Segment Reporting

9 Months Ended

Jul. 31, 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 July 31, 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 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 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.

We continue our ongoing efforts of realigning our management structure around the functional expertise needed to execute our core North American strategy. We believe these realignments, among other things, 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 Chief Operating Decision Maker ("CODM") will 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 July 31, 2013
External sales and revenues, net	$	1,909		$	439		$	472	$	41	$	—		$	2,861
Intersegment sales and revenues	15			284			19		20		(338		)	—
Total sales and revenues, net	$	1,924		$	723		$	491	$	61	$	(338	)	$	2,861
Income (loss) from continuing operations attributable to NIC, net of tax	$	(58	)	$	(86	)	$	76	$	23	$	(192	)	$	(237	)
Income tax expense	—			—			—		—		(16		)	(16		)
Segment profit (loss)	$	(58	)	$	(86	)	$	76	$	23	$	(176	)	$	(221	)
Depreciation and amortization(B)	$	40		$	30		$	3	$	10	$	5		$	88
Interest expense	—			—			—		17		59			76
Equity in income of non-consolidated affiliates	—			3			—		—		—			3
Capital expenditures(B)(C)	16			8			1		—		4			29

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2012
External sales and revenues, net	$	2,250		$	441		$	513	$	42	$	—		$	3,246
Intersegment sales and revenues	13			399			29		22		(463		)	—
Total sales and revenues, net	$	2,263		$	840		$	542	$	64	$	(463	)	$	3,246
Income (loss) from continuing operations attributable to NIC, net of tax	$	(26	)	$	(47	)	$	73	$	22	$	58		$	80
Income tax benefit	—			—			—		—		188			188
Segment profit (loss)	$	(26	)	$	(47	)	$	73	$	22	$	(130	)	$	(108	)
Depreciation and amortization(B)	$	41		$	28		$	2	$	9	$	6		$	86
Interest expense	—			—			—		20		39			59
Equity in income (loss) of non-consolidated affiliates	(12		)	1			1		—		—			(10		)
Capital expenditures(B)(C)	21			39			6		1		7			74

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2013
External sales and revenues, net	$	5,080		$	1,309		$	1,516	$	119	$	—		$	8,024
Intersegment sales and revenues	41			898			57		59		(1,055		)	—
Total sales and revenues, net	$	5,121		$	2,207		$	1,573	$	178	$	(1,055	)	$	8,024
Income (loss) from continuing operations attributable to NIC, net of tax	$	(225	)	$	(251	)	$	253	$	64	$	(545	)	$	(704	)
Income tax expense	—			—			—		—		(53		)	(53		)
Segment profit (loss)	$	(225	)	$	(251	)	$	253	$	64	$	(492	)	$	(651	)
Depreciation and amortization(B)	$	174		$	102		$	8	$	29	$	17		$	330
Interest expense	—			—			—		52		188			240
Equity in income of non-consolidated affiliates	—			2			4		—		—			6
Capital expenditures(B)(C)	47			77			2		1		9			136

(in millions)	Truck			Engine			Parts		Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2012
External sales and revenues, net	$	6,677		$	1,301		$	1,409	$	129	$	—		$	9,516
Intersegment sales and revenues	26			1,292			98		70		(1,486		)	—
Total sales and revenues, net	$	6,703		$	2,593		$	1,507	$	199	$	(1,486	)	$	9,516
Income (loss) from continuing operations attributable to NIC, net of tax	$	(98	)	$	(275	)	$	164	$	75	$	(68	)	$	(202	)
Income tax benefit	—			—			—		—		387			387
Segment profit (loss)	$	(98	)	$	(275	)	$	164	$	75	$	(455	)	$	(589	)
Depreciation and amortization(B)	$	111		$	87		$	8	$	25	$	15		$	246
Interest expense	—			—			—		67		115			182
Equity in income (loss) of non-consolidated affiliates	(27		)	2			4		—		—			(21		)
Capital expenditures(B)(C)	53			116			18		2		61			250

(in millions)	Truck(B)		Engine		Parts		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
July 31, 2013	$	2,052	$	1,581	$	657	$	2,444	$	1,507	$	8,241
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 $47 million and $140 million for the three and nine months ended July 31, 2013, respectively, and $53 million and $168 million for three and nine months ended July 31, 2012, respectively.

(B) The segment assets as of October 31, 2012 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.