For the first six months of 2001, consolidated net revenues totaled $5.143 billion compared to revenues of $5.502 billion last year. During the first half of 2001 the adverse impact of foreign exchange rates on consolidated net revenues totaled approximately $220 million; divestitures accounted for a further negative impact of about $210 million. The company's industrial operating margin for the first six months was $245 million, compared to $168 million for the same period in 2000.

"In spite of the significant decline in the construction equipment industry, we have achieved our objectives for the second quarter," said Paolo Monferino, CNH president and chief executive officer. "Our sales of agricultural equipment have improved substantially, particularly in North America where we have posted significant share gains both in tractors and combine harvesters.

"Our restructuring is proceeding according to plan and we have achieved our synergy targets for the quarter. We have reduced our Equipment Operations SG&A expenses as a percent of net revenue, reduced company and dealer inventories, and maintained our gross margin in the face of an unfavorable product mix. We are confident we will achieve our full year objective of merger related profit improvements of $300 million."

Restructuring Actions and Synergies
During the second quarter, the company achieved merger-related profit improvements of approximately $66 million partly due to the company's initial successes in marketing its extensive product offering through its multiple distribution channels. In addition, cost savings were achieved through manufacturing efficiencies as well as reductions in material costs and SG&A expenses. As previously reported, the company has completed the sale of its Carr Hill facility in the United Kingdom. Merger-related profit improvements achieved during the first half of 2001 totaled $126 million.

On June 30, 2001, the company's employment level was approximately 28,800, down 900, or 3%, from 29,700 on March 31, 2001. The decrease includes over 200 personnel employed in the divested Carr Hill facility. Total employment has now been reduced by approximately 7,200 personnel, or 20%, since the merger.

Equipment Operations
Second quarter net sales from Equipment Operations were $2.497 billion, compared to $2.723 billion for the same period in 2000. Significant revenue growth came from sales of agricultural equipment in North America as the company recorded market share gains in an up market.

In Europe, the company held production and wholesale levels significantly below retail sales levels in order to reduce dealer inventory. Worldwide revenue from sales of agricultural equipment were up 5%, net of currency impact and divestitures.

Revenues from the sale of higher margin heavy and light construction equipment were down 10% worldwide, net of adverse currency impact and divestitures. Unit sales of all CNH construction equipment were down slightly more than the industry. In sales of heavy equipment, the CNH brands significantly outperformed the industry in both Europe and Latin America but slightly underperformed the industry in the United States. In light equipment, the company's worldwide market share was essentially unchanged, as significant share gains in skid steer loaders and other light equipment lines offset lower sales of backhoe loaders.

Equipment Operations' gross margin as a percent of net sales of equipment improved to 18.8% in the second quarter of 2001, compared to 18.5% for the same period last year. Manufacturing efficiencies and other merger related cost savings more than compensated for the adverse impact resulting from the decline in construction equipment sales, an overall unfavorable product mix in agricultural equipment, and an unfavorable currency impact.

Compared to the same period last year, SG&A expenses decreased in the quarter, both in absolute terms and as a percent of net sales of equipment, reflecting the company's ongoing actions to achieve synergy targets and a favorable currency impact.

The second quarter industrial operating margin was $154 million, compared to $137 million in the same quarter last year.

Year-to-date net sales from Equipment Operations totaled $4.783 billion, compared to $5.146 billion for the first six months of 2000. The company's industrial operating margin totaled $245 million for the same period, up from $168 million in 2000.

Financial Services
CNH Capital, the financial services unit of CNH Global, reported a net income of $16 million for the second quarter of 2001 compared to a net income of $13 million for the same period last year. Second quarter net income benefited from CNH Capital's successful completion of ABS transactions totaling $713 million, partially offset by higher loan loss provisions and lower volumes resulting from the company's decision to exit non-core businesses. CNH Capital's managed portfolio at the end of the second quarter was $11.6 billion, essentially unchanged from March 31, 2001 levels.

Balance Sheet and Cash Flow
Pre-tax operating cash flow (defined as industrial operating margin plus depreciation, less capital expenditures and financial expense) generated by the core business was approximately $63 million positive for the first half of 2001, $77 million better than in the comparable period last year.

Company inventories were reduced during the quarter, both with respect to the prior quarter and year-over-year; June 30, 2001 inventory levels were approximately $150 million lower than June 30, 2000 levels.

Total debt is slightly higher ($258 million) than December 31, 2000, due to the normal seasonal increase in working capital. The increase in long term debt in the quarter resulted from the refinancing of current maturities through utilization of short time credit lines and a new medium term note with Fiat S.p.A. In addition, the company launched a new asset-backed commercial paper conduit in Australia. On June 30, 2001, CNH had remaining credit lines available in the amount of $3.5 billion.

Market Outlook for Agricultural Equipment
Through the first half of the year, the industry in the Americas has continued to perform better than last year and somewhat better than expected, with the strongest results in the United States and Brazil. As a result, the company now expects the industry will be up by as much as 5% in the Americas for the full year. In Europe, the market has performed as expected and the forecast for the full year is unchanged: down by 8%. Foot and mouth disease in Western Europe appears to have nearly run its course, but the possible impact of BSE remains unclear.

Market Outlook for Construction Equipment
In the second quarter, industry sales of construction equipment were down significantly in North America while Europe and Asia weakened slightly, and growth in Latin America slowed somewhat. Although further deterioration is not expected, neither is any significant recovery anticipated in 2001. Consequently, the company now expects that the segments of the construction equipment industry served by CNH will end the year down as much as 10% from 2000 levels, on a global basis.

CNH Outlook for 2001
The success of the company's overall integration process is evident in the steady growth of merger related profit improvements ($300 million expected for the full year) and the consistent improvement in the gross margin as well as the significant share gains and reductions in dealer and company inventory reported this quarter. Based on the success of the company's first actions to improve its supply chain management process, CNH expects to under produce retail sales levels through the balance of the year, while delivering improved levels of service to the market with lower inventory levels. As a result, the company's operating margin for the full year is expected to be in the range of $350 to $400 million, depending on the extent of the impact of weaker than expected foreign exchange rates and market conditions for construction equipment in North America. The year-over-year reduction in net loss is expected to be $50 to $100 million.