New Holland Reports Third Quarter Profit of $39 Million

AMSTERDAM, Netherlands (PROTEXT) - * Third quarter earnings per share (US GAAP) totaled $.25, bringing EPS for the first nine months of 1999 to $1.23. * Consolidated net revenues totaled $1.3 billion, up 2% compared to the third quarter of 1998. * New Holland's acquisition of Case Corporation is on schedule. * New Holland joint venture in China begins operations. "New Holland's inherent strengths have continued to serve us well in a difficult market," Umberto Quadrino, New Holland's Chief Executive Officer said. "Our product and geographic balance has reduced our exposure and enabled us to capitalize on stable and growing markets and product segments around the world. "The restructuring programs we launched a year ago contributed significantly to our bottom line in the third quarter. Tight control of costs across our operations has produced the best margin in the industry, and reduced overheads in our base business below 1998 levels. As a result, we have been able to sustain our investment in new products, services, and markets while delivering a return to our shareholders that compares very favorably within the industry. "Once the review process has been completed by the European Union and the United States, a new $12 billion company will be formed, delivering value to customers through unparalleled choice in innovative products and services. Present in over 160 countries, New Holland and Case combined will serve more customers than any other company in the industry. Even more balanced across markets and products, with tremendous opportunities for operating synergies, the combined company is well positioned to deliver outstanding shareholder value in the years ahead." New Holland's bottom line benefits from its global balance. New Holland N.V. (NYSE: NH), one of the world's leading producers of agricultural and construction equipment, today reported unaudited results for the third quarter of 1999. Third quarter earnings per share (US GAAP) totaled $.25, compared to $.33 per share in 1998. Earnings per share (US GAAP) for the first nine months of 1999 were $1.23, compared to $1.93 in 1998. The Company's accounts are prepared in accordance with International Accounting Standards (IAS). Earnings per share reported above are calculated using net income in accordance with United States Generally Accepted Accounting Principles (US GAAP). Third quarter consolidated net income totaled $39 million, compared to $57 million in the same period last year, down 31%. Consolidated net income for the first nine months totaled $191 million. Worldwide consolidated net sales and revenues for the third quarter totaled $1.308 billion, compared to $1.277 billion in 1998. Revenues for the first nine months were $4.268 billion, compared to $4.488 billion last year. New Holland's 1999 net sales and revenues benefited significantly from revenues generated by acquisitions, mainly Orenstein & Koppel (O&K). The relative strength of the dollar reduced top line performance by about $68 million in the quarter and $151 million year-to-date. Currency had a minor impact on net income for the quarter. New Products for World Agriculture. During the quarter New Holland extended the availability of many of the Company's newest products to the markets of the Asia/Pacific region. All three of the Company's new small and medium range tractor series were launched in selected markets including the TS Series (75 to 100 horsepower) in Malaysia and Thailand. In both Korea and Taiwan, New Holland introduced the TL Series (65 to 95 horsepower), along with the TN Series (35 to 88 horsepower) in Taiwan only. In Australia, New Holland launched its full line of telescopic handlers, while in New Zealand, the Company introduced its new FX28 and FX38 self-propelled forage harvesters. Europe saw the introduction of New Holland's latest large square balers featuring the