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ARMCO REPORTS SECOND QUARTER NET INCOME OF $8.7 MILLION

 PARSIPPANY, N.J., July 22 /PRNewswire/ -- Armco Inc. (NYSE: AS) reported net income of $8.7 million for the second quarter of 1993, or $.04 per share of common stock. This is a marked improvement over the second quarter of 1992, in which Armco had net income of $2.5 million. The second quarter of 1992 included tax refunds of $39.1 million, offset by special charges and equity losses of $38.3 million.
 Sales for the period were up 3 percent to $562.8 million from $545.0 million, while operating profit improved to $24.8 million, despite including $7.4 million of additional postretirement benefits expense associated with adopting SFAS 106. The second quarter 1992 operating loss of $6.2 million included special charges of $21.6 million.
 Armco Chairman and Chief Executive Officer Robert L. Purdum said, "Our strategic focus on specialty steels and the synergies from our acquisition of Cyclops in April 1992, combined with a strong stainless steel market, is manifesting itself in much improved operating results. We are also beginning to benefit from our restructuring efforts and anticipate that demand for specialty steels will remain firm in the second half."
 Purdum noted that during the quarter a cooperative labor/management effort at Armco's Mansfield and Dover, Ohio, locations had resulted in a new labor agreement and the Armco Board conditionally approving installation of a $100 million thin-slab caster at Mansfield. He said the company continues to make progress in obtaining commitments for financing the project and soon hoped to implement this piece of its strategy.
 Purdum added that Armco is continuing to divest non-strategic businesses and had signed a letter of intent to sell its Piqua, Ohio- based Miami Industries steel tubing plant to Copperweld.
 Specialty Flat-Rolled Steel
 In the second quarter of 1993, Specialty Flat-Rolled Steel had an operating profit of $24.7 million on sales of $274.8 million, including approximately $5.0 million of additional expense related to SFAS 106. This compared favorably to an operating profit of $20.3 million on sales of $228.5 million in the second quarter of 1992. Sales and operating profit increased more than 20 percent as a result of strong demand for specialty steels, synergies from the acquisition of Cyclops and increased melting efficiencies achieved at the Butler, Pa., plant.
 Operating profit per ton, excluding the additional expense related to SFAS 106, rose to $167 per ton, a 24 percent increase compared to $135 per ton in the second quarter a year ago. Entering the second half, melting facilities continue to run near capacity.
 (In thousands of net tons) 1993 1992
 Specialty Flat-Rolled 2nd 1st 4th 3rd 2nd 1st
 Steel: Qtr Qtr Year Qtr Qtr Qtr Qtr
 Steel products shipped 178 169 571 147 158 150 116
 Raw steel produced 247 244 793 194 195 222 182
 Capability utilization
 (percent) 98 98 84 76 76 92 98
 Worldwide Grinding Systems
 Worldwide Grinding Systems had an operating profit of $7.8 million on sales of $108.7 million compared to an operating profit of $1.6 million on sales of $101.8 million in the second quarter of 1992. Operating profit increased substantially as a result of higher carbon rod prices and improved operating efficiencies at the Kansas City plant.
 Worldwide Grinding Systems' joint venture businesses, which are not consolidated, provided income to Armco of $3.6 million in the quarter compared to $3.5 million in the quarter a year ago.
 Other Steel and Fabricated Products
 The Other Steel and Fabricated Products segment had an operating profit of $2.4 million on sales of $179.3 million compared to an operating loss of $18.6 million in the second quarter of 1992, which included special charges of $21.6 million. Sales were $214.7 million in the second quarter a year ago. Sales were off as substantial increases in carbon flat-rolled and tubular steel sales were offset by the divestiture of a steel service center business and the downsizing of the stainless long products business.
 First Half Results
 For the first six months of 1993, Armco had a net loss of $13.3 million, before the cumulative effect of accounting changes, or $.21 per share, on sales of $1,078.3 million. The net loss included equity losses of $19.5 million.
 Effective Jan. 1, 1993, Armco adopted Statement of Financial Accounting Standards (SFAS) 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS 109, "Accounting for Income Taxes." The cumulative effective of these accounting changes was a charge to net income of $304.4 million, or $2.94 per share. Including the effects of these changes, Armco's net loss for the six months of 1993 was $317.7 million, or $3.15 per share.
 For the first six months of 1992, Armco had a net loss of $28 million, or $.34 per share, on sales of $911.4 million. The first half of 1992 included equity losses and special charges totaling $63.6 million and $39.1 million of tax refunds.
 Armco Steel Company, L.P.
