months of 2017 were also impacted by $7 million of restructuring charges related to the closure of the Chatham, Ontario plant and $2 million of restructuring charges in our Truck and Corporate segments.

(D) In the first nine months of 2018, we recognized an additional charge of $1 million for a jury verdict related to the Maxxforce engine EGR product litigation in our Truck segment. In the third quarter and first nine months of 2017, we recognized a charge of $31 million for a jury verdict related to the Maxxforce engine EGR product litigation in our Truck segment.

(E) In the third quarter of 2017, we recognized a gain of $6 million related to the sale of a business line in our Parts segment.

(F) In the first nine months of 2018, we recorded a charge of $46 million for the write off of debt issuance costs and discounts associated with the repurchase of our 8.25% Senior Notes and the refinancing of our previously existing Term Loan. In the first nine months of 2017, we recorded a charge of $4 million related to third party fees and debt issuance costs associated with the repricing of our previously existing Term Loan.

(G) In the first quarter of 2018, we purchased a group annuity contract for certain retired pension plan participants resulting in a plan remeasurement. As a result, we recorded a pension settlement accounting charge of $9 million in SG&A expenses.

(H) In the third quarter of 2018, we settled a business economic loss claim relating to our Alabama engine manufacturing facility in which we will receive a net present value of $70 million, net of our fees and costs, from the Deepwater Horizon Settlement Program. We recorded the $70 million net present value of the settlement and related interest income of $1 million in Other Income, net.

Pension and Other Postretirement Benefits

Our pension plans are funded by contributions made from Company assets in accordance with applicable U.S. and Canadian government regulations. The regulatory funding requirements are computed using an actuarially determined funded status, which is determined using assumptions that often differ from assumptions used to measure the funded status for U.S. GAAP. U.S. funding targets are determined by rules promulgated under the Pension Protection Act of 2006 (the "PPA"). The PPA additionally requires underfunded plans to achieve 100% funding over a period of time. From time to time, we have discussions with and receive requests for certain information from the Pension Benefit Guaranty Corporation ("PBGC"). The PBGC was created by the Employee Retirement Income Security Act of 1974 to encourage the continuation and maintenance of private-sector defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum. In July 2012, the Moving Ahead for Progress in the 21^st Century Act was signed into law, impacting the minimum funding requirements for pension plans, but not otherwise impacting our accounting for pension benefits. In August 2014, the Highway and Transportation Funding Act of 2014, which included an extension of pension funding interest rate relief, was signed into law. The Bi-Partisan Budget Act of 2015 was signed into law in November of 2015 and provided for further extension of interest rate relief. These legislative measures will reduce our funding requirements over the next five years.

For the three and nine months ended July 31, 2018, we contributed $25 million and $78 million, respectively, and for the three and nine months ended July 31, 2017, we contributed $21 million and $67 million, respectively, to our U.S. and Canadian pension plans (the "Plans") to meet regulatory minimum funding requirements. We currently anticipate additional contributions of approximately $54 million during the remainder of 2018. Future contributions are dependent upon a number of factors, principally the changes in values of plan assets, changes in interest rates, and the impact of any future funding relief. We currently expect that from 2019 through 2021, we will be required to contribute $140 million to $190 million per year to the Plans, depending on asset performance and discount rates.

For more information, see Note 7, Postretirement Benefits, to the accompanying consolidated financial statements.

Other Information

Environmental Matters

We have been named a potentially responsible party ("PRP"), in conjunction with other parties, in a number of cases arising under an environmental protection law, the Comprehensive Environmental Response, Compensation, and Liability Act, popularly known as the "Superfund" law. These cases involve sites that allegedly received wastes from current or former Company locations. Based on information available to us which, in most cases, consists of data related to quantities and characteristics of material generated at current or former Company locations, material allegedly shipped by us to these disposal sites, as well as cost estimates from PRPs and/or federal or state regulatory agencies for the cleanup of these sites, a reasonable estimate is calculated of our share, if any, of the probable costs and accruals are recorded in our consolidated financial statements. These accruals are generally recognized no later than completion of the remedial feasibility study and are not discounted to their present value. We review all accruals on a regular basis and believe that, based on these calculations, our share of the potential additional costs for the cleanup of each site will not have a material effect on our financial condition, results of operations, or cash flows.

In addition, other sites formerly owned by us or where we are currently operating have been identified as having soil and groundwater contamination. While investigations and cleanup activities continue at these sites, we believe that we have appropriate accruals to cover costs to complete the cleanup of all sites.

55

Impact of Environmental Regulation

Government regulation related to climate change is under consideration at the U.S. federal and state levels. Because our products use fossil fuels, they may be impacted indirectly due to regulation, such as a cap and trade program, affecting the cost of fuels. The United States Environmental Protection Agency ("EPA") and National Highway Traffic Safety Administration ("NHTSA") issued final rules for greenhouse gas ("GHG") phase 1 emissions and fuel economy in 2011 and were fully implemented in model year 2017. We are complying with these rules through use of existing technologies and implementation of emerging technologies as they become available. The EPA and NHTSA adopted a final rule in October 2016 with the next phase of federal GHG emission and fuel economy regulations. This rule contains more stringent emissions levels for engines and vehicles and will take effect in model year 2021 and be implemented in three stages culminating in model year 2027. Canada has finalized a heavy duty phase 2 GHG rulemaking, which is substantially similar to EPA regulations with more stringent requirements for heavy haul tractors.

In December 2014, California adopted GHG emission rules for heavy duty vehicles equivalent to EPA phase 1 rules and is in the process of adopting its phase 2 equivalent rules. California also in 2014 adopted an optional lower emission standard for oxides of nitrogen ("NOx") in California. California has stated its intention to lower NOx standards for California-certified engines and has requested that the EPA lower its standards. In June 2016, several regional air quality management districts in California and other states, as well as the environmental agencies for several states, petitioned the EPA to adopt lower NOx emission standards for on-road heavy duty trucks and engines. The EPA responded to the petition in December 2016 stating that it would consider additional NOx regulations targeting model year 2024, but has not to date formally commenced any further NOx regulations. The EPA and the California Air Resources Board (CARB) may also consider other actions, including extended emission warranties. California is currently considering regulatory requirements to expand the zero emissions truck market, including the mandated sale of certain vehicles.

We expect that heavy duty vehicle and engine fuel economy and GHG emissions rules will be under consideration in other global jurisdictions in the future. The EPA also issued a final rule in October 2015 that lowered the National Ambient Air Quality Standard for ozone to 70 parts per billion. This rule could lead to future lower emission standards for substances that contribute to ozone, including NOx from vehicles, at the federal and state levels. Our facilities may be subject to regulation related to climate change and climate change itself may also have some impact on our operations. However, these impacts are currently uncertain and we cannot predict the nature and scope of those impacts.

These standards will require significant investments of capital and will significantly increase costs of development for engines and vehicles and will require us to incur administrative costs arising from implementation of the standard.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our consolidated financial statements, we use estimates and make judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. Our assumptions, estimates, and judgments are based on historical experience, current trends, and other factors we believe are relevant at the time we prepare our consolidated financial statements.

Our significant accounting policies and critical accounting estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements and the MD&A section of our Annual Report on Form 10-K for the year ended October 31, 2017. During the nine months ended July 31, 2018, there were no significant changes in our application of our critical accounting policies.

To aid in fully understanding and evaluating our reporting results, we have identified the following accounting policies as our most critical because they require us to make difficult, subjective, and complex judgments:

• Pension and Other Postretirement Benefits

• Allowance for Doubtful Accounts

• Income Taxes

• Impairment of Long-Lived Assets

• Contingency Accruals

• Inventories

Recently Issued Accounting Standards

The information required to be set forth under this heading is incorporated by reference from Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included in Part I, Item 1.

56

Item 3.Quantitative and Qualitative Disclosures about Market Risk

See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the year ended October 31, 2017. During the nine months ended July 31, 2018, there have been no material changes in our exposure to market risk.

Item 4.Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2018. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended July 31, 2018, our disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

There were no material changes in our internal control over financial reporting identified in connection with the evaluation

required by Rules 13a-15 and 15d-15 under the Exchange Act that occurred during the quarter ended July 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

57

PART II

Item 1. Legal Proceedings

The information required to be set forth under this heading is incorporated by reference from Note 10, Commitments and Contingencies, to the Consolidated Financial Statements included in Part I, Item 1.

Item 1A. Risk Factors

During the nine months ended July 31, 2018, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for our year ended October 31, 2017 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6.    Exhibits

Exhibit:	Description	Page
(10)	Material Contracts	E-1
(31.1)	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	E-2
(31.2)	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	E-3
(32.1)	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	E-4
(32.2)	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	E-5
(99.1)	Additional Financial Information (Unaudited)	E-6
(101.INS)	XBRL Instance Document	N/A
(101.SCH)	XBRL Taxonomy Extension Schema Document	N/A
(101.CAL)	XBRL Taxonomy Extension Calculation Linkbase Document	N/A
(101.LAB)	XBRL Taxonomy Extension Label Linkbase Document	N/A
(101.PRE)	XBRL Taxonomy Extension Presentation Linkbase Document	N/A
(101.DEF)	XBRL Taxonomy Extension Definition Linkbase Document	N/A

All exhibits other than those indicated above are omitted because of the absence of the conditions under which they are required or because the information called for is shown in the consolidated financial statements and notes thereto in the Quarterly Report on Form 10-Q for the period ended July 31, 2018.

58

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NAVISTAR INTERNATIONAL CORPORATION

(Registrant)

/s/    SAMARA A. STRYCKER

Samara A. Strycker

Senior Vice President and Corporate Controller

(Principal Accounting Officer)

September 6, 2018

59

EX-10

EXHIBIT 10

NAVISTAR INTERNATIONAL CORPORATION

AND CONSOLIDATED SUBSIDIARIES

______________________________

MATERIAL CONTRACTS

The following documents of Navistar International Corporation’s indirect subsidiary, Navistar Financial Corporation, are incorporated herein by reference.
10.98	Amendment No. 3, dated as of June 12, 2018, by and among Navistar Financial Corporation and Navistar Financial, S.A. de C.V., Sociedad Financiera De Objeto Multiple, Entidad Regulada, a Mexican corporation, as borrowers, the lenders party thereto and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.1 to the Current Report on Form 8-K dated June 14, 2018 and filed on June 14, 2018. Commission File No. 001-09618.
10.99	Joinder Agreement, dated July 30, 2018, among Navistar Financial Corporation, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Filed as Exhibit 10.1 to the Current Report on Form 8-K dated July 31, 2018 and filed on July 31, 2018. Commission File No. 001-09618.

E-1

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Troy A. Clarke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Navistar International Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 6, 2018

/s/     TROY A. CLARKE

Troy A. Clarke

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

E-2

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Walter G. Borst, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Navistar International Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 6, 2018

/s/     WALTER G. BORST        

Walter G. Borst

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

E-3

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Navistar International Corporation (the “Company”) on Form 10-Q for the period ended July 31, 2018 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), I, Troy A. Clarke, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: September 6, 2018

/s/     TROY A. CLARKE

Troy A. Clarke

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

E-4

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Navistar International Corporation (the “Company”) on Form 10-Q for the period ended July 31, 2018 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), I, Walter G. Borst, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: September 6, 2018

/s/ WALTER G. BORST

Walter G. Borst

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. This certification shall also not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

E-5

EX-99.1

EXHIBIT 99.1

Additional Financial Information (Unaudited)

The following additional financial information is provided based upon the continuing interest of certain stockholders and creditors to assist them in understanding our core Manufacturing operations and our Financial Services operations on an after-tax equity basis. Our Manufacturing operations, for this purpose, include our Truck segment, Parts segment, Global Operations segment, and Corporate items. The Manufacturing operations financial information represents non-GAAP financial measures. These non-GAAP financial measures should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. The reconciling differences between these non-GAAP financial measures and our U.S. GAAP condensed consolidated financial statements in Item 1, Financial Statements, are our Financial Services operations, which are included on an after-tax equity basis. Certain of our subsidiaries in our Manufacturing operations have debt outstanding with our Financial Services operations (“intercompany debt”). In the condensed statements of assets, liabilities, and stockholders' equity (deficit), the intercompany debt is reflected as accounts payable. The change in the intercompany debt is reflected in Net cash provided by (used in) operating activities in the condensed statements of cash activity.

Condensed Statements of Revenues and Expenses

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	For the Three Months Ended July 31, 2018
(in millions)	Manufacturing Operations			Financial Services Operations			Adjustments			Consolidated Statement of Operations
Sales of manufactured products	$	2,566		$	—		$	—		$	2,566
Finance revenues	—			65			(25		)	40
Sales and revenues, net	2,566			65			(25		)	2,606
Costs of products sold	2,096			—			—			2,096
Restructuring charges	1			—			—			1
Asset impairment charges	7			1			—			8
Selling, general and administrative expenses	221			23			—			244
Engineering and product development costs	72			—			—			72
Interest expense	60			22			—			82
Other income, net	(48		)	(4		)	(25		)	(77		)
Total costs and expenses	2,409			42			(25		)	2,426
Equity in income of non-consolidated affiliates	—			—			—			—
Income before equity income from financial services operations and income taxes	157			23			—			180
Equity income from financial services operations	17			—			(17		)	—
Income from continuing operations before income tax	174			23			(17		)	180
Income tax benefit (expense)	3			(6		)	—			(3		)
Income from continuing operations	177			17			(17		)	177
Income (loss) from discontinued operations, net of tax	—			—			—			—
Net income	177			17			(17		)	177
Less: Net income attributable to non-controlling interests	7			—			—			7
Net income attributable to Navistar International Corporation	$	170		$	17		$	(17	)	$	170

E-6

Condensed Statements of Revenues and Expenses

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	For the Nine Months Ended July 31, 2018
(in millions)	Manufacturing Operations			Financial Services Operations			Adjustments			Consolidated Statement of Operations
Sales of manufactured products	$	6,815		$	—		$	—		$	6,815
Finance revenues	—			187			(69		)	118
Sales and revenues, net	6,815			187			(69		)	6,933
Costs of products sold	5,615			—			—			5,615
Restructuring charges	(1		)	—			—			(1		)
Asset impairment charges	10			1			—			11
Selling, general and administrative expenses	619			68			(1		)	686
Engineering and product development costs	222			—			—			222
Interest expense	176			64			—			240
Other expense (income), net	39			(8		)	(68		)	(37		)
Total costs and expenses	6,680			125			(69		)	6,736
Equity in income of non-consolidated affiliates	—			—			—			—
Income before equity income from financial services operations and income taxes	135			62			—			197
Equity income from financial services operations	49			—			(49		)	—
Income from continuing operations before income tax	184			62			(49		)	197
Income tax expense	(12		)	(13		)	—			(25		)
Income from continuing operations	172			49			(49		)	172
Income (loss) from discontinued operations, net of tax	—			—			—			—
Net income	172			49			(49		)	172
Less: Net income attributable to non-controlling interests	20			—			—			20
Net income attributable to Navistar International Corporation	$	152		$	49		$	(49	)	$	152

E-7

Condensed Statements of Revenues and Expenses

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	For the Three Months Ended July 31, 2017
(in millions)	Manufacturing Operations			Financial Services Operations			Adjustments			Consolidated Statement of Operations
Sales of manufactured products	$	2,178		$	—		$	—		$	2,178
Finance revenues	—			62			(27		)	35
Sales and revenues, net	2,178			62			(27		)	2,213
Costs of products sold	1,803			—			—			1,803
Restructuring charges	(13		)	—			—			(13		)
Asset impairment charges	6			—			—			6
Selling, general and administrative expenses	215			19			(1		)	233
Engineering and product development costs	61			—			—			61
Interest expense	67			24			—			91
Other expense (income), net	22			(4		)	(26		)	(8		)
Total costs and expenses	2,161			39			(27		)	2,173
Equity in income of non-consolidated affiliates	1			—			—			1
Income before equity income from financial services operations and income taxes	18			23			—			41
Equity income from financial services operations	14			—			(14		)	—
Income from continuing operations before income taxes	32			23			(14		)	41
Income tax benefit (expense)	9			(9		)	—			—
Income from continuing operations	41			14			(14		)	41
Income from discontinued operations, net of tax	1			—			—			1
Net income	42			14			(14		)	42
Less: Net income attributable to non-controlling interests	5			—			—			5
Net income attributable to Navistar International Corporation	$	37		$	14		$	(14	)	$	37

E-8

Condensed Statements of Revenues and Expenses

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	For the Nine Months Ended July 31, 2017
(in millions)	Manufacturing Operations			Financial Services Operations			Adjustments			Consolidated Statement of Operations
Sales of manufactured products	$	5,870		$	—		$	—		$	5,870
Finance revenues	—			172			(70		)	102
Sales and revenues, net	5,870			172			(70		)	5,972
Costs of products sold	4,949			—			—			4,949
Restructuring charges	(4		)	—			—			(4		)
Asset impairment charges	13			—			—			13
Selling, general and administrative expenses	591			65			(2		)	654
Engineering and product development costs	189			—			—			189
Interest expense	201			65			(4		)	262
Other expense (income), net	66			(9		)	(64		)	(7		)
Total costs and expenses	6,005			121			(70		)	6,056
Equity in income of non-consolidated affiliates	6			—			—			6
Income (loss) before equity income from financial services operations and income taxes	(129		)	51			—			(78		)
Equity income from financial services operations	34			—			(34		)	—
Income (loss) from continuing operations before income taxes	(95		)	51			(34		)	(78		)
Income tax benefit (expense)	7			(17		)	—			(10		)
Income (loss) from continuing operations	(88		)	34			(34		)	(88		)
Income from discontinued operations, net of tax	1			—			—			1
Net income (loss)	(87		)	34			(34		)	(87		)
Less: Net income attributable to non-controlling interests	18			—			—			18
Net income (loss) attributable to Navistar International Corporation	$	(105	)	$	34		$	(34	)	$	(105	)

E-9

Condensed Statements of Assets, Liabilities, and Stockholders' Equity (Deficit)

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	As of July 31, 2018
(in millions)	Manufacturing Operations			Financial Services Operations		Adjustments			Consolidated Balance Sheet
Assets
Cash and cash equivalents	$	989		$	33	$	—		$	1,022
Marketable securities	95			—		—			95
Restricted cash	28			172		—			200
Finance and other receivables, net	452			2,161		(264		)	2,349
Inventories	1,391			9		—			1,400
Goodwill	38			—		—			38
Property and equipment, net	1,022			275		—			1,297
Investments in and advances to financial services operations	572			—		(572		)	—
Investments in non-consolidated affiliates	53			—		—			53
Deferred taxes, net	127			3		—			130
Other assets	322			18		—			340
Total assets	$	5,089		$	2,671	$	(836	)	$	6,924
Liabilities and stockholders' equity (deficit)
Accounts payable	$	1,755		$	36	$	(264	)	$	1,527
Debt	3,625			1,975		—			5,600
Postretirement benefits liabilities	2,435			—		—			2,435
Other liabilities	1,608			88		—			1,696
Total liabilities	9,423			2,099		(264		)	11,258
Stockholders' equity attributable to non-controlling interest	5			—		—			5
Stockholders' equity (deficit) attributable to controlling interest	(4,339		)	572		(572		)	(4,339		)
Total liabilities and stockholders' equity (deficit)	$	5,089		$	2,671	$	(836	)	$	6,924

E-10

Condensed Statements of Assets, Liabilities, and Stockholders' Equity (Deficit)

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	As of October 31, 2017
(in millions)	Manufacturing Operations			Financial Services Operations		Adjustments			Consolidated Balance Sheet
Assets
Cash and cash equivalents	$	666		$	40	$	—		$	706
Marketable securities	370			—		—			370
Restricted cash	24			110		—			134
Finance and other receivables, net	404			1,854		(69		)	2,189
Inventories	850			7		—			857
Goodwill	38			—		—			38
Property and equipment, net	1,083			243		—			1,326
Investments in and advances to financial services operations	517			—		(517		)	—
Investments in non-consolidated affiliates	56			—		—			56
Deferred taxes, net	125			4		—			129
Other assets	312			18		—			330
Total assets	$	4,445		$	2,276	$	(586	)	$	6,135
Liabilities and stockholders' equity (deficit)
Accounts payable	$	1,330		$	31	$	(69	)	$	1,292
Debt	3,407			1,651		—			5,058
Postretirement benefits liabilities	2,556			—		—			2,556
Other liabilities	1,726			77		—			1,803
Total liabilities	9,019			1,759		(69		)	10,709
Stockholders' equity attributable to non-controlling interest	4			—		—			4
Stockholders' equity (deficit) attributable to controlling interest	(4,578		)	517		(517		)	(4,578		)
Total liabilities and stockholders' equity (deficit)	$	4,445		$	2,276	$	(586	)	$	6,135

E-11

Condensed Statements of Cash Flows

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	For the Nine Months Ended July 31, 2018
(in millions)	Manufacturing Operations			Financial Services Operations			Adjustments			Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net income	$	172		$	49		$	(49	)	$	172
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization	106			1			—			107
Depreciation of equipment leased to others	13			40			—			53
Amortization of debt issuance costs and discount	16			7			—			23
Deferred income taxes	(3		)	—			—			(3		)
Asset impairment charges	10			1			—			11
Equity in income of financial services affiliates	(49		)	—			49			—
Dividends from non-consolidated affiliates	4			—			—			4
Change in intercompany receivables and payables	49			(49		)	—			—
Other, net	(472		)	(75		)	—			(547		)
Net cash used in operating activities	(154		)	(26		)	—			(180		)
Cash flows from investing activities
Purchases of marketable securities	(214		)	—			—			(214		)
Sales of marketable securities	460			—			—			460
Maturities of marketable securities	29			—			—			29
Net change in restricted cash and cash equivalents	(4		)	(62		)	—			(66		)
Capital expenditures	(78		)	(1		)	—			(79		)
Purchase of equipment leased to others	(62		)	(80		)	—			(142		)
Other investing activities	(2		)	8			—			6
Net cash provided by (used in) investing activities	129			(135		)	—			(6		)
Net cash provided by financing activities	363			155			—			518
Effect of exchange rate changes on cash and cash equivalents	(15		)	(1		)	—			(16		)
Increase (decrease) in cash and cash equivalents	323			(7		)	—			316
Cash and cash equivalents at beginning of the period	666			40			—			706
Cash and cash equivalents at end of the period	$	989		$	33		$	—		$	1,022

E-12

Condensed Statements of Cash Flows

Navistar International Corporation

(Manufacturing operations with financial services operations on an after-tax equity basis)

	For the Nine Months Ended July 31, 2017
(in millions)	Manufacturing Operations			Financial Services Operations			Adjustments			Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net income (loss)	$	(87	)	$	34		$	(34	)	$	(87	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	111			2			—			113
Depreciation of equipment leased to others	20			36			—			56
Amortization of debt issuance costs and discount	26			10			—			36
Deferred income taxes	(15		)	(1		)	—			(16		)
Asset impairment charges	13			—			—			13
Gain on sales of investments and businesses, net	(5		)	—			—			(5		)
Equity in income of non-consolidated affiliates	(6		)	—			—			(6		)
Equity in income of financial services affiliates	(34		)	—			34			—
Dividends from financial services operations	8			—			(8		)	—
Dividends from non-consolidated affiliates	7			—			—			7
Change in intercompany receivables and payables	(16		)	16			—			—
Other, net	(202		)	(77		)	—			(279		)
Net cash provided by (used in) operating activities	(180		)	20			(8		)	(168		)
Cash flows from investing activities
Purchases of marketable securities	(619		)	—			—			(619		)
Sales of marketable securities	586			—			—			586
Maturities of marketable securities	17			—			—			17
Net change in restricted cash and cash equivalents	2			(27		)	—			(25		)
Capital expenditures	(92		)	(1		)	—			(93		)
Purchase of equipment leased to others	(61		)	(35		)	—			(96		)
Other investing activities	24			12			—			36
Net cash used in investing activities	(143		)	(51		)	—			(194		)
Net cash provided by financing activities	428			32			8			468
Effect of exchange rate changes on cash and cash equivalents	2			(1		)	—			1
Increase in cash and cash equivalents	107			—			—			107
Cash and cash equivalents at beginning of the period	761			43			—			804
Cash and cash equivalents at end of the period	$	868		$	43		$	—		$	911

E-13

XML

Document and Entity Information Document	9 Months Ended
	Jul. 31, 2018 shares
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	nav
Entity Registrant Name	NAVISTAR INTERNATIONAL CORP
Entity Central Index Key	0000808450
Current Fiscal Year End Date	--10-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	98,870,065

XML

Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Sales and revenues
Sales of manufactured products, net	$ 2,566	$ 2,178	$ 6,815	$ 5,870
Finance revenues	40	35	118	102
Sales and revenues, net	2,606	2,213	6,933	5,972
Costs and expenses
Costs of products sold	2,096	1,803	5,615	4,949
Restructuring charges	1	(13)	(1)	(4)
Asset impairment charges	8	6	11	13
Selling, general and administrative expenses	244	233	686	654
Engineering and product development costs	72	61	222	189
Interest expense	82	91	240	262
Other income, net	(77)	(8)	(37)	(7)
Total costs and expenses	2,426	2,173	6,736	6,056
Equity in income of non-consolidated affiliates	0	1	0	6
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	180	41	197	(78)
Income Tax Expense (Benefit)	3	0	25	10
Income (loss) from continuing operations	177	41	172	(88)
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	0	1	0	1
Net income (loss)	177	42	172	(87)
Less: Net income attributable to non-controlling interests	(7)	(5)	(20)	(18)
Net income (loss) attributable to Navistar International Corporation	170	37	152	(105)
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	170	36	152	(106)
Income (Loss) from Discontinued Operations, Net of Tax, Attributable to Parent	$ 0	$ 1	$ 0	$ 1
Earnings (loss) per share attributable to Navistar International Corporation:
Income (Loss) from Continuing Operations, Per Basic Share	$ 1.72	$ 0.37	$ 1.54	$ (1.16)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Basic Share	0.00	0.01	0.00	0.01
Earnings Per Share, Basic	1.72	0.38	1.54	(1.15)
Income (Loss) from Continuing Operations, Per Diluted Share	1.71	0.37	1.53	(1.16)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Diluted Share	0.00	0.01	0.00	0.01
Earnings Per Share, Diluted	$ 1.71	$ 0.38	$ 1.53	$ (1.15)
Weighted average shares outstanding:
Basic (in shares)	99.0	98.3	98.8	91.1
Diluted (in shares)	99.7	98.6	99.6	91.1

XML

Consolidated Statements of Comprehensive Loss - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 177	$ 42	$ 172	$ (87)
Other comprehensive income (loss):
Foreign currency translation adjustment	(13)	42	(19)	34
Defined benefit plans, net of tax	29	125	92	194
Total other comprehensive income	16	167	73	228
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	193	209	245	141
Less: Net income attributable to non-controlling interests	7	5	20	18
Total comprehensive income attributable to Navistar International Corporation	$ 186	$ 204	$ 225	$ 123