industry's first self-steering tandem axle for superb driving characteristics in the field and on the road. With enhancements to the InfoView(TM) monitor and a redesigned CropCutter(TM) for the shortest cut on the market, the four models offer European farmers the most advanced balers available. Equipment Operations. Third quarter net sales from Equipment Operations totaled $1.241 billion, compared to $1.215 billion for the same period in 1998. During the quarter, the decline in revenue resulting from the current unfavorable conditions in the agricultural equipment industry was more than offset by the additional revenue resulting from Company's acquisition of O&K. Equipment Operations net sales for the first nine months were $4.082 billion compared to $4.317 billion in 1998. Equipment Operations gross margin as a percent of net sales of equipment was 20.8% in the third quarter of 1999, down from 22.4% for the third quarter of 1998. For the quarter, lower volumes and adverse mix accounted for nearly all the year-over- year drop. During the quarter, New Holland under-produced retail demand by 14% worldwide. R&D expenses rose by 14%, compared to 1998, due to the acquisition of O&K, and to ongoing higher levels of new product development activity, particularly for EEA and new markets. SG&A expenses as a percent of net sales of equipment also increased compared to the third quarter of 1998. The additional expenses attributable to recent acquisitions, particularly O&K, and higher levels of funding for the Company's Supply Chain Management Project were mostly offset by the benefits of the Company's restructuring and cost savings initiatives, and favorable currency effects. Excluding acquisitions, SG&A expenses declined compared to the same period last year. Operating income for the third quarter was $45 million, compared to $80 million in 1998. In the third quarter, the Company estimates that the strength of the US dollar had a minimal impact on operating income. Operating income in the period benefited from the favorable re-evaluation of certain reserves. For the first nine months, operating income totaled $268 million, compared to $462 million last year. Financial Services. Third quarter finance and interest income declined by 5%, from $98 million in 1998 to $93 million, due mainly to the reduction of dealer receivables as the Company has continued to align dealer inventories to market demand. In the United States and Canada, Financial Services third quarter acquisitions of new retail and lease receivables increased by 3%, to $330 million, compared with 1998 levels. In Europe, third quarter acquisitions of retail and lease receivables by the Company's joint venture with Barclays Bank increased by 16% to $135 million, compared to the third quarter of 1998, as Financial Services continues its rapid expansion in the markets of continental Europe. Effective Tax Rate. The Company's effective consolidated tax rate for the first nine months of 1999 was 31%, down from 34% in 1998 due to shifts in the geographic mix of profits. Changes in Inventories and Receivables. Equipment Operations inventories at September 30, 1999 were down by over $230 million compared to December 31, 1998 levels. This reflects favorable currency translation and the Company's actions to align inventories with market conditions. Trade and other receivables increased by $164 million due mainly to the $191 million one-time reclassification from finance to trade receivables reported in the first quarter, partly offset by currency. China Joint Venture Begins Operations. In September, Harbin New Holland Beidahuang Tractor Ltd. began operations in the People's Republic of China. The joint venture will produce New Holland agricultural tractors in the 100-180 horsepower range for sale in the People's Republic of China and for export. Preparation of the factory is scheduled during the coming winter months, with production