<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-873-2
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ARMCO INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-0200500
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Oxford Centre, 301 Grant St., Pittsburgh, PA 15219-1415
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(Address of principal executive offices, Zip Code)
(412) 255-9800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of common stock outstanding at October 31, 1995: 106,194,998
<PAGE> 2
ARMCO INC.
INDEX
Page
Part I. Financial Information
Condensed Statement of Consolidated Financial Position -
September 30, 1995 and December 31, 1994 2
Condensed Statement of Consolidated Operations and
Retained Deficit - Three and Nine Months Ended
September 30, 1995 and 1994 3
Condensed Statement of Consolidated Cash Flows -
Nine Months Ended September 30, 1995 and 1994 4
Notes to Condensed Consolidated Financial Statements 5-8
Management's Discussion and Analysis of the Condensed
Consolidated Financial Statements 9-14
Segment Report 15
Part II. Other Information
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit 11 Computation of Income (Loss) Per Common Share
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<TABLE>
ARMCO INC.
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(Unaudited)
<CAPTION>
(Dollars in millions) September 30, December 31,
1995 1994
---------- ----------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 119.7 $ 202.8
Short-term liquid investments 6.5 25.8
Receivables, less allowance for
doubtful accounts 228.5 183.3
Inventories (Note 2) 208.2 165.5
Net assets held for sale (Note 5) 85.5 25.6
Other (Note 6) 13.6 46.0
- ---------------------------------------------------------------------------
Total current assets 662.0 649.0
Investments
Investment in National-Oilwell (Note 5) - 79.5
Investment in AFSG (Note 7) 85.6 97.1
Other, less allowance for impairment 36.8 39.9
Property, plant and equipment 1,186.8 1,064.2
Accumulated depreciation (537.7) (499.6)
- ---------------------------------------------------------------------------
Property, plant and equipment - net 649.1 564.6
Deferred tax asset 321.8 321.8
Goodwill and other intangible assets 149.6 156.4
Other assets 9.7 26.6
- ---------------------------------------------------------------------------
Total assets $ 1,914.6 $ 1,934.9
- ---------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts and notes payable $ 154.7 $ 122.6
Employee benefit obligations 129.9 133.8
Accrued salaries and wages 36.1 32.7
Other accrued liabilities 76.0 90.8
Current portion of long-term debt 23.6 10.5
- ---------------------------------------------------------------------------
Total current liabilities 420.3 390.4
Long-term debt, less current portion 360.7 363.8
Long-term employee benefit obligations 1,210.4 1,255.3
Other liabilities 140.7 143.9
Commitments and contingencies (Notes 7 and 9)
Shareholders' deficit (Note 8)
Preferred stock - Class A 137.6 137.6
Preferred stock - Class B 48.3 48.3
Common stock 1.1 1.1
Additional paid-in capital 963.2 956.3
Retained deficit (1,365.6) (1,390.4)
Unrealized gain on equity securities (Note 6) - 31.6
Other (2.1) (3.0)
- ---------------------------------------------------------------------------
Total shareholders' deficit (217.5) (218.5)
- ---------------------------------------------------------------------------
Total liabilities and
shareholders' deficit $ 1,914.6 $ 1,934.9
- ---------------------------------------------------------------------------
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<TABLE>
ARMCO INC.
CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS
AND RETAINED DEFICIT
(Unaudited)
(Dollars and shares in millions,
except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ 404.1 $ 368.0 $1,163.1 $1,102.5
Cost of products sold (364.1) (316.5) (1,033.8) (979.5)
Selling and administrative expenses (23.2) (22.8) (70.2) (71.2)
Special charges (Note 3) - (15.0) - (35.0)
- ------------------------------------------------------------------------------
Operating profit 16.8 13.7 59.1 16.8
Interest income 3.0 3.4 9.9 7.2
Interest expense (8.7) (8.2) (24.7) (25.5)
Gain on sales of investments in joint
venture and related stock (Note 6) - 26.1 27.2 62.6
Sundry other - net (Note 4) (12.3) (11.8) (37.9) (30.0)
- ------------------------------------------------------------------------------
Income (loss) before income taxes (1.2) 23.2 33.6 31.1
Credit (provision) for income
taxes (Note 6) (0.9) (0.4) (1.7) 29.2
- ------------------------------------------------------------------------------
Income (loss) from continuing operations (2.1) 22.8 31.9 60.3
Discontinued operation - Equity in
income of National-Oilwell (Note 5) 2.0 2.6 6.3 7.8
- ------------------------------------------------------------------------------
Net income (loss) (0.1) 25.4 38.2 68.1
Retained deficit, beginning of period (1,361.0) (1,416.5) (1,390.4) (1,450.3)
Preferred stock dividends (4.5) (4.5) (13.4) (13.4)
- ------------------------------------------------------------------------------
Retained deficit, end of period $(1,365.6)$(1,395.6) $(1,365.6)$(1,395.6)
- ------------------------------------------------------------------------------
Weighted average number of common and
common equivalent shares outstanding
- primary 106.1 104.9 106.0 104.6
Net income (loss) applicable to
common stock $ (4.6) $ 20.9 $ 24.8 $ 54.7
Income (loss) from
continuing operations
per common share - primary $ (0.06) $ 0.17 $ 0.17 $ 0.45
Discontinued operation -
Equity in income of
National-Oilwell (Note 5) 0.02 0.03 0.06 0.07
Net income (loss) per common share
- primary (0.04) 0.20 0.23 0.52
Net income (loss) per common share
- fully dilutive * * * *
Cash dividends per share
$2.10 Class A $ 0.525 $ 0.525 $ 1.575 $ 1.575
$3.625 Class A 0.906 0.906 2.719 2.719
$4.50 Class B 1.125 1.125 3.375 3.375
<FN>
* Antidilutive or dilution less than 3%
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<TABLE>
ARMCO INC.
