Segment Reporting

12 Months Ended

Oct. 31, 2011

Segment Reporting [Abstract]

Segment Reporting

Segment reporting

The following is a description of our four reporting segments:

• Our Truck segment manufactures and distributes a full line of Class 4 through 8 trucks, buses and military vehicles under the International and IC Bus (“IC”) brands. Our Truck segment also produces chassis for motor homes and commercial step-van vehicles under the Workhorse brand and recreational vehicles under the Monaco family of brands. 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 Engine segment designs and manufactures diesel engines for use globally, in Class 3 through 8 vehicles, as well as off-road applications.  In North America, these engines primarily go into our Class 6 and 7 medium trucks and buses and Class 8 heavy trucks, and are sold to original equipment manufacturers (“OEMs”).  In addition, our Engine segment produces diesel engines in Brazil primarily for distribution in South America under the MWM brand for sale to OEMs. In all other areas of the world, including North America, engines are sold under the MaxxForce brand name.  To control cost and technology, our Engine segment has expanded its operations to include PPT, a components company focused on air, fuel, and aftertreatment systems to meet more stringent Euro and EPA emission standards. Also included in the Engine segment are the operating results of BDP, which manages the sourcing, merchandising, and distribution of certain service parts for vehicles we and Ford sell in North America.

• Our Parts segment provides customers with proprietary products needed to support the International commercial and military truck, IC bus, WCC chassis, and MaxxForce engine lines. Our Parts segment also provides a wide selection of other standard truck, trailer, and engine aftermarket parts. At October 31, 2011, this segment operated eleven regional parts distribution centers that provide 24-hour availability and shipment.

• 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.

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 Navistar International Corporation excluding income tax benefit (expense). Selected financial information is as follows:

• The UAW master contract and non-represented employee profit sharing, annual incentive compensation, and the costs of contingent contributions to the Supplemental Trust are included in corporate expenses, if applicable.

• Interest expense and interest income for the manufacturing operations are reported in corporate expenses.

• Certain sales to our dealers include interest-free periods that vary in length. The Financial Services segment finances these sales and our Truck segment subsidizes and reimburses the Financial Services segment for those finance charges.

• Intersegment purchases and sales between the Truck and Engine segments are recorded at our best estimates of arms-length pricings. During 2010 and 2009, MaxxForce Big-Bore engine program was treated as a joint program with the Truck and Engine segments sharing in certain costs of the program.

• Beginning in 2011, certain purchases from the Engine segment by the Parts segment, primarily related to PPT, are recorded at market-based pricing. All other intersegment purchases from the Truck and Engine segments by the Parts segment are recorded at standard production cost.

• We allocate “access fees” to the Parts segment from the Truck and Engine segments for certain engineering and product development costs, depreciation expense, and selling, general and administrative expenses incurred by the Truck and Engine segments based on the relative percentage of certain sales, as adjusted for cyclicality.

• The Financial Services segment provides the manufacturing operations, primarily our Truck and Parts segments, financing services that account for a significant share of its financing revenue. Certain sales financed by the Financial Services segment, primarily NFC, require the manufacturing operations, primarily the Truck segment, to share a portion of customer losses.

• Beginning in 2009, as a result of higher costs of borrowings our Financial Services segment began charging the manufacturing operations higher fees and interest rates for its funding services. Effective with the third quarter of 2011, with improvements in its cost of borrowings, the Financial Services segment reduced some of these incremental fees and interest rates through an amendment to the Company's master intercompany agreement. Effective with the fourth quarter of 2011, the Company's master intercompany agreement was again amended to provide for the Financial Services segment to reimburse the manufacturing operations for fees and financing revenue when the Financial Services segment exceeds a minimum interest coverage ratio. As a result of the amendment, in the fourth quarter of 2011 the Financial Services segment reimbursed the manufacturing operations $11 million of financing fees and revenues.

• Beginning in 2011, we allocate gains and losses on commodities derivatives to the segment to which the underlying commodities relate. Previously, the impacts of commodities derivatives were not material and were recorded in Corporate.

• Other than the items discussed above, the selected financial information presented below is recognized in accordance with our policies described in Note 1, Summary of significant accounting policies.