beginning in the spring of 2000. New Holland owns approximately 70% of the joint venture with the Heilongjiang Beidahuang State Farm Group holding the remaining 30%. Market Outlook: Agricultural Equipment. "Our outlook for 1999 has not changed appreciably since our mid-year forecast," Tom Kennedy, New Holland's Chief Marketing Officer, said. In North America, industry sales of big tractors and combines are expected to be down by over 35% for the year. Sales of agricultural tractors in Western Europe should end the year up slightly compared to 1998, with particularly strong performances in France and Italy. Combine harvester sales for season '99 were down by about 10%, however. In Brazil we expect the industry to end the year at, or slightly above, last year's levels, while the other markets of Latin America will likely be down by about 40%. The Africa and the Middle East region will be well below 1998 levels. Many of the markets in the Asia Pacific region are showing modest improvement, and we anticipate a recovery of about 5% for the year. "No major changes are anticipated in 2000. Industry sales of big equipment in North America should remain at or near this year's level, while sales in Western Europe should be down marginally. In Brazil, the market is expected to be volatile around 1999 levels, while the other markets of Latin America should show modest improvement. The Asia Pacific region should continue the slow recovery seen during the second half of 1999." Market Outlook: Construction Equipment. In North America the outlook remains positive for skid steer loaders, while sales of backhoe loaders and heavy equipment are expected to be lower year-over-year. Latin America, with the exception of Mexico, remains depressed with no change expected for the balance of 1999. The Brazilian economy is showing signs of recovery at a faster pace than forecast, but significant effects on demand are not expected until next year. In Western Europe industry outlook for 1999 remains positive with strong growth in Italy, France, Spain and Germany and higher demand in light machinery. In Africa and the Middle East the outlook remains negative. In Japan the market remains relatively weak and for 1999 the industry is expected to remain close to 1998 levels. China and India continue to register solid growth due to infrastructure work. The recovery in most of the remaining markets of Asia is proceeding somewhat faster than expected. Certain information included in this release is forward- looking and is subject to important risks and uncertainties that could cause actual results to differ materially. The Company's businesses include its agricultural and construction equipment operations as well as its financial services operations, and its outlook is predominantly based on its interpretation of what it considers to be the key economic factors affecting these businesses. Forward-looking statements with regard to the Company's businesses involve a number of important factors that are subject to change, including: the many interrelated factors that affect farmers' confidence, including world-wide demand for agricultural products, world grain stocks, commodities prices, weather, animal diseases, crop pests, harvest yields, real estate values and governmental farm programs; general economic conditions (including housing starts); legislation, particularly that relating to agriculture, the environment, trade and commerce and infrastructure development; actions of competitors in the various industries in which the Company competes; production difficulties, including capacity and supply constraints and excess inventory levels; labor relations; interest rates and currency exchange rates; political and civil unrest; and other risks and uncertainties. New Holland is a world leader in the design and manufacture of a full line of agricultural and construction equipment, and offers a rapidly expanding line of