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Current assets
Cash and cash equivalents	$ 1,022	$ 706
Restricted cash and cash equivalents	148	83
Marketable securities	95	370
Trade and other receivables, net	403	391
Finance receivables, net	1,638	1,565
Inventories, net	1,400	857
Other current assets	199	188
Total current assets	4,905	4,160
Restricted cash	52	51
Trade and other receivables, net	49	13
Finance receivables, net	259	220
Investments in non-consolidated affiliates	53	56
Property and equipment (net of accumulated depreciation and amortization of $2,468 and $2,474, respectively)	1,297	1,326
Goodwill	38	38
Intangible assets (net of accumulated amortization of $139 and $135, respectively)	30	40
Deferred taxes, net	130	129
Other noncurrent assets	111	102
Total assets	6,924	6,135
Current liabilities
Notes payable and current maturities of long-term debt	1,707	1,169
Accounts payable	1,527	1,292
Other current liabilities	1,075	1,184
Total current liabilities	4,309	3,645
Long-term debt	3,893	3,889
Postretirement benefits liabilities	2,378	2,497
Other noncurrent liabilities	678	678
Total liabilities	11,258	10,709
Stockholders’ deficit
Series D convertible junior preference stock	2	2
Common stock, $0.10 par value per share (103.1 shares issued and 220 shares authorized at both dates)	10	10
Additional paid-in capital	2,731	2,733
Accumulated deficit	(4,781)	(4,933)
Accumulated other comprehensive loss	(2,138)	(2,211)
Common stock held in treasury, at cost (4.2 and 4.6 shares, respectively)	(163)	(179)
Total stockholders’ deficit attributable to Navistar International Corporation	(4,339)	(4,578)
Stockholders’ equity attributable to non-controlling interests	5	4
Total stockholders’ deficit	(4,334)	(4,574)
Total liabilities and stockholders’ deficit	$ 6,924	$ 6,135

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Millions, $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Statement of Financial Position [Abstract]
Property and equipment, accumulated depreciation and amortization	$ 2,468	$ 2,474
Intangible assets, accumulated amortization	$ 139	$ 135
Common stock, par value	$ 0.1	$ 0.10
Common stock, shares authorized	220.0	220.0
Common stock, shares issued	103.1	103.1
Common stock held in treasury, shares	4.2	4.6

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017
Cash flows from operating activities
Net income (loss)	$ 172	$ (87)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	107	113
Depreciation of equipment leased to others	53	56
Deferred taxes, including change in valuation allowance	(3)	(16)
Asset impairment charges	11	13
Gain (Loss) on Sales of Investments and Businesses, Net	0	5
Amortization of debt issuance costs and discount	23	36
Stock-based compensation	27	19
Provision for doubtful accounts	6	9
Equity in income of non-consolidated affiliates, net of dividends	4	1
Write off of debt issuance cost and discount	43	4
Other non-cash operating activities	(17)	(21)
Changes in other assets and liabilities, exclusive of businesses disposed	(606)	(290)
Net cash used in operating activities	(180)	(168)
Cash flows from investing activities
Payments to Acquire Marketable Securities	(214)	(619)
Sales of marketable securities	460	586
Maturities of marketable securities	29	17
Net change in restricted cash and cash equivalents	(66)	(25)
Capital expenditures	(79)	(93)
Purchases of equipment leased to others	(142)	(96)
Proceeds from sales of property and equipment	9	32
Investments in non-consolidated affiliates	0	(2)
Payments for (Proceeds from) Businesses and Interest in Affiliates	(3)	6
Net Cash Provided by (Used in) Investing Activities	(6)	(194)
Cash flows from financing activities
Proceeds from issuance of secured debt	32	278
Principal payments on secured debt	(50)	(326)
Net change in secured revolving credit facilities	64	119
Proceeds from issuance of non-securitized debt	3,210	491
Principal payments on non-securitized debt	(2,669)	(368)
Net change in notes and debt outstanding under revolving credit facilities	(52)	23
Repayments of Debt and Capital Lease Obligations	0	1
Debt issuance costs	(36)	(22)
Proceeds from finance lease obligations	48	49
Proceeds from Issuance of Common Stock	0	256
Payments of Stock Issuance Costs	0	(11)
Proceeds from exercise of stock options	7	4
Dividends paid by subsidiaries to non-controlling interest	(19)	(21)
Other financing activities	(17)	(3)
Net cash provided by (used in) financing activities	518	468
Effect of exchange rate changes on cash and cash equivalents	(16)	1
Increase (decrease) in cash and cash equivalents	316	107
Cash and cash equivalents at beginning of the period	706	804
Cash and cash equivalents at end of the period	$ 1,022	$ 911

XML

Consolidated Statements of Stockholders' Deficit - USD ($) $ in Millions	Total	Convertible Junior Preference Stock Series D [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]
Stockholders' Equity balance at beginning of period at Oct. 31, 2016	$ (5,293)	$ 2	$ 9	$ 2,499	$ (4,963)	$ (2,640)	$ (205)	$ 5
Net income (loss)	(87)	0	0	0	(105)	0	0	18
Total other comprehensive income	228	0	0	0	0	228	0	0
Stock-based compensation	4	0	0	4	0	0	0	0
Stock ownership programs	2	0	0	(13)	0	0	15	0
Dividends paid by subsidiaries to non-controlling interest	(21)	0	0	0	0	0	0	(21)
Issuance of common stock	256	0	2	254	0	0	0	0
Payments of Stock Issuance Costs	11	0	0	11	0	0	0	0
Stock Deferral and Issuance to Directors	0	0	0	0	0	0	0	0
Stockholders' Equity, Other	(1)	0	(1)	0	0	0	0	0
Stockholders' Equity balance at end of period at Jul. 31, 2017	(4,923)	2	10	2,733	(5,068)	(2,412)	(190)	2
Stockholders' Equity balance at beginning of period at Oct. 31, 2017	(4,574)	2	10	2,733	(4,933)	(2,211)	(179)	4
Net income (loss)	172	0	0	0	152	0	0	20
Total other comprehensive income	73	0	0	0	0	73	0	0
Stock-based compensation	9	0	0	9	0	0	0	0
Stock ownership programs	6	0	0	(10)	0	0	16	0
Dividends paid by subsidiaries to non-controlling interest	(19)	0	0	0	0	0	0	(19)
Issuance of common stock	0	0	0	0	0	0	0	0
Payments of Stock Issuance Costs	0	0	0	0	0	0	0	0
Stock Deferral and Issuance to Directors	(1)	0	0	(1)	0	0	0	0
Stockholders' Equity, Other	0	0	0	0	0	0	0	0
Stockholders' Equity balance at end of period at Jul. 31, 2018	$ (4,334)	$ 2	$ 10	$ 2,731	$ (4,781)	$ (2,138)	$ (163)	$ 5

XML

Summary of Significant Accounting Policies

9 Months Ended

Jul. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Organization and Description of the Business

Navistar International Corporation ("NIC"), incorporated under the laws of the State of Delaware in 1993, is a holding company whose principal operating entities are Navistar, Inc. ("NI") and Navistar Financial Corporation ("NFC"). References herein to the "Company," "we," "our," or "us" refer collectively to NIC and its consolidated subsidiaries, including certain variable interest entities ("VIEs") of which we are the primary beneficiary. We operate in four principal industry segments: Truck, Parts, Global Operations (collectively called "Manufacturing operations"), and Financial Services, which consists of NFC and our foreign finance operations (collectively called "Financial Services operations"). These segments are discussed in Note 11, Segment Reporting.

Our fiscal year ends on October 31. As such, all references to 2018, 2017, and other years contained within this Quarterly Report on Form 10-Q relate to the fiscal year, unless otherwise indicated.

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements include the assets, liabilities, and results of operations of our Manufacturing operations and our Financial Services operations, including VIEs of which we are the primary beneficiary. The effects of transactions among consolidated entities have been eliminated to arrive at the consolidated amounts.

We prepared the accompanying unaudited consolidated financial statements in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for comprehensive annual financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting policies described in our Annual Report on Form 10-K for the year ended October 31, 2017, which should be read in conjunction with the disclosures therein. In our opinion, these interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial condition, results of operations, and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.

Variable Interest Entities

We have an interest in several VIEs, primarily joint ventures, established to manufacture or distribute products and enhance our operational capabilities. We have determined for certain of our VIEs that we are the primary beneficiary because we have the power to direct the activities of the VIE that most significantly impact its economic performance and we have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Accordingly, we include in our consolidated financial statements the assets and liabilities and results of operations of those entities, even though we may not own a majority voting interest. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather they represent claims against the specific assets of these VIEs. Assets of these entities are not readily available to satisfy claims against our general assets.

Significant Accounting Policies [Text Block]

Summary of Significant Accounting Policies

Organization and Description of the Business

Navistar International Corporation ("NIC"), incorporated under the laws of the State of Delaware in 1993, is a holding company whose principal operating entities are Navistar, Inc. ("NI") and Navistar Financial Corporation ("NFC"). References herein to the "Company," "we," "our," or "us" refer collectively to NIC and its consolidated subsidiaries, including certain variable interest entities ("VIEs") of which we are the primary beneficiary. We operate in four principal industry segments: Truck, Parts, Global Operations (collectively called "Manufacturing operations"), and Financial Services, which consists of NFC and our foreign finance operations (collectively called "Financial Services operations"). These segments are discussed in Note 11, Segment Reporting.

Our fiscal year ends on October 31. As such, all references to 2018, 2017, and other years contained within this Quarterly Report on Form 10-Q relate to the fiscal year, unless otherwise indicated.

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements include the assets, liabilities, and results of operations of our Manufacturing operations and our Financial Services operations, including VIEs of which we are the primary beneficiary. The effects of transactions among consolidated entities have been eliminated to arrive at the consolidated amounts.

We prepared the accompanying unaudited consolidated financial statements in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for comprehensive annual financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting policies described in our Annual Report on Form 10-K for the year ended October 31, 2017, which should be read in conjunction with the disclosures therein. In our opinion, these interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial condition, results of operations, and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.

Variable Interest Entities

We have an interest in several VIEs, primarily joint ventures, established to manufacture or distribute products and enhance our operational capabilities. We have determined for certain of our VIEs that we are the primary beneficiary because we have the power to direct the activities of the VIE that most significantly impact its economic performance and we have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Accordingly, we include in our consolidated financial statements the assets and liabilities and results of operations of those entities, even though we may not own a majority voting interest. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather they represent claims against the specific assets of these VIEs. Assets of these entities are not readily available to satisfy claims against our general assets.

We are the primary beneficiary of our Blue Diamond Parts, LLC ("BDP") joint venture with Ford Motor Company ("Ford"). As a result, our Consolidated Balance Sheets include assets of $43 million and $49 million and liabilities of $6 million and $13 million as of July 31, 2018 and October 31, 2017, respectively, including $2 million and $10 million of cash and cash equivalents, at the respective dates, which are not readily available to satisfy claims against our general assets. The creditors of BDP do not have recourse to our general credit.

Our Financial Services segment consolidates several VIEs. As a result, our Consolidated Balance Sheets include secured assets of $949 million and $869 million as of July 31, 2018 and October 31, 2017, respectively, and liabilities of $812 million and $754 million as of July 31, 2018 and October 31, 2017, respectively, all of which are involved in securitizations that are treated as asset-backed debt. In addition, our Consolidated Balance Sheets include secured assets of $311 million and $278 million as of July 31, 2018 and October 31, 2017, respectively, and corresponding liabilities of $184 million and $194 million, at the respective dates, which are related to other secured transactions that do not qualify for sale accounting treatment, and, therefore, are treated as borrowings secured by operating and finance leases. Investors that hold securitization debt have a priority claim on the cash flows generated by their respective securitized assets to the extent that the related VIEs are required to make principal and interest payments. Investors in securitizations have no recourse to our general credit.

We also have an interest in other VIEs, which we do not consolidate because we are not the primary beneficiary. Our financial support and maximum loss exposure relating to these non-consolidated VIEs are not material to our financial condition, results of operations, or cash flows.

We use the equity method to account for our investments in entities that we do not control under the voting interest or variable interest models, but where we have the ability to exercise significant influence over operating and financial policies. Equity in income of non-consolidated affiliates includes our share of the net income of these entities.

Related Party Transactions

We have a series of commercial relationships and agreements with TRATON AG (formerly Volkswagen Truck & Bus AG) and certain of its subsidiaries and affiliates ("TRATON Group") for royalties related to use of certain engine technology, contract manufacturing operations performed by us, the sale of engines, the sale and purchase of parts, and a procurement joint venture. We have also entered into development agreements with TRATON Group involving certain engine and transmission projects. This development work is being expensed as incurred. For the three and nine months ended July 31, 2018, revenue recognized was approximately $33 million and $114 million, respectively, compared to $36 million and $78 million in the comparable prior year periods. For the three and nine months ended July 31, 2018, net expenses incurred were $2 million and $21 million, respectively, compared to $2 million and $4 million in the comparable prior year periods, included primarily in Engineering and product development costs on our Consolidated Statements of Operations. Our receivable from TRATON Group was $11 million and $13 millionas of July 31, 2018 and October 31, 2017, respectively. Our payable to TRATON Group was $20 million and $5 million as of July 31, 2018 and October 31, 2017, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value ("NRV"). Cost is principally determined using the first-in, first-out method. Our gross used truck inventory was $191 million at July 31, 2018 compared to $206 million at October 31, 2017, offset by reserves of $48 million and $110 million, respectively.

In valuing our used truck inventory, we are required to make assumptions regarding the level of reserves required to value inventories at their NRV. Our judgments and estimates for used truck inventory are based on an analysis of current and forecasted sales prices, aging of and demand for used trucks, and the mix of sales through various market channels. The NRV is subject to change based on numerous conditions, including age, specifications, mileage, timing of sales, market mix and current and forecasted pricing. While calculations are made after taking these factors into account, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence our judgment and related estimates include general economic conditions in markets where our products are sold, actions of our competitors, and the ability to sell used trucks in a timely manner.

The following table presents the activity in our used truck reserve:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	110		$	208
Additions charged to expense(A)	38			102
Deductions/Other adjustments(B)	(100		)	(136		)
Balance at end of period	$	48		$	174

_________________________

(A) Additions charged to expense reflect the increase of the reserve for inventory on hand. During the second quarter of 2017, we implemented a shift in market mix to include an increase in volume to certain export markets, which had a lower price point as compared to sales through our domestic channels, and to lower domestic pricing to enable higher sales velocity.

(B) Deductions/Other adjustments reflect reductions of the reserve related to the sale of units and our currency translation adjustments.

Property and Equipment

We report land, buildings, leasehold improvements, machinery and equipment (including tooling and pattern equipment), furniture, fixtures, and equipment, and equipment leased to others at cost, net of depreciation. We initially record assets under capital lease obligations at the lower of their fair value or the present value of the aggregate future minimum lease payments. We depreciate our assets using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets.

We test for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset or asset group (hereinafter referred to as "asset group") may not be recoverable by comparing the sum of the estimated undiscounted future cash flows expected to result from the operation of the asset group and its eventual disposition to the carrying value. During 2017, we identified a triggering event related to continued economic weakness in Brazil which resulted in the decline in forecasted results for the Brazilian asset group. The Brazilian asset group is included in the Global Operations segment. As a result, we estimated the recoverable amount of the asset group and determined that the sum of the undiscounted future cash flows exceeds the carrying value and the asset group was not impaired. Significant adverse changes to our business environment and future cash flows could cause us to record impairment charges in future periods, which could be material.

Product Warranty Liability

The following table presents accrued product warranty and deferred warranty revenue activity:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	629		$	818
Costs accrued and revenues deferred	139			137
Adjustments to pre-existing warranties(A)	(4		)	(4		)
Payments and revenues recognized	(233		)	(292		)
Balance at end of period	531			659
Less: Current portion	254			340
Noncurrent accrued product warranty and deferred warranty revenue	$	277		$	319

_________________________

(A) Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior fiscal periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.

Extended Warranty Programs

The amount of deferred revenue related to extended warranty programs was $248 million and $271 million at July 31, 2018 and October 31, 2017, respectively. Revenue recognized under our extended warranty programs was $24 million and $80 million for the three and nine months ended July 31, 2018, respectively, and $28 million and $109 million for the three and nine months ended July 31, 2017, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to, pension and other postretirement benefits, allowance for doubtful accounts, income tax contingency accruals and valuation allowances, product warranty accruals, used truck inventory valuations, asbestos and other product liability accruals, asset impairment charges, restructuring charges and litigation-related accruals. Actual results could differ from our estimates.

Concentration Risks

Our financial condition, results of operations, and cash flows are subject to concentration risks related to our significant unionized workforce. As of July 31, 2018, approximately 7,800, or 98%, of our hourly workers and approximately 700, or 13%, of our salaried workers, are represented by labor unions and are covered by collective bargaining agreements. Our current master collective bargaining agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") will expire in October 2018 and we are in negotiations with the UAW to enter into a new collective bargaining agreement. Our future operations may be affected by changes in governmental procurement policies, tax policies, budget considerations, changing national defense requirements, and political, regulatory and economic developments in the U.S. and certain foreign countries (primarily Canada, Mexico, and Brazil).

Recently Issued Accounting Standards

In March 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118". This ASU updates the income tax accounting in U.S. GAAP to reflect the SEC's interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (H.R.1) (the "Tax Act") was signed into law. For more information regarding the impact of the Tax Act, see Note 8, Income Taxes.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)". This ASU provides guidance on a reclassification from accumulated other comprehensive income to retained earnings for the effect of the tax rate change resulting from the Tax Act. The amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2020. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". This ASU provides a new framework for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This ASU creates an initial screening test that reduces the population of transactions that an entity needs to analyze to determine whether there is an input and substantive processes in the acquisition or disposal. Fewer transactions are expected to involve acquiring or selling a business. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a prospective transition. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but we do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash" (Topic 230). This ASU requires that a statement of cash flows explain the change during the period in the total of cash, and cash equivalents, including amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a retrospective transition. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory” (Topic 740). This ASU update requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a modified retrospective transition. We do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” (Topic 230).This ASU provides guidance on how entities should classify eight specific cash flow transactions for which diversity in practice exists. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a retrospective transition.We do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (Topic 326). This ASU sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Adoption will require a modified retrospective transition. This ASU is effective for us in the first quarter of fiscal 2021. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). This ASU requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. The accounting by lessors will remain largely unchanged. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2020. Adoption will require a modified retrospective transition with an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (Topic 606), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition." This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which postponed the effective date of ASU No. 2014-09 to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted on the original effective date for fiscal years beginning after December 15, 2016. We continue to evaluate the requirements of the standard and its application to our business. During the quarter, we continued analyzing the ASU’s impact on our portfolio of customer contracts which may result in a change in the timing or the amount of revenue recognized in comparison with current guidance. Our ongoing analyses include assessing whether the new ASU will impact transactions previously recorded as borrowings or as leases, gross versus net accounting for certain revenue streams, and the timing and amount of revenue related to certain sales incentives. We are continuing to evaluate and quantify the impact of these changes, if any. We are also evaluating enhanced disclosure requirements and identifying and implementing appropriate changes to our business processes, systems and internal control framework to support recognition and disclosure under the new guidance. We will adopt this ASU in the first quarter of fiscal 2019 on a modified retrospective basis, with the cumulative effect adjustment recognized into Accumulated deficit as of November 1, 2018.

XML

Restructuring and Impairments

9 Months Ended

Jul. 31, 2018

Restructuring and Related Activities [Abstract]

Restructurings and Impairments

Restructurings and Impairments

Restructuring charges are recorded based on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.

Restructuring Liability

The following tables summarize the activity in the restructuring liability, which excludes pension and other postretirement contractual termination benefits:

(in millions)	Balance at October 31, 2017		Additions		Payments			Adjustments			Balance at July 31, 2018
Employee termination charges	$	14	$	3	$	(5	)	$	(4	)	$	8
Lease vacancy	—		—		—			—			—
Other	1		—		—			—			1
Restructuring liability	$	15	$	3	$	(5	)	$	(4	)	$	9

(in millions)	Balance at October 31, 2016		Additions		Payments			Adjustments		Balance at July 31, 2017
Employee termination charges	$	5	$	15	$	(11	)	$	—	$	9
Lease vacancy	1		—		(1		)	—		—
Other	1		—		—			—		1
Restructuring liability	$	7	$	15	$	(12	)	$	—	$	10

Manufacturing Restructuring Activities

We continue to focus on our core Truck and Parts businesses and evaluate our portfolio of assets to validate their strategic and financial fit. This allows us to close or divest non-strategic businesses, and identify opportunities to restructure our business and rationalize our Manufacturing operations in an effort to optimize our cost structure.

For those areas that fall outside our strategic businesses, we are evaluating alternatives which could result in additional restructuring and other related charges in the future, including but not limited to: (i) impairments, (ii) costs for employee and contractor termination and other related benefits, and (iii) charges for pension and other postretirement contractual benefits and curtailments. These charges could be significant.

Chatham restructuring activities

In the third quarter of 2011, we committed to close our Chatham, Ontario heavy truck plant, which had been idled since June 2009. At that time, we recognized curtailment and contractual termination charges related to postretirement plans. Based on a ruling regarding pension benefits received from the Financial Services Tribunal in Ontario, Canada, in the third quarter of 2014, we recognized an additional charge of $14 million related to the 2011 closure of the Chatham, Ontario plant. Unsuccessful efforts to appeal the ruling in the Ontario court system ended in December 2015. On April 25, 2016, we filed a qualified partial wind-up report for approval by the Financial Services Commission of Ontario ("FSCO"). On January 12, 2017, FSCO issued its approval of the partial wind-up report. On February 27, 2017, we finalized the resolution of statutory severance pay for former employees related to the closure of our Chatham, Ontario plant, resulting in a charge of $6 million in the first quarter of 2017. During the third quarter of 2017, we finalized the Chatham closure agreement. This resulted in the release of $66 million in other post-employment benefit ("OPEB") liabilities. In addition, a pension settlement accounting charge of $23 million was recorded as a result of lump-sum payments made to certain pension plan participants. These charges and benefits were recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations.

Global operations employee separation actions

In the fourth quarter of 2017, we initiated cost-reduction actions impacting our workforce in Brazil. As a result of these actions, we recognized restructuring charges of $6 million in personnel costs for employee separation and related benefits. In the first nine months of 2018, we recognized a benefit of $1 million upon the completion of these separation actions. This benefit was recorded in our Global operations segment within Restructuring charges in our Consolidated Statements of Operations.

Melrose Park Facility restructuring activities

In the third quarter of 2017, we committed to a plan to cease engine production at our plant in Melrose Park, Illinois (“Melrose Park Facility”) in the third quarter of fiscal year 2018. As a result, in the third quarter of 2017, we recognized charges of $41 million in our Truck segment. The charges include $23 million related to pension and OPEB liabilities and $8 million for severance pay recorded in Restructuring charges in our Consolidated Statements of Operations. We also recorded $10 million of inventory reserves and other related charges in Costs of products sold in our Consolidated Statements of Operations. In the first nine months of 2018, we recognized a benefit of $2 million related to the finalized cessation of production agreement. This benefit was recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations. Production at the Melrose Park Facility ceased on May 17, 2018.

Asset Impairments

In the nine months ended July 31, 2018, we concluded that we had triggering events related to the sale of our railcar business in Cherokee, Alabama requiring the impairment of certain long-lived assets. As a result, we recorded a charge of $2 million in our Truck segment. In February 2018, we completed the sale of the business. We also concluded that we had triggering events related to other certain long-lived assets, and recorded additional charges of $6 million in our Truck segment and a charge of $1 million in our Financial Services segment.

In the nine months ended July 31, 2017, we concluded that we had a triggering event in connection with the sale of our fabrication business in Conway, Arkansas requiring the impairment of certain long-lived assets. As a result, we recorded charges of $5 million in our Truck segment.

In the nine months ended July 31, 2018 and 2017, we concluded that we had triggering events related to certain assets under operating leases. As a result, we recorded charges of $2 million and $8 million, respectively, in our Truck segment.

These charges were recorded in Asset impairment charges in our Consolidated Statements of Operations.

See Note 9, Fair Value Measurements, for information on the valuation of impaired operating leases and other assets.

XML

Finance Receivables

9 Months Ended

Jul. 31, 2018

Receivables [Abstract]

Finance Receivables

Finance Receivables

Finance receivables are receivables of our Financial Services operations. Finance receivables generally consist of wholesale notes and accounts, as well as retail notes, finance leases and accounts. Total finance receivables reported on the Consolidated Balance Sheets are net of an allowance for doubtful accounts. Total assets of our Financial Services operations net of intercompany balances were $2.4 billion and $2.2 billion as of July 31, 2018 and October 31, 2017, respectively.

Included in total assets of our Financial Services operations were finance receivables of $1.9 billion and $1.8 billion as of July 31, 2018 and October 31, 2017, respectively. We have two portfolio segments of finance receivables that we distinguish based on the type of customer and nature of the financing inherent to each portfolio. The retail portfolio segment represents loans or leases to end-users for the purchase or lease of vehicles. The wholesale portfolio segment represents loans to dealers to finance their inventory.

Our Finance receivables, net in our Consolidated Balance Sheets consist of the following:

(in millions)	July 31, 2018		October 31, 2017
Retail portfolio	$	639	$	559
Wholesale portfolio	1,282		1,246
Total finance receivables	1,921		1,805
Less: Allowance for doubtful accounts	24		20
Total finance receivables, net	1,897		1,785
Less: Current portion, net(A)	1,638		1,565
Noncurrent portion, net	$	259	$	220

_________________________

(A) The current portion of finance receivables is computed based on contractual maturities. Actual cash collections typically vary from the contractual cash flows because of prepayments, extensions, delinquencies, credit losses, and renewals.

Securitizations

Our Financial Services operations transfer wholesale notes, retail accounts receivable, finance leases, and operating leases to special purpose entities ("SPEs"), which generally are only permitted to purchase these assets, issue asset-backed securities, and make payments on the securities issued. In addition to servicing receivables, our continued involvement in the SPEs may include an economic interest in the transferred receivables and, in some cases, managing exposure to interest rate changes on the securities using interest rate swaps or interest rate caps. There were no transfers of finance receivables that qualified for sale accounting treatment as of July 31, 2018 and October 31, 2017, and as a result, the transferred finance receivables are included in our Consolidated Balance Sheets and the related interest earned is included in Finance revenues.

We transfer eligible finance receivables into owner trusts in order to issue asset-backed securities. These trusts are VIEs of which we are determined to be the primary beneficiary, and, therefore, the assets and liabilities of the trusts are included in our Consolidated Balance Sheets. The outstanding balance of finance receivables transferred into these VIEs was $841 million and $797 million as of July 31, 2018 and October 31, 2017, respectively.

Other finance receivables related to secured transactions that do not qualify for sale accounting treatment were $166 million and $163 million as of July 31, 2018 and October 31, 2017, respectively. For more information on assets and liabilities of consolidated VIEs and other securitizations accounted for as secured borrowings by our Financial Services segment, see Note 1, Summary of Significant Accounting Policies.

Finance Revenues

The following table presents the components of our Finance revenues in our Consolidated Statements of Operations:

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions)	2018		2017		2018		2017
Retail notes and finance leases revenue	$	12	$	11	$	36	$	30
Wholesale notes interest	26		28		75		75
Operating lease revenue	19		17		54		50
Retail and wholesale accounts interest	8		6		22		17
Gross finance revenues	65		62		187		172
Less: Intercompany revenues	25		27		69		70
Finance revenues	$	40	$	35	$	118	$	102

XML

Allowance for Doubtful Accounts

9 Months Ended

Jul. 31, 2018

Allowance for Doubtful Accounts [Abstract]

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

Our two finance receivables portfolio segments, retail and wholesale, each consist of one class of receivable based on: (i) initial measurement attributes of the receivables, and (ii) the assessment and monitoring of risk and performance of the receivables. For more information, see Note 3, Finance Receivables.

