Segment Reporting

6 Months Ended

Apr. 30, 2013

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 concrete mixers under the Continental Mixers brand. 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 trucks and buses. In Brazil, our Engine segment produces diesel engines, primarily under contract manufacturing arrangements, as well as under the MWM brand, for sale to OEMs in South America. In all other areas of the world, including North America, engines are sold under the MaxxForce brand name. Also included in the Engine 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 Parts segment provides customers with proprietary products needed to support the International commercial and military truck, IC Bus, MaxxForce engine lines, as well as our other product lines. Our Parts segment also provides a wide selection of other standard truck, trailer, and engine aftermarket parts. At April 30, 2013, 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.

Potential Future Changes to Reporting Segments

Beginning in 2012, we renewed our focus on our primary markets, which are North American Class 4 through 8 trucks and buses, and realigned the Company around a more functionally-oriented structure in order to reduce overhead expenses and other costs. We implemented a new Return-on-Invested-Capital ("ROIC") methodology to assist with the evaluation of our portfolio of assets to validate their strategic and financial fit. We are using an ROIC decision framework to re-examine our individual businesses. This effort is ongoing, and may lead to divestitures of businesses or discontinuing engineering programs that are outside of our core operations or not performing to our expectations.

In the second quarter of 2013, our Chief Operating Decision Maker ("CODM") changed. We continue our ongoing efforts of realigning our management structure around the functional expertise needed to execute our core North American strategy. We believe this realignment will result in better execution of our strategies, streamline the decision making process, create better alignment towards a common objective, and reduce our operating costs. In the near future, we expect to complete these and any other changes to our organizational and reporting structures that will reflect how our new CODM will begin to assess the performance of our operating segments and make decisions about resource allocations.

Segment Profit (Loss)

We define segment profit (loss) as Net income (loss) from continuing operations attributable to Navistar International Corporation excluding Income tax benefit (expense). Operating results for interim reporting periods are not necessarily indicative of annual operating results.

Beginning in the first quarter of 2013, the Company began reporting the operating results of WCC and certain operating results of Monaco as discontinued operations in the Company's Consolidated statements of operations. For more information, see Note 2, Discontinued Operations and Other Divestitures. The 2012 selected financial information has been restated to reflect this change.

The following tables present selected financial information for our reporting segments:

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended April 30, 2013
External sales and revenues, net	$	1,515		$	458		$	514	$	39	$	—		$	2,526
Intersegment sales and revenues	4			286			16		19		(325		)	—
Total sales and revenues, net	$	1,519		$	744		$	530	$	58	$	(325	)	$	2,526
Income (loss) from continuing operations attributable to NIC, net of tax	$	(109	)	$	(138	)	$	91	$	19	$	(216	)	$	(353	)
Income tax expense	—			—			—		—		(22		)	(22		)
Segment profit (loss)	$	(109	)	$	(138	)	$	91	$	19	$	(194	)	$	(331	)
Depreciation and amortization(B)	$	92		$	33		$	2	$	10	$	5		$	142
Interest expense	—			—			—		17		73			90
Equity in income (loss) of non-consolidated affiliates	—			1			3		—		—			4
Capital expenditures(B)(C)	16			16			—		1		2			35

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended April 30, 2012
External sales and revenues, net	$	2,316		$	440		$	462	$	43	$	—		$	3,261
Intersegment sales and revenues	2			454			34		24		(514		)	—
Total sales and revenues, net	$	2,318		$	894		$	496	$	67	$	(514	)	$	3,261
Income (loss) from continuing operations attributable to NIC, net of tax	$	(45	)	$	(108	)	$	41	$	26	$	(52	)	$	(138	)
Income tax benefit	—			—			—		—		123			123
Segment profit (loss)	$	(45	)	$	(108	)	$	41	$	26	$	(175	)	$	(261	)
Depreciation and amortization(B)	$	35		$	30		$	4	$	8	$	5		$	82
Interest expense	—			—			—		22		40			62
Equity in income (loss) of non-consolidated affiliates	(6		)	—			2		—		—			(4		)
Capital expenditures(B)(C)	16			36			5		1		15			73

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Six Months Ended April 30, 2013
External sales and revenues, net	$	3,171		$	870		$	1,044	$	78	$	—		$	5,163
Intersegment sales and revenues	26			614			38		39		(717		)	—
Total sales and revenues, net	$	3,197		$	1,484		$	1,082	$	117	$	(717	)	$	5,163
Income (loss) from continuing operations attributable to NIC, net of tax	$	(167	)	$	(165	)	$	177	$	41	$	(353	)	$	(467	)
Income tax expense	—			—			—		—		(37		)	(37		)
Segment profit (loss)	$	(167	)	$	(165	)	$	177	$	41	$	(316	)	$	(430	)
Depreciation and amortization(B)	$	134		$	72		$	5	$	19	$	12		$	242
Interest expense	—			—			—		35		129			164
Equity in income (loss) of non-consolidated affiliates	—			(1		)	4		—		—			3
Capital expenditures(B)(C)	31			69			1		1		5			107

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Six Months Ended April 30, 2012
External sales and revenues, net	$	4,427		$	860		$	896	$	87	$	—		$	6,270
Intersegment sales and revenues	13			893			69		48		(1,023		)	—
Total sales and revenues, net	$	4,440		$	1,753		$	965	$	135	$	(1,023	)	$	6,270
Income (loss) from continuing operations attributable to NIC, net of tax	$	(72	)	$	(228	)	$	91	$	53	$	(126	)	$	(282	)
Income tax benefit	—			—			—		—		199			199
Segment profit (loss)	$	(72	)	$	(228	)	$	91	$	53	$	(325	)	$	(481	)
Depreciation and amortization(B)	$	69		$	59		$	6	$	16	$	10		$	160
Interest expense	—			—			—		47		76			123
Equity in income (loss) of non-consolidated affiliates	(15		)	1			3		—		—			(11		)
Capital expenditures(B)(C)	32			76			12		2		54			176

(in millions)	Truck(B)		Engine		Parts		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
April 30, 2013	$	2,139	$	1,738	$	709	$	2,518	$	1,619	$	8,723
October 31, 2012	$	2,118	$	1,777	$	707	$	2,563	$	1,937	$	9,102

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(A) Total sales and revenues in the Financial Services segment include interest revenues of $46 million and $93 million for the three and six months ended April 30, 2013, respectively, and $56 million and $114 million for three and six months ended April 30, 2012, respectively.

(B) Includes amounts related to discontinued operations. For more information, see Note 2, Discontinued Operations and Other Divestitures.

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