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ARMCO REPORTS THIRD QUARTER LOSS OF $25.2 MILLION

 ARMCO REPORTS THIRD QUARTER LOSS OF $25.2 MILLION
 PARSIPPANY, N.J., Oct. 21 /PRNewswire/ -- Armco Inc. (NYSE: AS)


reported a net loss of $25.2 million for the third quarter of 1992, or $.26 per share of common stock. Included are equity losses from Armco Steel Company, L.P. (ASC) and National-Oilwell totaling $26.2 million and a $5.4 million gain on the sale of Southwestern Ohio Steel.
 In the third quarter of 1991, Armco lost $26.9 million, or $.33 per share, including equity losses for ASC and National-Oilwell totaling $34.0 million.
 Sales for the period rose 52 percent to $590.5 million from $387.6 million, reflecting Armco's acquisition of Cyclops completed on April 24, 1992.
 "The effects of an uneven and anemic economy are evident," said Armco's chairman and chief executive officer, Robert L. Purdum. "Strength in specialty flat-rolled stainless products was offset by pronounced weaknesses in other businesses, particularly our carbon steel joint venture.
 "ASC results improved over the third quarter a year ago, but were poorer than expected and interrupted a trend of steady improvement made over the last three quarters. While ASC has initiated many changes, including 100 percent continuous casting, the full effects of these changes are not likely to be seen until 1993.
 "In early October, Armco completed a $125 million convertible preferred stock offering and a $100 million senior debt issue" Purdum said. "This capital provides flexibility in implementing our strategy of concentrating on specialty steels, prudently scheduling non-strategic asset divestments and reducing debt, particularly high cost debt maturing in the next two years."
 Summary of Third Quarter Segment Results
 Specialty Flat-Rolled Steel
 In the third quarter of 1992, Specialty Flat-Rolled Steel had an operating profit of $12.8 million on sales of $234.3 million. This compared to an operating profit of $8.4 million on sales of $147.4 million in the third quarter of 1991. Sales and operating profit increased primarily as a result of adding operating units from the Cyclops acquisition. In addition, a strong performance by stainless products was partially offset by weaker electrical steel results and a scheduled maintenance outage for widening a slab caster which reduced capability utilization.
 Specialty Flat-Rolled Steel shipped 158,000 tons compared to 110,000 tons shipped in the quarter a year ago and operated at 76 percent of capability versus 82 percent in the quarter a year ago. (In addition to Armco's Butler, Pa. and Zanesville, Ohio plants, this segment now includes former Cyclops units -- Coshocton Stainless, Eastern Stainless Corporation and the stainless and electrical products business of Empire-Detroit Steel.)
 Worldwide Grinding Systems
 Worldwide Grinding Systems had an operating profit of $0.6 million on sales of $92.3 million compared to a breakeven quarter on sales of $85.0 million in 1991. Worldwide Grinding Systems' joint venture businesses, which are not consolidated, provided income to Armco of $3.4 million in the quarter compared to $4.0 million in the quarter a year ago.
 Fabricating and Processing
 The Fabricating and Processing segment had an operating profit of $15.9 million on sales of $150.4 million compared to an operating profit of $9.6 million on sales of $104.9 million in the third quarter a year ago. Sales were up 43 percent primarily as a result of adding Cyclops' tubular products businesses and Bowman Metal Deck to this segment, partially offset by the August 31 sale of Southwestern Ohio Steel (SOS). Operating profit increased as a result of a $5.4 million gain on the sale of SOS.
 Other Steel Businesses
 The Other Steel Businesses segment had an operating loss of $13.1 million on sales of $68.7 million compared to an operating profit of $0.6 million on sales of $23.0 million in the third quarter of 1991. Following the acquisition of Cyclops, Armco's Baltimore long products plant and Cyclops' Bridgeville, Pa., operations were combined to create Armco Stainless and Alloy Products. (Former Cyclops units -- Cytemp Specialty Steel and the carbon steel business of Empire-Detroit Steel -- are also included in this segment.)
 Sales of the segment increased as a result of the acquisition. The operating loss was affected by reduced volume and lower prices caused by weakness in semi-finished and aerospace markets and increased foreign competition.
 Other Operations
 Other Operations had an operating profit of $4.6 million on sales of $44.8 million compared to an operating profit of $3.8 million on sales of $27.3 million in the quarter a year ago. The increase in sales and operating profit primarily reflects the addition of the Nonresidential Construction businesses from the Cyclops acquisition.