The following tables present the activity related to our allowance for doubtful accounts for our retail portfolio segment, wholesale portfolio segment, and trade and other receivables:

	Three Months Ended July 31, 2018											Three Months Ended July 31, 2017
(in millions)	Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total			Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables		Total
Allowance for doubtful accounts, at beginning of period	$	19		$	3	$	27		$	49		$	21		$	2	$	28	$	51
Provision for doubtful accounts	2			—		1			3			(1		)	1		1		1
Charge-off of accounts	(1		)	—		—			(1		)	(1		)	—		—		(1		)
Recoveries	1			—		—			1			—			—		—		—
Other(A)	—			—		(2		)	(2		)	1			—		—		1
Allowance for doubtful accounts, at end of period	$	21		$	3	$	26		$	50		$	20		$	3	$	29	$	52

	Nine Months Ended July 31, 2018											Nine Months Ended July 31, 2017
(in millions)	Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total			Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total
Allowance for doubtful accounts, at beginning of period	$	17		$	3	$	28		$	48		$	19		$	2	$	28		$	49
Provision for doubtful accounts	5			—		1			6			5			1		2			8
Charge-off of accounts	(4		)	—		—			(4		)	(5		)	—		(1		)	(6		)
Recoveries	3			—		—			3			—			—		—			—
Other(A)	—			—		(3		)	(3		)	1			—		—			1
Allowance for doubtful accounts, at end of period	$	21		$	3	$	26		$	50		$	20		$	3	$	29		$	52

____________________

(A)    Amounts include impact from currency translation.

The accrual of interest income is discontinued on certain impaired finance receivables. Impaired finance receivables include accounts with specific loss reserves and certain accounts that are on non-accrual status. In certain cases, we continue to collect payments on our impaired finance receivables.

The following table presents information regarding impaired finance receivables:

	July 31, 2018						October 31, 2017
(in millions)	Retail Portfolio		Wholesale Portfolio		Total		Retail Portfolio		Wholesale Portfolio		Total
Impaired finance receivables with specific loss reserves	$	19	$	—	$	19	$	16	$	—	$	16
Impaired finance receivables without specific loss reserves	5		—		5		—		—		—
Specific loss reserves on impaired finance receivables	11		—		11		7		—		7
Finance receivables on non-accrual status	19		—		19		16		—		16

The average balances of the impaired finance receivables in the retail portfolio were $19 million for both periods, during the nine months ended July 31, 2018 and 2017. See Note 9, Fair Value Measurements, for information on the valuation of impaired finance receivables.

We use the aging of our receivables as well as other inputs when assessing credit quality. The following table presents the aging analysis for finance receivables:

	July 31, 2018						October 31, 2017
(in millions)	Retail Portfolio		Wholesale Portfolio		Total		Retail Portfolio		Wholesale Portfolio		Total
Current, and up to 30 days past due	$	579	$	1,281	$	1,860	$	524	$	1,244	$	1,768
30-90 days past due	44		1		45		21		1		22
Over 90 days past due	16		—		16		14		1		15
Total finance receivables	$	639	$	1,282	$	1,921	$	559	$	1,246	$	1,805

XML

Inventories

9 Months Ended

Jul. 31, 2018

Inventory Disclosure [Abstract]

Inventories

Inventories

The following table presents the components of Inventories in our Consolidated Balance Sheets:

(in millions)	July 31, 2018		October 31, 2017
Finished products	$	751	$	584
Work in process	269		33
Raw materials	380		240
Total inventories, net	$	1,400	$	857

XML

Debt

9 Months Ended

Jul. 31, 2018

Debt Disclosure [Abstract]

Debt

Debt

The following tables present the components of Notes payable and current maturities of long-term debt and Long-term debt in our Consolidated Balance Sheets:

(in millions)	July 31, 2018		October 31, 2017
Manufacturing operations
Senior Secured Term Loan Credit Agreement, due 2025, net of unamortized discount of $7 and unamortized debt issuance costs of $12	$	1,573	$	—
Senior Secured Term Loan Credit Facility, as amended, due 2020, net of unamortized discount of $7 and unamortized debt issuance costs of $9	—		1,003
6.625% Senior Notes, due 2026, net of unamortized debt issuance costs of $17	1,083		—
8.25% Senior Notes, due 2022, net of unamortized discount of $13 and unamortized debt issuance costs of $14	—		1,423
4.50% Senior Subordinated Convertible Notes, due 2018, net of unamortized discount of $1 and $5, respectively, and unamortized debt issuance costs of less than $1 and $1, respectively	199		194
4.75% Senior Subordinated Convertible Notes, due 2019, net of unamortized discount of $7 and $14, respectively, and unamortized debt issuance costs of $2 and $3, respectively	402		394
Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040, net of unamortized debt issuance costs of $5 at both dates	220		220
Financed lease obligations	121		130
Other	27		43
Total Manufacturing operations debt	3,625		3,407
Less: Current portion	661		286
Net long-term Manufacturing operations debt	$	2,964	$	3,121

(in millions)	July 31, 2018		October 31, 2017
Financial Services operations
Asset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through 2023, net of unamortized debt issuance costs of $3 and $5, respectively	$	888	$	849
Senior secured NFC Term Loan, due 2025, net of unamortized discount of $2, and unamortized debt issuance costs of $4	394		—
Bank credit facilities, at fixed and variable rates, due dates from 2018 through 2024, net of unamortized debt issuance costs of $1 and $2, respectively	500		616
Commercial paper, at variable rates, program matures in 2022	88		92
Borrowings secured by operating and finance leases, at various rates, due serially through 2024	105		94
Total Financial Services operations debt	1,975		1,651
Less: Current portion	1,046		883
Net long-term Financial Services operations debt	$	929	$	768

Manufacturing Operations

Senior Secured Term Loan Credit Agreement

On November 6, 2017, we signed a definitive credit agreement relating to a seven-year senior secured term loan credit facility in an aggregate principal amount of $1.6 billion ("Term Loan Credit Agreement"), guaranteed by Navistar International Corporation and twelve of its subsidiaries. Under the terms of the Term Loan Credit Agreement, the interest rate on the outstanding loan is based, at our option, on an adjusted Eurodollar Rate, plus a margin of 3.50%, or a Base Rate, plus a margin of 2.50%. The Term Loan Credit Agreement requires quarterly amortization payments of $4 million with the balance due at maturity on November 6, 2024. A portion of the proceeds from the Term Loan Credit Agreement was used to repay all outstanding loans under our previously existing term loan ("Term Loan"), to redeem the remaining portion of the previously outstanding 8.25% Senior Notes and to pay accrued and unpaid interest thereon, and pay certain transaction fees and expenses incurred in connection with the new Term Loan Credit Agreement.

The remainder of the proceeds of the Term Loan Credit Agreement will be used for ongoing working capital purposes and general corporate purposes. In the first quarter of 2018, we recorded approximately $16 million of charges related to the extinguishment of unamortized debt issuance costs associated with the Term Loan, included in Other expense (income), net on our Consolidated Statements of Operations.

6.625% Senior Notes

On November 6, 2017, we issued $1.1 billion in aggregate principal amount of 6.625% senior notes, due 2026 ("6.625% Senior Notes"). Interest is payable on the 6.625% Senior Notes on May 1 and November 1 of each year beginning on May 1, 2018 until the maturity date of November 1, 2025. In connection with the retiring of our 8.25% Senior Notes, we also commenced a cash tender offer ("Tender Offer"), which resulted in the purchase of $1,051 million aggregate principal amount, or 72.50% of the total outstanding 8.25% Senior Notes at a purchase price of $1,003.80 per $1,000 principal amount, plus accrued and unpaid interest. The proceeds from the 6.625% Senior Notes offering were used to repurchase a portion of our previously existing 8.25% Senior Notes under the Tender Offer, to pay accrued and unpaid interest thereon, and pay the associated prepayment premiums, certain transaction fees and expenses incurred in connection with the new 6.625% Senior Notes. In the first quarter of 2018, we recorded approximately $30 million of charges related to the extinguishment of unamortized debt issuance costs and tender premiums associated with the Senior Notes, included in Other expense (income), net on our Consolidated Statements of Operations.

Tax Exempt Bond Amendments

On November 6, 2017, the Company entered into the First Amendment to Loan Agreement with The County of Cook, Illinois and the First Amendment to Loan Agreement with the Illinois Finance Authority ("Tax Exempt Bond Amendments") to adjust various covenants included in the loan agreements relating to the Recovery Zone Facility Revenue Bonds (the "Tax Exempt Bonds"), including to permit the Company to incur secured debt of up to $1.7 billion, in exchange for a coupon increase from 6.50% to 6.75% and the grant of a junior priority lien on certain collateral securing the Company's previously existing senior secured Term Loan and the Term Loan Credit Agreement.

Financial Services Operations

Asset-backed Debt

In December 2017, the maturity date of our variable funding notes ("VFN") facility was extended from May 2018 to December 2018, and the maximum capacity was reduced from $425 million to $350 million. The VFN facility is secured by assets of the wholesale note owner trust.

In January 2018, the maturity date of our $100 million Truck Retail Accounts Corporation ("TRAC") funding facility was extended from April 2018 to January 2019. Borrowings under this facility are secured by eligible retail accounts receivable.

Term Loan

In July 2018, NFC entered into a $400 million seven-year senior secured term loan facility ("NFC Term Loan"). The NFC Term Loan is secured by a first-priority security interest in certain assets of NFC and ranks equal to that of NFC's bank credit facility. The initial funding interest rate is LIBOR plus a margin of 3.75%. NFC has the option to use a defined alternate base rate. Debt issuance costs and the original issuance discount of $4 million and $2 million, respectively, were recorded as a direct deduction from the carrying amount and will amortize through Interest expense over the life of the loan. The NFC Term Loan requires quarterly principal amortization payments of $1 million, with the balance due at maturity.

Bank Credit Facilities

On June 1, 2018, in accordance with the terms of the May 2016 amended and extended bank credit facility of NFC, the term loan portion was paid in full and the revolving portion capacity was reduced from $275 million to $269 million. On June 12, 2018, certain leverage covenants and baskets under the NFC bank credit facility were amended to allow for a larger term loan replacement facility.

XML

Postretirement Benefits

9 Months Ended

Jul. 31, 2018

Retirement Benefits [Abstract]

Postretirement Benefits

Postretirement Benefits

Defined Benefit Plans

We provide postretirement benefits to a substantial portion of our employees and retirees. Costs associated with postretirement benefits include pension and postretirement health care expenses for employees, retirees, surviving spouses and dependents.

Generally, the pension plans are non-contributory. Our policy is to fund the pension plans in accordance with applicable U.S. and Canadian government regulations and to make additional contributions from time to time.

For the three and nine months ended July 31, 2018, we contributed $25 million and $78 million, respectively, and for the three and nine months ended July 31, 2017, we contributed $21 million and $67 million, respectively, to our pension plans to meet regulatory funding requirements. We expect to contribute approximately $54 million to our pension plans during the remainder of 2018.

We primarily fund OPEB obligations, such as retiree medical, in accordance with the 1993 Settlement Agreement (the "1993 Settlement Agreement"), which requires us to fund a portion of the plans' annual service cost to a retiree benefit trust (the "Base Trust"). The 1993 Settlement Agreement resolved a class action lawsuit originally filed in 1992 regarding the restructuring of our then applicable retiree health care and life insurance benefits. Contributions for the three and nine months ended July 31, 2018 and 2017, as well as anticipated contributions for the remainder of 2018, are not material.

Components of Net Periodic Benefit Expense

Net periodic benefit expense included in our Consolidated Statements of Operations, and other amounts recognized in our Consolidated Statements of Stockholders' Deficit, for the three and nine months ended July 31, 2018 and 2017 are comprised of the following:

	Three Months Ended July 31,												Nine Months Ended July 31,
	Pension Benefits						Health and Life Insurance Benefits						Pension Benefits						Health and Life Insurance Benefits
(in millions)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost for benefits earned during the period	$	1		$	2		$	1		$	1		$	5		$	6		$	3		$	4
Interest on obligation	27			27			10			11			81			80			32			35
Amortization of cumulative loss	26			30			3			6			79			89			7			17
Settlements	—			23			—			—			9			23			—			—
Contractual termination benefits	—			9			—			4			—			10			—			4
Curtailments and other	—			—			—			(58		)	—			—			—			(58		)
Premiums on pension insurance	1			4			—			—			3			12			—			—
Expected return on assets	(40		)	(40		)	(5		)	(5		)	(121		)	(119		)	(17		)	(17		)
Net periodic benefit expense	$	15		$	55		$	9		$	(41	)	$	56		$	101		$	25		$	(15	)

In the nine months ended July 31, 2018, we purchased a group annuity contract for certain retired pension plan participants resulting in a plan remeasurement. As a result, a net actuarial loss of $2 million was recognized as a component of Accumulated other comprehensive loss and a pension settlement accounting expense of $9 million was recognized in SG&A expenses in our Consolidated Statements of Operations.

In April 2016, we filed a qualified partial wind-up report for approval by FSCO related to the 2011 closure of our Chatham, Ontario plant. FSCO provided formal approval in January 2017. As a result of an ongoing administration review ordered in conjunction with the partial wind-up, we recognized $1 million of contractual termination charges in the first quarter of 2017. During the third quarter of 2017, we finalized the Chatham closure agreement. This resulted in the release of $66 million in OPEB liabilities. In addition, a pension settlement accounting charge of $23 million was recorded as a result of lump-sum payments made to certain pension plan participants. These charges and benefits were recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations. See Note 2, Restructurings and Impairments for further discussion. As a result of the pension and OPEB plan remeasurements in connection with the finalization of the Chatham closure agreement, net actuarial gains of $21 million were recognized as a component of Accumulated other comprehensive loss in the third quarter of 2017.

In the third quarter of 2017, we committed to a plan to cease engine production at our Melrose Park Facility in the second quarter of fiscal year 2018. As a result, in the third quarter of 2017, we recognized $9 million of pension and $4 million of OPEB contractual termination benefits charges and $10 million of OPEB curtailment charges. These charges were recorded in our Truck segment within Restructuring charges in our Consolidated Statements of Operations. See Note 2, Restructurings and Impairments for further discussion.A pension curtailment gain of $2 million and net actuarial gains of $91 million resulting from pension and OPEB remeasurements in connection with our Melrose Park Facility announcement were recognized as a component of Accumulated other comprehensive loss in the third quarter of 2017.

Also, in the third quarter of 2017, in accordance with the intraperiod tax allocation rules, we recorded a net benefit of $35 million related to domestic continuing operations in Income tax expense in our Consolidated Statements of Operations, and an offsetting reduction in Other comprehensive income due to the remeasurement of certain pension and OPEB plans.

Defined Contribution Plans and Other Contractual Arrangements

Our defined contribution plans cover a substantial portion of domestic salaried employees and certain domestic represented employees. The defined contribution plans contain a 401(k) feature and provide most participants with a matching contribution from the Company. We deposit the matching contribution annually. Many participants covered by the plans receive annual Company contributions to their retirement accounts based on an age-weighted percentage of the participant's eligible compensation for the calendar year. Defined contribution expense pursuant to these plans was $7 million and $25 million in the three and nine months ended July 31, 2018, respectively, and $7 million and $22 million in the three and nine months ended July 31, 2017, respectively.

In accordance with the 1993 Settlement Agreement, an independent Retiree Supplemental Benefit Trust (the "Supplemental Trust") was established. The Supplemental Trust, and the benefits it provides to certain retirees pursuant to a certain Retiree Supplemental Benefit Program under the 1993 Settlement Agreement ("Supplemental Benefit Program"), is not part of our consolidated financial statements.

Our contingent profit sharing obligations under a certain Supplemental Benefit Trust Profit Sharing Plan ("Supplemental Benefit Trust Profit Sharing Plan") will continue until certain funding targets defined by the 1993 Settlement Agreement are met. We record profit sharing accruals based on the operating performance of the entities that are included in the determination of qualifying profits. For more information on pending arbitration regarding the Supplemental Benefit Trust Profit Sharing Plan, see Note 10, Commitments and Contingencies.

XML

Income Taxes

9 Months Ended

Jul. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We compute, on a quarterly basis, an estimated annual effective tax rate considering ordinary income and related income tax expense. Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. Ordinary income refers to income (loss) before income tax expense excluding significant unusual or infrequently occurring items. The tax effect of a significant unusual or infrequently occurring item is recorded in the interim period in which the item occurs. Items included in income tax expense in the periods in which they occur include the tax effects of cumulative changes in tax laws or rates, foreign exchange gains and losses, adjustments to uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment regarding the ability to realize deferred tax assets in future years.

On December 22, 2017, the Tax Act was signed into U.S. law. The Tax Act reduces the statutory corporate income tax rate from 35% to 21%, effective January 1, 2018. This rate reduction requires us to remeasure our deferred taxes as of the date the Tax Act was enacted. Our U.S. deferred tax assets, net of deferred tax liabilities, were remeasured and reduced by $1.0 billion, entirely offset by a valuation allowance reduction. As a result, the remeasurement of our deferred tax assets, net of deferred tax liabilities, including the valuation allowance, did not impact our income tax expense or net loss.

The Tax Act imposes a tax on the mandatory deemed repatriation of earnings of the Company’s foreign subsidiaries and results in a one-time transition tax. We have provisionally determined that any additional foreign earnings included in taxable income due to deemed repatriation and related income taxes will be offset with existing deferred tax assets. The deferred tax impact has a valuation allowance offset, resulting in no impact on our income tax expense or net income. Our estimates related to the deemed repatriation may change as the Company determines the effect of foreign earnings, foreign cash balances and any regulatory guidance.

The Tax Act also adds many new provisions, including changes to limits on the deductions for executive compensation and interest expense, a tax on global intangible low‐taxed income (“GILTI”), the base erosion anti‐abuse tax (“BEAT”) and a deduction for foreign derived intangible income (“FDII”). We are still evaluating the impact of these provisions of the Tax Act, which do not apply until our taxable year beginning November 1, 2018. Companies can either account for taxes on GILTI as incurred or recognize deferred taxes when basis differences exist that are expected to affect the amount of the GILTI inclusion upon reversal. The Company is electing to account for taxes on GILTI as incurred.

We have not completed our accounting for the income tax effects of the Tax Act. However, we have computed estimates or “provisional” amounts as permitted by the SEC’s Staff Accounting Bulletin No. 118 (“SAB”) issued on December 22, 2017. Under the SAB companies are allowed a measurement period of up to one year from the date of enactment to complete the accounting for the effects of the Tax Act. We will continue to evaluate the Tax Act’s impact, which may change as a result of additional Treasury guidance, federal or state legislative actions, or changes in accounting standards or related interpretations. The Company’s analyses performed to date are sufficient to calculate a reasonable estimate of the impacts of the Tax Act.

We have evaluated the need to maintain a valuation allowance for deferred tax assets based on our assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. We continue to maintain a valuation allowance on the majority of our U.S. deferred tax assets as well as certain foreign deferred tax assets that we believe, on a more-likely-than-not basis, will not be realized based on our analysis of the relevant facts and circumstances. For all remaining deferred tax assets, while we believe that it is more likely than not that they will be realized, we believe that it is reasonably possible that additional deferred tax asset valuation allowances could be required in the next twelve months.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of July 31, 2018, the amount of liability for uncertain tax positions was $30 million. The liability at July 31, 2018 has a recorded offsetting tax benefit associated with various issues that total $9 million. If the unrecognized tax benefits are recognized, all would impact our effective tax rate. However, to the extent we continue to maintain a full valuation allowance against certain deferred tax assets, the effect may be in the form of an increase in the deferred tax asset related to our net operating loss carryforward, which would be offset by a full valuation allowance.

We recognize interest and penalties related to uncertain tax positions as part of income tax expense. Total interest and penalties related to our uncertain tax positions resulted in an income tax benefit of $1 million for the three and nine months ended July 31, 2018 and an income tax expense of less than $1 million and $1 million for the three and nine months ended July 31, 2017.

We have tax years open for examination going back to 2001 with various significant taxing jurisdictions, including the U.S., Canada, Mexico, and Brazil. In connection with the examination of tax returns, contingencies may arise that generally result from differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues or expenses in taxable income, or the sustainability of tax credits to reduce income taxes payable. We believe we have sufficient accruals for our contingent tax liabilities. Annual tax provisions include amounts considered sufficient to pay assessments that may result from examinations of prior year tax returns, although actual results may differ. While it is probable that the liability for unrecognized tax benefits may increase or decrease during the next twelve months, we do not expect any such change would have a material effect on our financial condition, results of operations, or cash flows.

XML

Fair Value Measurements

9 Months Ended

Jul. 31, 2018

Fair Value Disclosures [Abstract]

Fair value measurements

Fair Value Measurements

For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect our assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, we classify each fair value measurement as follows:

• Level 1—based upon quoted prices for identical instruments in active markets,

• Level 2—based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations, all of whose significant inputs are observable, and

• Level 3—based upon one or more significant unobservable inputs.

The following section describes key inputs and assumptions in our valuation methodologies:

Cash Equivalents and Restricted Cash Equivalents—We classify as cash equivalents and restricted cash equivalents highly liquid investments, with an original maturity of 90 days or less, which may include U.S. government and federal agency securities, commercial paper, and other highly liquid investments. The carrying amounts of cash and cash equivalents and restricted cash approximate fair value because of the short-term maturity and highly liquid nature of these instruments.

Marketable Securities—Our marketable securities portfolios are classified as available-for-sale and may include investments in U.S. government and federal agency securities, commercial paper and other investments with an original maturity greater than 90 days. We use quoted prices from active markets to determine fair value.

Derivative Assets and Liabilities—We measure the fair value of derivatives assuming that the unit of account is an individual derivative transaction and that each derivative could be sold or transferred on a stand-alone basis. We classify within Level 2 our derivatives that are traded over-the-counter and valued using internal models based on observable market inputs. In certain cases, market data is not available and we estimate inputs such as in situations where trading in a particular commodity is not active. Measurements based upon these unobservable inputs are classified within Level 3.

Guarantees—We provide certain guarantees of payments and residual values, to which losses are generally capped, to specific counterparties. The fair value of these guarantees includes a contingent component and a non-contingent component that are based upon internally developed models using unobservable inputs. We classify these liabilities within Level 3. For more information regarding guarantees, see Note 10, Commitments and Contingencies.

Impaired Finance Receivables and Impaired Assets Under Operating Leases—Fair values of the underlying collateral are determined by current and forecasted sales prices, aging of and demand for used trucks, and the mix of sales through various market channels. For more information regarding impaired finance receivables, see Note 4, Allowance for Doubtful Accounts, and for more information regarding impaired assets under operating leases, see Note 2, Restructurings and Impairments.

Impaired Property, Plant and Equipment—We measure the fair value by discounting future cash flows expected to be received from the operation of, or disposition of, the asset or asset group that has been determined to be impaired. For more information regarding the impairment of property, plant and equipment, see Note 2, Restructurings and Impairments.

The following table presents the financial instruments measured at fair value on a recurring basis:

	As of July 31, 2018								As of October 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Marketable securities:
U.S. government and federal agency securities	$	95	$	—	$	—	$	95	$	370	$	—	$	—	$	370
Derivative financial instruments:
Commodity forward contracts(A)	—		5		—		5		—		3		—		3
Foreign currency contracts(A)	—		1		—		1		—		3		—		3
Interest rate caps(B)	—		1		—		1		—		1		—		1
Total assets	$	95	$	7	$	—	$	102	$	370	$	7	$	—	$	377
Liabilities
Derivative financial instruments:
Commodity forward contracts(C)	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1
Foreign currency contracts(C)	—		1		—		1		—		1		—		1
Guarantees	—		—		20		20		—		—		21		21
Total liabilities	$	—	$	1	$	20	$	21	$	—	$	2	$	21	$	23

_________________________

(A) The asset value of commodity forward contracts and foreign currency contracts is included in Other current assets in the accompanying Consolidated Balance Sheets.

(B) The asset value of interest rate caps is included in Other noncurrent assets in the accompanying Consolidated Balance Sheets.

(C) The liability value of commodity forward contracts and foreign currency contracts is included in Other current liabilities in the accompanying Consolidated Balance Sheets.

The following table presents the changes for those financial instruments classified within Level 3 of the valuation hierarchy:

	Three Months Ended July 31,						Nine Months Ended July 31,
(in millions)	2018			2017			2018			2017
Guarantees, at beginning of period	$	(27	)	$	(19	)	$	(21	)	$	(23	)
Transfers out of (into) Level 3	—			—			—			—
Net terminations (issuances)	7			—			(1		)	1
Settlements	—			—			2			3
Guarantees, at end of period	$	(20	)	$	(19	)	$	(20	)	$	(19	)

In addition to the methods and assumptions we use for the financial instruments recorded at fair value as discussed above, we use the following methods and assumptions to estimate the fair value for our other financial instruments that are not marked to market on a recurring basis. The carrying amounts of Cash and cash equivalents, Restricted cash, and Accounts payable approximate fair values because of the short-term maturity and highly liquid nature of these instruments. Finance receivables generally consist of retail and wholesale accounts and retail and wholesale notes.

The carrying amounts of Trade and other receivables and retail and wholesale accounts approximate fair values as a result of the short-term nature of the receivables. The carrying amounts of wholesale notes approximate fair values as a result of the short-term nature of the wholesale notes and their variable interest rate terms. Due to the nature of the aforementioned financial instruments, they have been excluded from the fair value amounts presented in the table below.

The fair values of our retail notes are estimated by discounting expected cash flows at estimated current market rates. The fair values of our retail notes are classified as Level 3 financial instruments.

The fair values of our debt instruments classified as Level 1 were determined using quoted market prices. The 6.75% Tax Exempt Bonds, due 2040, are traded, but the trading market is illiquid, and as a result, the Loan Agreement underlying the Tax Exempt Bonds is classified as Level 2. The fair values of our Level 3 debt instruments are generally determined using internally developed valuation techniques such as discounted cash flow modeling. Inputs such as discount rates and credit spreads reflect our estimates of assumptions that market participants would use in pricing the instrument and may be unobservable.

The following tables present the carrying values and estimated fair values of financial instruments:

	As of July 31, 2018
	Estimated Fair Value								Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Retail notes	$	—	$	—	$	190	$	190	$	194
Liabilities
Debt:
Manufacturing operations
Senior Secured Term Loan Credit Agreement, due 2025	—		—		1,596		1,596		1,573
6.625% Senior Notes, due 2026	—		1,149		—		1,149		1,083
4.50% Senior Subordinated Convertible Notes, due 2018(A)	201		—		—		201		199
4.75% Senior Subordinated Convertible Notes, due 2019(A)	428		—		—		428		402
Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040	—		238		—		238		220
Financed lease obligations	—		—		121		121		121
Other	—		—		25		25		25
Financial Services operations
Asset-backed debt issued by consolidated SPEs, due serially through 2023	—		—		889		889		888
Senior secured NFC Term Loan, due 2025	—		—		398		398		394
Bank credit facilities, due dates from 2018 through 2024	—		—		477		477		500
Commercial paper, program matures in 2022	88		—		—		88		88
Borrowings secured by operating and finance leases, due serially through 2024	—		—		104		104		105

	As of October 31, 2017
	Estimated Fair Value								Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Retail notes	$	—	$	—	$	153	$	153	$	161
Liabilities
Debt:
Manufacturing operations
Senior Secured Term Loan Credit Facility, as Amended, due 2020	—		—		1,019		1,019		1,003
8.25% Senior Notes, due 2022	1,450		—		—		1,450		1,423
4.50% Senior Subordinated Convertible Notes, due 2018(A)	208		—		—		208		194
4.75% Senior Subordinated Convertible Notes, due 2019(A)	446		—		—		446		394
Loan Agreement related to 6.50% Tax Exempt Bonds, due 2040	—		243		—		243		220
Financed lease obligations	—		—		130		130		130
Other	—		—		23		23		39
Financial Services operations
Asset-backed debt issued by consolidated SPEs, at various rates, due serially through 2023	—		—		851		851		849
Bank credit facilities, at fixed and variable rates, due dates from 2018 through 2023	—		—		592		592		616
Commercial paper, at variable rates, program matures in 2022	92		—		—		92		92
Borrowings secured by operating and finance leases, at various rates, due serially through 2024	—		—		94		94		94

_________________________

(A) The carrying value represents the consolidated financial statement amount of the debt which excludes the allocation of the conversion feature to equity, while the estimated fair value is derived from quoted prices in active markets which include the equity feature.

