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VARITY'S NET LOSS AT $178 MILLION IN 1991 AFTER $108 MILLION CHARGE FOR MAJOR RESTRUCTURING ACTIONS

 VARITY'S NET LOSS AT $178 MILLION IN 1991 AFTER
 $108 MILLION CHARGE FOR MAJOR RESTRUCTURING ACTIONS
 BUFFALO, N.Y., March 26 /PRNewswire/ -- Restructuring actions and a significant decline in sales resulted in a net loss of $178 million, or $7.87 per common share, at Varity Corporation (NYSE: VAT) in fiscal 1991, in contrast to year-earlier net income of $94.4 million, or $2.77 per share fully diluted. The company recorded a restructuring charge of $108.3 million in the fourth quarter to reflect costs of its previously announced program to improve operating efficiencies, reduce employment, and decrease debt levels through sales of non-core assets.
 With all of Varity's major markets affected by recession, the company's consolidated sales and revenues fell 12 percent to $3.2 billion in the 12 months ended Jan. 31, 1992. Sales of Varity's farm machinery and diesel engine groups were severely affected, dropping 19 percent and 15 percent, respectively; sales of automotive components, which account for approximately 43 percent of total revenues, fell almost 7 percent.
 In the fourth quarter, Varity's net loss after the $108.3 million restructuring charge amounted to $115.3 million, or $4.80 per common share, on sales of $899.5 million. In the comparable year-ago period, the company posted net income of $19.1 million, or 56 cents per common share on a fully diluted basis, on sales of $896.3 million.
 Full-year results were also adversely affected by a loss of $10 million in fluctuations in foreign currency values, in contrast to a gain of $16 million a year earlier.
 Varity's chairman and chief executive officer, Victor Rice, said the company is moving forward with a series of restructuring measures "to improve operating performance significantly in 1992 whether or not there is an economic recovery." Among the effects of these actions will be the reduction of some 7 percent in worldwide employment, or 1,300 positions, by the end of the year; this will lower annual operating costs by $45 million. The company had earlier reduced employment by nearly 3,000 jobs since late 1989.
 Employment cutbacks account for approximately $40 million of the special charge. The balance of about $68 million reflects non-cash provisions for writedowns in anticipation of the sale of non-core businesses. Over the next 18 months Varity expects to raise $125 million to $175 million for debt reduction through sales of assets. "We have charted orderly steps to reduce debt as a key part of our strategic restructuring plan," Rice observed.
 He said Varity continues to review additional strategic initiatives to further improve profitability and strengthen the balance sheet. "Our core operations are fundamentally sound," he stressed. "We have excellent products and product technologies, a leadership position in important market sectors, powerful brands, and outstanding international distribution. Now we must apply these competitive advantages more effectively in a promising but unforgiving global economy."
 Rice said Varity has entered 1992 with a cautious yet hopeful outlook. "While we expect to see moderate improvement in some key markets later this year, we have prepared ourselves for more of the same difficult economic conditions," he declared. "Varity will substantially improve its operating results this year whether or not there is an economic recovery."
 SEGMENT ANALYSIS
 KELSEY-HAYES --In the recent year, the Kelsey-Hayes automotive components group remained Varity's front-runner in sales and operating income, despite weak demand for cars and trucks. Kelsey-Hayes, a world leader in anti-lock brakes and aluminum wheels, posted operating income of $56 million in the latest 12 months. After eliminating the impact of the fourth quarter special restructuring charge, Kelsey-Hayes' operating income for 1991 was $106 million. This compares with 1990 operating income of $135 million. In the fourth quarter, Kelsey-Hayes recorded an operating loss of $22 million (operating income of $28 million after eliminating the impact of the restructuring charge), against operating income of $36 million in the year-ago period.