 As a result of losses, Armco's investment in Armco Steel Company, L.P. (ASC), a carbon flat-rolled steel joint venture with Kawasaki Steel Corporation, was reduced to zero in the first quarter of 1993. Accordingly, Armco has stopped recording losses related to ASC.
 In the second quarter of 1993, ASC had an operating loss of $1.0 million, including $13.9 million of additional expense associated with adopting SFAS 106 on an amortization basis, compared to an operating loss of $20.9 million in the second quarter of 1992. This also represents a substantial improvement from the first quarter of 1993, in which ASC's operating loss was $30.2 million, including $14.1 million of additional expense related to SFAS 106.
 ASC reduced its net loss 39 percent to $15.1 million in the quarter from $24.8 million in the second quarter of 1992. Sales of ASC increased nearly 9 percent to $400.1 million from $367.6 million in the quarter a year ago.
 Operations improved dramatically in the second quarter of 1993, reflecting productivity increases, restructuring benefits and a stronger carbon steel market. Excluding the effects of the additional expense related to SFAS 106, ASC had an operating profit per ton of $15 compared to an operating loss per ton of $27 in the second quarter of 1992. In June, ASC reached a record low of 3.98 man-hours per ton of steel produced, nearly 50 percent lower than the 7.19 man-hours per ton recorded in July of 1992.
 ASC expects operating results to improve in the second half of the year, supported by modest economic growth and a firm market for flat- rolled carbon steels.
 (In thousand of net tons) 1993 1992
 Armco Steel Company, 2nd 1st 4th 3rd 2nd 1st
 L.P.: Qtr Qtr Year Qtr Qtr Qtr Qtr
 Steel products shipped 876 816 3,049 759 692 778 820
 Raw steel produced 913 878 3,399 815 760 921 903
 Capability utilization
 (percent) 93 90 79 82 73 81 80
 Armco Inc. is a leading domestic producer of stainless and electrical steels. Armco also produces carbon steels and steel products, non-residential construction products and tubular goods. Armco has joint venture interests in companies which produce stainless steels, carbon flat-rolled steels and produce and distribute oil field equipment.
 ARMCO INC.
 Statement of Consolidated Operations
 (Unaudited)
 (Dollars and shares in millions, except per-share amounts)
 Periods ended Three Months Six Months
 June 30 1993 1992 1993 1992
 Net sales $562.8 $545.0 $1,078.3 $911.4
 Operating expenses (538.0) (529.6) (1,044.5) (888.5)
 Special charges(A) -- (21.6) -- (21.6)
 Operating profit (loss) 24.8 (6.2) 33.8 1.3
 Interest income 1.4 1.8 3.1 6.0
 Interest expense (11.2) (11.7) (22.3) (24.2)
 Sundry other - net(B) (9.9) 21.6 (15.4) 17.4
 Income (loss) before
 income taxes 5.1 5.5 (0.8) 0.5
 Credit for inc. taxes(B) 1.7 14.7 7.0 14.5
 Income from Armco and
 consolidated subsidiaries 6.8 20.2 6.2 15.0
 Equity in losses of
 Armco Steel Company, L.P.(C) -- (14.3) (17.9) (39.2)
 Equity in income (loss) of
 other equity companies(D) 1.9 (2.4) (1.6) (2.8)
 Equity in income (loss) of
 AFSG companies to be
 sold(E) 2.8 (1.1) 5.5 (1.0)
 Deferred income (loss) of
 AFSG companies to be
 sold(E) (2.8) 0.1 (5.5) --
 Inc.(loss) before cum.
 effect of acctg. changes 8.7 2.5 (13.3) (28.0)
 Cum. effect of changes
 in acctg. for postretirement
 benefits and inc. taxes(F) -- -- (304.4) --
 Net income (loss) 8.7 2.5 (317.7) (28.0)
 Weighted avg. number of
 common and common
 equivalent shares
 outstanding - primary 104.2 99.9 103.7 94.1
 Net inc.(loss) applicable
 to common stock $4.2 $0.5 $(326.6) $(32.0)
 Per share of common stock
 Income (loss) per
 share - primary:
 Income (loss) before
 cum. effect of
 acctg. changes $0.04 $0.01 $(0.21) $(0.34)
 Cum. effect of
 changes in acctg.
 for postretirement
 benefits & inc. taxes -- -- (2.94) --
 Net income (loss) per
 share - primary 0.04 0.01 (3.15) (0.34)
 Net income (loss) per
 share - fully diluted (G) (G) (G) (G)
 Depr. and lease right amort. $16.6 $14.4 $33.3 $25.7
 Notes to Statement of Consolidated Operations
 (Unaudited)
 (Dollars in millions, except per-share amounts)
 (A) -- In the three and six months ended June 30, 1992, Armco recorded special charges of $20.4 for expenses related to closing the melt shop at Armco's Stainless and Alloy Products plant in Baltimore; and $1.2 to increase a reserve for the divestment of an investment castings plant, which Armco discontinued in 1991.