XML

Commitments and Contingencies

9 Months Ended

Jul. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Guarantees

We occasionally provide guarantees that could obligate us to make future payments if the primary entity fails to perform under its contractual obligations. We have recognized liabilities for some of these guarantees in our Consolidated Balance Sheets as they meet the recognition and measurement provisions of U.S. GAAP. In addition to the liabilities that have been recognized, we are contingently liable for other potential losses under various guarantees. We do not believe that claims that may be made under such guarantees would have a material effect on our financial condition, results of operations, or cash flows.

Under the terms of the Navistar Capital Operating Agreement, BMO Financial Group and its wholly-owned subsidiary BMO Harris Bank N.A. (together "BMO") is our third-party preferred source of retail customer financing for equipment offered by us and our dealers in the U.S. We refer to this alliance as "Navistar Capital." The Navistar Capital Operating Agreement contains a loss sharing arrangement for certain credit losses. Under the loss sharing arrangement, as amended, we generally reimburse BMO for credit losses in excess of the first 10% of the financed value of a contract; for certain leases we reimburse BMO for credit losses up to a maximum of the first 9.5% of the financed value of those lease contracts. Our exposure to loss is mitigated because contracts under the Navistar Capital Operating Agreement are secured by the financed equipment. There was $1.4 billion of outstanding loan principal and operating lease payments receivable at both July 31, 2018 and October 31, 2017, financed through the Navistar Capital Operating Agreement and subject to the loss sharing arrangements in the U.S. The related financed values of these outstanding contracts were $2.5 billion and $2.4 billion at July 31, 2018 and October 31, 2017, respectively. Generally, we do not carry the contracts under the Navistar Capital Operating Agreement on our Consolidated Balance Sheets. However, for certain Navistar Capital financed contracts which we have accounted for as borrowings, we have recognized equipment leased to others of $105 million and $116 million and financed lease obligations of $121 million and $129 million, in our Consolidated Balance Sheets as of July 31, 2018 and October 31, 2017, respectively.

We also have issued a limited number of residual value guarantees, for which losses are generally capped. If substantial risk of loss has not transferred, we account for these arrangements as operating leases and revenue is recognized on a straight-line basis over the term of the lease. If substantial risk of loss has transferred, revenue is recognized upon sale and the amounts of the guarantees are estimated and recorded. Our guarantees are contingent upon the fair value of the leased assets at the end of the lease term. We have recognized liabilities for some of these guarantees in our Consolidated Balance Sheets as they meet recognition and measurement provisions. In addition to the liabilities that have been recognized, we are contingently liable for other potential losses under various guarantees that are not recognized in our Consolidated Balance Sheets. We do not believe claims that may be made under such guarantees would have a material effect on our financial condition, results of operations, or cash flows.

We obtain certain stand-by letters of credit and surety bonds from third-party financial institutions in the ordinary course of business when required under contracts or to satisfy insurance-related requirements. As of July 31, 2018, the amount of stand-by letters of credit and surety bonds was $119 million.

In addition, as of July 31, 2018, we have $70 million of outstanding purchase commitments and contracts with $18 million of cancellation fees with expiration dates through 2025. We have entered into industrial participation agreements, commonly known as offset agreements, with customers outside of the U.S. to facilitate economic value back to entities within the foreign nations as the result of their procurement of goods and services from us. These commitments may be satisfied by our placement of supply contracts to established companies within the foreign nations, providing capabilities to the foreign nations, or the creation of joint ventures that generate profits and hire nationals from within the foreign nations. In certain cases, penalties could be imposed if we do not meet our industrial participation commitments. As of July 31, 2018, we have outstanding industrial participation agreements totaling $228 million that extend through 2025. Purchase order commitments associated with fulfilling the industrial participation agreements are included in the purchase commitments amount above.

In the ordinary course of business, we also provide routine indemnifications and other guarantees, the terms of which range in duration and often are not explicitly defined. We do not believe these will result in claims that would have a material impact on our financial condition, results of operations, or cash flows.

Environmental Liabilities

We have been named a potentially responsible party ("PRP"), in conjunction with other parties, in a number of cases arising under an environmental protection law, the Comprehensive Environmental Response, Compensation, and Liability Act, popularly known as the "Superfund" law. These cases involve sites that allegedly received wastes from current or former Company locations. Based on information available to us which, in most cases, consists of data related to quantities and characteristics of material generated at current or former Company locations, material allegedly shipped by us to these disposal sites, as well as cost estimates from PRPs and/or federal or state regulatory agencies for the cleanup of these sites, a reasonable estimate is calculated of our share of the probable costs, if any, and accruals are recorded in our consolidated financial statements. These accruals are generally recognized no later than upon completion of the remedial feasibility study and are not discounted to their present value. We review all accruals on a regular basis and believe that, based on these calculations, our share of the potential additional costs for the cleanup of each site will not have a material effect on our financial condition, results of operations, or cash flows.

In addition, other sites formerly owned by us or where we are currently operating have been identified as having soil and groundwater contamination. While investigations and cleanup activities continue at these sites, we believe that we have appropriate accruals to cover costs to complete the cleanup of all sites.

We have accrued $18 million for these and other environmental matters, which are included within Other current liabilities and Other noncurrent liabilities, as of July 31, 2018. The majority of these accrued liabilities are expected to be paid subsequent to 2019.

Along with other vehicle manufacturers, we have been subject to an increased number of asbestos-related claims in recent years. In general, these claims relate to illnesses alleged to have resulted from asbestos exposure from component parts found in older vehicles, although some cases relate to the alleged presence of asbestos in our facilities. In these claims, we are generally not the sole defendant, and the claims name as defendants numerous manufacturers and suppliers of a wide variety of products allegedly containing asbestos. We have strongly disputed these claims, and it has been our policy to defend against them vigorously. Historically, the actual damages paid out to claimants have not been material in any year to our financial condition, results of operations, or cash flows. It is possible that the number of these claims will continue to grow, and that the costs for resolving asbestos related claims could become significant in the future.

Legal Proceedings

Overview

We are subject to various claims arising in the ordinary course of business and are party to various legal proceedings that constitute ordinary, routine litigation incidental to our business. The majority of these claims and proceedings relate to commercial, product liability, and warranty matters. In addition, from time to time we are subject to various claims and legal proceedings related to employee compensation, benefits, and benefits administration including, but not limited to, compliance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Department of Labor requirements.

In our opinion, apart from the actions set forth below, the disposition of these proceedings and claims, after taking into account recorded accruals and the availability and limits of our insurance coverage, will not have a material adverse effect on our business or our financial condition, results of operations, or cash flows.

Profit Sharing Disputes

Pursuant to the 1993 Settlement Agreement, the program administrator and named fiduciary of the Supplemental Benefit Program is the Supplemental Benefit Program Committee (the "Committee"), composed of individuals not appointed by NI or NIC. In August 2013, the Committee filed a motion for leave to amend its February 2013 complaint (which sought injunctive relief for the Company to provide certain information to which it was allegedly entitled under the Supplemental Benefit Trust Profit Sharing Plan) and a proposed amended complaint (the "Profit Sharing Complaint") in the U.S. District Court for the Southern District of Ohio (the "Court"). Leave to file the Profit Sharing Complaint was granted by the Court in October 2013. In its Profit Sharing Complaint, the Committee alleged the Company breached the 1993 Settlement Agreement and violated ERISA by failing to properly calculate profit sharing contributions due under the Supplemental Benefit Trust Profit Sharing Plan. The Committee seeks damages in excess of $50 million, injunctive relief and reimbursement of attorneys' fees and costs. Following the resolution of a procedural dispute by the U.S. Court of Appeals for the 6th Circuit, in May 2015, the Court ordered that the claims in the Profit Sharing Complaint be arbitrated pursuant to the dispute resolution procedures in the Supplemental Benefit Trust Profit Sharing Plan. In November 2015, the Company and the Committee selected an arbitrator and the discovery process commenced. On August 1, 2016, the parties submitted briefs on issues related to the scope of the arbitration. On June 29, 2017, the arbitrator ruled, among other things, that the arbitration will include Supplemental Benefit Trust Profit Sharing Plan calculations for the years ending October 31, 2001 through October 31, 2014. On May 2, 2018, the Committee submitted to the arbitrator a proposed schedule for the presentation of the issues to be addressed in the arbitration. On May 30, 2018, the Company submitted to the arbitrator a response in opposition to the Committee’s proposal and proposed a different schedule for the presentation of the issues in the arbitration. As noted under “Retiree Health Care Litigation” below, on August 14, 2018, the Company filed a motion to schedule a status hearing, in which the Company requested an in-person hearing to discuss global resolution of various disputes under the 1993 Settlement Agreement, including the pending Profit Sharing Complaint.

In addition, various local bargaining units of the UAW have filed separate grievances pursuant to the profit sharing plans under various collective bargaining agreements in effect between the Company and the UAW that may have similar legal and factual issues as the Profit Sharing Complaint. On August 28, 2018, the court scheduled an in-person status conference for October 12, 2018.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

Retiree Health Care Litigation

On October 21, 2016, two lawsuits were filed in the U.S. District Court for the Southern District of Ohio relating to postretirement healthcare and life insurance obligations under the 1993 Settlement Agreement. The first lawsuit (the “Committee’s Complaint”) was filed by the Supplemental Benefit Program Committee. 

The Committee’s Complaint was filed against NIC, NI, NFC and a former affiliate, all of which are parties to the 1993 Settlement Agreement. Since January 1, 2012, the Navistar, Inc. Retiree Health Benefit Trust, created pursuant to the 1993 Settlement Agreement (the “Base Trust”), has received certain Medicare Part D subsidies from the federal Centers for Medicare and Medicaid Services that were made available for prescription drug benefits provided to Medicare-eligible seniors pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and has also received certain Medicare Part D coverage-gap discounts from prescription drug manufacturers that were made available to eligible seniors pursuant to the Patient Protection and Affordable Care Act (collectively, the “Subsidies”). 

The Committee alleges, among other things, that the defendants breached the 1993 Settlement Agreement since January 1, 2012 by causing the Base Trust to allocate the Subsidies in a manner that improperly decreased the defendants’ contributions to the Base Trust and increased retiree contributions. The Committee seeks damages, attorneys’ fees and costs for all alleged violations of the 1993 Settlement Agreement, including approximately $26 million which the Committee alleges is the eligible retirees’ “fair share” of the Subsidies that were allegedly misappropriated by the defendants from January, 2012 through April, 2015. 

The second lawsuit was filed by two individual members of the Committee (the “Committee Members”) who are retirees and participants in the Navistar, Inc. Health Benefit and Life Insurance Plan (the “Plan”) created pursuant to the 1993 Settlement Agreement. The Committee Members’ complaint (the “Committee Members’ Complaint”) was filed against NIC, NI, NFC and certain other former or current affiliates, all of which are parties or employers as defined in the 1993 Settlement Agreement. The Committee Members allege, among other things, that the Company violated the terms of the Plan, breached a fiduciary duty under ERISA, and engaged in ERISA-prohibited transactions by improperly using the Plan’s assets (a portion of the Subsidies) for the Company’s benefit. 

The Committee Members request that the court order the defendants to restore all losses to the Base Trust, including approximately $26 million, which the Committee Members allege is the Plan participants’ “fair share” of the Subsidies that were allegedly misappropriated by the defendants from January 2012 through April 2015. The Committee Members also request that the court enjoin the defendants from alleged future violations of the Plan and ERISA with respect to treatment of the Subsidies, order the defendants to remedy all alleged ERISA-prohibited transactions and pay the Committee Members’ attorneys’ fees and costs.

The defendants filed motions to dismiss each respective complaint on January 10, 2017. On May 10, 2017, the court dismissed the Committee's Complaint with prejudice, stating that the Committee lacked standing to bring its claims. With respect to the Committee Members’ Complaint, the court declined to dismiss the complaint, but ordered the parties to conduct discovery regarding whether the Committee Members’ Complaint is barred by the applicable statute of limitations and to file a motion for summary judgment thereafter on that issue of timeliness. The defendants filed their motion for summary judgment on September 21, 2017, the Committee Members’ filed their opposition on November 2, 2017, and the defendants filed their reply on November 22, 2017. On June 26, 2018, the court conditionally overruled the defendants’ motion for summary judgment. The court bifurcated the case and will first conduct a trial on the issue of whether the Committee Members’ Complaint is barred by the applicable statute of limitations in September 2018.

On August 14, 2018, under the original Shy et. al. v. Navistar International Corporation, Civil Action No. 3:92-CV-333 (S.D. Ohio 1992), we filed a motion to schedule a status hearing to request an in-person hearing to discuss global resolution of various disputes under the 1993 Settlement Agreement, including but not limited to resolving the pending Profit Sharing Complaint and Committee Members’ Complaint described above. On August 28, 2018, the court scheduled an in-person status conference for October 12, 2018.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

FATMA Notice

International Indústria Automotiva da América do Sul Ltda. ("IIAA"), formerly known as Maxion International Motores S/A ("Maxion"), now a wholly owned subsidiary of the Company, received a notice (the “FATMA Notice”) in July 2010 from the State of Santa Catarina Environmental Protection Agency ("FATMA") in Brazil. The FATMA Notice alleged that Maxion sent waste to a facility owned and operated by a company known as Natureza (the “Natureza Facility”) and that soil and groundwater contamination had occurred at the Natureza Facility.

The FATMA Notice asserted liability against Maxion and assessed an initial penalty in the amount of R$2 million (the equivalent of approximately less than US$1 million at July 31, 2018), which is not due and final until all administrative appeals are exhausted. Maxion was one of numerous companies that received similar notices. IIAA filed an administrative defense in August 2010 and has not yet received a decision following that filing.

In addition to the matter described above, there is a suit pending in the federal court of Brazil in which the federal district attorney has sued (a) FATMA, for claims related to FATMA’s actions in connection with licensing and inspection procedures related to the Natureza Facility, and (b) Selamix, as the current owner of the Natureza Facility. In this federal suit, Selamix was found liable for the contamination at the Natureza Facility due to it being the successor owner of the facility. However, the federal court’s decision does not prohibit Selamix from seeking to recover its damages from third parties that contributed to the contamination at the Natureza Facility.

In connection with the FATMA Notice, IIAA presented a motion to the district attorney of the State of Santa Catarina (the “SC District Attorney”) to set forth its defenses and correct inaccuracies in the FATMA Notice in August 2017. In September 2017, the SC District Attorney informed IIAA that it intended to present a Consent Agreement to all of the companies that sent waste to Natureza to determine the allocation of the liability for generating the waste which led to the contamination of the Natureza Facility. IIAA then filed a motion requesting that the SC District Attorney consider certain facts and circumstances prior to presenting the Consent Agreement.

In January 2018, the SC District Attorney, local and state authorities, Selamix, IIAA and the 14 other companies that are alleged to have significantly contributed to the contamination met to discuss the matter. Selamix then presented three proposals for conducting a preliminary environmental assessment in the area to determine the allocation of liability among the companies. In March 2018, Selamix informed the SC District Attorney that it would voluntarily conduct a preliminary environmental study at the Natureza Facility in an attempt to determine and allocate the liability for the contamination pursuant to an agreement with all of the companies after the study is completed. The SC District Attorney agreed to suspend further inquiry into the matter until Selamix’s study had been completed. The other companies involved in the matter have expressed an interest in having an independent environmental study conducted. The SC District Attorney has indicated that it may consider requiring an independent environmental study after Selamix’s environmental study is completed.

In June 2018, Selamix presented its Environmental Preliminary Assessment Report to the SC District Attorney and the other companies alleged to have contributed to the contamination and the report indicated that the entire property should be subject to further studies to confirm the type and extent of the contamination due to signs of buried residues in several areas. Selamix also presented commercial proposals from two additional different companies specializing in environmental studies to perform the next steps of the technical work. The SC District Attorney then requested a third commercial proposal which will be presented and paid for by Selamix.

IIAA continues to dispute the allegations in the FATMA Notice and intends to continue to vigorously defend itself. Currently, no demands or offers are outstanding.

Sao Paulo Groundwater Notice

In March 2014, IIAA, along with other nearby companies, received from the Sao Paulo District Attorney (the "District Attorney") a notice and proposed Consent Agreement relating to alleged neighborhood-wide groundwater contamination at or around its Sao Paulo manufacturing facility. The proposed Consent Agreement sought certain groundwater investigations and other technical relief and proposed sanctions in the amount of R$3 million (the equivalent of approximately less than US$1 million at July 31, 2018). In November 2014, IIAA extended a settlement offer. The parties remained in discussions and IIAA’s settlement offer was never accepted, rejected or countered by the District Attorney.

On August 31, 2016, the District Attorney filed civil actions against IIAA and other companies in the Central Forum of the capital of the State of São Paulo seeking soil and groundwater investigation and remediation, together with monetary payment in an unspecified amount. IIAA filed its defense to the civil action on January 26, 2017, alleging that IIAA has made all necessary investigations and has taken remedial measures to address the contamination and that Companhia Ambiental do Estado de São Paulo ("CETESB"), the environmental agency of São Paulo State, has agreed to the remedial measures taken by IIAA. On June 20, 2017, IIAA presented a petition requesting a 90-day suspension of the lawsuit. IIAA has since held and is currently engaged in discussions with the District Attorney regarding settlement of this matter. The District Attorney agreed to an initial suspension on June 30, 2017 and a subsequent suspension for an additional 90 days which ended on July 9, 2018.

A new district attorney (the “New District Attorney”) assumed responsibility for the case in February 2018. The New District Attorney would like the companies involved to try to reach a settlement agreement as to the remediation efforts to be taken after having discussions and negotiations with the New District Attorney’s technical experts. IIAA attempted to schedule a meeting with the New District Attorney’s technical experts. IIAA met with the New District Attorney on July 25, 2018. The New District Attorney has indicated that he will request information related to the status of the current remediation needs from CETESB. After receiving that information, the New District Attorney has indicated that he will schedule a meeting with IIAA to discuss the proposed terms of a potential settlement agreement and granted a third suspension on August 14, 2018 which ends on November 14, 2018.

There are no current demands or offers outstanding.

MaxxForce Engine EGR Warranty Litigation

On June 24, 2014, N&C Transportation Ltd. ("N&C") filed a putative class action lawsuit against NIC, NI, Navistar Canada Inc., and Harbour International Trucks in Canada in the Supreme Court of British Columbia (the "N&C Action"). Subsequently, seven additional, similar putative class action lawsuits have been filed in Canada (together with the N&C Action, the "Canadian Actions").

From June 13-17, 2016, the court conducted a certification hearing in the N&C Action. On November 16, 2016, the court certified a Canada-wide class comprised of persons who purchased heavy-duty trucks equipped with Advanced EGR MaxxForce 11, MaxxForce 13, and MaxxForce 15 engines designed to meet 2010 EPA regulations. The court in the N&C Action denied certification to persons who operated but did not buy the trucks in question. On November 2, 2017, NIC, NI, Navistar Canada Inc. and Harbour International Trucks filed a notice of appeal. On December 8, 2017, the plaintiff filed a notice of cross-appeal. Both the appeal and cross-appeal were heard by the British Columbia Court of Appeal on February 9, 2018. On August 1, 2018, the appellate court denied Navistar's appeal and granted, in part, N&C's cross-appeal and as such certified three narrow issues on whether misrepresentations were made in Navistar's advertising materials. The next step will be an attendance before the case management judge regarding the details of the notice of certification to be given to the class. No date for this attendance has been set.

On June 5, 2017, a hearing was held in the Quebec putative class action lawsuit captioned 4037308 Canada Inc. v. Navistar Canada Inc., NI, and NIC. At that hearing, the court ruled on certain motions regarding evidence related to certification but deferred a ruling on plaintiff’s proposed amendment to narrow the proposed class to Quebec-only purchasers and lessees of model year 2010-13 vehicles containing MaxxForce 11, 13, and 15 liter engines. On November 23, 2017, we filed a motion to stay the Quebec case until the British Columbia Court of Appeal rules on the certification order in the N&C Action. The stay motion was filed on November 23, 2017 and was granted on December 7, 2017. The decision of the British Columbia Court of Appeal was provided to the Quebec court.  The decision triggered a 30 day period within which the defendants must agree with class counsel on the presentation of its outstanding motions or on a date for the hearing of the motion to authorize proceeding as a class. An agreement has not yet been reached on the presentation of the outstanding motions nor have any hearing dates been set.

In the Manitoba putative class action lawsuit captioned Vern Brown v. Navistar International Corporation and Navistar Canada, Inc., the Court held a case management conference on June 29, 2018, after the plaintiff failed to file a complete certification record by the previously court-ordered due date. The plaintiff advised that it expected to file its remaining certification affidavits by August 31, 2018, and the court suspended certification scheduling in the interim. The plaintiff filed an additional affidavit on July 5, 2018. A new certification schedule is expected to be ordered at the next case management conference on September 6, 2018. There are no certification or other hearings scheduled in any of the other Canadian Actions at this time.

On July 7, 2014, Par 4 Transport, LLC filed a putative class action lawsuit against NI in the United States District Court for the Northern District of Illinois (the "Par 4 Action"). Subsequently, seventeen additional putative class action lawsuits were filed in various United States district courts, including the Northern District of Illinois, the Eastern District of Wisconsin, the Southern District of Florida, the Middle District of Pennsylvania, the Southern District of Texas, the Western District of Kentucky, the District of Minnesota, the Northern District of Alabama, and the District of New Jersey (together with the Par 4 Action, the "U.S. Actions"). Some of the U.S. Actions name both NIC and NI, and allege matters substantially similar to the Canadian Actions. More specifically, the Canadian Actions and the U.S. Actions (collectively, the "EGR Class Actions") seek to certify a class of persons or entities in Canada or the United States who purchased and/or leased a ProStar or other Navistar vehicle equipped with a model year 2008-2013 MaxxForce Advanced EGR engine.

In substance, the EGR Class Actions allege that the MaxxForce Advanced EGR engines are defective and that the Company and NI failed to disclose and correct the alleged defect. The EGR Class Actions assert claims based on theories of contract, breach of warranty, consumer fraud, unfair competition, misrepresentation and negligence. The EGR Class Actions seek relief in the form of monetary damages, punitive damages, declaratory relief, interest, fees, and costs.

On October 3, 2014, NIC and NI filed a motion before the United States Judicial Panel on Multidistrict Litigation (the "MDL Panel") seeking to transfer and consolidate before Judge Joan B. Gottschall of the United States District Court for the Northern District of Illinois all of the then-pending U.S. Actions, as well as certain non-class action MaxxForce Advanced EGR engine lawsuits pending in various federal district courts.

On December 17, 2014, Navistar's motion to consolidate the U.S. Actions and certain other non-class action lawsuits was granted. The MDL Panel issued an order consolidating all of the U.S. Actions that were pending on the date of Navistar’s motion before Judge Gottschall in the United States District Court for the Northern District of Illinois (the "MDL Action").

The MDL Panel also consolidated into the MDL Action certain non-class action MaxxForce Advanced EGR engine lawsuits pending in the various federal district courts. Non-class federal lawsuits presenting pre-trial issues similar to the MDL Action continue to be transferred to the MDL Action. Approximately 24 such actions are currently pending.

At the request of the various law firms representing the plaintiffs in the MDL Action, on March 5, 2015, Judge Gottschall entered an order in the MDL Action appointing interim lead counsel and interim liaison counsel for the plaintiffs. On May 11, 2015, lead counsel for the plaintiffs filed a First Master Consolidated Class Action Complaint ("Consolidated Complaint"). The parties to the MDL Action exchanged initial disclosures on May 29, 2015. The Company answered the Consolidated Complaint on July 13, 2015. On September 22, 2016, lead counsel for the plaintiffs filed a First Amended Consolidated Class Action Complaint (the “Amended Consolidated Complaint”). The Amended Consolidated Complaint added twenty-five additional named plaintiffs. NI and NIC answered the Amended Consolidated Complaint on October 20, 2016.

On May 27, 2016, Judge Gottschall entered a Case Management Order setting a July 13, 2017 date for plaintiffs' class certification motion. On November 30, 2016, the court entered an order referring discovery matters to a magistrate judge for supervision. Pursuant to the magistrate’s order, the parties jointly filed a new proposed case management order on January 25, 2017, which extended the fact discovery deadline to November 22, 2017. On January 31, 2017, the parties filed a joint motion with Judge Gottschall requesting adjustment of the class action briefing schedule to April 24, 2018. On February 2, 2017, Judge Gottschall granted the parties' motion extending the deadline to complete the class certification briefing to April 24, 2018. On February 6, 2017, the magistrate approved the parties' schedule set forth in the case management order jointly filed on January 25, 2017. In September 2017, the plaintiffs filed a motion to further extend the case deadlines. On October 5, 2017, Judge Gottschall entered an Agreed Order Extending the Discovery Cutoff ordering that fact discovery relevant to class certification be completed by March 13, 2018 and that the class certification briefing be completed by July 31, 2018. On March 5, 2018, Judge Gottschall extended the fact discovery deadline to be completed by May 25, 2018 and ordered that the class certification briefing be completed by October 22, 2018. Fact discovery relevant to class certification is now substantially complete. On June 19, 2018, Judge Gottschall extended the deadline for completion of a class certification briefing to November 30, 2018.

On October 13, 2017, lead counsel for the plaintiffs filed a Motion for Leave to File a Second Amended Consolidated Class Action Complaint, as well as a Motion for Voluntary Dismissal of Claims without Prejudice relating to 15 previously named plaintiffs. On January 4, 2018, Judge Gottschall granted both motions. On January 9, 2018, the plaintiffs filed a Second Amended Consolidated Class Action Complaint. The Second Amended Consolidated Class Action Complaint removed 15 named plaintiffs and substituted in eight new named plaintiffs. As a result, the total number of named plaintiffs is now 37 and three class action cases were dismissed entirely without prejudice because there were no longer any remaining plaintiffs in those cases. On August 16, 2018, Judge Gotschall entereda minute order setting a status hearing for September 26, 2018 in light of the ongoing settlement efforts of the parties. 

On November 11, 2017, seven plaintiffs (the “Direct Action Plaintiffs”) in the MDL moved for a separate trial and discovery schedule independent of the class action schedule. On January 2, 2018, Judge Gottschall granted in part and denied in part the Direct Action Plaintiffs’ motion, allowing two of the Direct Action Plaintiffs to begin limited discovery on plaintiff-specific issues. The parties submitted competing proposed discovery schedules. In a minute order dated January 26, 2018, Judge Gottschall declined to enter either schedule but ordered the parties to confer on a schedule for prioritizing the plaintiff-specific discovery after the close of fact discovery relevant to class certification issues. The parties are currently engaged in discovery.

