CNH's second quarter consolidated revenues totaled $2.713 billion, compared to $2.689 billion in 2001. Higher sales in Western Europe and Latin America, along with favorable foreign exchange rates, offset lower sales in North America during the quarter.

For the first half of 2002, consolidated revenues were essentially unchanged at $5.102 billion compared to $5.143 billion in 2001. This was achieved in spite of the significant drop in construction equipment industry unit sales. The company's net loss for the first six months of 2002 was $10 million compared to a net loss of $64 million in 2001. Excluding restructuring charges, the net result for the first half of 2002 was breakeven.

"Once again, our Case IH and New Holland agricultural brands have led the way with another quarter of strong growth, particularly in Western Europe," Paolo Monferino, CNH president and chief executive officer, said. "Our profit improvement initiatives are ahead of schedule at mid year and we have already achieved $481 million toward the original target of $600 million. With this kind of success we are confident that we can achieve even more, and so we have raised the bar by an additional $250 million, to a new target of $850 million in profit improvements by 2005."

New Products Set the Stage for Future Growth in the Agricultural Equipment Business
During the second quarter, the brands of CNH introduced new products to replace all the various models the company was required to divest at the time of the merger. These models, the first of the new products designed since the merger, will carry higher margins than the products they replace when they come into full production over the next twelve months. By the end of 2004, Case IH and New Holland plan to replace most of their respective product lines with new, higher margin products, yielding substantial profit improvements.

In recent dealer conventions held on three continents, an extensive array of these and other new products and models received a universally enthusiastic reception. Case IH presented two all new high horsepower row crop tractor ranges: the top of the line Magnum range and the new MXM Maxxum range. Joining the Case IH product offering were a new self-propelled forage harvester, a new range of utility tractors and substantial additions to its growing line of hay tools.

New Holland previewed its all new TG range, replacing the divested G-70 Genesis tractors, and launched a new, expanded TM medium-high horsepower row crop tractor range. Also introduced was the new CR range of rotary combines, expanding the innovative style and features that earned the CX conventional combine the 2002 Industrial Design Excellence Gold Award as well as the European Combine of the Year Award. New round balers in Europe and North America, a new range of utility combines, upgrades to the existing forage harvester lines, and a significant expansion of the medium and utility tractor ranges in Latin America completed the New Holland offering.

Equipment Operations Second Quarter Results
Second quarter net sales from Equipment Operations rose to $2.582 billion, compared to $2.497 billion for the same period in 2001.

Sales of agricultural equipment. Revenues from sales of agricultural equipment totaled $1.778 billion, up 8% compared to $1.649 billion in the second quarter of 2001. Worldwide industry unit sales in the period were up, except in the North American high horsepower tractor segment, which declined. In Western Europe, unit sales of CNH agricultural equipment increased significantly compared to the prior year. In North America, unit sales of CNH agricultural equipment were essentially unchanged from 2001 levels. In Latin America, unit sales increased while in Asia and the developing markets unit sales of CNH equipment declined. During the quarter, CNH under-produced retail demand by 14%, reducing both company and dealer inventory levels.

Sales of construction equipment. During the second quarter, construction equipment revenues totaled $804 million, down 5% compared to $848 million last year. Excluding acquisitions, revenues declined by 13%. Second quarter industry unit sales of heavy equipment were down in North America and Europe and up in Latin America and the Asia Pacific region. Industry unit sales of light equipment were down significantly compared to the prior year, especially in North America. Unit sales of CNH heavy equipment, excluding acquisitions, were unchanged from 2001 levels, as gains in North America, Latin America and the Asia Pacific region offset declines in Europe. Sales of light equipment increased significantly in the Asia Pacific region and declined elsewhere. During the quarter, CNH reduced both company and dealer inventories, under-producing retail demand by 8% overall. In absolute terms, production of light equipment was down 20% compared to the second quarter of 2001.

Financial results. As in the prior quarter, CNH's Equipment Operations gross margin was negatively impacted by the overall weakness in the construction equipment industry which resulted in lower wholesale volumes and lower fixed cost absorption. Higher employee benefit and pension costs also had a negative impact on the gross margin. These factors were partially offset by material cost savings.

Interest expense was lower in the quarter due mainly to lower interest rates. The impact of the company's debt reduction actions was minimal since the company enjoyed the benefit only in the last two weeks of the quarter.

