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ARMCO REPORTS THIRD QUARTER RESULTS

 PARSIPPANY, N.J., Oct. 21 /PRNewswire/ -- Armco Inc. reported a net loss of $223.0 million for the third quarter of 1993, or $2.19 per share of common stock. Included in the net loss are previously announced special charges of $205.5 million associated with Armco's decision to dispose of its Brazilian sheet and strip operations, the Worldwide Grinding Systems segment and a number of other domestic businesses. Excluding the effects of the special charges, Armco's net loss was $17.5 million, including $2.6 million in losses from equity companies and an additional $6.4 million of postretirement benefits expense associated with adopting SFAS 106.
 In the third quarter of 1992, Armco lost $25.2 million, or $0.26 per share, including losses from equity companies totaling $26.3 million and a $5.4 million gain on the sale of Southwestern Ohio Steel (SOS), a domestic carbon steel processor.
 Sales for the third quarter of 1993 declined 15 percent to $419.8 million from $497.0 million in the quarter a year ago, primarily as a result of divestitures, including SOS and the Brazilian sheet and strip operations, as well as the restructuring of Armco's stainless steel long products business.
 "Operating results for our specialty flat-rolled steel segment improved substantially for the quarter," said Robert L. Purdum, Armco chairman and chief executive officer. "However, the progress made by our specialty operations was overshadowed by the special charges and operating losses from the Other Steel and Fabricated Products segment. We are disappointed with the operating results of this segment, but the overall actions taken will improve it in the future."
 Specialty Flat-Rolled Steel Segment
 In the third quarter of 1993, Specialty Flat-Rolled Steel operating profit rose 40 percent to $18.7 million on sales of $240.3 million. Operating profit includes approximately $5.0 million of additional expense related to SFAS 106. In the third quarter of 1992, operating profit was $13.3 million on sales of $251.5 million. The increase in operating profit was a result of substantially lower costs for all products driven by improved yields and lower melt shop costs achieved at the Butler, Pennsylvania plant.
 Sales declined four percent reflecting a shift in product mix to lower priced automotive chrome stainless and semi-finished products. In addition, foreign imports and lower raw material costs have led to lower chrome-nickel prices. However, strong demand from the automotive market partially offset the decline in prices.
 The independent unions at the Butler, Pennsylvania and Zanesville, Ohio plants recently ratified new labor agreements. These follow successful completion of labor pacts at other key locations earlier this summer.
 1993 1992
 (in thousands of net tons)
 3rd 2nd 1st 4th 3rd 2nd 1st
Specialty Flat-Rolled Steel: Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr
 Steel products shipped 156 178 169 571 147 158 150 116
 Raw steel produced 203 247 244 793 194 195 222 182
 Capability utilization
 (percent) 91 98 98 84 76 76 92 98
 Other Steel and Fabricated Products Segment
 In the third quarter of 1993, the Other Steel and Fabricated Products segment had an operating loss of $172.0 million on sales of $179.5 million. The operating loss includes special charges of $165.5 million to cover estimated losses and reserve requirements for the ultimate disposal of a number of businesses in this segment. Of the total charges, $15.0 million is associated with the previously announced sale of Armco's Brazilian sheet and strip operations and the remaining $150.5 million is for the following businesses: Cytemp Specialty Steel, a producer of high temperature super alloys; Armco Stainless & Alloy Products, a provider of conversion services; Flour City Architectural Metals, a designer and fabricator of custom curtain wall systems; Tex-Tube, a manufacturer of carbon steel line pipe; and Miami Industries, a carbon steel tubing maker.
 Excluding the special charges, the operating loss in the third quarter of 1993 was $6.5 million primarily as a result of start-up costs of a new tubular steel stretch mill, losses on certain non-residential construction contracts and continued losses in flat-rolled carbon steel operations, partially driven by higher scrap costs.
 In the third quarter of 1992, the segment had an operating profit of $6.2 million, which included a special credit of $5.4 million. Sales were $245.5 million in the third quarter a year ago.
