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VARITY POSTS STRONG RECOVERY AND IMPROVES BALANCE SHEET IN 1992; OPERATING EARNINGS RISE 66 PERCENT BEFORE UNUSUAL CHARGES

 BUFFALO, N.Y., March 11 /PRNewswire/ -- Varity Corporation (NYSE: VAT) today reported net income for fiscal 1992 of $27 million, or $.32 per share, versus a prior-year loss of $178 million, or $7.87 per share, after a restructuring charge of $108.3 million. The 1992 results were affected by several unusual items recorded in the fourth quarter, including a $23.6 million loss associated with the sale of a Massey Ferguson unit, a $17.3 million gain from the sale of a majority ownership in Hayes Wheels and a $6.4 million extraordinary loss incurred from the early redemption of debt. Income before these one-time items was $39.7 million.
 "The underlying strength of Varity's recovery is evidenced in its operating income, which rose 66 percent on the year, excluding unusual charges," said Victor A. Rice, chairman and chief executive officer. All industrial segments achieved significant operating earnings gains in the year, he said. "Importantly, this improved performance occurred in economic conditions that were far from ideal," he said.
 Rice also noted that Varity had significantly improved its balance sheet during the year. "We have reduced our long-term debt-to- capitalization ratio to 36 percent from 64 percent and are well on our way to attaining a healthy, conservative balance sheet," said Rice.
 Excluding prior-year restructuring charges, Kelsey-Hayes operating earnings in 1992 grew 25 percent to $133 million on sales of $1.5 billion. Kelsey-Hayes benefitted from its strategic position as a major supplier of anti-lock braking systems (ABS), conventional brakes and wheels for light trucks, vans and sport utility vehicles, as North American industry production of these models increased 17 percent, compared to passenger car production growth of three percent. While operating in recessionary conditions in Europe, Perkins' earnings grew 31 percent, before restructuring charges in the prior year, while sales rose only four percent, due primarily to its continuing focus on cost reduction. Before unusual charges, Massey Ferguson remained cash generative and returned to profitability, posting operating income of $22 million, despite further weakening in the worldwide farm machinery industry, especially in its primary markets in Europe.
 Fourth Quarter Results Above Prior Year
 Fourth quarter net income was $4.8 million, or $.01 per share versus a loss a year ago of $115.3 million, or $4.80 per share. In the fourth quarter of fiscal 1991 Varity recorded a restructuring charge of $108.3 million. Three unusual items were recorded in the 1992 fourth quarter. A $23.6 million loss was associated with the sale of the Massey Ferguson North American distribution and finance business to AGCO Corporation. The $17.3 million gain resulted from the sale of 54 percent of the Kelsey-Hayes wheels business in the initial public offering of Hayes Wheels International. The previously announced $6.4 million extraordinary loss was incurred as a result of the early redemption of a $75 million issue of 14 percent senior subordinated notes. Fourth- quarter income before these one-time items was $17.5 million.
 In the fourth quarter Varity operating income, before unusual charges, increased 10 percent although sales decreased nine percent to $815 million. Kelsey-Hayes operating income before last year's restructuring charges increased 11 percent as a result of stronger auto production and higher ABS sales. As of Dec. 23, Varity no longer consolidates the results of Hayes Wheels International and began accounting for 46 percent of its earnings on an equity basis after the sale of the majority of the unit in an initial public offering. Additionally, after Dec. 23 Hayes Wheels sales and operating income were not included in segment results. Perkins' results were slightly below last year's fourth quarter, when recovery actions following settlement of a strike boosted sales and earnings. Earnings this year benefitted from a one-time shipment of military equipment. In the face of a severely declining farm equipment market in Europe, Massey Ferguson earned $6 million, before unusual charges, versus a loss of $2 million in the comparable quarter last year.
 Balance Sheet Improved
 Through a combination of public financings and private sales Varity raised net proceeds of approximately $550 million in 1992 to reduce debt and fund future growth. Additionally, as a result of the joint venture with AGCO in Massey Ferguson's North American equipment finance company, $300 million of debt was eliminated from the balance sheet. In 1992 the company reduced long-term debt by more than $550 million and lowered total debt by over $800 million.
 Ranges for SFAS 106 Obligation, Annual Expense Lowered
 In connection with Statement of Financial Accounting Standards (SFAS) No. 106, last year Varity made a preliminary estimate of its pre- tax transition obligation that ranged from $150 million to $275 million. It also estimated that its incremental annual expense would range from $10 million to $35 million on a pre-tax basis.
 As a result of cost reduction actions and the sales of businesses, the company now estimates that its pre-tax transition obligation ranges from $120 million to $140 million and that its incremental annual expense will range from $5 million to $10 million. The company will adopt SFAS No. 106 in the first quarter of fiscal 1993.
 Outlook for Further Improvement
 Looking forward to fiscal 1993, Rice said that the continuing weakness of the British Pound will benefit Perkins and Massey Ferguson earnings. He noted that recent new contracts with Caterpillar, Volvo Penta and Chrysler should produce incremental gains at Perkins, although no economic recovery in Europe is expected in the next year.
 "Intensive management actions and continued cost-cutting have positioned Massey Ferguson so that it will not be a drain on Varity resources in 1993, although we anticipate a continued downturn in the European farm equipment market," commented Rice. "It appears that North American automotive production schedules, particularly for light trucks, are well ahead of a year ago, which should mean gains at Kelsey-Hayes. Also, ABS sales will increase significantly in 1993," he said.
 "All in all, results for Varity in 1993 should be ahead of those of the year just completed," stated Rice.
 1992 VARITY CORPORATION RESULTS
 1993 1992
 Quarter to January 31
 Sales and revenues US$ 814,900,000 896,400,000
 Net income (loss) 4,800,000 (115,300,000)
 Preferred share dividends 4,600,000 4,600,000
 Share earnings (loss):
 Before extraordinary loss:
 Primary .23 (4.80)
 Fully diluted .23 (4.80)(A)
 Extraordinary loss:
 Primary (.22) --
 Fully diluted (.22) --
 Net income (loss):
 Primary .01 (4.80)
 Fully diluted .01 (4.80)(A)
 Average shares 28,961,000 24,969,000
 Year to January 31
 Sales and revenues US$ 3,374,500,000 3,169,100,000
 Net income (loss) 27,000,000 (178,000,000)
 Preferred share dividends 18,500,000 18,500,000
 Share earnings (loss):
 Before extraordinary loss:
 Primary .56 (7.87)
 Fully diluted .56 (7.87)(A)
 Extraordinary loss:
 Primary (.24) --
 Fully diluted (.24) --
 Net income (loss):
 Primary .32 (7.87)
 Fully diluted .32 (7.87)(A)
 Average shares 26,264,000 24,955,000
 (A) - Anti-dilutive
 -0- 3/11/93
 /CONTACT: Jerry Hostetter of Varity Corporation, 716-888-8073/
 (VAT)


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

KK -- CL004 -- 4948 03/11/93 07:52 EST
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Date:Mar 11, 1993
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