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ARMCO REPORTS NET LOSS FOR THE FOURTH QUARTER AND FULL YEAR

 ARMCO REPORTS NET LOSS FOR THE FOURTH QUARTER AND FULL YEAR
 PARSIPPANY, N.J., Jan. 29 /PRNewswire/ -- Armco Inc. (NYSE: AS) today reported a net loss of $241.5 million for the fourth quarter of 1991, or $2.75 per share of common stock, compared to a net loss of $8.5 million in the fourth quarter of 1990, or $.12 per share. Included in the 1991 fourth quarter are special charges and unusual items which reduced net income by $203.1 million and equity losses from Armco Steel Company (ASC) and the ongoing insurance companies to be sold totaling $40.4 million. Sales for the period were $408.5 million compared to $414 million in the fourth quarter of 1990.
 For 1991, Armco had a net loss of $336.5 million, or $3.89 per share, compared to a net loss of $89.5 million for 1990, or $1.10 per share. The 1991 loss includes special charges and unusual items which reduced net income by $192.9 million and equity losses from ASC and the ongoing insurance companies to be sold totaling $133.4 million. The 1990 loss includes net unusual items which reduced income by $86.1 million and an equity loss from ASC of $36.5 million. Sales for 1991 declined 8 percent to $1,595.3 million from $1,735.2 million in 1990.
 Robert L. Purdum, chairman and chief executive officer, said, "Even though we anticipated losses and focused all year on reducing costs and conserving cash, the severity of the recession and its effect on all of our major markets, particularly automotive, weakened steel prices and reduced domestic shipments below expectations. While all of our consolidated business segments operated at breakeven or better (before special charges), ASC and the ongoing insurance companies to be sold had a very difficult year.
 "Naturally, we are most concerned about the performance of Armco Steel Company, our carbon flat-rolled steel joint venture with Kawasaki Steel Corporation. Our share of ASC's loss for the year was $119 million. Both partners are dedicated to turning ASC around. A major modernization of more than $700 million is being completed as ASC continues to restructure itself to better balance its operations. Recent, unprecedented employee meetings involving both union and salaried personnel are leading to a new, better labor/management relationship. But, to return ASC to profitability will require sustained innovative efforts."
 Purdum added that Armco is aggressively pursuing its plans to divest or rationalize non-strategic businesses. The company had previously announced that future charges associated with this effort could be up to $350 million. Charges incurred in the fourth quarter for divestment or rationalization of businesses in the U.S. and South America were $30.7 million. In addition, a fourth quarter writedown of Armco's carrying value for its ongoing insurance companies to be sold totaled $170.3 million. Importantly, the insurance writedown does not require the use of cash nor do the other charges require the immediate use of significant cash.
 Purdum also stated that when final audited financial statements are released, he expected the current explanatory language concerning Armco's ability to recover its investment in its insurance operations to be eliminated. This language has been included in Armco's independent auditors' reports since 1984.
 Purdum went on to say that because of the year-long focus on conserving cash and reducing overheads, Armco's cash flow was positive in the fourth quarter and the company ended 1991 with more than $360 million in cash and liquid investments. He also mentioned that Armco Inc.'s major pension plans are now fully funded, which should reduce future funding requirements.
 "As we move into 1992, our concentration is on building our specialty steel operations into a world class competitor. These operations continue to be profitable even in this tough economic climate. Unfortunately, because we don't expect any solid improvement in the overall economy until late in the year and because of anticipated losses at ASC, Armco may post another loss in 1992."
 Purdum spoke optimistically about the proposed merger with Cyclops Industries, Inc. announced in September of 1991. "We are working very hard to complete the transaction and expect to close it by the end of the first quarter. Balancing our modern specialty steel melting capability with Cyclops' modern finishing operations should produce substantial operating efficiencies, generate higher revenues and increase cash flow, all of which will be very important to our performance in 1992 and beyond. This merger will make us more competitive against large U.S. and foreign companies.
 Summary of Results from Operations
 Specialty Flat-Rolled Steel
 In the fourth quarter of 1991, the Specialty Flat-Rolled Steel segment had an operating profit of $10.7 million on sales of $141.9 million compared to an operating profit of $15.4 million on sales of $150.5 million in the fourth quarter of 1990. Sales and operating profit declined as a result of lower
selling prices and a poorer product mix. For the year, Specialty Flat-Rolled Steel had an operating profit of $41.1 million on sales of $560.5 million compared to an operating profit of $58.5 million on sales of $606.2 million in 1990. Lower domestic shipments, lower prices and a weaker product mix offset cost improvements and combined to reduce sales and operating profit.