 (B) -- In the three and six months ended June 30, 1993, Armco recorded income tax benefits of $2.5 and $4.9, respectively, and income of $2.2 and $5.8 in Sundry other - net related to settlements of state income tax issues. Also in the six months ended June 30, 1993, Armco reversed a federal tax reserve of $4.3 as a result of the resolution of certain other tax issues. This amount was recorded in Credit for income taxes.
 In the three and six months ended June 30, 1992, Armco recognized income of $39.1 as a result of a settlement on two federal tax refund claims. Of this amount, $16.2, representing the tax refunds, was recorded in Credit for income taxes and $22.9, representing interest on the claim, was recorded in Sundry other - net.
 (C) -- Armco accounts for its investment in Armco Steel Company, L.P. (ASC) using the equity method, recognizing its proportionate share of ASC's results. At Dec. 31, 1992, Armco's investment in ASC was $8.5. In 1992, Armco agreed to contribute $10.0 to the joint venture to fund hot strip mill improvements, which enhance ASC's ability to roll stainless steel for Armco. Of this total, $0.6 was contributed in 1992. The remaining $9.4 effectively increased Armco's investment in ASC to $17.9 during the first quarter of 1993. However, losses incurred during the three months ended March 31, 1993, have reduced Armco's investment to zero, after which Armco stopped recording losses related to the results of ASC. Had Armco continued to record its equity in the results of ASC, it would have recognized additional equity losses of $10.9. In the near term, Armco does not expect to recognize its equity in the future losses of ASC unless it makes further capital contributions or commitments to ASC.
 In the first quarter of 1992, ASC recorded a charge of $16.0 for the permanent shutdown of a hot strip rolling mill and associated units at its Ashland Kentucky Works. In the six months ended June 30, 1992, the effect of this charge on Armco's equity in the losses of ASC was to increase the loss by $8.0.
 In June 1990, ASC filed an antitrust action against several companies. In the six months ended June 30, 1992, ASC reached a settlement, subject to a confidentiality agreement, with two of the three remaining defendants. The favorable settlement benefited earnings and cash flows for the period. ASC continues to pursue its claim against the third defendant.
 (D) -- Equity in income (loss) of other equity companies includes the following:
 Periods ended Three Months Six Months
 June 30 1993 1992 1993 1992
 National-Oilwell $(0.2) $(4.8) $(1.5) $(6.4)
 North American Stainless (0.3) -- (2.1) --
 Other (primarily Grinding
 businesses) 2.4 2.4 2.0 3.6
 Total $1.9 $(2.4) $(1.6) $(2.8)
 (E) -- Armco Financial Services Group (AFSG) consists of insurance companies which Armco intends to sell and which continue underwriting activities (AFSG companies to be sold) and runoff companies owned directly or through holding companies. Armco includes the operating results of the AFSG companies to be sold as a component of continuing operations; however, because it has been the strategy of management to sell these companies, Armco accounts for these operations under the cost recovery method, whereby net income is not recognized until realized through a sale of the businesses, while net losses are charged against income as incurred.
 Armco accounts for the runoff companies as a discontinued business and utilizes the liquidation basis of accounting whereby all future cash inflows and outflows are considered.
 (F) -- Effective Jan. 1, 1993, Armco adopted Statement of Financial Accounting Standards (SFAS) 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS 109, "Accounting for Income Taxes." SFAS 106 requires the accrual of certain postretirement health care and life insurance benefits during the years an employee is actively employed. Upon adoption of SFAS 106, Armco recorded a net of tax charge of $440.0 or $4.25 per share for the cumulative effect of this accounting change.
 SFAS 109 requires an asset and liability approach for financial accounting and reporting of income taxes. Armco's adoption of SFAS 109 resulted in a credit to the cumulative effect of accounting changes of $135.6 or $1.31 per share.
 The cumulative effect of adoption of these two standards includes amounts related to the AFSG companies to be sold.
 (G) -- Antidilutive or dilution less than 3 percent.
 -0- 7/22/93
 /CONTACT: James A. Herzog of Armco, 201-316-5287/
 (AS)


CO: Armco Inc. ST: New Jersey IN: MNG SU: ERN

CK -- NY032 -- 4452 07/22/93 10:52 EDT
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Date:Jul 22, 1993
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