 Sales for the third quarter of 1993 were off substantially primarily as a result of the divestiture of SOS and the Brazilian sheet and strip operations and the restructuring of the stainless long products business, partially offset by an increase in carbon flat-rolled steel sales.
 Discontinued Operations - Worldwide Grinding Systems (WGS)
 Reflecting the completed sale of joint venture interests in several wire drawing mills to Leggett and Platt, and the decision to sell the remainder of the Worldwide Grinding Systems business to Bain Capital, the results of WGS are now presented as discontinued operations. For the third quarter, WGS had income from operations of $5.0 million compared to income of $3.8 million in the third quarter of 1992.
 Nine Month Results
 For the first nine months of 1993, Armco had a loss of $236.3 million, before the cumulative effect of accounting changes, or $2.41 per share, on sales of $1,300.5 million. The loss includes special charges and equity losses totaling $229.3 million.
 Effective January 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 net 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 nine months of 1993 was $540.7 million, or $5.34 per share.
 For the first nine months of 1992, Armco had a net loss of $53.2 million, or $.61 per share, on sales of $1,209.2 million. The net loss included equity losses and special charges totaling $88.9 million.
 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 third quarter of 1993, ASC had an operating profit of $8.0 million, including $14 million of additional expense associated with adopting SFAS 106, compared to an operating loss of $33.7 million in the third quarter of 1992. The move to 100 percent continuous casting, improved productivity, salaried force reductions and the rationalization of higher cost operations contributed to the substantial gains in operating results.
 ASC reduced its net loss to $5.7 million in the quarter from $42.8 million in the third quarter of 1992. Sales of ASC increased to $405.4 million from $321.4 million in the quarter a year ago, reflecting higher prices and increased shipments to all major markets.
 1993 1992
(in thousands of net tons) 3rd 2nd 1st 4th 3rd 2nd 1st
Armco Steel Company, L.P.: Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr
 Steel products shipped 875 876 816 3,049 759 692 778 820
 Raw steel produced 905 913 878 3,399 815 760 921 903
 Capability utilization
 (percent) 91 93 90 79 82 73 81 80
 Armco Inc. is a leading domestic producer of stainless and electrical steels. Armco also produces carbon flat-rolled steels, steel products and carbon steel 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)
 Three Months Ended Nine Months Ended
 September 30, September 30,
 1993 1992 1993 1992
 Net sales $ 419.8 $ 497.0 $1,300.5 $1,209.2
 Cost of products sold (385.0) (454.3) (1,177.8)(1,085.0)
 Selling and admin. exp. (30.0) (33.7) (93.0) (94.6)
 Spec'l.credits(charges)(A) (165.5) 5.4 (165.5) (16.2)
 Operating profit (loss) (160.7) 14.4 (135.8) 13.4
 Interest income 0.7 1.8 3.6 7.3
 Interest expense (11.0) (11.7) (32.4) (33.8)
 Sundry other - net (B) (12.8) (7.2) (29.6) 7.2
 Loss before income taxes (183.8) (2.7) (194.2) (5.9)
 Credit (provision) for
 income taxes (B) (1.6) 1.9 7.5 16.8
 Income (loss) from Armco &
 consolidated subsidiaries (185.4) (0.8) (186.7) 10.9
 Equity in losses of Armco
 Steel Company, L.P. (C) - (21.0) (17.9) (60.2)
 Equity in losses of other
 equity companies (D) (2.6) (5.3) (5.9) (12.5)
 Equity in inc.(loss) of AFSG
 companies to be sold (E) 3.3 (1.9) 8.8 (2.9)
 Deferred inc. of AFSG
 companies to be sold (E) (3.3) - (8.8) -
 Loss from cont. operations (188.0) (29.0) (210.5) (64.7)
 Discont'd. ops - Worldwide
 Grinding Systems (A)
 Income from operations 5.0 3.8 14.2 11.5
 Loss on disposal of business (40.0) - (40.0) -
 Loss before cumulative
 effect of acctg changes (223.0) (25.2) (236.3) (53.2)
 Cum. effect of chngs. in
 acctg for postretirement
 benefits and inc.taxes (F) - - (304.4) -
 Net loss $(223.0) $ (25.2) $ (540.7) $ (53.2)
 Weighted avg. number of
 common and common equiv.