 Fabricating and Processing
 For the quarter, the Fabricating and Processing segment had an operating loss of $18 million on sales of $102.4 million compared to an operating profit of $5.6 million on sales of $104.5 million in the fourth quarter of 1990. Included in the operating loss are special charges of $27.2 million for planned divestments of certain South American operations.
 For the year, the segment had an operating loss of $12.9 million on sales of $399.8 million compared to an operating profit of $55.8 million on sales of $487.6 million in 1990. Included in the loss is $34.1 million of special charges for planned divestments in South America and of VSX Corporation, a domestic investment castings manufacturer. While unsettled conditions in Brazil continue to negatively affect sales and operating profit, operations in the country have improved and are profitable.
 Bar, Rod and Wire Products
 The Bar, Rod and Wire Products segment had an operating loss of $0.5 million on sales of $56.9 million in the fourth quarter of 1991 compared to an operating loss of $6.8 million on sales of $68 million in the fourth quarter of 1990. Baltimore Specialty Steels Corporation (BSSC) continued to downsize and
reduce its product lines. The operating loss, which includes a $2.7 million charge for further salaried force reductions at BSSC, narrowed primarily as a result of LIFO credits of $8 million at BSSC compared to $2.7 million of LIFO charges in the fourth quarter of 1990.
 For the year, Bar, Rod and Wire Products had an operating loss of $12.8 million on sales of $265.1 million compared to an operating loss of $13.6 million on sales of $289.3 million in 1990. Included in the 1991 operating loss are special charges of $13.8 million for BSSC force reductions and LIFO credits of $26.2 million compared to LIFO credits of $2.3 million in 1990.
 Other Operations
 For the quarter, Other Operations had an operating profit of $0.9 million on sales of $107.3 million compared to an operating profit of $1.8 million on sales of $91 million in the fourth quarter of 1990. Sales increased primarily as a result of the acquisition of Douglas Dynamics in July of 1991. Lower operating profit reflects the effects of political and economic conditions in Europe and South America on Armco's grinding systems business.
 For 1991, Other Operations had an operating profit of $8.7 million on sales of $369.9 million compared to an operating profit of $15 million on sales of $352.1 million in 1990.
 Joint Ventures and Investments
 Armco Steel Company (ASC)
 For the fourth quarter of 1991, Armco's share in the net loss of ASC was $30.3 million compared to a $17.2 million share in the net loss of the fourth quarter of 1990. Weaker prices in the distribution and conversion market offset higher volume and an improved product mix. ASC's operating loss for the period was $45.5 million on sales of $341.9 million compared to an operating loss of $24.3 million on sales of $331 million in the quarter a year ago.
 For 1991, Armco's share of ASC's net loss was $119 million compared to a $36.5 million share in the loss for 1990. The effects of recessionary market conditions, idling and operating certain facilities at reduced levels, planned outages for the installation of new technology at the Middletown, Ohio hot strip mill and significantly higher costs for the year were major factors in ASC's results. ASC sales dropped 8 percent in 1991 to $1.3 billion from $1.4 billion, reflecting a 10 percent reduction in shipments. ASC's operating loss for the year was $196.8 million compared to an operating loss of $50.5 million for 1990.
 National-Oilwell
 For the fourth quarter of 1991, Armco's share in the loss of National-Oilwell, an oilfield equipment joint venture with USX, was $15.5 million compared to income of $0.5 million in the fourth quarter of 1990. The loss was the result of a charge taken for the announced shutdown of the Garland, Texas manufacturing plant and weakness in domestic drilling activity. Armco's share of the charge for closing the Garland plant was $9.3 million.
 For 1991, Armco's share in the loss of National-Oilwell was $17.8 million compared to a loss of $2.4 million in 1990. Reduced U.S. sales and charges related to plant closings widened the loss for the year. Armco's share of the plant closing charges for the year was $12.3 million.
 Armco Financial Services Group (AFSG)
 AFSG's ongoing insurance companies to be sold lost $10.1 million in the fourth quarter of 1991 compared to income of $0.2 million in the fourth quarter of 1990. For 1991, the loss was $14.4 million compared to income of $9.7 million in 1990. A continuing soft insurance market, greater than normal catastrophe losses and an increase in the frequency and severity of fire and commercial auto losses contributed to the marked deterioration in results for the quarter and the year.