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Dollars in millions)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 38.2 $ 68.1
Adjustments to reconcile net income to net cash
(used in)/provided by operating activities:
Depreciation and lease-right amortization 39.8 36.9
Undistributed earnings from discontinued operations (5.4) (7.8)
Net gain on sales of investments and facilities (28.4) (62.8)
Deferred income tax benefit - (30.0)
Equity in net undistributed earnings of associated
companies (0.2) (1.6)
Special charges - 35.0
Other 9.0 11.0
Change in assets and liabilities, net of effects of
dispositions:
Accounts receivable (49.4) (31.6)
Inventory (41.4) 30.6
Payables and accrued expenses 38.3 (21.7)
Other assets and liabilities - net (24.5) (12.0)
- ------------------------------------------------------------------------------
Net cash (used in)/provided by operating activities (24.0) 14.1
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Net proceeds from the sale of businesses and assets 23.5 3.7
Proceeds from the sale and maturity of liquid
investments 24.7 -
Proceeds from the sale of investments 29.9 88.9
Purchase of liquid investments (5.0) (8.7)
Purchase of other investments (1.2)
Contributions to equity investees - (6.1)
Capital expenditures (110.2) (58.8)
Other (1.2) (1.2)
- ------------------------------------------------------------------------------
Net cash (used in)/provided by investing activities (39.5) 17.8
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from drawdown of construction debt - 15.0
Principal payments on debt (6.1) (14.5)
Dividends paid (16.4) (13.4)
Other 2.9 (0.2)
- ------------------------------------------------------------------------------
Net cash used in financing activities (19.6) (13.1)
- ------------------------------------------------------------------------------
Net change in cash and cash equivalents (83.1) 18.8
Cash and cash equivalents:
Beginning of period 202.8 183.5
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End of period $ 119.7 $ 202.3
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of capitalized interest) $ 20.3 $ 19.2
Income taxes 0.7 0.5
Supplemental schedule of noncash investing and
financing activities:
Issuance of restricted stock 4.6 2.5
Debt incurred directly for property 16.2 5.4
Note receivable in partial payment for asset sale 1.0 0.8
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in millions,
except per share amounts)
1. The condensed consolidated financial statements of Armco Inc. (Armco)
should be read in conjunction with the financial statements in Armco's Annual
Report to Shareholders for the year ended December 31, 1994. In the opinion
of Armco's management, the accompanying condensed consolidated financial
statements contain all adjustments, which were of a normal recurring nature,
necessary to present fairly, in all material respects, the financial position
as of September 30, 1995, the results of operations for the three and nine
months ended September 30, 1995 and 1994, and cash flows for the nine months
ended September 30, 1995 and 1994. The results of operations for the nine
months ended September 30, 1995 are not necessarily indicative of the results
to be expected for the year 1995.
2. Armco's inventories are valued at the lower of cost or market. Most of
Armco's domestic inventories are valued using the LIFO - Last In, First Out -
method. Other inventories are valued principally at average cost.
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Inventories on LIFO:
Finished and semi-finished $ 193.3 $ 158.7
Raw materials and supplies 38.7 24.8
Adjustment to state inventories at LIFO value (48.6) (41.1)
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Total 183.4 142.4
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Inventories on average cost:
Finished and semi-finished 15.8 14.8
Raw materials and supplies 9.0 8.3
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Total 24.8 23.1
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Total inventories $ 208.2 $ 165.5
======= =======
</TABLE>
The increase in inventories during the first nine months of 1995 is primarily
a result of the restart of the Mansfield and Dover Operations.