	Truck(A)			Engine(A)(B)			Parts		Financial Services(C)		Corporate and Eliminations			Total
(in millions)
October 31, 2011
External sales and revenues, net	$	9,690		$	2,101		$	1,967	$	200	$	—		$	13,958
Intersegment sales and revenues	48			1,690			188		91		(2,017		)	—
Total sales and revenues, net	$	9,738		$	3,791		$	2,155	$	291	$	(2,017	)	$	13,958
Net income attributable to NIC	$	336		$	84		$	287	$	129	$	887		$	1,723
Income tax benefit	—			—			—		—		1,458			1,458
Segment profit (loss)	$	336		$	84		$	287	$	129	$	(571	)	$	265
Depreciation and amortization	$	151		$	120		$	9	$	28	$	20		$	328
Interest expense	—			—			—		109		138			247
Equity in income (loss) of non-consolidated affiliates	(73		)	(4		)	6		—		—			(71		)
Segment assets	2,771			1,849			700		3,580		3,391			12,291
Capital expenditures(D)	83			172			19		2		153			429

	Truck(A)			Engine(A)			Parts		Financial Services(C)		Corporate and Eliminations			Total
(in millions)
October 31, 2010
External sales and revenues, net	$	8,205		$	2,031		$	1,690	$	219	$	—		$	12,145
Intersegment sales and revenues	2			955			195		90		(1,242		)	—
Total sales and revenues, net	$	8,207		$	2,986		$	1,885	$	309	$	(1,242	)	$	12,145
Net income (loss) attributable to NIC	$	424		$	51		$	266	$	95	$	(613	)	$	223
Income tax expense	—			—			—		—		(23		)	(23		)
Segment profit (loss)	$	424		$	51		$	266	$	95	$	(590	)	$	246
Depreciation and amortization	$	160		$	106		$	7	$	28	$	15		$	316
Interest expense	—			—			—		113		140			253
Equity in income (loss) of non-consolidated affiliates	(51		)	(2		)	3		—		—			(50		)
Segment assets	2,457			1,715			811		3,497		1,250			9,730
Capital expenditures	82			116			8		2		26			234

	Truck			Engine		Parts		Financial Services(C)		Corporate and Eliminations			Total
(in millions)
October 31, 2009
External sales and revenues, net	$	7,294		$	2,031	$	1,975	$	269	$	—		$	11,569
Intersegment sales and revenues	3			659		198		79		(939		)	—
Total sales and revenues, net	$	7,297		$	2,690	$	2,173	$	348	$	(939	)	$	11,569
Net income (loss) attributable to NIC	$	147		$	253	$	436	$	40	$	(556	)	$	320
Income tax expense	—			—		—		—		(37		)	(37		)
Segment profit (loss)	$	147		$	253	$	436	$	40	$	(519	)	$	357
Depreciation and amortization	$	178		$	118	$	7	$	25	$	16		$	344
Interest expense	—			—		—		161		90			251
Equity in income (loss) of non-consolidated affiliates	(5		)	45		6		—		—			46
Segment assets	2,660			1,517		664		4,136		1,051			10,028
Capital expenditures(D)	65			56		13		3		14			151

_______________ 

(A) See Note 2, Restructurings and impairments, for further discussion.

(B) In 2011, the Engine segment recognized a $10 million gain on the extinguishment of a liability related to an equipment financing transaction. Previously, such gains were not material and were recorded in Corporate.

(C) Total sales and revenues in the Financial Services segment include interest revenues of $285 million, $270 million, and $304 million for 2011, 2010, and 2009, respectively.

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

Sales of vehicles and service parts to the U.S. government were 13%, 15%, 25% of consolidated sales and revenues for 2011, 2010, and 2009, respectively. Sales of vehicles and service parts to the U.S. government are reported in our Truck and Parts segments.

Information concerning principal geographic areas for the years ended October 31, 2011, 2010, and 2009 is as follows:

	2011		2010		2009
(in millions)
Sales and revenues:
United States	$	9,098	$	8,728	$	9,762
Canada	1,071		1,006		748
Mexico	1,550		609		467
Brazil	1,190		961		638
Other	1,049		841		454

	2011		2010
(in millions)
Long-lived assets:(A)
United States	$	1,340	$	1,277
Canada	83		126
Mexico	152		148
Brazil	519		476
Other	29		1

__________________________

(A) Long-lived assets consist of Property and equipment, net, Goodwill, and Intangible assets, net.