There are also non-class action MaxxForce Advanced EGR engine lawsuits filed against the Company in various state courts. A number of non-class action lawsuits have been resolved in favor of the Company prior to or at trial or settled for immaterial amounts. Approximately 40 state court non-class actions are pending at this time. One of the non-class action lawsuits ("Milan"), alleging violations of the Tennessee Consumer Protection Act and fraud and involving approximately 235 trucks, was tried in Tennessee state court in August 2017. On August 10, 2017, the Milan jury returned a verdict of approximately $31 million against the Company, including $20 million in punitive damages. On October 2, 2017, the Company filed various motions in the trial court challenging the verdict, including a Motion for Judgment Notwithstanding the Verdict or, in the Alternative, a New Trial and Motion to Disapprove of the Award of Punitive Damages. The hearing on these motions was held on December 1, 2017 and the court denied our motions, denied Milan’s motion for pre-judgment interest and granted Milan $1.4 million in fees and costs. On January 11, 2018, the Company filed a Notice of Appeal in the Tennessee Court of Appeals challenging the verdict. Briefing on the appeal is currently scheduled to be completed by October 22, 2018. In the third quarter of 2017, we recorded $31 million of charges in SG&A expenses in our Consolidated Statements of Operations.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

EPA Clean Air Act Litigation

In February 2012, NI received a Notice of Violation ("NOV") from the United States Environmental Protection Agency (the "EPA") pertaining to certain heavy-duty diesel engines which, according to the EPA, were not completely assembled by NI until calendar year 2010 and, therefore, were not covered by NI's model year 2009 certificates of conformity. The NOV concluded that NI's introduction into commerce of each of these engines violated the Federal Clean Air Act.

On July 14, 2015, the Department of Justice ("DOJ"), on behalf of the EPA, filed a lawsuit against NIC and NI in the U.S. District Court for the Northern District of Illinois. Similar to the NOV, the lawsuit alleges that NIC and NI introduced into commerce approximately 7,749 heavy-duty diesel engines that were not covered by model year 2009 certificates of conformity because those engines were not completely assembled until calendar year 2010, resulting in violations of the Federal Clean Air Act. On July 16, 2015, the DOJ filed an Amended Complaint clarifying the amount of civil penalties being sought. The lawsuit requests injunctive relief and the assessment of civil penalties of up to $37,500 for each violation. On September 14, 2015, NIC and NI each filed an Answer and Affirmative Defenses to the Amended Complaint. We dispute the allegations in the lawsuit.

Discovery in the matter is proceeding in two phases. Fact discovery for the liability phase commenced on December 9, 2015. Pursuant to the court's Minute Order entered on July 12, 2017, the Phase I liability fact discovery was completed as of November 9, 2017.

On May 13, 2016, the DOJ, on behalf of the EPA, filed a motion for summary judgment on liability. On June 30, 2016, NIC and NI opposed the EPA's motion for summary judgment, and NIC cross-moved for summary judgment against the EPA. On March 1, 2017, the court entered a Memorandum Opinion and Order (i) granting the DOJ’s motion for summary judgment on the issue of liability with respect to NI, (ii) denying the DOJ’s motion for summary judgment on the issue of liability with respect to NIC, and (iii) denying NIC’s motion for summary judgment.

On April 3, 2018, the parties jointly filed a stipulation of dismissal with prejudice for NIC only. The stipulation with prejudice has no effect on the claims made against NI. With the dismissal of NIC, the matter moved to the remedy phase with respect to NI. The court entered a scheduling order on May 3, 2018, setting a discovery deadline of May 22, 2019, expert report and deposition deadlines through November 7, 2019, and a deadline for submission of dispositive motions of December 9, 2019.

Based on our assessment of the facts underlying the complaint above, potential charges to the Consolidated Statements of Operations and cash outlays in future periods could range from $2 million to $291 million related to the resolution of this matter. Other than the aforementioned, we are unable to provide further meaningful quantification of how the final resolution of this matter may impact our future consolidated financial condition, results of operations or cash flows.

American Intermodal Container Manufacturing

In 2014, NI began negotiating a contract manufacturing agreement (the “Manufacturing Agreement”) with American Intermodal Container Manufacturing, Inc. and American Intermodal Container Manufacturing Co., LLC (together, “AICM”), pursuant to which NI agreed to manufacture freight containers on AICM’s behalf for J.B. Hunt. Before the negotiations were completed, the members of AICM’s board became involved in a dispute regarding the ownership and control of AICM which resulted in a majority of the AICM board members acting to remove two of the other board members (the “Removed Directors”).

NI and its subsidiary, International Truck and Engine Investments Corporation (“ITEIC”), subsequently entered into the Manufacturing Agreement with AICM. On October 1, 2014, the Removed Directors filed a suit against AICM and its remaining board members (together, the “AICM Defendants”) in the Supreme Court of New York in New York County, alleging that the AICM Defendants had improperly (a) removed the Removed Directors and (b) taken control of AICM. The suit alleged: (i) breach of contract (relating to the ownership and control of AICM); (ii) promissory estoppel; (iii) tortious interference with contract; (iv) breach of fiduciary duty; (v) aiding and abetting breach of fiduciary duty; (vi) tortious interference with prospective business relations; and (vii) declaratory judgment. The Removed Directors claimed damages of not less than $50 million.

On September 29, 2016, the Removed Directors filed a Motion for Leave to Amend Complaint to add NI, ITEIC and J.B. Hunt as defendants, alleging that NI and ITEIC personnel allied and conspired with the AICM Defendants to (a) support the AICM Defendants in breaching the ownership contract of the Removed Defendants, (b) remove the Removed Directors, and (c) wrongfully interfere with certain AICM fundraising efforts. NI filed its opposition to this motion on November 9, 2016 and the Removed Directors replied on November 18, 2016. On February 7, 2018, the court issued an order granting the Removed Directors’ Motion for Leave to Amend Complaint to add claims against NI, ITEIC and J.B. Hunt for (i) tortious interference with contract and (ii) aiding and abetting breach of fiduciary duty.

The court denied the Removed Directors’ request to add a claim for tortious interference with prospective business relations against NI, ITEIC and J.B. Hunt. The Removed Directors claim damages against NI, ITEIC and J.B. Hunt of not less than $50 million.

On February 27, 2018, the Removed Directors filed an amended complaint (the “Amended Complaint”) in conformance with the court’s February 7, 2018 order. On April 30, 2018, NI and ITEIC filed an answer to the Amended Complaint denying liability and asserting affirmative defenses and counterclaims and including counterclaims against AICM for indemnification and breach of contract (seeking to recover amounts due to NI) under the Manufacturing Agreement. NI and ITEIC intend to vigorously defend their position that they are not liable for the claims asserted by the Removed Directors.

Based on our assessment of the facts underlying the claims in the above actions, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition, results of operations, or cash flows.

Brazil Truck Dealer Disputes

In January 2014, IIAA initiated an arbitration proceeding under the International Chamber of Commerce rules seeking payment for goods sold and unpaid, in the amount of R$64 million (approximately US$17 million as of July 31, 2018), including penalties and interest, from a group of affiliated truck dealers in Brazil. The truck dealers are affiliated with each other, but not with us, and are collectively referred to as Navitrucks. In the proceeding, IIAA also seeks a declaration of fault against Navitrucks related to the termination of the truck dealer agreements between IIAA and Navitrucks. Navitrucks responded in part by submitting counterclaims against IIAA seeking the amount of R$128 million (approximately US$34 million as of July 31, 2018) for damages related to alleged unfulfilled promises and injury to Navitrucks’ reputation. In October 2014, Navitrucks amended their counterclaims by increasing the amount of damages. During a preliminary hearing before the arbitral tribunal on March 24, 2015, the parties agreed to submit all of the pending claims between the parties to the exclusive jurisdiction of the arbitral tribunal. Pursuant to the timetable issued in the arbitration proceeding, IIAA presented its complaint in July 2015, Navitrucks filed its answer and counterclaims on August 24, 2015, and IIAA filed its rebuttal and answer to Navitrucks’ counterclaims on October 22, 2015. On December 7, 2015, Navitrucks filed its rebuttal to IIAA’s answer to counterclaims. On June 13-15, 2016, the arbitral tribunal held hearings on the parties presenting witnesses and evidence.

On July 18, 2016, IIAA and Navitrucks presented additional documents and information related to the hearing held on June 13-15, 2016. On September 30, 2016, the parties presented their final allegations. On April 20, 2017, the arbitral tribunal issued a partial award (the "Initial Award") granting a portion of the relief sought by each of the parties. Specifically, the arbitral tribunal's Initial Award held that: (a) Navitrucks failed to pay certain amounts to IIAA for the purchase of vehicles under its agreements with IIAA, thereby breaching its contractual obligations; and (b) IIAA breached its contractual obligations under its agreements with Navitrucks due to its failure to fulfill its promises to invest in products, infrastructure, and a dealership network.Furthermore, the arbitral tribunal held that, due to the mutual breach of the agreements between IIAA and Navitrucks, the agreements should be deemed terminated.

On June 3, 2017, IIAA and Navitrucks filed an application to clarify certain interpretations of the Initial Award and to correct clerical errors in the Initial Award. IIAA also requested an award to (a) set the indisputable amount of the Initial Award, and (2) order Navitrucks to promptly pay such amount. On June 8, 2017, the arbitral tribunal invited IIAA and Navitrucks to present their respective comments on each other’s applications on or before June 27, 2017. On June 3, 2017 and June 27, 2017, IIAA and Navitrucks, respectively, filed their comments. On September 29, 2017, the arbitral tribunal issued a decision on the applications filed by both parties in which it rejected all of the requests made in the applications of both parties. On October 31, 2017, the arbitral tribunal issued a decision relating to the timeline for the production of technical evidence to be used in the calculation phase in which the actual monetary amount of the damages owed by each party to the other will be definitively determined.

As determined by the arbitral tribunal, IIAA (a) designated its expert assistant and disclosed the questions to be answered by the arbitral expert (official expert designated by the arbitral tribunal); (b) presented a summary of the amount that Navitrucks owes to IIAA in accordance with the previous calculation and related award issued on April 20, 2017; and (c) presented its replies to the Navitrucks' petitions.

On May 11, 2018, the arbitral tribunal issued a decision allowing the calculation to be made by the parties’ experts and scheduled the calculation phase hearing for August 16, 2018. On July 6, 2018, each party’s experts presented their reports indicating the calculation of the total amount due from each party to the other party. On August 6, 2018, the parties jointly filed a petition informing the arbitral tribunal that they reached an agreement as to the total amount due from each party to the other party. Pursuant to the agreement, Navitrucks agreed that it owes IIAA the total amount of R$107 million (approximately US$28 million as of July 31, 2018) after deducting the agreed amount of Navitrucks' claim against IIAA.

In addition, the parties requested: (a) the cancellation of the hearing scheduled for August 16, 2018; (b) a 15 day period for the parties to present their respective costs incurred with the arbitral proceeding; and (c) the closure of the calculation phase with the final ruling of merits.

On August 13, 2018, the arbitral tribunal issued a decision canceling the hearing scheduled for August 16, 2018 and directing the parties to prove their respective costs incurred with the arbitral proceeding and to specify whether there is any additional production of evidence or considerations by August 23, 2018. Thereafter, we expect that the arbitral tribunal’s final decision on the merits will be issued.

In addition, another truck dealer and two truck fleet owners in Brazil have separate adversarial proceedings pending against IIAA that may have similar legal and factual issues as the Navitrucks claim. These other claims are not material either individually or in the aggregate.

Other

U.S. Department of Defense Matter

In the third quarter of 2016, Navistar Defense, LLC ("ND") received a subpoena from the United States Department of Defense Inspector General (the "DOD IG"). The subpoena requested documents relating to ND's sale of its independent suspension systems ("ISS") for military vehicles to the government for the period from January 1, 2009 through December 31, 2010. On June 3, 2016, ND met with government representatives, including representatives from the DOD IG and the DOJ to discuss the matter.

Since then, ND has been in ongoing discussions with the DOD IG and the DOJ. ND made submissions of documents responsive to the subpoena in June and August 2016 and has completed its subpoena response. On May 1, 2017, ND met with government representatives, including representatives from the DOD IG and the DOJ, to further discuss the matter, including assertions that ND may have overcharged the United States for the ISS components. ND agreed to provide additional information relating to the pricing of the ISS components. The parties met again on June 13, 2017. In August 2017, ND received a letter from the DOJ claiming that ND made false and misleading statements during the course of price negotiations and during the Defense Contract Audit Agency audit which resulted in ND overcharging the United States for the ISS components by approximately $88 million and asking for treble damages and penalties for a total demand of approximately $264 million. ND has responded to the DOJ’s demand letter explaining its position that it has no liability in this matter and outlining the bases for such position, and that ND intends to vigorously defend its position. ND and the DOJ communicated between October 5, 2017 and December 8, 2017 to discuss their respective positions on both liability and damages. The parties have engaged in discussions related to mediation, but there is currently no written agreement or schedule for mediation.

On December 8, 2017, ND received another subpoena from the DOD IG which requested documents relating to ND's pricing of the Mine Resistant Ambush Protected (“MRAP”) vehicle and its sale of parts to the government for the period from January 1, 2006 through December 31, 2013. ND is responding to the subpoena and made four productions of responsive documents. At this time, we are unable to predict the outcome of these matters, including whether a settlement will be reached, or provide meaningful quantification of how the final resolution of this matter may impact our future consolidated financial condition, results of operations or cash flows.

On July 10, 2018, ND received another subpoena from the DOD IG requesting additional custodian emails and documents related to the MRAP and ISS components. ND is responding to the subpoena and has made one production of responsive documents. Additionally, in August 2018, the DOJ indicated that it would like to interview certain current and/or former employees.   

Deepwater Horizon Settlement Program

On June 3, 2018, we concluded the settlement of a business economic loss claim relating to our Alabama engine manufacturing facility. We will receive a gross amount of $85 million with a net present value of $70 million, net of our fees and costs, from the Deepwater Horizon Settlement Program. The cash proceeds will be received in installments in 2019 and 2020. The net present value of the settlement was recorded in our third quarter 2018 financial results in Other Income in our Consolidated Statements of Operations, and Other current and Other non-current assets in our Consolidated Balance Sheets.

XML

Segment Reporting

9 Months Ended

Jul. 31, 2018

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The following is a description of our four reporting segments:

• Our Truck segment manufactures and distributes Class 4 through 8 trucks, buses, and military vehicles under the International and IC Bus ("IC") brands, and produces engines under our proprietary brand name and parts required to support the military truck lines.

This segment sells its products in the U.S., Canada, and Mexico markets, as well as through our export truck business. In an effort to strengthen and maintain our dealer network, this segment occasionally acquires and operates dealer locations for the purpose of transitioning ownership.

• Our Parts segment provides customers with proprietary products needed to support the International commercial truck, IC Bus, proprietary engine lines, and export parts business, as well as our other product lines. Our Parts segment also provides a wide selection of other standard truck, trailer, and engine aftermarket parts. Also included in the Parts segment are the operating results of BDP, which manages the sourcing, merchandising, and distribution of certain service parts we sell to Ford in North America.

• Our Global Operations segment primarily consists of Brazil engine operations which produce diesel engines under contract manufacturing arrangements, as well as under the MWM brand, for sale to original equipment manufacturers (OEMs) in South America. In addition, our Global Operations segment includes the operating results of our joint venture in China with Anhui Jianghuai Automobile Co ("JAC").

• Our Financial Services segment provides retail, wholesale, and lease financing of products sold by the Truck and Parts segments and their dealers within the U.S. and Mexico, as well as financing for wholesale accounts and selected retail accounts receivable. This segment also facilitates financing relationships in other countries to support our Manufacturing Operations.

Corporate contains those items that are not included in our four segments.

Segment Profit (Loss)

We define segment profit (loss) as net income (loss) attributable to NIC, excluding income tax benefit (expense). Selected financial information from our Consolidated Statements of Operations and our Consolidated Balance Sheets is as follows:

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2018
External sales and revenues, net	$	1,894	$	603	$	68		$	40	$	1		$	2,606
Intersegment sales and revenues	22		2		21			25		(70		)	—
Total sales and revenues, net	$	1,916	$	605	$	89		$	65	$	(69	)	$	2,606
Income (loss) from continuing operations attributable to NIC, net of tax	$	165	$	144	$	4		$	23	$	(166	)	$	170
Income tax expense	—		—		—			—		(3		)	(3		)
Segment profit (loss)	$	165	$	144	$	4		$	23	$	(163	)	$	173
Depreciation and amortization	$	31	$	2	$	3		$	14	$	1		$	51
Interest expense	—		—		—			22		60			82
Equity in income (loss) of non-consolidated affiliates	1		1		(2		)	—		—			—
Capital expenditures(B)	19		—		1			1		5			26

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2017
External sales and revenues, net	$	1,521	$	580	$	74		$	35	$	3		$	2,213
Intersegment sales and revenues	10		6		10			27		(53		)	—
Total sales and revenues, net	$	1,531	$	586	$	84		$	62	$	(50	)	$	2,213
Income (loss) from continuing operations attributable to NIC, net of tax	$	7	$	157	$	3		$	23	$	(154	)	$	36
Income tax expense	—		—		—			—		—			—
Segment profit (loss)	$	7	$	157	$	3		$	23	$	(154	)	$	36
Depreciation and amortization	$	35	$	3	$	3		$	13	$	3		$	57
Interest expense	—		—		—			24		67			91
Equity in income (loss) of non-consolidated affiliates	1		1		(1		)	—		—			1
Capital expenditures(B)	21		1		2			—		3			27

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2018
External sales and revenues, net	$	4,810	$	1,768	$	229		$	118	$	8		$	6,933
Intersegment sales and revenues	61		6		38			69		(174		)	—
Total sales and revenues, net	$	4,871	$	1,774	$	267		$	187	$	(166	)	$	6,933
Income (loss) from continuing operations attributable to NIC, net of tax	$	200	$	413	$	(2	)	$	62	$	(521	)	$	152
Income tax expense	—		—		—			—		(25		)	(25		)
Segment profit (loss)	$	200	$	413	$	(2	)	$	62	$	(496	)	$	177
Depreciation and amortization	$	100	$	5	$	8		$	41	$	6		$	160
Interest expense	—		—		—			64		176			240
Equity in income (loss) of non-consolidated affiliates	2		2		(4		)	—		—			—
Capital expenditures(B)	74		1		2			1		1			79

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2017
External sales and revenues, net	$	3,929		$	1,747	$	186		$	102	$	8		$	5,972
Intersegment sales and revenues	27			19		18			70		(134		)	—
Total sales and revenues, net	$	3,956		$	1,766	$	204		$	172	$	(126	)	$	5,972
Income (loss) from continuing operations attributable to NIC, net of tax	$	(118	)	$	459	$	(8	)	$	51	$	(490	)	$	(106	)
Income tax expense	—			—		—			—		(10		)	(10		)
Segment profit (loss)	$	(118	)	$	459	$	(8	)	$	51	$	(480	)	$	(96	)
Depreciation and amortization	$	103		$	9	$	10		$	38	$	9		$	169
Interest expense	—			—		—			65		197			262
Equity in income of non-consolidated affiliates	3			3		—			—		—			6
Capital expenditures(B)	78			2		5			1		7			93

(in millions)	Truck		Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
July 31, 2018	$	2,264	$	645	$	335	$	2,407	$	1,273	$	6,924
October 31, 2017	1,621		632		378		2,207		1,297		6,135

_________________________

(A) Total sales and revenues in the Financial Services segment include interest revenues of $46 million and $131 million for the three and nine months ended July 31, 2018, respectively, and $45 million and $121 million for the three and nine months ended July 31, 2017, respectively.

(B) Exclusive of purchases of equipment leased to others.

XML

Stockholders' Deficit

9 Months Ended

Jul. 31, 2018

Equity [Abstract]

Stockholders' Deficit

Stockholders' Deficit

Accumulated Other Comprehensive Loss

The following table presents changes in Accumulated other comprehensive loss, net of tax, included in our Consolidated Statements of Stockholders' Deficit:

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of April 30, 2018	$	—	$	(289	)	$	(1,865	)	$	(2,154	)
Other comprehensive loss before reclassifications	—		(13		)	—			(13		)
Amounts reclassified out of accumulated other comprehensive loss	—		—			29			29
Net current-period other comprehensive income (loss)	—		(13		)	29			16
Balance as of July 31, 2018	$	—	$	(302	)	$	(1,836	)	$	(2,138	)

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of October 31, 2017	$	—	$	(283	)	$	(1,928	)	$	(2,211	)
Other comprehensive loss before reclassifications	—		(19		)	(2		)	(21		)
Amounts reclassified out of accumulated other comprehensive loss	—		—			94			94
Net current-period other comprehensive income (loss)	—		(19		)	92			73
Balance as of July 31, 2018	$	—	$	(302	)	$	(1,836	)	$	(2,138	)

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of April 30, 2017	$	1	$	(288	)	$	(2,292	)	$	(2,579	)
Other comprehensive income before reclassifications(A)	—		42			72			114
Amounts reclassified out of accumulated other comprehensive loss	—		—			53			53
Net current-period other comprehensive income	—		42			125			167
Balance as of July 31, 2017	$	1	$	(246	)	$	(2,167	)	$	(2,412	)

____________________

(A) Other comprehensive income before reclassifications for Defined Benefit Plans includes $111 million of remeasurement gains and $2 million of curtailment gains, partially offset by a $35 million intraperiod tax allocation and $6 million of deferred tax assets during the third quarter of 2017.

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of October 31, 2016	$	1	$	(280	)	$	(2,361	)	$	(2,640	)
Other comprehensive income before reclassifications(A)	—		34			72			106
Amounts reclassified out of accumulated other comprehensive loss	—		—			122			122
Net current-period other comprehensive income	—		34			194			228
Balance as of July 31, 2017	$	1	$	(246	)	$	(2,167	)	$	(2,412	)

____________________

(A) Other comprehensive income before reclassifications for Defined Benefit Plans includes $111 million of remeasurement gains and $2 million of curtailment gains, partially offset by a $35 million intraperiod tax allocation and $6 million of deferred tax assets during the third quarter of 2017.

The following table presents the amounts reclassified from Accumulated other comprehensive loss and the affected line item in our Consolidated Statements of Operations:

		Three Months Ended July 31,					Nine Months Ended July 31,
	Location in Consolidated Statements of Operations	2018		2017			2018			2017
Defined benefit plans
Amortization of actuarial loss	Selling, general and administrative expenses	$	29	$	36		$	86		$	106
Settlements	Selling, general and administrative expenses	—		—			9			—
Settlements	Restructuring charges	—		23			—			23
	Total before tax	29		59			95			129
	Tax expense	—		(6		)	(1		)	(7		)
Total reclassifications for the period, net of tax		$	29	$	53		$	94		$	122

XML

Earnings (Loss) Per Share Attributable to Navistar International Corporation

9 Months Ended

Jul. 31, 2018

Earnings Per Share [Abstract]

Loss Per Share Attributable to Navistar International Corporation

Earnings (Loss) Per Share Attributable to Navistar International Corporation

The following table presents the information used in the calculation of our basic and diluted earnings (loss) per share all attributable to NIC in our Consolidated Statements of Operations:

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions, except per share data)	2018		2017		2018		2017
Numerator:
Amounts attributable to Navistar International Corporation common stockholders:
Income (loss) from continuing operations, net of tax	$	170	$	36	$	152	$	(106	)
Income from discontinued operations, net of tax	—		1		—		1
Net income (loss)	$	170	$	37	$	152	$	(105	)
Denominator:
Weighted average shares outstanding:
Basic	99.0		98.3		98.8		91.1
Effect of dilutive securities	0.7		0.3		0.8		—
Diluted	99.7		98.6		99.6		91.1
Earnings (loss) per share attributable to Navistar International Corporation:
Basic:
Continuing operations	$	1.72	$	0.37	$	1.54	$	(1.16	)
Discontinued operations	—		0.01		—		0.01
	$	1.72	$	0.38	$	1.54	$	(1.15	)
Diluted:
Continuing operations	$	1.71	$	0.37	$	1.53	$	(1.16	)
Discontinued operations	—		0.01		—		0.01
	$	1.71	$	0.38	$	1.53	$	(1.15	)

The conversion rate on our 4.5% Senior Subordinated Convertible Notes due 2018 (the "2018 Convertible Notes") is 17.1233 shares of common stock per $1,000 principal amount of 2018 Convertible Notes, equivalent to an initial conversion price of approximately $58.40 per share of common stock. The 2018 Convertible Notes have an anti-dilutive effect when calculating diluted earnings per share when our average stock price is less than $58.40.

The conversion rate on our 4.75% Senior Subordinated Convertible Notes due 2019 (the “2019 Convertible Notes”) is 18.4946 shares of common stock per $1,000 principal amount of 2019 Convertible Notes, equivalent to an initial conversion price of approximately $54.07 per share of common stock. The 2019 Convertible Notes have an anti-dilutive effect when calculating diluted earnings per share when our average stock price is less than $54.07.

In February 2017, we consummated our previously announced strategic alliance with TRATON Group, which included an equity investment in the Company by TRATON Group pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement"), a License and Supply Framework Agreement and a Procurement JV Framework Agreement.

Pursuant to the Stock Purchase Agreement, on February 28, 2017 we issued and TRATON Group purchased 16.2 million shares of our common stock for an aggregate purchase price of $256 million at $15.76 per share (a 19.9% stake (16.6% on a fully-diluted basis) in the Company), excluding stock issuance costs.

The computation of diluted earnings per share also excludes outstanding options and other common stock equivalents in periods where inclusion of such potential common stock instruments would be anti-dilutive.

For the nine months ended July 31, 2018, certain securities have been excluded from the computation of earnings per share, as our average stock price during the period was less than their respective exercise prices. For the nine months ended July 31, 2018, the aggregate shares not included were 13.3 million.

For the nine months ended July 31, 2017, no dilutive securities were included in the computation of diluted earnings per share because they would have been anti-dilutive due to the net loss attributable to NIC. Additionally, certain securities have been excluded from the computation of earnings per share, as our average stock price during the period was less than their respective exercise prices. For the nine months ended July 31, 2017, the aggregate shares not included were 14.7 million.

For both the three months ended July 31, 2018 and 2017, certain securities have been excluded from the computation of earnings per share, as our average stock price during the period was less than their respective exercise prices. For the three months ended July 31, 2018 and 2017, the aggregate shares not included were 13.2 million and 14.6 million, respectively.

For both the three and nine months ended July 31, 2018 and 2017, the aggregate shares not included in the computation of earnings per share were primarily comprised of 3.4 million shares related to the 2018 Convertible Notes and 7.6 million sharesrelated to the 2019 Convertible Notes.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Jul. 31, 2018

Inventory [Line Items]

Product Warranty Disclosure [Text Block]

Product Warranty Liability

The following table presents accrued product warranty and deferred warranty revenue activity:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	629		$	818
Costs accrued and revenues deferred	139			137
Adjustments to pre-existing warranties(A)	(4		)	(4		)
Payments and revenues recognized	(233		)	(292		)
Balance at end of period	531			659
Less: Current portion	254			340
Noncurrent accrued product warranty and deferred warranty revenue	$	277		$	319

_________________________

(A) Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior fiscal periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.