 Also in the fourth quarter of 1991, Armco recorded a charge of $170.3 million to writedown Armco's carrying value for AFSG's ongoing insurance companies to be sold.
 Selected Steel Data (supplemental information)
 The data under Specialty Flat-Rolled Steel is for Armco Inc.'s stainless and electrical steel plants at Butler, Pa, and Zanesville, OH. The data under Armco Steel Company is for the joint venture limited partnership between Armco Inc. and Kawasaki Steel Corporation. ASC has flat-rolled carbon steel plants in Middletown, Ohio, and Ashland, Ky.
 ARMCO INC.
 1991
 4th 3rd 2nd 1st
 Year Qtr. Qtr. Qtr. Qtr
 Specialty Flat-Rolled Steel:
 Steel products shipped 570 125 110 115 119
 Raw steel produced 612 138 161 147 166
 Capability utilization (percent) 79 71 82 75 86
 Armco Steel Company, L.P.:
 Steel products shipped 2,769 749 648 668 704
 Raw steel produced 3,087 816 835 825 611
 Capability utilization (percent) 68 71 72 72 54
 1990
 4th 3rd 2nd 1st
 Year Qtr. Qtr. Qtr. Qtr
 Specialty Flat-Rolled Steel:
 Steel products shipped 466 120 116 118 112
 Raw steel produced 622 150 145 160 167
 Capability utilization (percent) 78 75 72 80 85
 Armco Steel Company, L.P.:
 Steel products shipped 3,066 696 739 763 868
 Raw steel produced 3,991 963 1,071 940 1,017
 Capability utilization (percent) 87 84 93 83 90
 ARMCO INC. AND CONSOLIDATED SUBSIDIARIES
 Statement of Consolidated Income
 (Unaudited, dollars and shares in millions,
 except per share amounts)
 Periods ended: Three months Twelve months
 Dec. 31: 1991 1990 1991 1990
 Net sales $ 408.5 $ 414.0 $1,595.3 $1,735.2
 Cost of products
 sold (A)(B) (354.9) (365.0) (1,412.4) (1,500.6)
 Selling and admin. expenses (31.1) (40.9) (142.5) (157.7)
 Special charges (C) (30.7) -- (48.7) --
 Operating profit (loss) (8.2) 8.1 (8.3) 76.9
 Interest income 5.2 11.1 28.7 52.8
 Interest expense (13.0) (11.3) (55.5) (59.4)
 Sundry other-net (D) (5.1) (6.8) (3.9) (102.2)
 Income (loss) before
 income taxes (21.1) 1.1 (39.0) (31.9)
 Credit (provision) for
 income taxes (0.9) 7.1 (0.1) (2.5)
 Income (loss) from Armco and
 consolidated subsidiaries (22.0) 8.2 (39.1) (34.4)
 Equity in losses of Armco
 Steel Company, L.P. (E) (30.3) (17.2) (119.0) (36.5)
 Gain on investment in Armco
 Steel Company, L.P. (E) 6.7 -- 24.1 18.1
 Equity in inc. (loss) of
 National-Oilwell (F) (15.5) 0.5 (17.8) (2.4)
 Equity in inc.(loss) of AFSG
 companies to be sold (G) (10.1) 0.2 (14.4) 9.7
 Equity applied to AFSG
 advances (G) -- (0.2) -- (9.7)
 Writeoff of advances
 to AFSG (G) (170.3) -- (170.3) --
 Loss from cont. operations (241.5) (8.5) (336.5) (55.2)
 Net loss of AFSG runoff
 companies (G) -- -- -- (30.0)
 Loss before
 extraordinary item (241.5) (8.5) (336.5) (85.2)
 Loss on early
 retirement of debt -- -- -- (4.3)
 Net loss $(241.5) $ (8.5) $ (336.5) $ (89.5)
 Weighted average number
 of common and common
 equivalent shares
 outstanding -- primary 88.5 88.5 88.5 88.5
 Per share of common stock
 Loss per share - primary
 Loss from continuing
 operations $ (2.75) $ (0.12) $ (3.89) $ (0.71)
 Net loss of AFSG
 runoff companies -- -- -- (0.34)
 Loss before
 extraordinary item (2.75) (0.12) (3.89) (1.05)
 Loss on early
 retirement of debt -- -- -- (0.05)
 Net loss per
 share -- primary $ (2.75) $ (0.12) $ (3.89) $ (1.10)
 Loss per share --
 fully diluted (AA) (AA) (AA) (AA)
 Depreciation and
 leaseright amortization $ 11.6 $ 10.9 $ 45.2 $ 40.2
 (AA) -- Antidilutive or dilution less than 3 percent.