Year-to-date net sales from Equipment Operations were $4.821 billion, compared to $4.783 billion in the first half of 2001.

CNH's profit improvement initiatives totaled $28 million in the second quarter, bringing the total for the year to $48 million. Since the merger, the company has achieved a total of $481 million in profit improvements.

Financial Services
In the second quarter of 2002, CNH Capital reported net income of $12 million, compared to $16 million in the same period last year. Second quarter net income benefited from lower loan loss provisions. However, in 2002 the company completed an ABS transaction in the first quarter while in 2001 an ABS transaction was completed in the second quarter, and this difference in timing negatively impacted the year-over-year comparison for the quarter. Underlying results are showing clear improvement as Financial Services earned a first half profit of $21 million compared with a profit of $13 million in the first half of 2001. Originations in the core business were up 10% compared to the second quarter of 2001.

Equity Increase
On June 14, 2002, CNH issued 50,000,000 new shares of common stock priced at $4.00 per share. Concurrently, the Fiat Group, CNH's majority shareholder, exchanged $1.3 billion of debt owed to Fiat by CNH for new common CNH shares also at $4.00 per share. The net proceeds from these actions were applied to the company's debt (defined as Equipment Operations total debt less inter-segment receivables), reducing its debt to capitalization ratio from 76% on December 31, 2001 to 55% on June 30, 2002. As a result of these actions, on June 30, 2002, the total number of shares of common stock was 652,683,830, of which 93,353,648 were held by investors other than Fiat.

Subsequently, on July 15, 2002, CNH announced that its underwriters had exercised their over-allotment option for an additional 3,500,000 new shares of common stock, concluding the company's public offering.

Balance Sheet and Cash Flow
The $1.780 billion reduction in Equipment Operations net debt since March 31, 2002 was due primarily to the equity increase and debt exchange noted above. The increase in Financial Services debt of $540 million since March 31, 2002 was due primarily to an increase in the size of the retail financing portfolio pending ABS transactions later in the year.

Market Outlook for Agricultural Equipment
Based on the results of the first six months, CNH believes that 2002 total industry sales of agricultural equipment will be essentially unchanged from 2001 levels. In Europe, where CNH is the market leader, sales have been stronger than expected in the first half and this should continue into the second half of the year. In North America, unit sales of under 40 horsepower tractors have been stronger than anticipated while sales of high horsepower equipment have steadily weakened. Both trends are expected to continue through the balance of the year. In Latin America, CNH now believes that sales will be above 2001 levels through the end of 2002.

Market Outlook for Construction Equipment
In North America and in Europe, CNH now believes that industry sales are unlikely to show improvement in 2002 and should finish the year down by over 10% compared to last year. In Latin America and the Asia Pacific region industry sales are showing some improvement, and sales in these regions may finish the year above 2001 levels.

CNH Outlook for 2002
CNH believes that the growing strength of its global agricultural business will contribute significantly to the company's bottom line in the second half of the year. The successful completion of the company's debt reduction actions during the second quarter should reduce second half interest expense by about $40 million.

New product introductions in the agricultural equipment business should begin to contribute to the bottom line in the second half. However, launch costs, plant shutdowns for model change-over, and other new product introduction costs will more than offset margin improvements in the third quarter.

As announced at the beginning of 2002, the company intends to continue to reduce dealer and company inventory by keeping wholesale levels below retail sales levels and production below wholesale levels through the balance of the year. Employee benefit and pension costs are expected to increase in 2002 by about $60 million.

Despite the decline in the North American construction equipment industry and North American high horsepower agricultural equipment market, CNH believes that the company's 2002 loss per share will be close to breakeven, before restructuring costs. The company expects that continued growth in the European agricultural equipment industry, together with the reduction in interest expense achieved through the company's successful debt reduction actions, will be sufficient to offset the declines in North America. However, should the European construction equipment market perform below current expectations in the second half, the company's bottom line will be directly impacted.

As described in the company's 20-F and F-3 filings, preliminary results of transitional impairment tests of goodwill (under US GAAP) have indicated that the company may incur a goodwill impairment charge associated with its construction equipment business of up to $300 million in 2002, reflecting the negative trends in the construction equipment industry.