On a net basis, CNH reported a fourth quarter loss of $155 million, compared to a loss of $134 million, for the fourth quarter of 2000, as the company cut production significantly in order to reduce company and dealer inventories, especially in construction equipment. The loss per share, before restructuring, was $.35, within expectations, despite the production cuts and provision for a pretax loss of approximately $15 million ($.03 per share) related to the recent devaluation of the Argentine peso and the resulting economic uncertainty in that country. On a net basis, the loss per share was $.56, compared to a loss of $.48 per share for the fourth quarter of 2000.

For the full year 2001, consolidated revenues totaled $9.715 billion compared to $10.041 billion in 2000. Adjusted for the adverse impact of foreign exchange rates ($311 million) and divestitures ($351 million), consolidated revenues rose by 3% compared to 2000, despite a declining construction equipment market.

Operating earnings for the year increased significantly to $245 million, up 54% compared to $159 million in 2000. Improvements in the company's agricultural business along with the achievement of planned profit improvement targets more than offset the significant drop in profitability from construction equipment. The loss per share, before restructuring, was $.91 in 2001, compared to a loss of $1.26 in 2000.

"Our premier agricultural equipment brands, Case IH and New Holland, have delivered another quarter of significant growth in markets around the world," Paolo Monferino, CNH president and chief executive officer, said. "We have regained share lost through required divestitures and competitive pressure in the early months after the merger. Thanks to the launch of the first of our new products, and thanks to the profit improvement actions we have taken, we increased our operating earnings significantly in 2001 in spite of global weakness in the agricultural equipment industry and a decline in the construction equipment industry.

"In 2002 we intend to do it again, for the third year in a row, even though we do not anticipate any significant improvement in the industry. We are well positioned to grow in 2002, with more new products and services for our customers. On the construction equipment side, we have started 2002 by finalizing our joint venture agreement with Kobelco, giving us full access to Asian markets and a stronger position in North America and Western Europe. Because we have aggressively pursued our opportunities for merger-related profit improvements, we expect to achieve our $600 million target ahead of schedule."

Equipment Operations Fourth Quarter Performance
Fourth quarter net sales from Equipment Operations rose by 7% to $2.236 billion, compared to $2.096 billion for the same period in 2000. Revenues from sales of agricultural equipment were up 14% compared to the same period in 2000. In North America, the company achieved share gains in nearly all product segments, with the biggest gains coming in the high horsepower tractor segments. CNH also recorded share gains in Latin America, Africa, and the Asia Pacific region. In Western Europe, where the company is market leader, retail unit sales declined slightly more than the industry, due mainly to the impact of divestitures. During the quarter, CNH under-produced retail demand by 4%.

Compared to the fourth quarter of 2000, construction equipment revenues were down 6%. In North America, retail sales of construction equipment were essentially unchanged, while share gains in Latin America, Africa and the Asia Pacific region offset modest declines in Western Europe. During the quarter, CNH reduced both company and dealer inventories, under-producing retail demand by 28%.

Holding production levels significantly below retail sales in the fourth quarter adversely impacted the Equipment Operations' gross margin, largely through an unfavorable mix and under-absorption of fixed costs.

Compared to the fourth quarter of 2000, Equipment Operations' SG&A expenses declined as a percentage of revenues due mainly to the company's success in implementing its merger-related profit improvement initiatives on schedule.

During the quarter, CNH completed the closure of its Sorocaba, Brazil facility, and three parts depots in Latin America.

Equipment Operations Full Year Performance
Net sales from Equipment Operations in 2001 were $9.030 billion, compared to $9.337 billion in the prior year. Adjusted for the impact of unfavorable exchange rates and divestitures, net sales rose by 4% compared to 2000.

Sales of agricultural equipment grew significantly during the year, more than offsetting revenue lost through government-mandated divestitures, while sales of construction equipment, which carry higher average margins, declined with the industry. The combination of lower volumes, unfavorable mix, and adverse currency impact offset margin improvements achieved through CNH's merger-related profit improvement initiatives.

CNH's merger-related profit improvement initiatives totaled $83 million in the fourth quarter, bringing the total for the full year to $278 million. Since the merger, the company has achieved a total of $433 million in merger-related profit improvements.

The company's industrial operating margin for 2001 improved to $223 million, up 30% compared to $172 million in 2000.

During the fourth quarter, the company's employment level was reduced by approximately 400 personnel, ending the year at approximately 28,100. During 2001, divestitures accounted for a reduction of approximately 1,300 personnel. Total employment has now been reduced by approximately 7,900, or 22%, since the merger; salaried employment has been reduced by 25%.