 Joint Ventures and Investments
 Armco Steel Company, L.P.
 Armco's share in the net loss of Armco Steel Company, L.P. (ASC), a carbon flat-rolled steel joint venture with Kawasaki Steel Corporation, was $21.0 million, a 34 percent improvement, compared to a $31.9 million share of the net loss in the third quarter of 1991.
 Sales for ASC were $321.4 million, compared to $299.8 million in the third quarter a year ago, a seven percent increase. Sales and shipments in the 1991 third quarter were significantly reduced by a scheduled outage for modernization which lasted 40 days.
 ASC's third quarter 1992 operating loss dropped 38 percent to $33.7 million, or $49 per ton, compared to $54.7 million, or $84 per ton, in the third quarter of 1991. However, this represents a marked deterioration in results from the second quarter of 1992 when the operating loss had been reduced to $27 per ton.
 Continuing weakness in primary markets, particularly automotive reduced volume and contributed to lower selling prices in the third quarter of 1992. In addition, the installation of a $52 million gas cleaning system at the Ashland plant increased operating costs as the project reduced steelmaking capacity for most of the quarter.
 National-Oilwell
 Armco's share in the net loss of National-Oilwell, an oil field equipment joint venture with USX, was $5.2 million compared to a loss of $2.1 million in the third quarter a year ago. National-Oilwell's revenues decreased 33 percent as a result of the continuing depression in North American drilling activities and a drop in international rig sales.
 Armco Financial Services Group
 For the third quarter of 1992, the AFSG companies to be sold had a net loss of $1.9 million compared with a loss of $6.4 million in the third quarter a year ago. An increase in realized gains from investments accounted for the substantial improvement.
 Nine Month Results
 For the first nine months of 1992, Armco had a net loss of $53.2 million, or $.61 per share, on sales of $1,501.9 million. Included are equity losses of $60.2 million attributable to ASC and $11.6 million to National-Oilwell. Unusual items include gains of $39.1 million for a federal tax refund and $5.4 million on the sale of SOS and charges of $21.6 for force reductions and rationalizations. The net effect of these and other smaller unusual items was to increase income by $31.6 million.
 For the first nine months of 1991, Armco had a net loss of $95.0 million, or $1.14 per share, on sales of $1,186.8 million. Included are equity losses of $88.7 million attributable to ASC. The net effect of unusual items was to increase income by $13.4 million.
 Selected Steel Data (supplemental information)
 Specialty Flat-Rolled Steel data is for Armco Inc.'s flat-rolled stainless and electrical steel plants at Butler, Pa., Coshocton, Mansfield and Zanesville, Ohio and Baltimore. Data from former Cyclops companies is included effective April 25, 1992.
 Armco Steel Company, L.P. data 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.
 Selected Steel Data (supplemental information)
 1992 1991
 3rd 2nd 1st 4th 3rd 2nd 1st
 Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr
 (in thousands of net tons)
 Specialty Flat-Rolled Steel
 Steel products shipped 158 150 116 469 125 110 115 119
 Raw steel produced 195 222 182 612 138 161 147 166
 Utilization of
 production capability
 (as a percent) 76 92 98 79 71 82 75 86
 Armco Steel Company
 Steel products shipped 692 778 820 2,769 749 648 668 704
 Raw steel produced 760 921 903 3,087 816 835 825 611
 Utilization of
 production capability
 (as a percent) 73 81 80 68 71 72 72 54
 ARMCO INC. AND CONSOLIDATED SUBSIDIARIES
 Statement of Consolidated Operations
 (Unaudited, dollars and shares in millions,
 except per share amounts)
 Periods ended Three months Nine months
 Sept. 30: 1992 1991 1992 1991
 Net sales $ 590.5 $ 387.6 $1,501.9 $1,186.8
 Cost of products sold(B) (539.5) (336.9) (1,353.5) (1,057.5)
 Selling and admin. exp. (40.7) (35.1) (115.2) (111.4)
 Special credits (charges)(C) 5.4 (1.7) (16.2) (18.0)
 Operating profit(loss) 15.7 13.9 17.0 (0.1)
 Interest income 1.8 6.1 7.8 23.5
 Interest expense (11.8) (13.2) (36.0) (42.5)
 Sundry other-net (D) (4.4) 5.2 16.6 (0.2)
 Income (loss) before
 income taxes 1.3 12.0 5.4 (19.3)
 Credit (provision) for
 income taxes (D) 1.6 (0.6) 16.1 0.8
 Income (loss) from
 Armco and consolidated
 subsidiaries 2.9 11.4 21.5 (18.5)
 Equity in losses of Armco
 Steel Company,L.P.(E) (21.0) (31.9) (60.2) (88.7)
 Gain on investment in Armco
 Steel Company,L.P.(E) -- -- -- 17.4
 Equity in losses of
 National-Oilwell (5.2) (2.1) (11.6) (0.9)
 Equity in losses of
 AFSG companies to
 be sold (F) (1.9) (6.4) (2.9) (4.3)
 Deferred income of
 AFSG companies to
 be sold (F) -- 2.1 -- --
 Net loss $ (25.2) $ (26.9) $ (53.2) $ (95.0)
 Weighted average
 number of common and
 common equivalent
 shares outstanding -
 primary 103.4 88.5 97.2 88.5
 Per share of common stock
 Loss per share - primary $ (0.26) $ (0.33) $ (0.61) $ (1.14)
 Loss per share -
 fully diluted (AA) (AA) (AA) (AA)
 Depreciation and
 leaseright amortization $ 16.4 $ 11.2 $ 42.1 $ 33.6
 (AA) -- Antidilutive or dilution less than 3 percent.