Extended Warranty Programs

The amount of deferred revenue related to extended warranty programs was $248 million and $271 million at July 31, 2018 and October 31, 2017, respectively. Revenue recognized under our extended warranty programs was $24 million and $80 million for the three and nine months ended July 31, 2018, respectively

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements include the assets, liabilities, and results of operations of our Manufacturing operations and our Financial Services operations, including VIEs of which we are the primary beneficiary. The effects of transactions among consolidated entities have been eliminated to arrive at the consolidated amounts.

We prepared the accompanying unaudited consolidated financial statements in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for comprehensive annual financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting policies described in our Annual Report on Form 10-K for the year ended October 31, 2017, which should be read in conjunction with the disclosures therein. In our opinion, these interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial condition, results of operations, and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.

Variable Interest Entities

Variable Interest Entities

We have an interest in several VIEs, primarily joint ventures, established to manufacture or distribute products and enhance our operational capabilities. We have determined for certain of our VIEs that we are the primary beneficiary because we have the power to direct the activities of the VIE that most significantly impact its economic performance and we have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Accordingly, we include in our consolidated financial statements the assets and liabilities and results of operations of those entities, even though we may not own a majority voting interest. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather they represent claims against the specific assets of these VIEs. Assets of these entities are not readily available to satisfy claims against our general assets.

We are the primary beneficiary of our Blue Diamond Parts, LLC ("BDP") joint venture with Ford Motor Company ("Ford"). As a result, our Consolidated Balance Sheets include assets of $43 million and $49 million and liabilities of $6 million and $13 million as of July 31, 2018 and October 31, 2017, respectively, including $2 million and $10 million of cash and cash equivalents, at the respective dates, which are not readily available to satisfy claims against our general assets. The creditors of BDP do not have recourse to our general credit.

Our Financial Services segment consolidates several VIEs. As a result, our Consolidated Balance Sheets include secured assets of $949 million and $869 million as of July 31, 2018 and October 31, 2017, respectively, and liabilities of $812 million and $754 million as of July 31, 2018 and October 31, 2017, respectively, all of which are involved in securitizations that are treated as asset-backed debt. In addition, our Consolidated Balance Sheets include secured assets of $311 million and $278 million as of July 31, 2018 and October 31, 2017, respectively, and corresponding liabilities of $184 million and $194 million, at the respective dates, which are related to other secured transactions that do not qualify for sale accounting treatment, and, therefore, are treated as borrowings secured by operating and finance leases. Investors that hold securitization debt have a priority claim on the cash flows generated by their respective securitized assets to the extent that the related VIEs are required to make principal and interest payments. Investors in securitizations have no recourse to our general credit.

We also have an interest in other VIEs, which we do not consolidate because we are not the primary beneficiary. Our financial support and maximum loss exposure relating to these non-consolidated VIEs are not material to our financial condition, results of operations, or cash flows.

We use the equity method to account for our investments in entities that we do not control under the voting interest or variable interest models, but where we have the ability to exercise significant influence over operating and financial policies. Equity in income of non-consolidated affiliates includes our share of the net income of these entities.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to, pension and other postretirement benefits, allowance for doubtful accounts, income tax contingency accruals and valuation allowances, product warranty accruals, used truck inventory valuations, asbestos and other product liability accruals, asset impairment charges, restructuring charges and litigation-related accruals. Actual results could differ from our estimates.

Concentration Risk Disclosure [Text Block]

Concentration Risks

Our financial condition, results of operations, and cash flows are subject to concentration risks related to our significant unionized workforce. As of July 31, 2018, approximately 7,800, or 98%, of our hourly workers and approximately 700, or 13%, of our salaried workers, are represented by labor unions and are covered by collective bargaining agreements. Our current master collective bargaining agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") will expire in October 2018 and we are in negotiations with the UAW to enter into a new collective bargaining agreement. Our future operations may be affected by changes in governmental procurement policies, tax policies, budget considerations, changing national defense requirements, and political, regulatory and economic developments in the U.S. and certain foreign countries (primarily Canada, Mexico, and Brazil).

Inventory, Policy [Policy Text Block]

In valuing our used truck inventory, we are required to make assumptions regarding the level of reserves required to value inventories at their NRV. Our judgments and estimates for used truck inventory are based on an analysis of current and forecasted sales prices, aging of and demand for used trucks, and the mix of sales through various market channels. The NRV is subject to change based on numerous conditions, including age, specifications, mileage, timing of sales, market mix and current and forecasted pricing. While calculations are made after taking these factors into account, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence our judgment and related estimates include general economic conditions in markets where our products are sold, actions of our competitors, and the ability to sell used trucks in a timely manner.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Standards

In March 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118". This ASU updates the income tax accounting in U.S. GAAP to reflect the SEC's interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (H.R.1) (the "Tax Act") was signed into law. For more information regarding the impact of the Tax Act, see Note 8, Income Taxes.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)". This ASU provides guidance on a reclassification from accumulated other comprehensive income to retained earnings for the effect of the tax rate change resulting from the Tax Act. The amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2020. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". This ASU provides a new framework for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This ASU creates an initial screening test that reduces the population of transactions that an entity needs to analyze to determine whether there is an input and substantive processes in the acquisition or disposal. Fewer transactions are expected to involve acquiring or selling a business. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a prospective transition. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but we do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash" (Topic 230). This ASU requires that a statement of cash flows explain the change during the period in the total of cash, and cash equivalents, including amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a retrospective transition. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory” (Topic 740). This ASU update requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a modified retrospective transition. We do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” (Topic 230).This ASU provides guidance on how entities should classify eight specific cash flow transactions for which diversity in practice exists. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2019. Adoption will require a retrospective transition.We do not expect the impact of this ASU to have a material effect on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (Topic 326). This ASU sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Adoption will require a modified retrospective transition. This ASU is effective for us in the first quarter of fiscal 2021. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). This ASU requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. The accounting by lessors will remain largely unchanged. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us in the first quarter of fiscal 2020. Adoption will require a modified retrospective transition with an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (Topic 606), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition." This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which postponed the effective date of ASU No. 2014-09 to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted on the original effective date for fiscal years beginning after December 15, 2016. We continue to evaluate the requirements of the standard and its application to our business. During the quarter, we continued analyzing the ASU’s impact on our portfolio of customer contracts which may result in a change in the timing or the amount of revenue recognized in comparison with current guidance. Our ongoing analyses include assessing whether the new ASU will impact transactions previously recorded as borrowings or as leases, gross versus net accounting for certain revenue streams, and the timing and amount of revenue related to certain sales incentives. We are continuing to evaluate and quantify the impact of these changes, if any. We are also evaluating enhanced disclosure requirements and identifying and implementing appropriate changes to our business processes, systems and internal control framework to support recognition and disclosure under the new guidance. We will adopt this ASU in the first quarter of fiscal 2019 on a modified retrospective basis, with the cumulative effect adjustment recognized into Accumulated deficit as of November 1, 2018.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Jul. 31, 2018

Product Warranty Liability [Line Items]

Schedule of Product Warranty Liability [Table Text Block]

The following table presents accrued product warranty and deferred warranty revenue activity:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	629		$	818
Costs accrued and revenues deferred	139			137
Adjustments to pre-existing warranties(A)	(4		)	(4		)
Payments and revenues recognized	(233		)	(292		)
Balance at end of period	531			659
Less: Current portion	254			340
Noncurrent accrued product warranty and deferred warranty revenue	$	277		$	319

_________________________

(A) Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior fiscal periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.

XML

Summary of Significant Accounting Policies Inventory Reserve (Tables)

9 Months Ended

Jul. 31, 2018

Schedule of Used Truck Reserve [Abstract]

Inventory Reserve [Table Text Block]

The following table presents the activity in our used truck reserve:

	Nine Months Ended July 31,
(in millions)	2018			2017
Balance at beginning of period	$	110		$	208
Additions charged to expense(A)	38			102
Deductions/Other adjustments(B)	(100		)	(136		)
Balance at end of period	$	48		$	174

_________________________

(A) Additions charged to expense reflect the increase of the reserve for inventory on hand. During the second quarter of 2017, we implemented a shift in market mix to include an increase in volume to certain export markets, which had a lower price point as compared to sales through our domestic channels, and to lower domestic pricing to enable higher sales velocity.

(B) Deductions/Other adjustments reflect reductions of the reserve related to the sale of units and our currency translation adjustments.

XML

Summary of Significant Accounting Policies Inventory (Tables)

9 Months Ended

Jul. 31, 2018

Inventory Disclosure [Abstract]

Inventory Reserve [Table Text Block]

In valuing our used truck inventory, we are required to make assumptions regarding the level of reserves required to value inventories at their NRV. Our judgments and estimates for used truck inventory are based on an analysis of current and forecasted sales prices, aging of and demand for used trucks, and the mix of sales through various market channels. The NRV is subject to change based on numerous conditions, including age, specifications, mileage, timing of sales, market mix and current and forecasted pricing. While calculations are made after taking these factors into account, significant management judgment regarding expectations for future events is involved. Future events that could significantly influence our judgment and related estimates include general economic conditions in markets where our products are sold, actions of our competitors, and the ability to sell used trucks in a timely manner.

XML

Restructuring and Impairments (Tables)

9 Months Ended

Jul. 31, 2018

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

The following tables summarize the activity in the restructuring liability, which excludes pension and other postretirement contractual termination benefits:

(in millions)	Balance at October 31, 2017		Additions		Payments			Adjustments			Balance at July 31, 2018
Employee termination charges	$	14	$	3	$	(5	)	$	(4	)	$	8
Lease vacancy	—		—		—			—			—
Other	1		—		—			—			1
Restructuring liability	$	15	$	3	$	(5	)	$	(4	)	$	9

(in millions)	Balance at October 31, 2016		Additions		Payments			Adjustments		Balance at July 31, 2017
Employee termination charges	$	5	$	15	$	(11	)	$	—	$	9
Lease vacancy	1		—		(1		)	—		—
Other	1		—		—			—		1
Restructuring liability	$	7	$	15	$	(12	)	$	—	$	10

XML

Finance Receivables (Tables)

9 Months Ended

Jul. 31, 2018

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Our Finance receivables, net in our Consolidated Balance Sheets consist of the following:

(in millions)	July 31, 2018		October 31, 2017
Retail portfolio	$	639	$	559
Wholesale portfolio	1,282		1,246
Total finance receivables	1,921		1,805
Less: Allowance for doubtful accounts	24		20
Total finance receivables, net	1,897		1,785
Less: Current portion, net(A)	1,638		1,565
Noncurrent portion, net	$	259	$	220

_________________________

(A) The current portion of finance receivables is computed based on contractual maturities. Actual cash collections typically vary from the contractual cash flows because of prepayments, extensions, delinquencies, credit losses, and renewals.

Finance Revenues Derived From Receivables [Table Text Block]

The following table presents the components of our Finance revenues in our Consolidated Statements of Operations:

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions)	2018		2017		2018		2017
Retail notes and finance leases revenue	$	12	$	11	$	36	$	30
Wholesale notes interest	26		28		75		75
Operating lease revenue	19		17		54		50
Retail and wholesale accounts interest	8		6		22		17
Gross finance revenues	65		62		187		172
Less: Intercompany revenues	25		27		69		70
Finance revenues	$	40	$	35	$	118	$	102

XML

Allowance for Doubtful Accounts (Tables)

9 Months Ended

Jul. 31, 2018

Allowance for Doubtful Accounts [Abstract]

Allowance For Credit Losses On Receivables [Table Text Block]

The following tables present the activity related to our allowance for doubtful accounts for our retail portfolio segment, wholesale portfolio segment, and trade and other receivables:

	Three Months Ended July 31, 2018											Three Months Ended July 31, 2017
(in millions)	Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total			Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables		Total
Allowance for doubtful accounts, at beginning of period	$	19		$	3	$	27		$	49		$	21		$	2	$	28	$	51
Provision for doubtful accounts	2			—		1			3			(1		)	1		1		1
Charge-off of accounts	(1		)	—		—			(1		)	(1		)	—		—		(1		)
Recoveries	1			—		—			1			—			—		—		—
Other(A)	—			—		(2		)	(2		)	1			—		—		1
Allowance for doubtful accounts, at end of period	$	21		$	3	$	26		$	50		$	20		$	3	$	29	$	52

	Nine Months Ended July 31, 2018											Nine Months Ended July 31, 2017
(in millions)	Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total			Retail Portfolio			Wholesale Portfolio		Trade and Other Receivables			Total
Allowance for doubtful accounts, at beginning of period	$	17		$	3	$	28		$	48		$	19		$	2	$	28		$	49
Provision for doubtful accounts	5			—		1			6			5			1		2			8
Charge-off of accounts	(4		)	—		—			(4		)	(5		)	—		(1		)	(6		)
Recoveries	3			—		—			3			—			—		—			—
Other(A)	—			—		(3		)	(3		)	1			—		—			1
Allowance for doubtful accounts, at end of period	$	21		$	3	$	26		$	50		$	20		$	3	$	29		$	52

____________________

(A)    Amounts include impact from currency translation.

Impaired Financing Receivables [Table Text Block]

The following table presents information regarding impaired finance receivables:

	July 31, 2018						October 31, 2017
(in millions)	Retail Portfolio		Wholesale Portfolio		Total		Retail Portfolio		Wholesale Portfolio		Total
Impaired finance receivables with specific loss reserves	$	19	$	—	$	19	$	16	$	—	$	16
Impaired finance receivables without specific loss reserves	5		—		5		—		—		—
Specific loss reserves on impaired finance receivables	11		—		11		7		—		7
Finance receivables on non-accrual status	19		—		19		16		—		16

Allowance for Credit Losses on Financing Receivables [Table Text Block]

We use the aging of our receivables as well as other inputs when assessing credit quality. The following table presents the aging analysis for finance receivables:

	July 31, 2018						October 31, 2017
(in millions)	Retail Portfolio		Wholesale Portfolio		Total		Retail Portfolio		Wholesale Portfolio		Total
Current, and up to 30 days past due	$	579	$	1,281	$	1,860	$	524	$	1,244	$	1,768
30-90 days past due	44		1		45		21		1		22
Over 90 days past due	16		—		16		14		1		15
Total finance receivables	$	639	$	1,282	$	1,921	$	559	$	1,246	$	1,805

XML

Inventories (Tables)

9 Months Ended

Jul. 31, 2018

Inventory Disclosure [Abstract]

Schedule of inventories

The following table presents the components of Inventories in our Consolidated Balance Sheets:

(in millions)	July 31, 2018		October 31, 2017
Finished products	$	751	$	584
Work in process	269		33
Raw materials	380		240
Total inventories, net	$	1,400	$	857

XML

Debt (Tables)

9 Months Ended

Jul. 31, 2018

Debt Disclosure [Abstract]

Debt

The following tables present the components of Notes payable and current maturities of long-term debt and Long-term debt in our Consolidated Balance Sheets:

(in millions)	July 31, 2018		October 31, 2017
Manufacturing operations
Senior Secured Term Loan Credit Agreement, due 2025, net of unamortized discount of $7 and unamortized debt issuance costs of $12	$	1,573	$	—
Senior Secured Term Loan Credit Facility, as amended, due 2020, net of unamortized discount of $7 and unamortized debt issuance costs of $9	—		1,003
6.625% Senior Notes, due 2026, net of unamortized debt issuance costs of $17	1,083		—
8.25% Senior Notes, due 2022, net of unamortized discount of $13 and unamortized debt issuance costs of $14	—		1,423
4.50% Senior Subordinated Convertible Notes, due 2018, net of unamortized discount of $1 and $5, respectively, and unamortized debt issuance costs of less than $1 and $1, respectively	199		194
4.75% Senior Subordinated Convertible Notes, due 2019, net of unamortized discount of $7 and $14, respectively, and unamortized debt issuance costs of $2 and $3, respectively	402		394
Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040, net of unamortized debt issuance costs of $5 at both dates	220		220
Financed lease obligations	121		130
Other	27		43
Total Manufacturing operations debt	3,625		3,407
Less: Current portion	661		286
Net long-term Manufacturing operations debt	$	2,964	$	3,121

(in millions)	July 31, 2018		October 31, 2017
Financial Services operations
Asset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through 2023, net of unamortized debt issuance costs of $3 and $5, respectively	$	888	$	849
Senior secured NFC Term Loan, due 2025, net of unamortized discount of $2, and unamortized debt issuance costs of $4	394		—
Bank credit facilities, at fixed and variable rates, due dates from 2018 through 2024, net of unamortized debt issuance costs of $1 and $2, respectively	500		616
Commercial paper, at variable rates, program matures in 2022	88		92
Borrowings secured by operating and finance leases, at various rates, due serially through 2024	105		94
Total Financial Services operations debt	1,975		1,651
Less: Current portion	1,046		883
Net long-term Financial Services operations debt	$	929	$	768

XML

(Tables)

9 Months Ended

Jul. 31, 2018

Retirement Benefits [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

Net periodic benefit expense included in our Consolidated Statements of Operations, and other amounts recognized in our Consolidated Statements of Stockholders' Deficit, for the three and nine months ended July 31, 2018 and 2017 are comprised of the following:

	Three Months Ended July 31,												Nine Months Ended July 31,
	Pension Benefits						Health and Life Insurance Benefits						Pension Benefits						Health and Life Insurance Benefits
(in millions)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost for benefits earned during the period	$	1		$	2		$	1		$	1		$	5		$	6		$	3		$	4
Interest on obligation	27			27			10			11			81			80			32			35
Amortization of cumulative loss	26			30			3			6			79			89			7			17
Settlements	—			23			—			—			9			23			—			—
Contractual termination benefits	—			9			—			4			—			10			—			4
Curtailments and other	—			—			—			(58		)	—			—			—			(58		)
Premiums on pension insurance	1			4			—			—			3			12			—			—
Expected return on assets	(40		)	(40		)	(5		)	(5		)	(121		)	(119		)	(17		)	(17		)
Net periodic benefit expense	$	15		$	55		$	9		$	(41	)	$	56		$	101		$	25		$	(15	)

XML

Fair Value Measurements (Tables)

9 Months Ended

Jul. 31, 2018

Fair Value Disclosures [Abstract]

Financial instruments measured at fair value, recurring basis

The following table presents the financial instruments measured at fair value on a recurring basis:

	As of July 31, 2018								As of October 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Marketable securities:
U.S. government and federal agency securities	$	95	$	—	$	—	$	95	$	370	$	—	$	—	$	370
Derivative financial instruments:
Commodity forward contracts(A)	—		5		—		5		—		3		—		3
Foreign currency contracts(A)	—		1		—		1		—		3		—		3
Interest rate caps(B)	—		1		—		1		—		1		—		1
Total assets	$	95	$	7	$	—	$	102	$	370	$	7	$	—	$	377
Liabilities
Derivative financial instruments:
Commodity forward contracts(C)	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1
Foreign currency contracts(C)	—		1		—		1		—		1		—		1
Guarantees	—		—		20		20		—		—		21		21
Total liabilities	$	—	$	1	$	20	$	21	$	—	$	2	$	21	$	23

_________________________

(A) The asset value of commodity forward contracts and foreign currency contracts is included in Other current assets in the accompanying Consolidated Balance Sheets.

(B) The asset value of interest rate caps is included in Other noncurrent assets in the accompanying Consolidated Balance Sheets.

(C) The liability value of commodity forward contracts and foreign currency contracts is included in Other current liabilities in the accompanying Consolidated Balance Sheets.

Financial instruments classified within Level 3

The following table presents the changes for those financial instruments classified within Level 3 of the valuation hierarchy:

	Three Months Ended July 31,						Nine Months Ended July 31,
(in millions)	2018			2017			2018			2017
Guarantees, at beginning of period	$	(27	)	$	(19	)	$	(21	)	$	(23	)
Transfers out of (into) Level 3	—			—			—			—
Net terminations (issuances)	7			—			(1		)	1
Settlements	—			—			2			3
Guarantees, at end of period	$	(20	)	$	(19	)	$	(20	)	$	(19	)

Carrying values and estimated fair values of financial instruments

	As of July 31, 2018
	Estimated Fair Value								Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Retail notes	$	—	$	—	$	190	$	190	$	194
Liabilities
Debt:
Manufacturing operations
Senior Secured Term Loan Credit Agreement, due 2025	—		—		1,596		1,596		1,573
6.625% Senior Notes, due 2026	—		1,149		—		1,149		1,083
4.50% Senior Subordinated Convertible Notes, due 2018(A)	201		—		—		201		199
4.75% Senior Subordinated Convertible Notes, due 2019(A)	428		—		—		428		402
Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040	—		238		—		238		220
Financed lease obligations	—		—		121		121		121
Other	—		—		25		25		25
Financial Services operations
Asset-backed debt issued by consolidated SPEs, due serially through 2023	—		—		889		889		888
Senior secured NFC Term Loan, due 2025	—		—		398		398		394
Bank credit facilities, due dates from 2018 through 2024	—		—		477		477		500
Commercial paper, program matures in 2022	88		—		—		88		88
Borrowings secured by operating and finance leases, due serially through 2024	—		—		104		104		105

	As of October 31, 2017
	Estimated Fair Value								Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Retail notes	$	—	$	—	$	153	$	153	$	161
Liabilities
Debt:
Manufacturing operations
Senior Secured Term Loan Credit Facility, as Amended, due 2020	—		—		1,019		1,019		1,003
8.25% Senior Notes, due 2022	1,450		—		—		1,450		1,423
4.50% Senior Subordinated Convertible Notes, due 2018(A)	208		—		—		208		194
4.75% Senior Subordinated Convertible Notes, due 2019(A)	446		—		—		446		394
Loan Agreement related to 6.50% Tax Exempt Bonds, due 2040	—		243		—		243		220
Financed lease obligations	—		—		130		130		130
Other	—		—		23		23		39
Financial Services operations
Asset-backed debt issued by consolidated SPEs, at various rates, due serially through 2023	—		—		851		851		849
Bank credit facilities, at fixed and variable rates, due dates from 2018 through 2023	—		—		592		592		616
Commercial paper, at variable rates, program matures in 2022	92		—		—		92		92
Borrowings secured by operating and finance leases, at various rates, due serially through 2024	—		—		94		94		94

_________________________

(A) The carrying value represents the consolidated financial statement amount of the debt which excludes the allocation of the conversion feature to equity, while the estimated fair value is derived from quoted prices in active markets which include the equity feature.

XML

Segment Reporting (Tables)

9 Months Ended

Jul. 31, 2018

Segment Reporting [Abstract]

Schedule of selected financial information, by segment

(in millions)	Truck		Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
July 31, 2018	$	2,264	$	645	$	335	$	2,407	$	1,273	$	6,924
October 31, 2017	1,621		632		378		2,207		1,297		6,135

_________________________

(A) Total sales and revenues in the Financial Services segment include interest revenues of $46 million and $131 million for the three and nine months ended July 31, 2018, respectively, and $45 million and $121 million for the three and nine months ended July 31, 2017, respectively.

(B) Exclusive of purchases of equipment leased to others.

We define segment profit (loss) as net income (loss) attributable to NIC, excluding income tax benefit (expense). Selected financial information from our Consolidated Statements of Operations and our Consolidated Balance Sheets is as follows:

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2018
External sales and revenues, net	$	1,894	$	603	$	68		$	40	$	1		$	2,606
Intersegment sales and revenues	22		2		21			25		(70		)	—
Total sales and revenues, net	$	1,916	$	605	$	89		$	65	$	(69	)	$	2,606
Income (loss) from continuing operations attributable to NIC, net of tax	$	165	$	144	$	4		$	23	$	(166	)	$	170
Income tax expense	—		—		—			—		(3		)	(3		)
Segment profit (loss)	$	165	$	144	$	4		$	23	$	(163	)	$	173
Depreciation and amortization	$	31	$	2	$	3		$	14	$	1		$	51
Interest expense	—		—		—			22		60			82
Equity in income (loss) of non-consolidated affiliates	1		1		(2		)	—		—			—
Capital expenditures(B)	19		—		1			1		5			26

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2017
External sales and revenues, net	$	1,521	$	580	$	74		$	35	$	3		$	2,213
Intersegment sales and revenues	10		6		10			27		(53		)	—
Total sales and revenues, net	$	1,531	$	586	$	84		$	62	$	(50	)	$	2,213
Income (loss) from continuing operations attributable to NIC, net of tax	$	7	$	157	$	3		$	23	$	(154	)	$	36
Income tax expense	—		—		—			—		—			—
Segment profit (loss)	$	7	$	157	$	3		$	23	$	(154	)	$	36
Depreciation and amortization	$	35	$	3	$	3		$	13	$	3		$	57
Interest expense	—		—		—			24		67			91
Equity in income (loss) of non-consolidated affiliates	1		1		(1		)	—		—			1
Capital expenditures(B)	21		1		2			—		3			27

(in millions)	Truck		Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2018
External sales and revenues, net	$	4,810	$	1,768	$	229		$	118	$	8		$	6,933
Intersegment sales and revenues	61		6		38			69		(174		)	—
Total sales and revenues, net	$	4,871	$	1,774	$	267		$	187	$	(166	)	$	6,933
Income (loss) from continuing operations attributable to NIC, net of tax	$	200	$	413	$	(2	)	$	62	$	(521	)	$	152
Income tax expense	—		—		—			—		(25		)	(25		)
Segment profit (loss)	$	200	$	413	$	(2	)	$	62	$	(496	)	$	177
Depreciation and amortization	$	100	$	5	$	8		$	41	$	6		$	160
Interest expense	—		—		—			64		176			240
Equity in income (loss) of non-consolidated affiliates	2		2		(4		)	—		—			—
Capital expenditures(B)	74		1		2			1		1			79

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2017
External sales and revenues, net	$	3,929		$	1,747	$	186		$	102	$	8		$	5,972
Intersegment sales and revenues	27			19		18			70		(134		)	—
Total sales and revenues, net	$	3,956		$	1,766	$	204		$	172	$	(126	)	$	5,972
Income (loss) from continuing operations attributable to NIC, net of tax	$	(118	)	$	459	$	(8	)	$	51	$	(490	)	$	(106	)
Income tax expense	—			—		—			—		(10		)	(10		)
Segment profit (loss)	$	(118	)	$	459	$	(8	)	$	51	$	(480	)	$	(96	)
Depreciation and amortization	$	103		$	9	$	10		$	38	$	9		$	169
Interest expense	—			—		—			65		197			262
Equity in income of non-consolidated affiliates	3			3		—			—		—			6
Capital expenditures(B)	78			2		5			1		7			93

(in millions)	Truck		Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
July 31, 2018	$	2,264	$	645	$	335	$	2,407	$	1,273	$	6,924
October 31, 2017	1,621		632		378		2,207		1,297		6,135

XML

Stockholders' Deficit (Tables) (Tables)

9 Months Ended

Jul. 31, 2018

Accumulated Other Comprehensive Income (Loss) [Line Items]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table presents changes in Accumulated other comprehensive loss, net of tax, included in our Consolidated Statements of Stockholders' Deficit:

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of April 30, 2018	$	—	$	(289	)	$	(1,865	)	$	(2,154	)
Other comprehensive loss before reclassifications	—		(13		)	—			(13		)
Amounts reclassified out of accumulated other comprehensive loss	—		—			29			29
Net current-period other comprehensive income (loss)	—		(13		)	29			16
Balance as of July 31, 2018	$	—	$	(302	)	$	(1,836	)	$	(2,138	)

