Segment Reporting

During November 2014, we announced changes in our leadership team and in our organizational and reporting structures, which we believe will guide us into the future and enable us to accelerate our performance as we finish the turnaround. These changes impacted 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 our reportable segments. 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 proprietary 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, proprietary 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:


•	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 finances certain sales to our dealers in North America, which include an interest-free period that varies in length, that are subsidized by our Truck and Parts segments. Additionally, the Financial Services segment reports intersegment revenues from secured loans to the Manufacturing operations. Certain retail sales financed by the Financial Services segment, primarily NFC, require the Manufacturing operations, primarily the Truck segment, to share a portion of any credit losses.


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


•	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.

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



(in millions)	Truck			Parts		Global Operations			Financial Services^(A)		Corporate and Eliminations			Total
Year Ended October 31, 2015
External sales and revenues, net	$	7,055		$	2,475	$	455		$	145	$	10		$	10,140
Intersegment sales and revenues	158			38		51			96		(343		)	—
Total sales and revenues, net	$	7,213		$	2,513	$	506		$	241	$	(333	)	$	10,140
Income (loss) from continuing operations attributable to NIC, net of tax	$	(141	)	$	592	$	(67	)	$	98	$	(669	)	$	(187	)
Income tax expense	—			—		—			—		(51		)	(51		)
Segment profit (loss)	$	(141	)	$	592	$	(67	)	$	98	$	(618	)	$	(136	)
Depreciation and amortization	$	173		$	14	$	23		$	51	$	20		$	281
Interest expense	—			—		—			74		233			307
Equity in income (loss) of non-consolidated affiliates	5			4		(3		)	—		—			6
Capital expenditures^(B)	92			3		4			4		12			115



(in millions)	Truck			Parts		Global Operations			Financial Services^(A)		Corporate and Eliminations			Total
Year Ended October 31, 2014
External sales and revenues, net	$	7,255		$	2,493	$	905		$	153	$	—		$	10,806
Intersegment sales and revenues	218			58		35			79		(390		)	—
Total sales and revenues, net	$	7,473		$	2,551	$	940		$	232	$	(390	)	$	10,806
Income (loss) from continuing operations attributable to NIC, net of tax	$	(380	)	$	528	$	(274	)	$	97	$	(593	)	$	(622	)
Income tax expense	—			—		—			—		(26		)	(26		)
Segment profit (loss)	$	(380	)	$	528	$	(274	)	$	97	$	(567	)	$	(596	)
Depreciation and amortization	$	216		$	15	$	28		$	46	$	27		$	332
Interest expense	—			—		—			71		243			314
Equity in income of non-consolidated affiliates	5			4		—			—		—			9
Capital expenditures^(B)	65			6		8			1		8			88



(in millions)	Truck			Parts		Global Operations			Financial Services^(A)		Corporate and Eliminations			Total
Year Ended October 31, 2013
External sales and revenues, net	$	7,049		$	2,448	$	1,120		$	158	$	—		$	10,775
Intersegment sales and revenues	242			62		77			75		(456		)	—
Total sales and revenues, net	$	7,291		$	2,510	$	1,197		$	233	$	(456	)	$	10,775
Income (loss) from continuing operations attributable to NIC, net of tax	$	(883	)	$	463	$	(12	)	$	81	$	(506	)	$	(857	)
Income tax benefit	—			—		—			—		171			171
Segment profit (loss)	$	(883	)	$	463	$	(12	)	$	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)	137			2		14			2		12			167



(in millions)	Truck		Parts		Global Operations		Financial Services		Corporate and Eliminations		Total
Segment assets, as of:
October 31, 2015	$	1,876	$	641	$	409	$	2,455	$	1,311	$	6,692
October 31, 2014^(C)	2,245		672		657		2,582		1,287		7,443

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(A)	Total sales and revenues in the Financial Services segment include interest revenues of $175 million, $170 million, and $181 million for 2015, 2014, and 2013, 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.

No single customer accounted for more than 10% of consolidated sales and revenues for the years ended October 31, 2015, 2014 and 2013.

Sales and revenues to external customers classified by significant products and services for the years ended October 31, 2015, 2014, and 2013 were as follows:



(in millions)	2015		2014		2013
Sales and revenues:
Trucks	$	6,845	$	7,137	$	6,738
Parts	2,399		2,424		2,906
Engine	751		1,092		973
Financial Services	145		153		158

Information concerning principal geographic areas for the years ended October 31, 2015, 2014, and 2013 were as follows:



(in millions)	2015		2014		2013
Sales and revenues:
United States	$	7,722	$	7,760	$	7,122
Canada	774		749		791
Mexico	653		657		694
Brazil	486		833		1,121
Other	505		807		1,047



(in millions)	2015		2014
Long-lived assets:^(A)
United States	$	1,126	$	1,277
Canada	19		26
Mexico	186		190
Brazil	98		182
Other	11		15

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