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 BUFFALO, N.Y., Aug. 23 /PRNewswire/ -- Varity Corporation (NYSE: VAT) announced today that net income before an extraordinary loss for the second quarter was $16.1 million, 14 percent above results of a year ago. Earnings per share of $.34 before the extraordinary loss were below those of last year of $.37, as more than eight million additional shares were outstanding, principally resulting from equity offerings.
 During the second quarter Varity recorded an extraordinary loss of $1.7 million, or $.05 per share, for costs associated with the early redemption of debt. After the loss, net income was $14.4 million, versus $14.1 million reported last year. Earnings per share after th charge were $.29. Sales of $661 million were well below $891 million reported a year ago, reflecting the disposition of several businesses. After adjusting the year-ago second quarter for these dispositions, sales would have been $690 million.
 Operating income in the quarter was $34 million, versus $53 million last year. However, after adjusting 1992 results for dispositions and the impact of the adoption of SFAS No. 106, operating income rose 26 percent above the adjusted $27 million in 1992, fueled by a strong performance at Varity's automotive components unit, Kelsey-Hayes.
 "Kelsey-Hayes, which has emerged as one of the fastest-growing automotive suppliers in the world, was responsible for most of our operating performance improvement in the quarter," said Victor Rice, chairman and chief executive officer of Varity. "Additionally, we continued to reap the rewards of our recently-completed restructuring and financing actions that have reduced consolidated debt by $1 billion over the last year. Interest expense in the second quarter was down 73 percent from a year ago for a savings of more than $25 million," he said.
 Although North American light vehicle production increased five percent in Varity's second fiscal quarter ended July 31, Kelsey-Hayes' sales rose 12 percent, due to increased penetration of anti-lock braking systems (ABS) on new models and strong demand for car and light truck braking components. Kelsey-Hayes operating income was 46 percent above 1992 proforma results adjusted for divestitures and SFAS No. 106. Improved operating efficiencies resulted in higher margins than last year, despite costs associated with the start up of European operations, without offsetting revenues, in support of the previously-announced major new contracts awarded to Kelsey-Hayes for the EBC 10 ABS system. Kelsey-Hayes also recently announced that it would build a $40 million ABS manufacturing facility in Michigan, with production scheduled to begin in the summer of 1994.
 Although the European farm equipment industry has declined more than 10 percent from last year, Massey Ferguson rebounded from a first- quarter loss to record $4 million in operating earnings, the same as proforma income in the quarter last year. Massey Ferguson also has gained share in Europe this year.
 Earnings of $11 million at Perkins were even with the same period a year ago. The strengthening of the dollar against the British pound affected reported results at Perkins, based in the United Kingdom. Adjusting for exchange rate changes versus 1992, both sales and earnings were above the prior-year period.
 Perkins experienced increased demand in its major market, the United Kingdom, particularly for diesel engines for generator sets. Margins expanded as a result of manufacturing efficiencies and an improved mix of engines that produced higher average revenues per unit.
 "Kelsey-Hayes will continue to participate in the current resurgence of the U.S. automotive industry in the second half of the year, while Perkins' order book indicates healthy earnings growth," said Rice. "And, even in the face of a continuing decline in the European farm equipment market, we expect Massey Ferguson to remain profitable in 1993," he said.
 During the quarter Varity redeemed three Kelsey-Hayes long-term public debt issues which carried a weighted average interest rate of 10.8 percent, incurring an extraordinary loss of $1.7 million for the early redemption of debt. "After reducing debt by $1 billion in the last year, our balance sheet has never been healthier," said Rice. "Varity's long term debt to capitalization ratio is 23 percent, despite having incurred a one-time charge of $146.1 million in the first quarter for SFAS No. 106."
 In the first half of fiscal 1993 Varity reported income before the extraordinary loss and cumulative effect of changes in accounting principles of $27.1 million, or $.55 per share, versus $11.7 million, or $.10 per share a year ago.
 1993 1992
 Quarter to July 31
 Sales and revenues US$660,900,000 891,400,000
 Net income 14,400,000(B) 14,100,000
 Preferred share dividends 4,600,000 4,700,000
 Per share earnings:
 Before extraordinary loss:
 Primary 0.34 0.37
 Fully diluted 0.34 0.37
 Extraordinary loss:
 Primary (0.05) ---
 Fully diluted (0.05)(A) ---
 Net income:
 Primary 0.29 0.37
 Fully diluted 0.29 0.37
 Average shares 33,688,000 25,488,000
 Six months to July 31
 Sales and revenues US$1,305,900,000 1,715,200,000
 Net income (loss) (120,700,000)(C) 11,700,000
 Preferred share dividends 9,200,000 9,300,000
 Per share earnings (loss):
 Before extraordinary loss and
 cumulative effect of changes
 in accounting principles:
 Primary 0.55 0.10
 Fully diluted 0.55 0.10
 Extraordinary loss:
 Primary (0.05) ---
 Fully diluted (0.05)(A) ---
 Cumulative effect of changes
 in accounting principles:
 Primary (4.49) ---
 Fully diluted (4.49)(A) ---
 Net income (loss):
 Primary (3.99) 0.10
 Fully diluted (3.99)(A) 0.10
 Average shares 32,541,000 25,263,000
 (A) -- anti-dilutive
 (B) -- After $1.7 million extraordinary loss.
 (C) -- After $146.1 million charge for cumulative effect of accounting changes and $1.7 million extraordinary loss.
 -0- 8/23/93
 /CONTACT: Jerry Hostetter of Varity Corporation, 716-888-8073/

CO: Varity Corporation ST: New York IN: AUT SU: ERN

AR -- CL003 -- 4907 08/23/93 08:06 EDT
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Publication:PR Newswire
Date:Aug 23, 1993

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