 shares outstanding -
 primary 103.9 103.4 103.8 97.2
 Net loss applicable to
 common stock $(227.5) $ (27.2) $ (554.1) $ (59.2)
 Per share of common stock
 Loss per share-primary
 Loss from cont ops $ (1.85) $ (0.30) $ (2.16) $ (0.73)
 Loss before cum.effect
 of acctg changes (2.19) (0.26) (2.41) (0.61)
 Cumulative effect of
 changes in acctg for
 postretirement benefits
 and income taxes --- --- (2.94) ---
 Net loss per share -
 primary (2.19) (0.26) (5.34) (0.61)
 Net loss per share -
 fully diluted a a a a
 Deprec.& leaseright amort. $ 13.8 $ 13.6 $ 41.8 $ 34.2
 (a) Antidilutive or dilution less than 3%.
 See Notes to Statement of Consolidated Operations and Segment
 Report.
 NOTES TO STATEMENT OF CONSOLIDATED OPERATIONS
 (Unaudited)
 Dollars in millions, except per share amounts)
 (A) In the three and nine months ended September 30, 1993, Armco recorded charges totaling $205.5 for costs associated with the disposal of a number of its businesses. Included was a charge of $40.0 for expenses and losses associated with its decision to sell the Worldwide Grinding Systems (WGS) business segment. This group of businesses headquartered in Kansas City, Missouri, produces grinding balls and rods, abrasion-resistant castings, liners, process control systems and carbon wire rods. The results of the WGS businesses have been reclassified from Armco's Loss from continuing operations and are presented as discontinued operations in all periods presented in Armco's Statement of Consolidated Operations.
 In the three and nine months ended September 30, 1993, Armco recognized special charges totaling $165.5 related to a loss on the sale of its Brazilian operations and its decision to exit a number of domestic businesses. Of the total, approximately $15.0 related to the sale of Armco do Brasil S.A. and the remainder was associated with the ultimate disposal of Flour City Architectural Metals, Tex-Tube, Armco Stainless & Alloy Products and Cytemp Specialty Steel. The announced plan to sell Miami Industries is expected to result in an immaterial gain.
 In the three and nine months ended September 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. Through a newly formed partnership, Armco sold 75% of the businesses and contributed the remaining 25% to Armco Steel Company, L.P. (ASC). After the sale, ASC owned 50% of the new partnership.
 In the nine months ended September 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, Maryland; and $1.2 to increase a reserve for the divestment of an investment castings plant, which Armco discontinued in 1991.
 (B) In the nine months ended September 30, 1993, Armco recorded income tax benefits of $4.9 in credit (provision) for income taxes, and income of $5.8 in Sundry other - net related to settlements of state income tax issues; and reversed a federal tax reserve of $4.3 as a result of the resolution of certain other tax issues. This latter amount was recorded in Credit (provision) for income taxes.
 In the nine months ended September 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 (provision) 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. using the equity method, recognizing its proportionate share of ASC's results. At December 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 $2.5 and $13.4 for the three and nine months ended September 30, 1993. 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.
 (D) Equity in losses of other equity companies includes the following:
 Three Months Ended Nine Months Ended
 September 30, September 30,
 1993 1992 1993 1992
 National-Oilwell $(2.4) $(5.2) $(3.9) $(11.6)
 North Am. Stainless (0.7) - (2.8) -
 Other 0.5 (0.1) 0.8 (0.9)
 Total $ (2.6) $(5.3) $(5.9) $(12.5)
 (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 January 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. In the three and nine months ended September 30, 1993, the accrual of expense for these benefits exceeded the expense which would have been recognized under the pay-as-you-go method by $6.4 and $19.1, respectively.
 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- 10/21/93
 /CONTACT: James A. Herzog of Armco, 201-316-5276/
 (AS)


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

LG -- NY016 -- 4988 10/21/93 08:55 EDT
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Date:Oct 21, 1993
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