(in millions)	Unrealized Gain on Marketable Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Total
Balance as of October 31, 2017	$	—	$	(283	)	$	(1,928	)	$	(2,211	)
Other comprehensive loss before reclassifications	—		(19		)	(2		)	(21		)
Amounts reclassified out of accumulated other comprehensive loss	—		—			94			94
Net current-period other comprehensive income (loss)	—		(19		)	92			73
Balance as of July 31, 2018	$	—	$	(302	)	$	(1,836	)	$	(2,138	)

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

The following table presents the amounts reclassified from Accumulated other comprehensive loss and the affected line item in our Consolidated Statements of Operations:

		Three Months Ended July 31,					Nine Months Ended July 31,
	Location in Consolidated Statements of Operations	2018		2017			2018			2017
Defined benefit plans
Amortization of actuarial loss	Selling, general and administrative expenses	$	29	$	36		$	86		$	106
Settlements	Selling, general and administrative expenses	—		—			9			—
Settlements	Restructuring charges	—		23			—			23
	Total before tax	29		59			95			129
	Tax expense	—		(6		)	(1		)	(7		)
Total reclassifications for the period, net of tax		$	29	$	53		$	94		$	122

XML

Earnings (Loss) Per Share Attributable to Navistar International Corporation (Tables)

9 Months Ended

Jul. 31, 2018

Earnings Per Share [Abstract]

Schedule of Earnings Per Share Reconciliation [Table Text Block]

The following table presents the information used in the calculation of our basic and diluted earnings (loss) per share all attributable to NIC in our Consolidated Statements of Operations:

	Three Months Ended July 31,				Nine Months Ended July 31,
(in millions, except per share data)	2018		2017		2018		2017
Numerator:
Amounts attributable to Navistar International Corporation common stockholders:
Income (loss) from continuing operations, net of tax	$	170	$	36	$	152	$	(106	)
Income from discontinued operations, net of tax	—		1		—		1
Net income (loss)	$	170	$	37	$	152	$	(105	)
Denominator:
Weighted average shares outstanding:
Basic	99.0		98.3		98.8		91.1
Effect of dilutive securities	0.7		0.3		0.8		—
Diluted	99.7		98.6		99.6		91.1
Earnings (loss) per share attributable to Navistar International Corporation:
Basic:
Continuing operations	$	1.72	$	0.37	$	1.54	$	(1.16	)
Discontinued operations	—		0.01		—		0.01
	$	1.72	$	0.38	$	1.54	$	(1.15	)
Diluted:
Continuing operations	$	1.71	$	0.37	$	1.53	$	(1.16	)
Discontinued operations	—		0.01		—		0.01
	$	1.71	$	0.38	$	1.53	$	(1.15	)

XML

Summary of Significant Accounting Policies - Narrative (Details)	3 Months Ended		9 Months Ended
	Jul. 31, 2018 USD ($) employees segments	Jul. 31, 2017 USD ($)	Jul. 31, 2018 USD ($) employees segments	Jul. 31, 2017 USD ($)	Oct. 31, 2017 USD ($)
Accounting Policies [Line Items]
Less: Intercompany revenues	$ 33,000,000	$ 36,000,000	$ 114,000,000	$ 78,000,000
Costs of products sold	2,096,000,000	1,803,000,000	5,615,000,000	4,949,000,000
Net loss attributable to Navistar International Corporation	$ 170,000,000	37,000,000	$ 152,000,000	(105,000,000)
Number Of Segments | segments	4		4
Goodwill	$ 38,000,000		$ 38,000,000		$ 38,000,000
Sales of manufactured products, net	2,566,000,000	2,178,000,000	6,815,000,000	5,870,000,000
Interest expense	82,000,000	91,000,000	240,000,000	262,000,000
Capital expenditures	26,000,000	27,000,000	79,000,000	93,000,000
Proceeds from finance lease obligations			48,000,000	49,000,000
Product Warranty Accrual, Preexisting, Increase (Decrease)			$ (4,000,000)	(4,000,000)
Document Type			10-Q
Costs and Expenses, Related Party	2,000,000	2,000,000	$ 21,000,000	4,000,000
Accounts Receivable, Related Parties	11,000,000		11,000,000		13,000,000
Accounts Payable, Related Parties	20,000,000		20,000,000		5,000,000
Inventory, Gross	$ 191,000,000		$ 191,000,000		206,000,000
Unionized Employees Concentration Risk [Member] | Number Of Employees Hourly Workers [Member]
Accounting Policies [Line Items]
Concentration Risk Number Of Employees | employees	7,800		7,800
concentration risk number of employees percentage	98.00%		98.00%
Unionized Employees Concentration Risk [Member] | Number of Employees Salaried Workers [Member]
Accounting Policies [Line Items]
Concentration Risk Number Of Employees | employees	700		700
concentration risk number of employees percentage	13.00%		13.00%
North America Truck [Member]
Accounting Policies [Line Items]
Interest expense	$ 0	0	$ 0	0
Capital expenditures	19,000,000	21,000,000	74,000,000	78,000,000
Extended Warranty Programs [Member]
Accounting Policies [Line Items]
Deferred Revenue, Revenue Recognized	24,000,000	$ 28,000,000	80,000,000	$ 109,000,000
Deferred Revenue	$ 248,000,000		$ 248,000,000		$ 271,000,000

XML

Summary of Significant Accounting Policies - Variable Interest Entities (Details) - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Variable Interest Entity [Line Items]
Cash and cash equivalents	$ 1,022	$ 706
Variable Interest Entity Primary Beneficiary, Blue Diamond Parts [Member]
Variable Interest Entity [Line Items]
Variable Interest Entity, Consolidated, Carrying Amount, Assets	43	49
Cash and cash equivalents	2	10
Variable Interest Entity, Consolidated, Carrying Amount, Liabilities	6	13
Variable Interest Entity Primary Beneficiary Securitizations Treated As Borrowings [Member] | Financial Services Operations
Variable Interest Entity [Line Items]
Variable Interest Entity, Consolidated, Carrying Amount, Assets	949	869
Variable Interest Entity, Consolidated, Carrying Amount, Liabilities	812	754
Transaction Does Not Qualify for Sale Accounting [Member] | Financial Services Operations
Variable Interest Entity [Line Items]
Variable Interest Entity, Consolidated, Carrying Amount, Assets	311	278
Variable Interest Entity, Consolidated, Carrying Amount, Liabilities	$ 184	$ 194

XML

Summary of Significant Accounting Policies - Product Warranty Liability (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017	Oct. 31, 2016
Product Liability Contingency [Line Items]
Document Type			10-Q
Product Warranty Accrual	$ 531	$ 659	$ 531	$ 659	$ 629	$ 818
Product Warranty Accrual, Warranties Issued			139	137
Accrued Product Warranty And Deferred Warranty Revenue, Standard And Extended Warranty Programs, Roll Forward:
Adjustments to pre-existing warranties(A)(B)			(4)	(4)
Extended Warranty Program:
Product Warranty Accrual, Payments			(233)	(292)
Product Warranty Accrual, Current	254	340	254	340
Product Warranty Accrual, Noncurrent	277	319	277	319
Extended Warranty Programs [Member]
Extended Warranty Program:
Deferred Revenue, Revenue Recognized	24	$ 28	80	$ 109
Deferred Revenue	$ 248		$ 248		$ 271

XML

Summary of Significant Accounting Policies - Inventory (Details) - USD ($) $ in Millions	9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017	Oct. 31, 2016
Inventory Reserve [Line Items]
Gross truck bed inventory	$ 191		$ 206
Inventory reserves	48		110
Trucks [Member]
Inventory Reserve [Line Items]
Valuation Allowances and Reserves, Additions for Charges to Cost and Expense	38	$ 102
Valuation Allowances and Reserves, Deductions	(100)	(136)
Valuation Allowances and Reserves, Balance	$ 48	$ 174	$ 110	$ 208

XML

Restructuring and Impairments - Narrative (Details) - USD ($) $ in Millions	3 Months Ended						9 Months Ended
	Jul. 31, 2018	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Jan. 31, 2017	Jul. 31, 2014	Jul. 31, 2018	Jul. 31, 2017
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 1		$ 6	$ (13)			$ (1)	$ (4)
Pension Liability				23
Restructuring Benefit				8
Inventory Reserve Charge				10
Liability, Defined Benefit Plan, Noncurrent	2,378		2,497				2,378
Restructuring and Related Cost, Incurred Cost							3	15
Asset impairment charges	8			6			11	13
Goodwill	$ 38		$ 38				38
Other Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring and Related Cost, Incurred Cost							0	0
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring and Related Cost, Incurred Cost							3	15
Lease Vacancy [Member] [Domain]
Restructuring Cost and Reserve [Line Items]
Restructuring and Related Cost, Incurred Cost							0	0
Melrose Park [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges		$ 2		41
Navistar Financial Corporation [Member]
Restructuring Cost and Reserve [Line Items]
Asset impairment charges							1
Global Operations [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges		$ 1
Other Postretirement Benefits Plan [Member] | Chatham [Member] | Facility Closing [Member]
Restructuring Cost and Reserve [Line Items]
Postemployment Benefits, Period Expense				23	$ 6	$ 14
Liability, Defined Benefit Plan, Noncurrent				$ 66				66
Cherokee [Domain]
Restructuring Cost and Reserve [Line Items]
Asset impairment charges							2
long-lived asset [Domain] | North America Truck [Member]
Restructuring Cost and Reserve [Line Items]
Asset impairment charges							6	5
Property Subject to Operating Lease [Member] | North America Truck [Member]
Restructuring Cost and Reserve [Line Items]
Asset impairment charges							$ 2	$ 8

XML

Restructuring and Impairments - Restructuring Reserve by Type (Details) - USD ($) $ in Millions	3 Months Ended					9 Months Ended
	Jul. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Jan. 31, 2017	Jul. 31, 2014	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2016
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 1	$ 6	$ (13)			$ (1)	$ (4)
Restructuring Reserve	9	15	10			9	10	$ 7
Restructuring and Related Cost, Incurred Cost						3	15
Payments for Restructuring						(5)	(12)
Restructuring Reserve, Accrual Adjustment						(4)	0
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	8	14	9			8	9	5
Restructuring and Related Cost, Incurred Cost						3	15
Payments for Restructuring						(5)	(11)
Restructuring Reserve, Accrual Adjustment						(4)	0
Lease Vacancy [Member] [Domain]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	0	0	0			0	0	1
Restructuring and Related Cost, Incurred Cost						0	0
Payments for Restructuring						0	(1)
Restructuring Reserve, Accrual Adjustment						0	0
Other Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	$ 1	$ 1	1			1	1	$ 1
Restructuring and Related Cost, Incurred Cost						0	0
Payments for Restructuring						0	0
Restructuring Reserve, Accrual Adjustment						$ 0	$ 0
Other Postretirement Benefits Plan [Member] | Chatham [Member] | Facility Closing [Member]
Restructuring Cost and Reserve [Line Items]
Postemployment Benefits, Period Expense			$ 23	$ 6	$ 14

XML

Restructuring and Impairments - Schedule of Impairment Charges (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Restructuring Cost and Reserve [Line Items]
Liability, Defined Benefit Plan, Noncurrent	$ (2,378)		$ (2,378)		$ (2,497)
Asset impairment charges	$ 8	$ 6	$ 11	$ 13

XML

Finance Receivables - Narrative (Details) $ in Millions	Jul. 31, 2018 USD ($) segments	Jan. 31, 2018 segments	Oct. 31, 2017 USD ($)
Schedule of Securitization [Line Items]
Loans and Leases Receivable, Net Amount	$ 1,900		$ 1,800
Number of Portfolio Segments for Finance Receivables | segments	2	2
Trac Funding Facility [Member]
Schedule of Securitization [Line Items]
Finance Receivables Retail Accounts Collateral For Borrowed Securities	$ 841		797
Cash Collateral for Borrowed Securities	166		163
Financial Services Operations
Schedule of Securitization [Line Items]
Assets Net Of Intercompany Balances	$ 2,400		$ 2,200

XML

Finance Receivables - Finance Receivables (Details) - USD ($) $ in Millions		Jul. 31, 2018	Oct. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount, Covered		$ 1,921	$ 1,805
Less: Allowance for Doubtful accounts		24	20
Total finance receivables, net		1,897	1,785
Financing Receivable, Recorded Investment, Current	[1]	1,638	1,565
Finance Receivables, Noncurrent		259	220
Loans and Leases Receivable, Gross		1,921	1,805
Retail Portfolio [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount, Covered		639	559
Wholesale Portfolio [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount, Covered		$ 1,282	$ 1,246

[1] (A)The current portion of finance receivables is computed based on contractual maturities. Actual cash collections typically vary from the contractual cash flows because of prepayments, extensions, delinquencies, credit losses, and renewals.

XML

Finance Receivables - Schedule of Finance Revenues (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Finance Revenues [Line Items]
Retail notes and finance leases revenue	$ 12	$ 11	$ 36	$ 30
Gross finance revenues	65	62	187	172
Intercompany Revenues	25	27	69	70
Less: Intercompany revenues	33	36	114	78
Finance revenues	40	35	118	102
Financing Receivable [Member]
Finance Revenues [Line Items]
Operating lease revenue	19	17	54	50
Wholesale Portfolio [Member] | Notes Receivable [Member]
Finance Revenues [Line Items]
Interest Income, Operating	26	28	75	75
Retail And Wholesale Portfolios [Member]
Finance Revenues [Line Items]
Interest Income, Operating	$ 8	$ 6	$ 22	$ 17

XML

Allowance for Doubtful Accounts - Schedule of Allowance for Retail, Wholesale, Trade & Other (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for doubtful accounts at beginning of period	$ 49	$ 51	$ 48	$ 49
Provision for doubtful accounts, net of recoveries	3	1	6	8
Charge-off of accounts	(1)	(1)	(4)	(6)
Allowance for Doubtful Accounts Receivable, Recoveries		0		0
Financing Receivable, Allowance for Credit Losses, Other	(2)	1	(3)	1
Allowance for doubtful accounts at end of period	50	52	50	52
Allowance for Doubtful Accounts [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for Doubtful Accounts Receivable, Recoveries	1		3
Retail Portfolio [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for doubtful accounts at beginning of period	19	21	17	19
Provision for doubtful accounts, net of recoveries	2	(1)	5	5
Charge-off of accounts	(1)	(1)	(4)	(5)
Financing Receivable, Allowance for Credit Losses, Other	0	1	0	1
Allowance for doubtful accounts at end of period	21	20	21	20
Impaired Financing Receivable, Average Recorded Investment			19
Wholesale Portfolio [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for doubtful accounts at beginning of period	3	2	3	2
Provision for doubtful accounts, net of recoveries	0	1	0	1
Charge-off of accounts	0	0	0	0
Financing Receivable, Allowance for Credit Losses, Other	0	0	0	0
Allowance for doubtful accounts at end of period	3	3	3	3
Trade and Other Receivables [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for doubtful accounts at beginning of period	27	28	28	28
Provision for doubtful accounts, net of recoveries	1	1	1	2
Charge-off of accounts	0	0	0	(1)
Financing Receivable, Allowance for Credit Losses, Other	(2)	0	(3)	0
Allowance for doubtful accounts at end of period	26	$ 29	26	$ 29
Trade and Other Receivables [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for Doubtful Accounts Receivable, Recoveries	0		0
Wholesale Portfolio [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for Doubtful Accounts Receivable, Recoveries	0		0
Retail Portfolio [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for Doubtful Accounts Receivable, Recoveries	$ 1		$ 3

XML

Allowance for Doubtful Accounts - Schedule of Impaired Finance Receivables (Details) - USD ($) $ in Millions	9 Months Ended
	Jul. 31, 2018	Oct. 31, 2017
Retail Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	$ 19
Impaired finance receivables with specific loss reserves [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	19	$ 16
Impaired finance receivables with specific loss reserves [Member] | Retail Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	19	16
Impaired finance receivables with specific loss reserves [Member] | Wholesale Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	0	0
Impaired financing receivable without specific loss reserves [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	5	0
Impaired financing receivable without specific loss reserves [Member] | Retail Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	5	0
Impaired financing receivable without specific loss reserves [Member] | Wholesale Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	0	0
Specific loss reserves on impaired finance receivables [Member]
Finance Receivable, Impaired [Line Items]
Specific loss reserves on impaired finance receivables	11	7
Specific loss reserves on impaired finance receivables [Member] | Retail Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Specific loss reserves on impaired finance receivables	11	7
Specific loss reserves on impaired finance receivables [Member] | Wholesale Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Specific loss reserves on impaired finance receivables	0	0
Finance receivable non-accrual status [Member]
Finance Receivable, Impaired [Line Items]
Finance receivables on non-accrual status	19	16
Finance receivable non-accrual status [Member] | Retail Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Finance receivables on non-accrual status	19	16
Finance receivable non-accrual status [Member] | Wholesale Portfolio [Member]
Finance Receivable, Impaired [Line Items]
Finance receivables on non-accrual status	$ 0	$ 0

XML

Allowance for Doubtful Accounts - Schedule of Allowance Aging Analysis (Details) - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Finance Receivables, Current	$ 1,860	$ 1,768
30-90 days past due	45	22
Total finance receivables	1,921	1,805
Retail Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Finance Receivables, Current	579	524
30-90 days past due	44	21
Total finance receivables	639	559
Wholesale Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Finance Receivables, Current	1,281	1,244
30-90 days past due	1	1
Total finance receivables	1,282	1,246
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Over 90 days past due	16	15
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Retail Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Over 90 days past due	16	14
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Wholesale Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Over 90 days past due	$ 0	$ 1

XML

Allowance for Doubtful Accounts - Narrative (Details) $ in Millions	9 Months Ended
	Jul. 31, 2018 USD ($) segments	Jan. 31, 2018 segments class
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Portfolio Segments for Finance Receivables | segments	2	2
Classes Of Receivables In Each Portfolio | class		1
Retail Portfolio [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, Average Recorded Investment | $	$ 19

XML

Inventories - Inventory (Details) - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Inventory Disclosure [Abstract]
Finished products	$ 751	$ 584
Work in process	269	33
Raw materials	380	240
Total inventories, net	$ 1,400	$ 857

XML

Debt - Schedule of Debt Instruments (Details) - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	6.75%
Long-term Debt	$ 0
Long-term Debt and Capital Lease Obligations	3,893	$ 3,889
Term Loan [Member]
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount	2
Gross maximum borrowing capacity	394	0
Term Loan [Member]
Debt Instrument [Line Items]
Long-term Debt		1,003
Senior Notes [Member]
Debt Instrument [Line Items]
Long-term Debt		1,423
Financial Services Operations
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	1,975	1,651
Long-term Debt and Capital Lease Obligations, Current	1,046	883
Long-term Debt and Capital Lease Obligations	929	768
Financial Services Operations | Secured Debt [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	3	5
Long-term Debt	888	849
Financial Services Operations | Line of Credit [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	1	2
Long-term Debt	500	616
Financial Services Operations | Commercial Paper [Member]
Debt Instrument [Line Items]
Long-term Debt		92
Commercial Paper	88
Financial Services Operations | Borrowings Secured By Operating and Finance Leases [Member]
Debt Instrument [Line Items]
Long-term Debt	105	94
Manufacturing Operations [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	3,625	3,407
Long-term Debt and Capital Lease Obligations, Current	661	286
Long-term Debt and Capital Lease Obligations	2,964	3,121
Manufacturing Operations [Member] | Line of Credit [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	0	9
Debt Instrument, Unamortized Discount	0	7
Long-term Debt	1,573	0
Manufacturing Operations [Member] | Notes Payable to Banks [Member] | Eight Point Two Five Percent Senior Notes [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	0	14
Debt Instrument, Unamortized Discount	$ 0	13
Debt Instrument, Interest Rate, Stated Percentage	8.25%
Long-term Debt	$ 1,083	0
Manufacturing Operations [Member] | Convertible Subordinated Debt [Member] | Four Point Five Zero Senior Subordinated Convertible Notes [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	1	1
Debt Instrument, Unamortized Discount	$ 1	5
Debt Instrument, Interest Rate, Stated Percentage	4.50%
Long-term Debt	$ 199	194
Manufacturing Operations [Member] | Convertible Subordinated Debt [Member] | Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	2	3
Debt Instrument, Unamortized Discount	$ 7	14
Debt Instrument, Interest Rate, Stated Percentage	4.75%
Long-term Debt	$ 402	394
Manufacturing Operations [Member] | Tax Exempt Bond [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Net	$ 5	5
Debt Instrument, Interest Rate, Stated Percentage	6.75%
Long-term Debt	$ 220	220
Manufacturing Operations [Member] | Financed lease obligations [Member]
Debt Instrument [Line Items]
Long-term Debt	121	130
Manufacturing Operations [Member] | Notes Payable, Other Payables [Member]
Debt Instrument [Line Items]
Long-term Debt	27	$ 43
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term Debt	$ 0

XML

Debt - Narrative (Details)	3 Months Ended			9 Months Ended
	Jul. 31, 2018 USD ($)	Jan. 31, 2018 USD ($)	Jan. 31, 2017 USD ($)	Jul. 31, 2018 USD ($)	Jul. 31, 2017 USD ($)	Oct. 31, 2017 USD ($)
Debt Instrument [Line Items]
Notes Issued		$ 1,100,000,000
Senior Notes		$ 1,051,000,000
Percentage of Aggregate Principal		0.7250
Notes Payable		$ 1,003.80
Line of Credit Facility, Increase (Decrease) for Period, Description		1700
Debt Instrument, Coupon Rate, Increase (Decrease)		0.0675	0.0650
Long-term Line of Credit		$ 1,600,000,000
Amortization		4,000,000
Line of Credit Facility, Maximum Borrowing Capacity		350,000,000
Payments of Debt Issuance Costs				$ 36,000,000	$ 22,000,000
Debt Instrument, Interest Rate, Stated Percentage	6.75%			6.75%
Term Loan [Member]
Debt Instrument [Line Items]
Amortization	$ 1,000,000
Gross maximum borrowing capacity	400,000,000			$ 400,000,000
Debt Issuance Costs, Line of Credit Arrangements, Gross	4,000,000			4,000,000
Debt Instrument, Unamortized Discount	2,000,000			2,000,000
Financial Services Operations | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity			$ 275,000,000			$ 269,000,000
Financial Services Operations | VFN Facility [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount		425,000,000
Financial Services Operations | Trac Funding Facility [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		100,000,000
Senior Notes [Member]
Debt Instrument [Line Items]
Gain (Loss) on Extinguishment of Debt		30,000,000
Term Loan [Member]
Debt Instrument [Line Items]
Gain (Loss) on Extinguishment of Debt		$ 16,000,000
Line of Credit [Member] | Manufacturing Operations [Member]
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount	0			0		7,000,000
Debt Issuance Costs, Net	0			0		9,000,000
Line of Credit [Member] | Financial Services Operations
Debt Instrument [Line Items]
Debt Issuance Costs, Net	$ 1,000,000			$ 1,000,000		$ 2,000,000

XML

Postretirement Benefits - Narrative (Details) - USD ($) $ in Millions	3 Months Ended				9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jan. 31, 2017	Jul. 31, 2014	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation, Actuarial Gain (Loss)		$ 21			$ 2
Defined Benefit Plan, Benefit Obligation, Special and Contractual Termination Benefits		9
Defined Contribution Plan, Administrative Expense		23			9
Defined Benefit Plan, Benefit Obligation, (Increase) Decrease for Curtailment		10
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement and Curtailment		2
Income (Loss) from Continuing Operations before Income Taxes, Domestic		35
Defined Benefit Plan, Cost of Providing Special and Contractual Termination Benefits			$ 1
Liabilities	$ 11,258	66			11,258	$ 66	$ 10,709
Employer contributions	25	21			78	67
Defined Benefit Plan, Expected Future Employer Contributions, Remainder of Fiscal Year	54				54
Income Tax Expense (Benefit)	3	0			25	10
Liability, Defined Benefit Plan, Noncurrent	2,378				2,378		$ 2,497
Defined Contribution Plan, Cost	7	7			25	22
Other Postretirement Benefits Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation, Special and Contractual Termination Benefits		4
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement and Curtailment	$ 0	58			$ 0	58
Chatham [Member] | Facility Closing [Member] | Other Postretirement Benefits Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Postemployment Benefits, Period Expense		23	$ 6	$ 14
Liability, Defined Benefit Plan, Noncurrent		66				$ 66
Melrose Park [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement and Curtailment		$ 91

XML

Postretirement Benefits - Schedule of Net Benefit (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Defined Benefit Plan Disclosure [Line Items]
Defined Contribution Plan, Cost	$ 7	$ 7	$ 25	$ 22
Employer contributions	25	21	78	67
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement and Curtailment		2
Pension Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	1	2	5	6
Interest on obligations	27	27	81	80
Amortization of cumulative loss	26	30	79	89
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement	0	23	9	23
Contractual termination benefits	0	9	0	10
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement and Curtailment	0	0	0	0
Premiums on pension insurance	1	4	3	12
Expected return on assets	(40)	(40)	(121)	(119)
Net postretirement benefits expense	15	55	56	101
Health and Life Insurance Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	1	1	3	4
Interest on obligations	10	11	32	35
Amortization of cumulative loss	3	6	7	17
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement	0	0	0	0
Contractual termination benefits	0	4	0	4
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement and Curtailment	0	58	0	58
Premiums on pension insurance	0	0	0	0
Expected return on assets	(5)	(5)	(17)	(17)
Net postretirement benefits expense	$ 9	$ (41)	$ 25	$ (15)

XML

Income Taxes - Narrative (Details) - USD ($)	3 Months Ended				9 Months Ended
	Jul. 31, 2018	Jan. 31, 2018	Jul. 31, 2017	Jan. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Operating Loss Carryforwards [Line Items]
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount		$ 0.21		$ 0.35
Deferred Tax Assets, Valuation Allowance	$ 1,000,000,000				$ 1,000,000,000
Income Taxes Percent Likelihood Of Being Realized Upon Settlement	50.00%				50.00%
Income tax expense	$ (3,000,000)		$ 0		$ (25,000,000)	$ (10,000,000)
Interest and Penalties from Uncertain Tax Positions, Income Tax Benefit					1,000,000
Unrecognized Tax Benefits	$ 30,000,000				30,000,000
Interest and Penalties from Uncertain Tax Positions, Income Tax Expense			$1 million			$1 million
Other Comprehensive Income (Loss) [Member]
Operating Loss Carryforwards [Line Items]
Income tax expense					$ 9,000,000

XML

Fair Value Measurements - Financial Instruments Measured on Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 95	$ 370
Guarantees, Fair Value Disclosure	0	0
Liabilities, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	7	7
Guarantees, Fair Value Disclosure	0	0
Liabilities, Fair Value Disclosure	1	2
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	0	0
Guarantees, Fair Value Disclosure	20	21
Liabilities, Fair Value Disclosure	20	21
US Treasury Bill Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	95	370
US Treasury Bill Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	0	0
US Treasury Bill Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	0	0
Other Current Assets [Member] | Foreign Exchange Contract [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	0	0
Other Current Assets [Member] | Foreign Exchange Contract [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	1	3
Other Current Assets [Member] | Foreign Exchange Contract [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	0	0
Other Current Assets [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	0
Other Current Assets [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	5	3
Other Current Assets [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	0
Other Noncurrent Assets [Member] | Interest Rate Cap [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	0	0
Other Noncurrent Assets [Member] | Interest Rate Cap [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	1	1
Other Noncurrent Assets [Member] | Interest Rate Cap [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	0	0
Other Current Liabilities [Member] | Foreign Exchange Contract [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	0
Other Current Liabilities [Member] | Foreign Exchange Contract [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	1	1
Other Current Liabilities [Member] | Foreign Exchange Contract [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	0
Other Current Liabilities [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	0
Other Current Liabilities [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	1
Other Current Liabilities [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	0	0
Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	102	377
Guarantees, Fair Value Disclosure	20	21
Liabilities, Fair Value Disclosure	21	23
Estimate of Fair Value Measurement [Member] | US Treasury Bill Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	95	370
Estimate of Fair Value Measurement [Member] | Other Current Assets [Member] | Foreign Exchange Contract [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	1	3
Estimate of Fair Value Measurement [Member] | Other Current Assets [Member] | Commodity Contract [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	5	3
Estimate of Fair Value Measurement [Member] | Other Noncurrent Assets [Member] | Interest Rate Cap [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency contracts	1	1
Estimate of Fair Value Measurement [Member] | Other Current Liabilities [Member] | Foreign Exchange Contract [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	1	1
Estimate of Fair Value Measurement [Member] | Other Current Liabilities [Member] | Commodity Contract [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	$ 0	$ 1

