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ARMCO REPORTS FIRST QUARTER NET LOSS OF $22 MILLION, BEFORE ACCOUNTING CHANGES

 PARSIPPANY, N.J., April 22 /PRNewswire/ -- Armco Inc. (NYSE: AS) reported a net loss of $22 million for the first quarter of 1993, or $.25 per share of common stock, before the cumulative effect of accounting changes. This is nearly a 30 percent improvement over the first quarter of 1992, when Armco had a net loss of $30.5 million, or $.37 per share. Included in the 1993 first quarter are equity losses of $21.4 million from joint ventures. In the 1992 first quarter, equity losses from joint ventures were $25.3 million.
 Effective Jan. 1, 1993, Armco adopted Statements of Financial Accounting Standards, No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions (SFAS 106), and No. 109, Accounting for Income Taxes (SFAS 109), resulting in a one-time, non cash, net charge in the quarter of $304.4 million or $2.94 per share of common stock. In addition, the adoption of SFAS 106 resulted in a non cash increase in postretirement benefit expense and a reduction in net income before the cumulative effect of the accounting change for the first quarter of 1993 of $6.6 million, or $.06 per share. Including the cumulative effect of accounting changes, Armco's net loss was $326.4 million, or $3.19 per share, for the first quarter of 1993.
 Sales for the period increased 40 percent to $515.5 million from sales of $366.4 million in the first quarter a year ago, primarily as a result of the acquisition of Cyclops Industries, Inc. in April 1992. Operating profit increased to $9.0 million, despite including $7.4 million of additional expense as a result of SFAS 106, compared to an operating profit of $7.5 million in the first quarter of 1992.
 "We are continuing to benefit from the numerous synergies of our combined specialty steel operations," said Chairman and Chief Executive Officer, Robert L. Purdum. "We are very pleased with the progress to date and the potential for even better results in the future as productivity improves and we realize the benefits of the restructuring actions announced earlier this year."
 Purdum added that improved operating results at Armco Steel Company, a carbon steel joint venture, were encouraging and were continuing the positive trends established in recent months.
 Commenting on the accounting change for postretirement benefits, Purdum said that Armco, like other companies, finds itself in the middle of the health care cost spiral. He indicated the company was identifying opportunities to control these costs, such as managed care alternatives, freezing future benefits at certain cost levels, increased employee and retiree cost-sharing and other options.
 SFAS 106, Employers' Accounting for Postretirement Benefits Other than Pensions, requires a company to recognize its expenses for postretirement health care and life insurance benefits during the years an employee is actively employed. The previous practice was to expense these benefits on a pay-as-you-go basis.
 Armco, in its annual report, stated that it wanted to recognize the full amount of the unrecognized accumulated postretirement benefit obligation immediately rather than amortize it over 20 years. The company was, however, waiting for the outcome of legislation providing that Ohio corporations, such as Armco, would not be penalized in their ability to pay dividends if they took the full charge rather than amortize it. The legislation was enacted and Armco elected to recognize immediately the entire obligation as of Jan. 1, 1993. The cumulative effect of adopting this accounting change, resulted in a charge of $440 million, or $4.25 per share, net of a tax benefit of $170 million. The accounting change has no effect on cash flows.
 In addition, the adoption of SFAS 106 required an adjustment to the accounting for the Cyclops acquisition, resulting in the recognition of approximately $130 million of goodwill, effective Jan. 1, 1993.
 SFAS 109, Accounting for Income Taxes, requires an asset and liability approach for financial accounting and reporting of income taxes. In connection with adopting this standard, effective Jan. 1, 1993, Armco recorded a credit to income of $135.6 million, or $1.31 per share, as the cumulative effect of the accounting change. The effect of adopting this standard, including the deferred tax benefit connected with adopting SFAS 106, results in a total net deferred tax asset of approximately $300 million. The potential deferred tax asset available to Armco of approximately $860 million has been reduced by a valuation allowance of approximately $560 million.
 Specialty Flat-Rolled Steel
 In the first quarter of 1993, the Specialty Flat-Rolled Steel segment had an operating profit of $19.9 million on sales of $260.9 million compared to an operating profit of $10.6 million on sales of $163.5 million in the first quarter of 1992. Sales were up 60 percent and operating profit nearly doubled, primarily as a result of the Cyclops acquisition and strong demand for stainless products.
 The near term outlook is good as melting facilities are running near capacity and order rates remain strong, particularly for automotive chrome grades of stainless. Results of the segment should benefit from a May 1 price increase, previously announced restructuring actions and continued gains from production efficiencies.
 1993 1992
 (in thousands of net tons) 1st 4th 3rd 2nd 1st
 Specialty Flat-Rolled Steel: Qtr Year Qtr Qtr Qtr Qtr
 Steel products shipped 169 571 147 158 150 116
 Raw steel produced 244 793 194 195 222 182
 Capability utilization (percent) 98 84 76 76 92 98
 Worldwide Grinding Systems
 Worldwide Grinding Systems had an operating profit of $1.1 million on sales of $88.9 million compared to an operating profit of $0.7 million on sales of $97.4 million in the first quarter of 1992.
 Other Steel and Fabricated Products
 The Other Steel and Fabricated Products segment had an operating loss of $2.1 million on sales of $165.7 million compared to an operating profit of $3.4 million on sales of $105.5 million in the first quarter a year ago. Sales increased 57 percent primarily as a result of the Cyclops acquisition offset by the loss of sales from discontinued businesses. Operating losses, incurred primarily in the carbon steel business of this segment, were only partially offset by the profitable Brazilian sheet and strip operations and the tubular businesses.
 Armco Steel Company, L.P.
 Armco's equity in the loss of Armco Steel Company, L.P. (ASC), a carbon flat-rolled steel joint venture with Kawasaki Steel Corporation, was $17.9 million, compared to a $24.9 million loss for the first quarter of 1992. Armco's equity loss in the 1993 first quarter was limited to the amount of its investment at Dec. 31, 1992, and commitments for capital contributions.
 Sales for ASC were $368.5 million compared to $374.9 million in the first quarter a year ago. ASC's operating loss narrowed 19 percent to $30.2 million from $37.6 million in the first quarter of 1992. ASC had a net loss of $43.8 million versus a net loss of $47.9 million in 1992.
 ASC also adopted SFAS 106, Employer's Accounting for Postretirement Benefits Other than Pensions, in the first quarter of 1993 and is amortizing its transition obligation of approximately $620 million over 20 years. In the first quarter, $14.1 million of ASC's operating loss ($17 per shipped ton) is attributable to the increase in expenses as a result of adopting the new accounting standard.
 Armco Steel Company continues to make progress. Excluding the effect of the non cash accounting change and 1992 restructuring charges, ASC's operating loss per ton of $20 was a 57 percent improvement over the $46 loss per ton in the first quarter a year ago and 29 percent better than the fourth quarter of 1992. Man-hours per ton of steel produced in March were 4.2, substantially lower than the over six man- hours per ton of early 1992. ASC's order book remains strong, particularly from automotive customers, and recent price increases are holding.
 1993 1992
 (in thousands of net tons) 1st 4th 3rd 2nd 1st
 Armco Steel Company, L.P.: Qtr Year Qtr Qtr Qtr Qtr
 Steel products shipped 816 3,049 759 692 778 820
 Raw steel produced 878 3,399 815 760 921 903
 Capability utilization
 (percent) 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 machinery and equipment.
 ARMCO INC.
 Statement of Consolidated Operations