 Notes to Statement of Consolidated Income (Unaudited, dollars in millions, except per share amounts)
 (A) -- In the three and twelve months ended Dec. 31, 1991, Armco recognized income from LIFO layer liquidations of $10.0 or $.11 per share and $27.4 or $.31 per share, respectively. In the three and twelve months ended Dec. 31, 1990, Armco recognized income from LIFO layer liquidations of $3.0 or $.03 per share and $6.5 or $.07 per share, respectively.
 (B) -- In the year ended Dec. 31, 1990, Armco recorded a gain of $4.0 on the sale of its stainless pipe and tubing plant in Wildwood, Florida and $4.4 on the transfer of three companies to Armco Steel Company, L.P. (ASC) in return for the reduction of an Armco liability owed to ASC. These gains are recorded in Cost of products sold in the Statement of Consolidated Income.
 (C) -- Special charges for the three months ended Dec. 31, 1991 included $27.2 for the planned divestment of certain fabricating and processing businesses in South America, $0.8 for closing the office of a trading company in the United States and $2.7 for employee termination expenses at Armco's Baltimore Specialty Steels Corporation (BSSC). For the twelve months ended Dec. 31, 1991, special charges included $1.7 for the planned divestment of VSX Corporation, a manufacturer of near net shape investment castings; a total of $13.8 for expenses associated with work force reductions at BSSC; and $33.2 for the divestments of the South American businesses and the trading company.
 (D) -- Sundry other - net for the twelve months ended Dec. 31, 1990 included $25.6 in nonfinancing foreign exchange losses primarily related to Armco's operations in Brazil and Peru, one-time charges totaling $56.0 for additional litigation and claims reserves, and $15.0 for tax assessments.
 (E) -- On May 13, 1989, Armco Steel Company, L.P. (ASC) was formed from the business and assets of Armco's Eastern Steel Division, as a joint venture in which Armco has equal control with Kawasaki Steel Corporation (Kawasaki). On that date, Armco had a 60 percent financial interest and Kawasaki had a 40 percent interest in the joint venture. As part of the agreement creating ASC, Kawasaki agreed to make additional contributions to the joint venture. In consideration of these contributions, Kawasaki's financial interest would increase and Armco's interest would decrease until each had an equal financial interest in the partnership. In May 1990, Kawasaki made a contribution of $70.0 and its financial interest increased from 40 percent to 45 percent. In May 1991, Kawasaki contributed another $70.0 and its financial interest increased to 50 percent. In October 1991, Kawasaki made a contribution of $33.8 to ASC with no further change in ownership percentage. This final payment was originally scheduled as a $35.0 contribution in March 1992 but was accelerated and discounted through an agreement between the partners. In the three and twelve months ended Dec. 31, 1991 and for the year 1990, Armco recorded gains of $6.7, $24.1 and $18.1, respectively, which primarily represented Armco's interest in the increase in net assets of ASC due to the contributions reduced by the decrease in Armco's investment as a result of the ownership change.
 (F) -- In the three months ended Dec. 31, 1991, National-Oilwell, Armco's oilfield equipment joint venture with USX Corporation, recorded a charge of $18.5 for the cost of closing its Garland, Texas manufacturing plant. As a 50 percent owner of National-Oilwell, Armco recognized $9.3 of this charge in its equity in the income (loss) of the joint venture. In the twelve months ended Dec. 31, 1991, Armco's portion of the charges taken to shutdown National-Oilwell facilities totaled $12.3.
 (G) -- 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.
 Because the sale of the AFSG companies to be sold is not expected to occur within a one-year period, Armco includes their operating results as a component of continuing operations; however, because it continues to be the intent of Armco management to sell these companies, any net income from such operations is deferred until disposition of the companies occurs. Net losses incurred on a year-to-date basis are charged against income.
 In the three months ended Dec. 31, 1991, Armco recorded a charge of $170.3 to writeoff the balance of the advance account. The writeoff will not require the use of cash.
 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. Armco recorded a charge of $30.0 in the year ended Dec. 31, 1990 primarily for commutations, writedown of receivables for reinsurance and financing operations, and other changes in estimated future net losses.
 -0- 1/29/92
 /CONTACT: James A. Herzog of Armco, 201-316-5276/
 (AS) CO: Armco Inc. ST: New Jersey IN: MNG SU: ERN


TS -- NY013 -- 4602 01/29/92 09:35 EST
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