3. In the three and nine months ended September 30, 1994, Armco recognized a
charge of $15.0 related to a decision by Eastern Stainless Corporation to sell
substantially all of its assets. The charge was to cover increases in pension
and other employee benefit obligations, asset writedowns, estimated losses
through the date of disposal, and fees and expenses. The sale was consummated
on March 14, 1995.
In the nine months ended September 30, 1994, Armco recorded a special charge
of $20.0 for expenses associated with the temporary idling and restructuring
of its Mansfield and Dover, Ohio steelmaking and finishing facilities. The
Dover plant started limited production in early 1995 and the new thin-slab
caster and renovated hot strip mill at the Mansfield facility commenced
startup in early April 1995.
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4. Sundry other - net in Armco's Condensed Statement of Consolidated
Operations and Retained Deficit includes expenses of $9.4 and $29.0 for the
three and nine months ended September 30, 1995, respectively, and $9.5 and
$26.7 for the three and nine months ended September 30, 1994, respectively,
for interest on employee benefit obligations related to facilities which have
been divested.
5. Armco owns a 50% interest in National-Oilwell, an oil field equipment and
supply joint venture. USX Corporation holds the other 50% ownership interest.
Armco and USX Corporation reached a definitive agreement, dated September 22,
1995, to sell their respective partnership interests in National-Oilwell to an
investor group including Duff & Phelps/Inverness LLC, Bain Capital and
National-Oilwell management. The sale, which is subject to several
contingencies, including the buyers obtaining financing for the purchase, is
expected to close by the end of this year. The results of National-Oilwell
are reported in Discontinued operations and, at September 30, 1995, Armco's
investment in the joint venture, totaling $85.5, is reported in Net assets
held for sale in the Condensed Statement of Consolidated Financial Position.
Armco does not expect to recognize a gain or loss on the sale.
National-Oilwell's net revenues for the three and nine months ended September
30, 1995, were $133.6 and $400.1, respectively, compared to $161.2 and $422.6
for the same respective periods in 1994. Armco recorded equity income from
National-Oilwell of $2.0 and $6.3 for the three and nine months ended
September 30, 1995; and $2.6 and $7.8 for the three and nine months ended
September 30, 1994.
6. On April 7, 1994, Armco Steel Company, L.P. (ASC), a fifty percent owned
joint venture limited partnership between subsidiaries of Armco and Kawasaki
Steel Corporation, completed an initial public offering and recapitalization.
As part of this transaction, the business and assets of ASC were transferred
to AK Steel Holding Corporation (AK Steel) and Armco received 1,023,987 shares
of the newly-formed corporation's stock, representing approximately 4% of the
outstanding shares. In addition, Armco was released from certain obligations
to make future cash payments to the former joint venture. At December 31,
1994, the investment in AK Steel stock was recorded in Other current assets
with a corresponding credit in Unrealized gain on equity securities in the
Condensed Statement of Consolidated Financial Position.
As a result of the transaction, Armco recognized a nonrecurring pretax gain in
the nine months ended September 30, 1994 of $36.5, primarily as a result of
the release from certain obligations, discussed above, and recognition of
deferred pension curtailment gains established at ASC's formation. At the
same time, Armco reevaluated its deferred tax asset position in light of this
transaction and concluded that the amount of deferred tax asset, for which
realization of a future benefit is more likely than not, had increased by
$30.0. This latter amount is recorded in Credit (provision) for income taxes
in the Condensed Statement of Consolidated Operations and Retained Deficit.
On May 4, 1995, Armco announced that it had completed the sale of all of the
shares in AK Steel it had received as a result of the initial public offering
and recapitalization. In the nine months ended September 30, 1995, Armco
recorded a gain of $27.2 related to the sale of this stock. Armco will use
available capital loss carryforwards to offset federal and state income taxes
on the gain. With the completion of the sale, Armco no longer owns any stock
in AK Steel.
7. At December 31, 1994, Armco Financial Services Group consisted primarily
of insurance companies which Armco intended to sell and which continued
underwriting activities (AFSG companies to be sold) and insurance companies
that had stopped writing new business and are being liquidated (runoff
companies).
On April 7, 1995, the sale of the AFSG companies to be sold was completed. The
proceeds from the sale consisted of $64.2 in cash at the closing and $15.0 to
be received in April 1998. The latter amount is subject to potential
adjustment for adverse experience in certain insurance
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<PAGE> 8
reserves. Substantially all of these proceeds have been pledged as security
for certain note obligations due to the runoff companies and will be retained
in the investment portfolio of those companies.