 Rice said Kelsey-Hayes' dominant position in the fast-growing market for anti-lock brake systems is encouraging. In late 1991 Kelsey-Hayes introduced a compact, lower-cost four-wheel ABS that is compatible with any passenger car or light truck in the world; this was quickly followed by a traction control package for the new ABS. Kelsey-Hayes has formed a joint venture to manufacture anti-lock brakes in Japan, and arrangements for European production are progressing. North American consumption of four-wheel ABS is expected to rise 45 percent annually through the 1996 model year, and the Varity unit intends to fulfill a significant share of this increasing demand.
 PERKINS -- Results of the Perkins diesel engine business were affected unfavorably by the prolonged recession in the United Kingdom and a four week strike in the third quarter of 1991. Operating income for 1991 was $23 million ($35 million after eliminating the impact of the fourth quarter special charge) in contrast to last year's operating income of $61 million. In the fourth quarter, diesel engine operating income was $8 million ($20 million excluding the impact of the restructuring charge); this compares with year-earlier operating income of $3 million. A Perkins unit, Pacoma hydraulic products, incurred a 12-month operating loss of $16 million; this compares with last year's operating income of $3 million. Pacoma has undertaken major initiatives to restore profitability, including a reduction of 30 percent in the labor force, an enhanced product mix and improved inventory controls.
 In the near term, Perkins foresees continued sluggish demand, but the unit's prospects were recently enhanced by a long-term supply agreement with Caterpillar Inc. Over the next 10 years, Perkins sales under this contract are estimated at $1 billion. Perkins is also encouraged by early market reaction to a new heavy-duty engine for long-haul trucks.
 MASSEY FERGUSON -- The Massey Ferguson farm and industrial machinery group suffered from a further 10 percent decline in world industry demand for agricultural equipment. In 1991 the unit registered an operating loss of $61 million (a loss of $17 million after eliminating the impact of the fourth quarter special restructuring charge), compared with operating income of $60 million a year ago. Latest fourth quarter results showed an operating loss of $46 million (a loss of $2 million after excluding the impact of the restructuring charge), compared with operating income of $5 million in the year-ago period.
 Massey Ferguson, projecting acceleration in Europe's movement toward consolidation of small farms into larger units, added two models to its range of higher-powered, computerized tractors in 1991. Despite intense price competition in most major markets, Massey Ferguson's global market share increased by one percentage point to approximately 17 percent in the latest year.
 VARITY'S NET LOSS AT $178 MILLION
 IN 1991 AFTER $108 MILLION CHARGE
 FOR MAJOR RESTRUCTURING ACTIONS
 Quarter to Jan 31 (A) 1992 1991
 Sales and revenues USD 899,500,000 896,300,000
 Net income (loss) (115,300,000) 19,100,000
 Preferred share dividends 4,600,000 4,400,000
 Share earnings (loss)
 Primary (4.80) 0.59
 Fully diluted (4.80) x 0.56
 Average shares 24,969,000 24,943,000
 Year to Jan 31 (A) 1992 1991
 Sales and revenues USD 3,169,100,000 3,616,300,000
 Net income (loss) (178,000,000) 94,400,000
 Preferred share dividends 18,500,000 18,100,000
 Share earnings (loss)
 Primary (7.87) 3.06
 Fully diluted (7.87) x 2.77
 Average shares 24,955,000 24,927,000
 (A) -- All amounts for previous periods have been restated to reflect the company's adoption of U.S. generally accepted accounting principles (GAAP) as a result of its reincorporation in the U.S. on July 31, 1991. Until then the company had reported its financial results under Canadian GAAP. Per share earnings and average common shares outstanding have been restated to reflect a one-for-10 reverse split of common shares, effective Aug. 1, 1991.
 x anti-dilutive
 -0- 3/26/92
 /CONTACT: Andrea S. Rosen of Varity Corporation, 716-888-8037/
 (VAT) CO: Varity Corporation ST: New York IN: AUT SU: ERN


KK -- CL002 -- 1828 03/26/92 09:08 EST
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