financial services in many of its markets. The Company and its joint venture partners operate in 160 countries through a network of approximately 6,100 dealers and distributors. New Holland N.V. Consolidated Statements of Income (IAS) (Unaudited) (in millions of dollars, except per share amounts) CONSOLIDATED EQUIPMENT OPERATIONS** FINANCIAL SERVICES For the 3 months For the 3 months For the 3 months ended Sept. 30, ended Sept. 30, ended Sept. 30, 1999 1998* 1999 1998 1999 1998* Net Sales and Revenues: Net sales of equipment 1,240.5 1,214.6 1,240.5 1,214.6 -- -- Finance and interest inc. 67.0 62.8 -- -- 92.5 97.9 Total net sales and revenues 1,307.5 1,277.4 1,240.5 1,214.6 92.5 97.9 Costs and Expenses: Cost of goods sold 982.3 942.1 982.3 942.1 -- -- R&D expenses 42.9 37.6 42.9 37.6 -- -- SG&A expenses 187.2 171.1 172.9 163.1 14.9 10.6 Net finance and interest exp. 53.9 52.5 22.7 22.3 56.1 62.7 Other expenses (income), net (1.2) (6.2) (2.6) (7.7) 1.4 1.5 Total cost and expenses 1,265.1 1,197.1 1,218.2 1,157.4 72.4 74.8 Income from unconsolidated subs. and affiliates - Fin. Serv. subs. and aff. 0.3 (0.1) 14.2 14.1 0.3 (0.1) - Other affiliates 4.4 6.1 4.4 6.1 -- -- Income before tax, min. int. 47.1 86.3 40.9 77.4 20.4 23.0 Prov. for income taxes 7.6 29.1 1.4 20.2 6.2 8.9 Minority interest 0.4 0.6 0.4 0.6 -- -- Net income 39.1 56.6 39.1 56.6 14.2 14.1 Net income per share 0.26 0.38 Shares outstanding (mil) 149 149 Reconciliation with US GAAP Net income 39.1 56.6 Items increasing (decreasing) reported net income: Goodwill amortization (0.8) (0.8) Reduction in depr. of PP&E 0.3 0.3 Restruct. reserves reversal -- (3.0) Adjust. to pension reserves -- (1.2) Reversal of change in acc. princ. - post-retirement benefits (2.2) (2.2) Net income (US GAAP) 36.4 49.7 EPS (US GAAP) 0.25 0.33 Shares outstanding (mil) 149 149 * Certain 1998 amounts have been reclassified to conform to present year presentation ** Equipment Operations includes Financial Services on the equity basis. New Holland N.V. Consolidated Statements of Income (IAS) (Unaudited) (in millions of dollars, except per share amounts) CONSOLIDATED EQUIPMENT OPERATIONS** FINANCIAL SERVICES For the 9 months For the 9 months For the 9 months ended Sept. 30, ended Sept. 30, ended Sept. 30, 1999 1998* 1999 1998 1999 1998* Net Sales and Revenues: Net sales of equipment 4,082.1 4,316.8 4,082.1 4,316.8 -- -- Finance and interest inc. 185.5 170.9 -- -- 264.9 276.0 Total net sales and revenues 4,267.6 4,487.7 4,082.1 4,316.8 264.9 276.0 Costs and Expenses: Cost of goods sold 3,179.9 3,270.5 3,179.9 3,270.5 -- -- R&D expenses 127.5 110.4 127.5 110.4 -- -- SG&A expenses 550.5 513.6 510.2 482.4 42.5 33.9 Net finance and interest exp. 142.0 134.2 67.1 67.1 152.1 169.5 Other expenses (income), net 1.0 (3.6) (3.8) (8.6) 4.8 5.0 Total cost and expenses 4,000.9 4,025.1 3,880.9 3,921.8 199.4 208.4 Income from unconsolidated subs. and affiliates - Fin. Serv. subs. and aff. 0.7 0.2 43.0 38.2 0.7 0.2 - Other affiliates 12.1 4.0 12.1 4.0 -- -- Income before tax, min. int. and cum. effect of change in accounting principle 279.5 466.8 256.3 437.2 66.2 67.8 Prov. for income taxes 86.6 156.9 63.4 130.5 23.2 26.4 Minority interest 2.1 2.0 2.1 2.0 -- -- Net income before cum. effect of change in acc. principle 190.8 307.9 190.8 304.7 43.0 41.4 Cumulative effect of change in accounting principle -- 260.4 -- 263.6 -- (3.2) Net income 190.8 568.3 190.8 568.3 43.0 38.2 Net income per share, before cum effect of change in accounting princ. 