(unaudited -- Dollars and shares in millions, except per share amounts)
 Three months ended March 31, 1993 1992
 Net sales $ 515.5 $ 366.4
 Cost of products sold (459.8) (326.4)
 Selling and admin. expenses (46.7) (32.5)
 Operating profit 9.0 7.5
 Interest income 1.7 4.2
 Interest expense (11.1) (12.5)
 Sundry other - net (A) (5.5) (4.2)
 Loss before income taxes (5.9) (5.0)
 Credit (provision) for inc. taxes (A) 5.3 (0.2)
 Loss from Armco and
 consolidated subsidiaries (0.6) (5.2)
 Equity in losses of Armco Steel
 Company, L.P. (B) (17.9) (24.9)
 Equity in losses of other
 equity companies (C) (3.5) (0.4)
 Equity in income of AFSG companies
 to be sold (D) 2.7 0.1
 Deferred income of AFSG companies
 to be sold (D) (2.7) (0.1)
 Loss before cumulative effect of
 accounting changes (22.0) (30.5)
 Cumulative effect of changes in
 accounting for postretirement
 benefits and income taxes (E) (304.4) -
 Net loss $(326.4) $ (30.5)
 Weighted average number of common
 and common equivalent shares
 outstanding - primary 103.6 88.5
 Per share of common stock
 Loss per share - primary
 Loss before cumulative effect
 of accounting changes $ (0.25) $ (0.37)
 Cumulative effect of changes
 in accounting for postretirement
 benefits and income taxes (2.94) -
 Net loss per share- primary (3.19) $ (0.37)
 Net loss per share - fully diluted (F)
 Depreciation and leaseright
 amortization $16.7 $ 11.3
 (F) Antidilutive or dilution less than 3 percent.
 See Notes to Statement of Consolidated Operations.
 NOTES TO STATEMENT OF CONSOLIDATED OPERATIONS
 (Unaudited -- dollars in millions, except per share amounts)
 (A) In the three months ended March 31, 1993, Armco recognized income of $6.0 as the result of a settlement of state income taxes related to a former Armco subsidiary. Of the total amount, $2.4 was recorded in Credit (provision) for income taxes and $3.6, representing interest on the settlement, was recorded in Sundry other - net. In addition, Armco reversed a federal tax reserve of $4.3 as a result of the resolution of certain tax issues. The amount was recorded in Credit (provision) for income taxes.
 (B) 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 the three months ended March 31, 1993, Armco committed to contribute $9.4 to the joint venture to fund a project ASC was undertaking to roll certain grades of Armco stainless steel. The commitment effectively increased the investment amount to $17.9. 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 operations of ASC. Armco will not recognize its equity in future losses unless it makes further capital contributions or commitments to ASC or ASC returns to profitability and records income greater than the amount of losses not previously recognized.
 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 three months ended March 31, 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 three months ended March 31, 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.
 (C) Equity in losses of other equity companies includes losses of $1.3 for National-Oilwell and $1.8 for North American Stainless in the three months ended March 31, 1993, and a loss of $1.6 for National- Oilwell in the three months ended March 31, 1992.
 (D) 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.
 (E) 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.
 -0- 4/22/93
 /CONTACT: Jim Herzog of Armco, 201-316-5276/
 (AS)


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

SH -- NY044 -- 9327 04/22/93 10:55 EDT
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Date:Apr 22, 1993
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