Segment Reporting

9 Months Ended

Jul. 31, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

During November 2014, we announced changes in our leadership team and in our organizational and reporting structures. We believe this realignment will guide us into the future and enable us to accelerate our performance as we finish the turnaround. These changes impact how our Chief Operating Decision Maker (“CODM”) assesses the performance of our operating segments and makes decisions about resource allocations. As a result, we identified the following changes within our reportable segments:

• The export truck and parts operations, formerly in our Global Operations segment, are now included within the results of our Truck and Parts segments, respectively.

• Parts required to support the military truck lines, formerly within our Parts segment, are now included within the results of our Truck segment.

All prior period segment information has been updated to conform to the 2015 presentation. Other than the changes noted above, there were no material changes to the reportable segments disclosed in our Annual Report on Form 10-K for the year ended October 31, 2014. The change in reportable segments had no effect on the Company's consolidated financial position, results of operations, or cash flows for the periods presented.

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, along with production of engines under the MaxxForce brand name and parts required to support the military truck lines, in the markets that include sales in the U.S., Canada, Mexico, and within 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, MaxxForce 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 the IIAA (formerly MWM International Industria De Motores Da America Do Sul Ltda. ("MWM")) engine and truck operations in Brazil. 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. 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.

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:

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2015
External sales and revenues, net	$	1,785		$	614	$	100		$	37	$	2		$	2,538
Intersegment sales and revenues	49			11		9			26		(95		)	—
Total sales and revenues, net	$	1,834		$	625	$	109		$	63	$	(93	)	$	2,538
Income (loss) from continuing operations attributable to NIC, net of tax	$	(36	)	$	151	$	(26	)	$	26	$	(145	)	$	(30	)
Income tax expense	—			—		—			—		(12		)	(12		)
Segment profit (loss)	$	(36	)	$	151	$	(26	)	$	26	$	(133	)	$	(18	)
Depreciation and amortization	$	40		$	4	$	6		$	13	$	5		$	68
Interest expense	—			—		—			19		56			75
Equity in income of non-consolidated affiliates	1			1		1			—		—			3
Capital expenditures(B)	20			1		1			—		5			27

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Three Months Ended July 31, 2014
External sales and revenues, net	$	1,956		$	629	$	221		$	38	$	—		$	2,844
Intersegment sales and revenues	46			15		12			22		(95		)	—
Total sales and revenues, net	$	2,002		$	644	$	233		$	60	$	(95	)	$	2,844
Income (loss) from continuing operations attributable to NIC, net of tax	$	(3	)	$	137	$	(21	)	$	24	$	(140	)	$	(3	)
Income tax expense	—			—		—			—		(14		)	(14		)
Segment profit (loss)	$	(3	)	$	137	$	(21	)	$	24	$	(126	)	$	11
Depreciation and amortization	$	42		$	4	$	7		$	12	$	6		$	71
Interest expense	—			—		—			18		60			78
Equity in income of non-consolidated affiliates	1			1		—			—		—			2
Capital expenditures(B)	4			—		2			—		1			7

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2015
External sales and revenues, net	$	5,349		$	1,835	$	353		$	108	$	7		$	7,652
Intersegment sales and revenues	121			29		38			75		(263		)	—
Total sales and revenues, net	$	5,470		$	1,864	$	391		$	183	$	(256	)	$	7,652
Income (loss) from continuing operations attributable to NIC, net of tax	$	(105	)	$	429	$	(40	)	$	72	$	(492	)	$	(136	)
Income tax expense	—			—		—			—		(37		)	(37		)
Segment profit (loss)	$	(105	)	$	429	$	(40	)	$	72	$	(455	)	$	(99	)
Depreciation and amortization	$	139		$	11	$	18		$	37	$	16		$	221
Interest expense	—			—		—			57		170			227
Equity in income (loss) of non-consolidated affiliates	4			3		(1		)	—		—			6
Capital expenditures(B)	58			1		4			2		7			72

(in millions)	Truck			Parts		Global Operations			Financial Services(A)		Corporate and Eliminations			Total
Nine Months Ended July 31, 2014
External sales and revenues, net	$	5,176		$	1,817	$	690		$	115	$	—		$	7,798
Intersegment sales and revenues	166			43		26			57		(292		)	—
Total sales and revenues, net	$	5,342		$	1,860	$	716		$	172	$	(292	)	$	7,798
Income (loss) from continuing operations attributable to NIC, net of tax	$	(340	)	$	378	$	(218	)	$	71	$	(441	)	$	(550	)
Income tax expense	—			—		—			—		(25		)	(25		)
Segment profit (loss)	$	(340	)	$	378	$	(218	)	$	71	$	(416	)	$	(525	)
Depreciation and amortization	$	171		$	12	$	21		$	33	$	19		$	256
Interest expense	—			—		—			52		182			234
Equity in income (loss) of non-consolidated affiliates	3			3		(1		)	—		—			5
Capital expenditures(B)	42			5		6			1		3			57

(in millions)	Truck		Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
July 31, 2015	$	1,967	$	640	$	458	$	2,655	$	1,049	$	6,769
October 31, 2014(C)	2,245		672		657		2,582		1,287		7,443

_________________________

(A) Total sales and revenues in the Financial Services segment include interest revenues of $46 million and $135 million for the three and nine months ended July 31, 2015, respectively and $44 million and $126 million for the three and nine months ended July 31, 2014, respectively.

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

(C) During the third quarter of 2015, it was determined that multiemployer plan accounting should have been applied in recording postretirement benefits related to our Financial Services segment, which provides that assets and liabilities of a plan are recorded only on the parent company and that periodic contributions to the plan made by the participating subsidiary are charged to expense for the purposes of the subsidiary's financial statements. As a result, we have reclassified $16 million of deferred tax assets between Financial Services and Corporate and Eliminations related to the postretirement benefits. This reclassification did not impact consolidated segment assets for the year-ended October 31, 2014.