1.28 2.07 Net income per share of cum. effect of change in accounting princ. -- 1.74 Net income per share 1.28 3.81 Shares outstanding (mil) 149 149 Reconciliation with US GAAP Net income 190.8 568.3 Items increasing (decreasing) reported net income: Goodwill amortization (2.4) (2.4) Reduction in depr. of PP&E 1.0 1.0 Restruct. reserves reversal -- (9.0) Adjust. to pension reserves -- (3.2) Reversal of change in acc. princ. - post-retirement benefits (6.8) (6.8) Reversal of change in acc. princ. deferred taxes -- (260.4) Net income (US GAAP) 182.6 287.5 EPS (US GAAP) 1.23 1.93 Shares outstanding (mil) 149 149 * Certain 1998 amounts have been reclassified to conform to present year presentation. ** Equipment Operations includes Financial Services on the equity basis. New Holland N.V. Condensed Consolidated Balance Sheet (IAS) ($ millions) CONSOLIDATED EQUIPMENT OPERATIONS** FINANCIAL SERVICES Sep 30 Dec 31 Sep 30 Dec 31 Sep 30 Dec 31 1999 1998 1999 1998 1999 1998 ASSETS Cash and cash equivalents 705.6 676.7 661.6 587.5 44.0 89.2 Finance receivables 2,640.3 2,320.9 370.5 505.0 2,428.6 2,320.0 Trade and other receivables 1,197.2 1,194.8 991.9 828.3 219.5 376.0 Inventories 1,290.6 1,518.0 1,280.2 1,512.1 10.4 5.9 Property, plant and equipment, net 684.0 779.6 646.8 757.7 37.2 21.9 Investments in uncons. subs. and affiliates 213.9 215.3 566.9 517.2 7.1 6.4 Other assets 96.2 175.5 80.1 151.8 43.9 44.9 Deferred tax assets, net 214.6 224.6 216.2 226.2 -- -- Total assets 7,042.4 7,105.4 4,814.2 5,085.8 2,790.7 2,864.3 LIABILITIES AND SHAREHOLDERS' EQUITY Short term borrowings 1,948.8 1,765.2 611.7 582.8 1,495.9 1,686.5 Accounts payable 834.6 899.3 834.3 898.8 3.3 0.5 Accrued expenses and def. income 911.8 1,020.8 924.2 1,028.7 26.6 22.8 Accrued income taxes 104.0 78.5 102.3 78.5 3.3 1.6 Medium and long term borrowings 1,004.1 927.6 113.9 95.0 890.2 832.6 Retirement benefit accruals 615.9 653.0 604.6 641.5 11.3 11.5 Other liabilities 110.1 141.4 110.1 140.9 -- 0.5 Total liabilities 5,529.3 5,485.8 3,301.1 3,466.2 2,430.6 2,556.0 Minority interest 63.7 73.2 63.7 73.2 -- -- Shareholders' equity 1,449.4 1,546.4 1,449.4 1,546.4 360.1 308.3 Total liabilities and shareholders' equity 7,042.4 7,105.4 4,814.2 5,085.8 2,790.7 2,864.3 Reconciliation with US GAAP Shareholders'equity in accordance with IAS 1,449.4 1,546.4 Reinstatement of goodwill previously charged to equity 189.4 191.8 Elimination of fixed assets revaluation (21.0) (20.6) Reversal of change in acc. princ. - post-retirement benefits (FAS 106) 75.5 82.3 Reversal of cum. acc. change for postretirement benefits (IAS 19 revised) 60.2 -- Shareholders' equity in accordance with US GAAP 1,753.5 1,799.9 * Equipment Operations includes Financial Services on the equity basis. New Holland N.V. Net Sales of Equipment ($ millions) For the 3 months ended September 30 1999 1998 % Change By Product Line Agricultural Equipment (a) 621.3 695.2 -11% Construction Equipment 372.6 283.9 +31% Replacement Parts 246.6 235.5 + 5% Total 1,240.5 1,214.6 + 2% By Geographic Area (b) Europe 621.9 521.7 +19% North America 406.5 427.1 - 5% Brazil 47.6 92.3 -48% Rest of World 164.5 173.5 - 5% Total 1,240.5 1,214.6 + 2% For the 9 months ended September 30 1999 1998 % Change By Product Line Agricultural Equipment (a) 2,265.4 2,792.2 -19% Construction Equipment 1,113.4 875.9 +27% Replacement Parts 703.3 648.7 + 8% Total 4,082.1 4,316.8 - 5% By Geographic Area (b) Europe 2,072.3 1,728.1 +20% North America 1,350.5 1,771.2 -24% Brazil 172.7 282.2 -39% Rest of World 486.6 535.3 - 9% Total 4,082.1 4,316.8 - 5% (a) Includes commission on sales of OEM units. (b) Includes sales of equipment and parts made in their domestic markets by New Holland companies located in such markets, plus exports from other New Holland companies in such countries. ots Original Text Service: New Holland N.V. Internet: http://www.newsaktuell.de Contact: Jeffrey Walsh, media, +44- 181-479-8809, or fax, +44-181-479-8626, or jwalsh@newholland.com, or Albert Trefts, Jr., investors, +44-181-479-8606, or fax, +44- 181-479-8658, or atrefts@newholland.com, both of New Holland Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. Protext is a commercial service providing distribution of press releases from clients, who are identified in the text of Protext reports and who bear full responsibility for their contents. PROTEXT