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VARITY ANNOUNCES SECOND QUARTER EARNINGS; COST REDUCTIONS PRODUCE SIGNIFICANTLY IMPROVED RESULTS

 VARITY ANNOUNCES SECOND QUARTER EARNINGS;
 COST REDUCTIONS PRODUCE SIGNIFICANTLY IMPROVED RESULTS
 BUFFALO, N.Y., Aug. 26 /PRNewswire/ -- Varity Corporation (NYSE: VAT) today reported significantly improved net income for the second quarter of $14.1 million, or 37 cents per share, compared to a net loss of $7.6 million, or 49 cents per share in the same quarter a year ago. Sales and revenues were $891.4 million versus $830.5 million last year.
 For the six months ended July 31, net income was $11.7 million, or 10 cents per share, versus a net loss of $44.9 million, or $2.16 per share, in the first half of 1991. Sales and revenues were $1.7 billion, compared to $1.5 billion in the prior year.
 Second quarter results benefitted from a foreign exchange gain of $3.3 million, compared to a year-ago loss of $2.6 million. For the first six months the company reported a gain from foreign exchange of $3.9 million, in contrast to a loss of $15.3 million in the 1991 period.
 "Cost reduction actions contributed substantially to the profitability of all of Varity's businesses, particularly Massey Ferguson and Perkins, which are operating in European markets suffering from a deep recession," said Victor A. Rice, chairman and chief executive officer of Varity. "A bright spot was Massey Ferguson's return to profitability for the first time in a year, even though sales were down compared to last year, when adjusted for foreign exchange," he said.
 Earlier this year Varity announced that it would eliminate 1,300 jobs in order to improve operating efficiencies and lower annual operating costs by an estimated $45 million. Rice reported that the process was well underway and that nearly 800 jobs had been eliminated at the end of the quarter. He added that the cost reduction measures will have a meaningful impact on operations this year.
 Massey Ferguson reported operating income of $9 million on sales of $315 million, versus $1 million in income on sales of $291 million a year ago. The sales increase was entirely attributable to the weakening of the U.S. dollar versus European currencies. Adjusted for exchange rate changes, Massey Ferguson sales for the three-month period declined marginally from last year's levels. Market share gains were recorded in the United Kingdom, France and the United States. At the end of the quarter, Massey Ferguson unit inventories were below the levels of the same period a year ago.
 Perkins, a major producer of diesel engines, reported operating income of $12 million on sales of $190 million, compared to $14 million in operating income on sales of $178 million in the second quarter of last year. Results of the period last year reflect high military parts sales in connection with Operation Desert Storm. When adjusted for foreign exchange rate changes, 1992 second quarter sales were down approximately four percent versus a year ago, as demand in the industrial and construction sectors in Europe remained weak.
 Earnings of Kelsey-Hayes, a major supplier of conventional and anti- lock braking systems and aluminum and fabricated steel wheels to the automotive industry, rose to $33 million on sales of $385 million, compared to operating income of $31 million on sales of $359 million in the prior year. Sales and earnings grew seven percent in the quarter, although North American auto and light truck production grew only four percent.
 Varity's higher first-half results included the earnings turnaround at Massey Ferguson, a 36 percent rise in earnings at Kelsey-Hayes, and an 80 percent reduction of the year-earlier losses at the company's Pacoma hydraulic components unit. Operating efficiencies have been put in place at this unit that have significantly improved results after a loss in 1991.
 "Kelsey-Hayes continues to grow by gaining market share and increasing its penetration of the automotive industry worldwide," said Rice. "We have taken aggressive measures to lower costs in all our businesses and initiatives are in place to reduce them further. We will not realize the full benefits of these cost reductions until demand improves. These actions will keep Massey Ferguson competitive in an industry that is not forecast to grow and prepare Perkins to maximize its earnings potential once a cyclical rebound begins in Europe," he said.
 Rice said that the economic outlook remains very uncertain. "We see absolutely no sign of a recovery in Europe, where Massey Ferguson and Perkins conduct most of their business. Meanwhile, prospects for the U.S. automotive industry, upon which Kelsey-Hayes is dependent, are for modest growth, at best, for the remainder of the year."
 Varity Corporation (NYSE: VAT) had sales and revenues in 1991 of $3.2 billion and is one of the 150 largest U.S. industrial firms.
 Quarter to July 31 1992 1991
 Sales and revenues USD 891,400,000 830,500,000
 Net income (loss) 14,100,000 (7,600,000)
 Share earnings
 Primary .37 (.49)
 Fully diluted .37 (.49)x
 Average common shares 25,488,000 24,957,000
 Six months to July 31
 Sales and revenues USD 1,715,200,000 1,513,300,000
 Net income (loss) 11,700,000 (44,900,000)
 Share earnings
 Primary .10 (2.16)
 Fully diluted .10 (2.16)x
 Average common shares 25,263,000 24,952,000
 x - anti-dilutive
 -0- 8/26/92
 /CONTACT: Jerry Hostetter of Varity Corporation, 716-888-8073/
 (VAT) CO: Varity Corporation ST: New York IN: AUT SU: ERN


KK -- CL002 -- 3291 08/26/92 07:47 EDT
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Publication:PR Newswire
Date:Aug 26, 1992
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