Segment Reporting

Beginning in 2012, we renewed our focus on our primary markets, which are North American Class 6 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 ROIC methodology decision framework to assist with the evaluation of our portfolio of assets and individual businesses to validate their strategic and financial fit. 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 2013, we continued our ongoing efforts to realign 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 fourth quarter of 2013, we completed certain changes to our organizational and reporting structures that reflect how our new Chief Operating Decision Maker ("CODM") assesses the performance of our operating segments and makes decisions about resource allocations. As a result, we determined our reporting segments consist of: North America Truck, North America Parts, Global Operations, and Financial Services.

The following is a description of our four reporting segments:

•

Our North America Truck segment manufactures and distributes Class 4 through 8 trucks, buses, and military vehicles under the International and IC Bus ("IC") brands, along with production of engines under the MaxxForce brand name, in the North America markets that include sales in the U.S., Canada, and Mexico. 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 North America 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 North America Parts segment also provides a wide selection of other standard truck, trailer, and engine aftermarket parts. At October 31, 2013, this segment operated eleven regional parts distribution centers that provide 24-hour availability and shipment. Also included in the North America 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 includes businesses that derive their revenue from outside our core North America markets and primarily consists of the IIAA (formerly MWM) engine and truck operations in Brazil and our export truck and parts businesses. The IIAA engine operations produce diesel engines, primarily under contract manufacturing arrangements, as well as under the MWM brand, for sale to OEMs in South America.


•	Our Financial Services segment provides retail, wholesale, and lease financing of products sold by the North America Truck and North America 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) from continuing operations attributable to Navistar International Corporation excluding Income tax benefit (expense). Selected financial information is as follows:


•	The costs of profit sharing and annual incentive compensation for the Manufacturing operations are included in corporate expenses.


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

•

The Financial Services segment provides financing services to our Manufacturing operations, as well as finances certain sales to our dealers in North America, which include an interest-free period that varies in length, that are subsidized by our North America Truck and North America Parts segments. Certain retail sales financed by the Financial Services segment, primarily NFC, require the Manufacturing operations, primarily the North America Truck segment, to share a portion of any credit losses.


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

•

In 2011, as a result of higher costs of borrowings, the Financial Services segment charged the Manufacturing operations certain 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 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. Effective with the first quarter of 2012, the Company's master intercompany agreement was again amended to eliminate these intercompany fees.


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

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 selected financial information has been restated to reflect this change, as well as the change in our reporting segments.

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



(in millions)	North America Truck			North America Parts		Global Operations			Financial Services^(A)		Corporate and Eliminations			Total
Year Ended October 31, 2013
External sales and revenues, net	$	6,312		$	2,558	$	1,747		$	158	$	—		$	10,775
Intersegment sales and revenues	486			57		78			75		(696		)	—
Total sales and revenues, net	$	6,798		$	2,615	$	1,825		$	233	$	(696	)	$	10,775
Income (loss) from continuing operations attributable to NIC, net of tax	$	(902	)	$	476	$	(6	)	$	81	$	(506	)	$	(857	)
Income tax benefit	—			—		—			—		171			171
Segment profit (loss)	$	(902	)	$	476	$	(6	)	$	81	$	(677	)	$	(1,028	)
Depreciation and amortization	$	305		$	17	$	32		$	40	$	23		$	417
Interest expense	—			—		—			70		251			321
Equity in income (loss) of non-consolidated affiliates	10			6		(5		)	—		—			11
Capital expenditures^(B)	142			2		9			2		12			167



(in millions)	North America Truck			North America Parts		Global Operations			Financial Services^(A)		Corporate and Eliminations			Total
Year Ended October 31, 2012
External sales and revenues, net	$	7,946		$	2,497	$	2,084		$	168	$	—		$	12,695
Intersegment sales and revenues	442			124		126			91		(783		)	—
Total sales and revenues, net	$	8,388		$	2,621	$	2,210		$	259	$	(783	)	$	12,695
Income (loss) from continuing operations attributable to NIC, net of tax	$	(736	)	$	343	$	(168	)	$	91	$	(2,469	)	$	(2,939	)
Income tax expense	—			—		—			—		(1,780		)	(1,780		)
Segment profit (loss)	$	(736	)	$	343	$	(168	)	$	91	$	(689	)	$	(1,159	)
Depreciation and amortization	$	216		$	16	$	36		$	33	$	22		$	323
Interest expense	—			—		—			88		171			259
Equity in income (loss) of non-consolidated affiliates	(1		)	5		(33		)	—		—			(29		)
Capital expenditures^(B)	173			21		50			3		62			309



(in millions)	North America Truck		North America Parts		Global Operations			Financial Services^(A)		Corporate and Eliminations			Total
Year Ended October 31, 2011
External sales and revenues, net	$	8,591	$	2,562	$	2,288		$	200	$	—		$	13,641
Intersegment sales and revenues	572		178		142			91		(983		)	—
Total sales and revenues, net	$	9,163	$	2,740	$	2,430		$	291	$	(983	)	$	13,641
Income from continuing operations attributable to NIC, net of tax	$	344	$	397	$	72		$	129	$	855		$	1,797
Income tax benefit	—		—		—			—		1,417			1,417
Segment profit (loss)	$	344	$	397	$	72		$	129	$	(562	)	$	380
Depreciation and amortization	$	230	$	16	$	34		$	28	$	20		$	328
Interest expense	—		—		—			109		138			247
Equity in income (loss) of non-consolidated affiliates	—		5		(76		)	—		—			(71		)
Capital expenditures^(B)	171		19		84			2		153			429



(in millions)	North America Truck^(C)		North America Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
October 31, 2013	$	2,250	$	716	$	1,162	$	2,355	$	1,832	$	8,315
October 31, 2012	2,481		782		1,333		2,563		1,943		9,102
October 31, 2011	2,828		804		1,657		3,580		3,422		12,291

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(A)	Total sales and revenues in the Financial Services segment include interest revenues of $181 million, $254 million, and $285 million for 2013, 2012, and 2011, respectively.


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


(C)	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.

Sales of vehicles and service parts to the U.S. government were 13% of consolidated sales and revenues for the year ended October 31, 2011. No single customer accounted for more than 10% of consolidated sales and revenues for the years ended October 31, 2013 and 2012. Sales of vehicles and service parts to the U.S. government are reported in our North America Truck and North America Parts segments, respectively.

Sales and revenues to external customers classified by significant products and services for the years ended October 31, 2013, 2012, and 2011 were as follows:



(in millions)	2013		2012		2011
Sales and revenues:
Trucks	$	6,738	$	8,705	$	9,312
Parts	2,906		2,886		2,901
Engines	973		936		1,228
Financial Services	158		168		200

Information concerning principal geographic areas for the years ended October 31, 2013, 2012, and 2011 were as follows:



(in millions)	2013		2012		2011
Sales and revenues:
United States	$	7,122	$	8,822	$	9,329
Canada	791		949		1,071
Mexico	694		728		1,002
Brazil	1,121		1,066		1,190
Other	1,047		1,130		1,049



(in millions)	2013		2012
Long-lived assets:^(A)
United States	$	1,467	$	1,519
Canada	26		28
Mexico	157		94
Brazil	376		445
Other	37		25

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