 NOTES TO STATEMENT OF CONSOLIDATED OPERATIONS
 (Unaudited, dollars in millions, except per share amounts)
 A. On April 24, 1992, Armco completed the acquisition of Cyclops Industries, Inc. (Cyclops) a producer of flat-rolled stainless and carbon steels, tubular steel products and special alloys. In addition, Cyclops operated businesses which design, fabricate and erect non- residential construction products. As of April 25, 1992 Armco began consolidating the former Cyclops units. The acquisition was accounted for under the purchase method of accounting and prior periods were not restated. For the year 1991, Cyclops reported sales of $1,056.5.
 B. In the three and nine months ended Sept. 30, 1991, income from LIFO layer liquidation totaled $5.8 or $0.7 per share and $17.4 or $.20 per share, respectively. There was no income from layer liquidation recognized in the nine months ended Sept. 30, 1992.
 C. In the three and nine months ended Sept. 30, 1992, Armco recorded a special credit of $5.4 representing a gain on the sale of Southwestern Ohio Steel and SOS Leveling Co., Inc. (collectively, SOS). Through a newly formed partnership, Armco sold 75 percent of the business of SOS and contributed the remaining 25 percent to Armco Steel Company, LP, Armco's 50 percent-owned partnership, (ASC).
 After the sale, ASC owned 50 percent of the new partnership.
 In the nine months ended Sept. 30, 1992, Armco recorded a special charge of $20.4 for expenses related to closing the melt shop at Armco's Stainless and Alloy Products plant in Baltimore, formerly Baltimore Specialty Steels Corporation (BSSC). During the same period, Armco recorded a charge of $1.2 to increase a reserve for the planned divestment of an investment castings plant, which Armco discontinued in the third quarter of 1991 recording, a $1.7 special charge.
 Other special charges for the nine months ended Sept. 30, 1991 included $11.1 for expenses associated with work force reductions at BSSC and $5.2 for the planned divestment of a tubing plant in South America.
 D. In the nine months ended Sept. 30, 1992, Armco recognized income of $39.1 as the result of a settlement with the Internal Revenue Service on two federal tax refund claims involving Armco's tax returns for 1978-80 and 1987.
 Of the total amount recognized, $16.2, representing the tax refund, was recorded in Credit (provision) for income taxes and $22.9, representing interest on the claim, was recorded in Sundry other - net.
 E. 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 nine months ended Sept. 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 nine months ended Sept. 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.
 As part of the agreement creating ASC, Kawasaki Steel Corporation, the other partner in the joint venture, agreed to make certain cash contributions to ASC during 1990 and 1991, receiving in return, an increase in its financial interest from 40 percent to 50 percent. In the second quarter of 1991, Kawasaki made a $70.0 contribution and its interest increased from 45 percent to 50 percent. In the nine months ended Sept. 30, 1991, Armco recognized a gain of $17.4, primarily representing Armco's interest in the increase in net assets of ASC due to the contributions, reduced by the decrease in Armco's investment due to the ownership change.
 F. 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, 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.
 -0- 10/21/92 R
 /CONTACT: James A. Herzog of Armco Inc., 201-316-5276/
 (AS) CO: Armco Inc. ST: New Jersey IN: MNG SU: ERN


KD-TS -- NY028 -- 2766 10/21/92 10:13 EDT
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