XML

Fair Value Measurements - Level 3 Reconciliation (Details) - Guarantees [Member] - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Fair Value Assets And Liablities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset (Liability) Beginning Value	$ (27)	$ (19)	$ (21)	$ (23)
Transfers out of Level 3	0	0	0	0
Issuances	7	0	(1)	1
Settlements	0	0	2	3
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset (Liability) Ending Value	$ (20)	$ (19)	$ (20)	$ (19)

XML

Fair Value Measurements - Financial Instruments Measured on Nonrecurring Basis (Details) - USD ($) $ in Millions	Jul. 31, 2018	Oct. 31, 2017
Impaired finance receivables with specific loss reserves [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 19	$ 16
Specific loss reserves on impaired finance receivables [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Specific loss reserve	$ (11)	$ (7)

XML

Fair Value Measurements - Carrying Values and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
		Jul. 31, 2018		Jul. 31, 2017	Jul. 31, 2018		Jul. 31, 2017	Oct. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		6.75%			6.75%
Goodwill		$ 38			$ 38			$ 38
Long-term Debt		0			0
Asset impairment charges		8		$ 6	11		$ 13
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Retail Notes		194			194			161
Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Retail Notes		190			190			153
Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Retail Notes		0			0			0
Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Retail Notes		0			0			0
Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Retail Notes		190			190			153
Term Loan [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt								1,003
Term Loan [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		1,573			1,573
Term Loan [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		1,596			1,596
Term Loan [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Term Loan [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Term Loan [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		1,596			1,596
Term Loan [Member] | Financial Services Operations | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		394			394
Term Loan [Member] | Financial Services Operations | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		398			398
Term Loan [Member] | Financial Services Operations | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Term Loan [Member] | Financial Services Operations | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Term Loan [Member] | Financial Services Operations | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		398			398
Line of Credit [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		1,573			1,573			0
Line of Credit [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt								1,003
Line of Credit [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								1,019
Line of Credit [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								0
Line of Credit [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								0
Line of Credit [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								1,019
Line of Credit [Member] | Financial Services Operations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		500			500			616
Line of Credit [Member] | Financial Services Operations | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		500			500			616
Line of Credit [Member] | Financial Services Operations | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		477			477			592
Line of Credit [Member] | Financial Services Operations | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Line of Credit [Member] | Financial Services Operations | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Line of Credit [Member] | Financial Services Operations | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		477			477			592
Senior Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt								1,423
Senior Notes [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		1,083			1,083
Senior Notes [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		1,149			1,149
Senior Notes [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Senior Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		1,149			1,149
Senior Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		$ 0			$ 0
Tax Exempt Bond [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		6.75%			6.75%
Long-term Debt		$ 220			$ 220			220
Tax Exempt Bond [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		220			220			220
Tax Exempt Bond [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		238			238			243
Tax Exempt Bond [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Tax Exempt Bond [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		238			238			243
Tax Exempt Bond [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Financed lease obligations [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		121			121			130
Financed lease obligations [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		121			121			130
Financed lease obligations [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		121			121			130
Financed lease obligations [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Financed lease obligations [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Financed lease obligations [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		121			121			130
Notes Payable, Other Payables [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		27			27			43
Notes Payable, Other Payables [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		25			25			39
Notes Payable, Other Payables [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		25			25			23
Notes Payable, Other Payables [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Notes Payable, Other Payables [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Notes Payable, Other Payables [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		25			25			23
Secured Debt [Member] | Financial Services Operations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		888			888			849
Secured Debt [Member] | Financial Services Operations | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		888			888			849
Secured Debt [Member] | Financial Services Operations | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		889			889			851
Secured Debt [Member] | Financial Services Operations | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Secured Debt [Member] | Financial Services Operations | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Secured Debt [Member] | Financial Services Operations | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		889			889			851
Commercial Paper [Member] | Financial Services Operations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt								92
Commercial Paper [Member] | Financial Services Operations | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		88			88			92
Commercial Paper [Member] | Financial Services Operations | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		88			88			92
Commercial Paper [Member] | Financial Services Operations | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		88			88
Commercial Paper [Member] | Financial Services Operations | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								92
Commercial Paper [Member] | Financial Services Operations | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Commercial Paper [Member] | Financial Services Operations | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								0
Commercial Paper [Member] | Financial Services Operations | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0
Commercial Paper [Member] | Financial Services Operations | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								0
Borrowings Secured By Operating and Finance Leases [Member] | Financial Services Operations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		105			105			94
Borrowings Secured By Operating and Finance Leases [Member] | Financial Services Operations | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt		105			105			94
Borrowings Secured By Operating and Finance Leases [Member] | Financial Services Operations | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		104			104			94
Borrowings Secured By Operating and Finance Leases [Member] | Financial Services Operations | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Borrowings Secured By Operating and Finance Leases [Member] | Financial Services Operations | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0			0			0
Borrowings Secured By Operating and Finance Leases [Member] | Financial Services Operations | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		$ 104			$ 104			94
Eight Point Two Five Percent Senior Notes [Member] | Notes Payable to Banks [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		8.25%			8.25%
Long-term Debt		$ 1,083			$ 1,083			0
Eight Point Two Five Percent Senior Notes [Member] | Notes Payable to Banks [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt								1,423
Eight Point Two Five Percent Senior Notes [Member] | Notes Payable to Banks [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								1,450
Eight Point Two Five Percent Senior Notes [Member] | Notes Payable to Banks [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								1,450
Eight Point Two Five Percent Senior Notes [Member] | Notes Payable to Banks [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								0
Eight Point Two Five Percent Senior Notes [Member] | Notes Payable to Banks [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value								0
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		4.50%			4.50%
Long-term Debt		$ 199			$ 199			194
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt	[1]	199			199			194
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	201			201			208
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	201			201			208
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	0			0			0
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	$ 0			$ 0			0
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		4.75%			4.75%
Long-term Debt		$ 402			$ 402			394
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt	[1]	402			402			394
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	428			428			446
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	428			428			446
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		0	[1]		0	[1]		0
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Subordinated Debt [Member] | Manufacturing Operations [Member] | Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	[1]	$ 0			$ 0			$ 0

[1] The carrying value represents the consolidated financial statement amount of the debt which excludes the allocation of the conversion feature to equity, while the estimated fair value is derived from quoted prices in active markets which include the equity feature.

XML

Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	6.75%		6.75%
Asset impairment charges	$ 8	$ 6	$ 11	$ 13
Goodwill	$ 38		$ 38		$ 38
Cash and Cash Equivalents, Maturity Term	90 days
Marketable Securities, Maturity Term	90 days
Tax Exempt Bond [Member] | Manufacturing Operations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	6.75%		6.75%

XML

Commitments and Contingencies - Narrative (Details) R$ in Millions		1 Months Ended		3 Months Ended								9 Months Ended
	Jul. 16, 2015 USD ($)	Oct. 31, 2016 members	Mar. 31, 2014 BRL (R$)	Jul. 31, 2018 USD ($)	Jan. 31, 2018 USD ($)	Oct. 31, 2017 USD ($)	Jul. 31, 2017 USD ($)	Oct. 31, 2016 USD ($) lawsuits plaintiff	Jul. 31, 2014 lawsuits	Jan. 31, 2014 BRL (R$)	Jul. 31, 2010 BRL (R$)	Jul. 31, 2018 USD ($) dealer	Jul. 31, 2017 USD ($)	Jul. 31, 2015 engine
Loss Contingencies [Line Items]
Long-term Debt				$ 0								$ 0
Available stand-by letters of credit and surety bonds				119,000,000								119,000,000
Purchase commitments				70,000,000								70,000,000
Long Term Purchase Commitment Cancellation Fees												18,000,000
Securities Sold under Agreements to Repurchase, Amount Offset Against Collateral				228,000,000								228,000,000
Accrual for environmental loss contingencies				18,000,000								18,000,000
Damages sought, value				50,000,000		$ 31,000,000
Loss Contingency, Number of Plaintiffs		2						25
Loss Contingency, New Claims Filed, Number | lawsuits								2	17
Notice of Violation, number | engine														7,749
Civil penalties sought, per violation	$ 37,500
Loss Contingency, Overcharge Penalty						88,000,000
Loss Contingency, Damages Sought, Value, Punitive Damages						20,000,000
Legal Fees					$ 1,360,000
Selling, general and administrative expenses				$ 244,000,000			$ 233,000,000					686,000,000	$ 654,000,000
Loss Contingency, Damages Sought						264,000,000
Gain (Loss) Related to Litigation Settlement												85,000,000
Gain from Settlement, Net												70,000,000
Sao Paulo Groundwater Notice [Member] | Sanctions [Member]
Loss Contingencies [Line Items]
Damages sought, value			R$ 3									1,000,000
International Chamber of Commerce [Member] | Penalties and Interest [Member]
Loss Contingencies [Line Items]
Damages sought, value												17,000,000
Navitrucks [Member] | Alleged Unfulfilled Promises and Injury to Reputation [Member]
Loss Contingencies [Line Items]
Damages sought, value												$ 34,000,000
G E Operating Agreement [Member]
Loss Contingencies [Line Items]
Operating Agreement Excess Loss Percentage												10.00%
Loss Sharing Agreement, Percentage				9.50%								9.50%
Off Balance Sheet Finance Receivables				$ 1,400,000,000								$ 1,400,000,000
Off Balance Sheet Finance Receivables Related Originations1				2,500,000,000		2,400,000,000						2,500,000,000
Minimum [Member] | Damages from Product Defects [Member] | EPA [Member]
Loss Contingencies [Line Items]
Civil penalties sought, per violation	2,000,000
Maximum [Member] | Damages from Product Defects [Member] | EPA [Member]
Loss Contingencies [Line Items]
Civil penalties sought, per violation	$ 291,000,000
G E Operating Agreement [Member]
Loss Contingencies [Line Items]
Equipment leased to others				105,000,000		116,000,000						105,000,000
Manufacturing Operations [Member] | Financed lease obligations [Member]
Loss Contingencies [Line Items]
Long-term Debt				121,000,000		130,000,000						121,000,000
Manufacturing Operations [Member] | G E Operating Agreement [Member] | Financed lease obligations [Member]
Loss Contingencies [Line Items]
Long-term Debt				$ 121,000,000		$ 129,000,000						121,000,000
Pending Litigation [Member] | FATMA Notice, Trial [Member] | Penalties [Member]
Loss Contingencies [Line Items]
Damages sought, value											R$ 2	1,000,000
Profit Sharing Litigation [Member] | Pending Litigation [Member] | Disputes [Member]
Loss Contingencies [Line Items]
Damages sought, value								$ 50,000,000
Retiree Health Care [Member]
Loss Contingencies [Line Items]
Damages sought, value												$ 26,000,000
MaxxForce Engine EGR Warranty Litigation [Member]
Loss Contingencies [Line Items]
Selling, general and administrative expenses							$ 31,000,000
Brazil, Brazil Real | International Chamber of Commerce [Member] | Penalties and Interest [Member]
Loss Contingencies [Line Items]
Damages sought, value | R$										R$ 64
Brazil, Brazil Real | Navitrucks [Member] | Alleged Unfulfilled Promises and Injury to Reputation [Member]
Loss Contingencies [Line Items]
Damages sought, value | R$										R$ 128
International Indústria de Motores da América do Sul Ltda [Member] | Other Cases Vs. International Indústria de Motores da América do Sul Ltda [Member] | Pending Litigation [Member]
Loss Contingencies [Line Items]
Loss Contingency, Number of Truck Fleet Owners | dealer												2

XML

Segment Reporting - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018 USD ($) segments	Jul. 31, 2017 USD ($)	Jul. 31, 2018 USD ($) segments	Jul. 31, 2017 USD ($)
Segment Reporting Information [Line Items]
Number Of Segments | segments	4		4
Intersegment sales and revenues	$ 0	$ 0	$ 0	$ 0
Sales and revenues, net	2,606	2,213	6,933	5,972
Financial Services Operations
Segment Reporting Information [Line Items]
Intersegment sales and revenues	25	27	69	70
Sales and revenues, net	65	62	187	172
North America Truck [Member]
Segment Reporting Information [Line Items]
Intersegment sales and revenues	22	10	61	27
Sales and revenues, net	1,916	1,531	4,871	3,956
North America Parts [Member]
Segment Reporting Information [Line Items]
Intersegment sales and revenues	2	6	6	19
Sales and revenues, net	605	586	1,774	1,766
Corporate And Eliminations [Member]
Segment Reporting Information [Line Items]
Intersegment sales and revenues	(70)	(53)	(174)	(134)
Sales and revenues, net	$ (69)	$ (50)	$ (166)	$ (126)

XML

Segment Reporting - Summary of Segment Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Segment Reporting Information [Line Items]
External sales and revenues, net	$ 2,606	$ 2,213	$ 6,933	$ 5,972
Segment Assets	6,924		6,924		$ 6,135
Intersegment sales and revenues	0	0	0	0
Sales and revenues, net	2,606	2,213	6,933	5,972
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	170	36	152	(106)
Income Tax Expense (Benefit)	3	0	25	10
Segment Profit Loss	173	36	177	(96)
Depreciation, Depletion and Amortization	51	57	160	169
Interest expense	82	91	240	262
Equity in income of non-consolidated affiliates	0	1	0	6
Capital expenditures	26	27	79	93
North America Truck [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	1,894	1,521	4,810	3,929
Segment Assets	2,264		2,264		1,621
Intersegment sales and revenues	22	10	61	27
Sales and revenues, net	1,916	1,531	4,871	3,956
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	165	7	200	(118)
Income Tax Expense (Benefit)	0	0	0	0
Segment Profit Loss	165	7	200	(118)
Depreciation, Depletion and Amortization	31	35	100	103
Interest expense	0	0	0	0
Equity in income of non-consolidated affiliates	1	1	2	3
Capital expenditures	19	21	74	78
North America Parts [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	603	580	1,768	1,747
Segment Assets	645		645		632
Intersegment sales and revenues	2	6	6	19
Sales and revenues, net	605	586	1,774	1,766
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	144	157	413	459
Income Tax Expense (Benefit)	0	0	0	0
Segment Profit Loss	144	157	413	459
Depreciation, Depletion and Amortization	2	3	5	9
Interest expense	0	0	0	0
Equity in income of non-consolidated affiliates	1	1	2	3
Capital expenditures	0	1	1	2
Global Operations [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	68	74	229	186
Segment Assets	335		335		378
Intersegment sales and revenues	21	10	38	18
Sales and revenues, net	89	84	267	204
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	4	3	(2)	(8)
Income Tax Expense (Benefit)	0	0	0	0
Segment Profit Loss	4	3	(2)	(8)
Depreciation, Depletion and Amortization	3	3	8	10
Interest expense	0	0	0	0
Equity in income of non-consolidated affiliates	(2)	(1)	(4)	0
Capital expenditures	1	2	2	5
Financial Services Operations
Segment Reporting Information [Line Items]
External sales and revenues, net	40	35	118	102
Segment Assets	2,407		2,407		2,207
Intersegment sales and revenues	25	27	69	70
Sales and revenues, net	65	62	187	172
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	23	23	62	51
Income Tax Expense (Benefit)	0	0	0	0
Segment Profit Loss	23	23	62	51
Depreciation, Depletion and Amortization	14	13	41	38
Interest expense	22	24	64	65
Equity in income of non-consolidated affiliates	0	0	0	0
Capital expenditures	1	0	1	1
Corporate And Eliminations [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	1	3	8	8
Segment Assets	1,273		1,273		$ 1,297
Intersegment sales and revenues	(70)	(53)	(174)	(134)
Sales and revenues, net	(69)	(50)	(166)	(126)
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	(166)	(154)	(521)	(490)
Income Tax Expense (Benefit)	(3)	0	(25)	(10)
Segment Profit Loss	(163)	(154)	(496)	(480)
Depreciation, Depletion and Amortization	1	3	6	9
Interest expense	60	67	176	197
Equity in income of non-consolidated affiliates	0	0	0	0
Capital expenditures	$ 5	$ 3	$ 1	$ 7

XML

Segment Reporting - Summary of Segment Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Segment Reporting Information [Line Items]
External sales and revenues, net	$ 2,606	$ 2,213	$ 6,933	$ 5,972
Sales and revenues, net	2,606	2,213	6,933	5,972
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	170	36	152	(106)
Income tax expense	(3)	0	(25)	(10)
Interest expense	82	91	240	262
Equity in income of non-consolidated affiliates	0	1	0	6
Capital expenditures	26	27	79	93
Intersegment sales and revenues	0	0	0	0
Segment Profit Loss	173	36	177	(96)
Depreciation, Depletion and Amortization	51	57	160	169
North America Truck [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	1,894	1,521	4,810	3,929
Sales and revenues, net	1,916	1,531	4,871	3,956
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	165	7	200	(118)
Income tax expense	0	0	0	0
Interest expense	0	0	0	0
Equity in income of non-consolidated affiliates	1	1	2	3
Capital expenditures	19	21	74	78
Intersegment sales and revenues	22	10	61	27
Segment Profit Loss	165	7	200	(118)
Depreciation, Depletion and Amortization	31	35	100	103
Corporate And Eliminations [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	1	3	8	8
Sales and revenues, net	(69)	(50)	(166)	(126)
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	(166)	(154)	(521)	(490)
Income tax expense	3	0	25	10
Interest expense	60	67	176	197
Equity in income of non-consolidated affiliates	0	0	0	0
Capital expenditures	5	3	1	7
Intersegment sales and revenues	(70)	(53)	(174)	(134)
Segment Profit Loss	(163)	(154)	(496)	(480)
Depreciation, Depletion and Amortization	1	3	6	9
North America Parts [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	603	580	1,768	1,747
Sales and revenues, net	605	586	1,774	1,766
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	144	157	413	459
Income tax expense	0	0	0	0
Interest expense	0	0	0	0
Equity in income of non-consolidated affiliates	1	1	2	3
Capital expenditures	0	1	1	2
Intersegment sales and revenues	2	6	6	19
Segment Profit Loss	144	157	413	459
Depreciation, Depletion and Amortization	2	3	5	9
Global Operations [Member]
Segment Reporting Information [Line Items]
External sales and revenues, net	68	74	229	186
Sales and revenues, net	89	84	267	204
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	4	3	(2)	(8)
Income tax expense	0	0	0	0
Interest expense	0	0	0	0
Equity in income of non-consolidated affiliates	(2)	(1)	(4)	0
Capital expenditures	1	2	2	5
Intersegment sales and revenues	21	10	38	18
Segment Profit Loss	4	3	(2)	(8)
Depreciation, Depletion and Amortization	3	3	8	10
Financial Services Operations
Segment Reporting Information [Line Items]
Interest Revenue (Expense), Net	46	45	131	121
External sales and revenues, net	40	35	118	102
Sales and revenues, net	65	62	187	172
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	23	23	62	51
Income tax expense	0	0	0	0
Interest expense	22	24	64	65
Equity in income of non-consolidated affiliates	0	0	0	0
Capital expenditures	1	0	1	1
Intersegment sales and revenues	25	27	69	70
Segment Profit Loss	23	23	62	51
Depreciation, Depletion and Amortization	$ 14	$ 13	$ 41	$ 38

XML

Segment Reporting - Summary of Segment Long Lived Assets and Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales and revenues, net	$ 2,606	$ 2,213	$ 6,933	$ 5,972
Financial Services Operations
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales and revenues, net	$ 65	$ 62	$ 187	$ 172

XML

Stockholders' Deficit Accumulated Other Comprehensive Income (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended				9 Months Ended
	Feb. 28, 2017	Jul. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jul. 31, 2018	Jul. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Issuance of common stock						$ 0	$ 256
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Loss, Beginning Balance		$ (2,154)	$ (2,412)	$ (2,579)		(2,211)	(2,640)
Other comprehensive loss before reclassifications		(13)		114		(21)	106
Amounts reclassified out of accumulated other comprehensive loss		29		53		94	122
Net current-period other comprehensive income (loss)		16		167		73	228
Accumulated Other Comprehensive Loss, Ending Balance		(2,138)	(2,211)	(2,412)	$ (2,579)	(2,138)	(2,412)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax [Abstract]
Restructuring Charges		1	$ 6	(13)		(1)	(4)
Other Comprehensive Income (Loss), Defined Benefit Plan, Settlement and Curtailment Gain (Loss), before Tax		0		0
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest		177		41		172	(88)
Tax expense		(3)		0		(25)	(10)
Net income (loss) attributable to Navistar International Corporation		$ 170		37		$ 152	(105)
Common stock, shares authorized		220.0	220.0			220.0
Common stock, par value		$ 0.1	$ 0.10			$ 0.1
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Loss, Beginning Balance		$ 0	$ 1	1		$ 0	1
Other comprehensive loss before reclassifications		0		0		0	0
Amounts reclassified out of accumulated other comprehensive loss		0		0		0	0
Net current-period other comprehensive income (loss)		0		0		0	0
Accumulated Other Comprehensive Loss, Ending Balance		0	0	1	1	0	1
Accumulated Translation Adjustment [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Loss, Beginning Balance		(289)	(246)	(288)		(283)	(280)
Other comprehensive loss before reclassifications		(13)		42		(19)	34
Amounts reclassified out of accumulated other comprehensive loss		0		0		0	0
Net current-period other comprehensive income (loss)		(13)		42		(19)	34
Accumulated Other Comprehensive Loss, Ending Balance		(302)	(283)	(246)	(288)	(302)	(246)
Pension Benefits
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Loss, Beginning Balance		(1,865)	(2,167)	(2,292)		(1,928)	(2,361)
Other comprehensive loss before reclassifications		0		72		(2)	72
Amounts reclassified out of accumulated other comprehensive loss		29		53		94	122
Net current-period other comprehensive income (loss)		29		125		92	194
Accumulated Other Comprehensive Loss, Ending Balance		(1,836)	$ (1,928)	(2,167)	$ (2,292)	(1,836)	(2,167)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax [Abstract]
Amortization of actuarial loss		29		36		86	106
Reclassification out of Accumulated Other Comprehensive Income [Member] | Pension Benefits
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax [Abstract]
Amortization of actuarial loss						9	0
Restructuring Charges		0		23		0	23
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest		(29)		(59)		(95)	(129)
Tax expense		0		(6)		(1)	(7)
Reclassification from AOCI, Current Period, Net of Tax, Attributable to Parent		$ 29		$ 53		$ 94	$ 122
Volkswagen Truck and Bus GmbH [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stock Purchase Agreement, Ownership Percentage Transferred to Acquirer, Pro Forma	16.60%
Stock Purchase Agreement, Ownership Percentage Transferred to Acquirer	19.90%
Stock Issued During Period, Shares, New Issues	16.2
Share Price					$ 15.76
Issuance of common stock					$ 256

XML

Earnings (Loss) Per Share Attributable to Navistar International Corporation - Basic & Diluted Loss per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Income (loss) from continuing operations, net of tax	$ 170	$ 36	$ 152	$ (106)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	177	42	172	(87)
Income (Loss) from Discontinued Operations, Net of Tax, Attributable to Parent	0	1	0	1
Net loss attributable to Navistar International Corporation	$ 170	$ 37	$ 152	$ (105)
Basic (in shares)	99.0	98.3	98.8	91.1
Weighted Average Number Diluted Shares Outstanding Adjustment	0.7	0.3	0.8	0.0
Diluted (in shares)	99.7	98.6	99.6	91.1
Earnings Per Share, Basic	$ 1.72	$ 0.38	$ 1.54	$ (1.15)
Income (Loss) from Continuing Operations, Per Basic Share	1.72	0.37	1.54	(1.16)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Basic Share	0.00	0.01	0.00	0.01
Earnings Per Share, Diluted	1.71	0.38	1.53	(1.15)
Income (Loss) from Continuing Operations, Per Diluted Share	1.71	0.37	1.53	(1.16)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Diluted Share	$ 0.00	$ 0.01	$ 0.00	$ 0.01
Retained Earnings [Member]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest			$ 152	$ (105)

XML

Earnings (Loss) Per Share Attributable to Navistar International Corporation - Narrative (Details) $ / shares in Units, shares in Millions		3 Months Ended			9 Months Ended
	Feb. 28, 2017 shares	Jul. 31, 2018 USD ($) $ / shares shares	Jul. 31, 2017 shares	Apr. 30, 2017 USD ($) $ / shares	Jul. 31, 2018 USD ($) $ / shares shares	Jul. 31, 2017 USD ($) shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		6.75%			6.75%
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares		13.2	14.6		13.3	14.7
Issuance of common stock | $					$ 0	$ 256,000,000
Four Point Five Zero Senior Subordinated Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares related to convertible notes | shares		3.4			3.4
Four Point Five Zero Senior Subordinated Convertible Notes [Member] | Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Convertible, Conversion Ratio		17.1233
Debt Instrument Convertible Conversion Ratio Basis | $		$ 1,000
Debt Instrument, Convertible, Conversion Price | $ / shares		$ 58.40			$ 58.40
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Convertible, Conversion Ratio		18.4946
Option Indexed to Issuer's Equity, Strike Price | $ / shares		$ 54.07
Shares related to convertible notes | shares			7.6		7.6
Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member] | Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument Convertible Conversion Ratio Basis | $		$ 1,000
Volkswagen Truck and Bus GmbH [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock Issued During Period, Shares, New Issues | shares	16.2
Issuance of common stock | $				$ 256,000,000
Share Price | $ / shares				$ 15.76
Stock Purchase Agreement, Ownership Percentage Transferred to Acquirer	19.90%
Stock Purchase Agreement, Ownership Percentage Transferred to Acquirer, Pro Forma	16.60%
Manufacturing Operations [Member] | Convertible Subordinated Debt [Member] | Four Point Five Zero Senior Subordinated Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		4.50%			4.50%
Manufacturing Operations [Member] | Convertible Subordinated Debt [Member] | Four Point Seven Five Senior Subordinated Convertible Notes [Member] [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		4.75%			4.75%

XML

Subsequent Event (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended	9 Months Ended
	Feb. 28, 2017	Apr. 30, 2017	Jul. 31, 2018	Jul. 31, 2017
Subsequent Event [Line Items]
Issuance of common stock			$ 0	$ 256
Volkswagen Truck and Bus GmbH [Member]
Subsequent Event [Line Items]
Stock Purchase Agreement, Ownership Percentage Transferred to Acquirer	19.90%
Stock Issued During Period, Shares, New Issues	16.2
Issuance of common stock		$ 256
Share Price		$ 15.76
Stock Purchase Agreement, Ownership Percentage Transferred to Acquirer, Pro Forma	16.60%