Financial Services
In the fourth quarter of 2001, CNH Capital completed its transformation into a financial services company dedicated solely to the support of CNH dealers and customers across all its brands. In the final phase of the transition, begun in the first quarter of 2001, CNH Capital exited the commercial lending business, ended retail financing activities outside its own dealer networks, and reorganized its European businesses to better support the company's customers and dealers.

During the fourth quarter, the company recorded additional loss provisions related to loans in the non-core businesses. This was partially offset by a gain resulting from the difference in the timing of the company's ABS transactions in 2001 compared to 2000. As a result, the Financial Services Operations reported a net loss of $7 million for the fourth quarter of 2001 compared to a net loss of $13 million for the same period in 2000. Originations in the core business were up 6% compared to the fourth quarter of 2000.

For the full year, CNH Capital reported net income of $4 million, compared to net income of $26 million in 2000. For the year, the company's loan loss provisions were higher by approximately $30 million, on a pre-tax basis, mainly due to loans made in the non-core businesses.

Balance Sheet and Cash Flow
The year-over-year increase in net debt at December 31, 2001, was due mainly to the combination of expenditures for property, plant and equipment, cash restructuring, and the annual dividend. Net of depreciation and amortization expenses the cash impact of the net loss was essentially breakeven. The year-over-year decline in equity was also due to additional minimum pension liability requirements of approximately $117 million and the impact of adverse foreign exchange rates of about $110 million.

Market Outlook for Agricultural Equipment
In 2002 CNH anticipates that industry sales of agricultural equipment will be slightly lower than the levels seen in 2001. In North America, the company expects total industry sales to be relatively flat in the first quarter followed by a slight decline in industry sales through the balance of the year. Sales of under 40 horsepower tractors, which closely follow consumer confidence indicators, are expected to remain somewhat below 2001 levels throughout the year, with some improvement in the second half. Sales of over 40 horsepower tractors are expected to decline after the first quarter, reflecting the uncertainty generated by the protracted debate surrounding the US farm bill. In Latin America, CNH expects industry sales to be down by about 5% from 2001 levels, reflecting the impact of the devaluation of the Argentine peso and the uncertainty surrounding continued subsidized financing in Brazil. Sales in Western Europe are expected to decline slightly.

Market Outlook for Construction Equipment
Across all the markets it serves, with the possible exception of Latin America, CNH expects industry sales of construction equipment to be down by as much as 15% from 2001 levels during the first half of the year. Expected improvements in economic conditions, if accompanied by increases in infrastructure spending, may result in improved second half industry sales levels, perhaps approaching 2001 levels.

CNH Outlook for the Current Quarter
For the first quarter of 2002, CNH expects revenues to improve, as CNH's agricultural equipment business continues to grow, and the newly acquired Kobelco operations begin to contribute incremental revenue in North America. The company intends to cut production and wholesales of construction equipment by over 25% compared to the first quarter of 2001, resulting in lower dealer and company inventory levels. The company expects that there will be pressure on margins, due to mix and capacity under-utilization. On a pre-tax basis, earnings in the first quarter will be negatively impacted by approximately $17 million of increased employee benefit and pension costs. As a result, CNH expects to report a loss for the quarter of between $.20 and $.30 per share, before restructuring and without goodwill amortization. This compares to a loss per share of $.17 in the first quarter of 2001, before restructuring and goodwill.

CNH Outlook for 2002
While the pressure on margins will likely continue into the second quarter, CNH believes that the growing strength of its global agricultural business, along with possible second-half improvements in the construction equipment industry, will contribute significantly to the company's bottom line in the second half of the year. Based on the progress achieved in the company's accelerated profit improvement actions during the second half of 2001, CNH now expects to achieve most of the remaining $170 million in merger-related profit improvements in 2002, bringing the company to its $600 million target ahead of schedule.

Overall, and for the third year in a row, CNH expects to record improved bottom line performance in spite of weakness in the agricultural equipment industry and a declining market for construction equipment. Under the current market scenario, the company anticipates achieving a considerable improvement in its industrial operating margin for the year. With significant improvement anticipated in Financial Services' contribution to the bottom line, and lower interest rates compared to 2001, CNH expects to reduce its net loss substantially in 2002, before restructuring and without goodwill amortization.

Through the company's supply chain initiatives, as well as the reengineering of other processes, CNH believes that significant reductions in working capital may be achieved during 2002. Specifically, inventories are targeted for a reduction of $300 million, year-over-year, mostly in construction equipment inventories. CNH expects to reduce company and dealer inventories of agricultural equipment, already well below industry averages, on a selective basis.