In 1993, Armco recorded reserves totaling approximately $11.5, primarily for
employee benefit liabilities Armco expected to retain after the sale of the
AFSG companies to be sold. As part of the sale agreement, Armco received $4.2
in cash from the former companies to be sold and assumed an equal amount of
additional employee benefit obligations from them. Armco transferred the cash
and all of the above liabilities to the runoff companies in the second quarter
of 1995, concurrent with the closing of the sale of the AFSG companies to be
sold. As a result of the transfer, Armco reduced its investment in the runoff
companies by $11.5 in the second quarter of 1995.
The runoff companies are accounted for by Armco as discontinued operations
under the liquidation basis of accounting whereby all future cash inflows and
outflows are considered. Armco management continues to believe, based on
current facts and circumstances and the views of outside counsel and advisors,
that future charges, if any, resulting from the runoff companies will not be
material to Armco's consolidated financial condition or liquidity. However,
it is possible that due to fluctuations in Armco's results, future
developments could have a material effect on the results of one or more future
interim or annual periods. Following the sale of the AFSG companies to be
sold and the transfer of the liabilities described above, Armco's investment
in the runoff companies totaled $85.6 at September 30, 1995.
There are various matters pending which involve AFSG, relating to litigation,
arbitration and regulatory affairs, including matters related to Northwestern
National Insurance Company, a runoff company currently involved in, among
other matters, arbitration and litigation with respect to certain reinsurance
programs. The ultimate liability from such matters at September 30, 1995
cannot be determined; but in Armco's opinion, based on current facts and
circumstances and the views of outside counsel and advisors, any liability
resulting will not materially affect Armco's consolidated financial condition
or liquidity. However, it is possible that due to fluctuations in Armco's
results, future developments with respect to changes in the ultimate liability
could have a material effect on future interim or annual results of
operations.
8. Under the terms of its $170.0 amended bank credit agreement, which expires
on December 31, 1995, Armco is not permitted to pay cash dividends on its
common stock. The payment of dividends on preferred stock is prohibited if
Armco is in default under the credit agreement.
Under the terms of the indentures for Armco's 11.375% Senior Notes Due 1999
and 9.375% Senior Notes Due 2000, Armco cannot pay a dividend on its common
stock or repurchase its capital stock, unless it meets certain financial tests
described in the indentures. Armco does not expect to be able to meet all of
these tests in the near term.
At its October 27, 1995 meeting, the Board of Directors declared the regular
quarterly dividends payable on Armco's $2.10 Cumulative Convertible Preferred
Stock, Class A, $3.625 Cumulative Convertible Preferred Stock, Class A, and
$4.50 Cumulative Convertible Preferred Stock, Class B.
9. There are various claims pending involving Armco and its subsidiaries
regarding product liability, antitrust, patent, employee benefits,
environmental and hazardous waste matters, reinsurance and insurance
arrangements (Note 7), and other matters arising out of the conduct of Armco's
business.
Like other manufacturers, Armco is subject to various environmental laws.
These laws necessitate expenditures to assure compliance at Armco's facilities
and to remediate sites where contamination has occurred. Compliance costs are
either expensed as they are incurred or, when
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<PAGE> 9
appropriate, are recorded as capital expenditures. Armco has accrued its
estimate of remediation costs for sites where it is probable that a liability
has been incurred and the amount can be reasonably estimated. The recorded
amounts are currently believed by management to be sufficient. However, such
estimates could significantly change in future periods to reflect new laws or
regulations, advances in technologies, additional sites requiring remediation,
new remediation requirements at existing sites, and Armco's share of liability
at multi-party sites.
Armco believes, based on current facts and circumstances, that its ultimate
liability for pending claims, contingent liabilities and environmental matters
identified to date will not materially affect its consolidated financial
condition or liquidity. However, it is possible that due to fluctuations in
Armco's results, future developments with respect to such pending claims,
contingent liabilities and environmental matters could have a material effect
on the results of operations in future interim or annual periods.
At September 30, 1995, Armco had recorded in its Condensed Statement of
Consolidated Financial Position, legal and environmental reserves of $89.0, of
which $18.8 was classified as current.
10. Information relating to Armco's industry segments can be found on
page 15.
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------------------------------------------
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(Dollars in millions, except per share data)
GENERAL
Armco Inc.'s consolidated results in the third quarter and first nine months
of 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ 404.1 $ 368.0 $1,163.1 $1,102.5
Special charges -- (15.0) -- (35.0)
Operating profit 16.8 13.7 59.1 16.8
Gain on sales of investments
in joint ventures and
related stock -- 26.1 27.2 62.6
Credit (provision) for
income taxes (0.9) (0.4) (1.7) 29.2
Income (loss) from
continuing operations (2.1) 22.8 31.9 60.3
Discontinued operation -
Equity in income of
National-Oilwell 2.0 2.6 6.3 7.8
Net income (loss) (0.1) 25.4 38.2 68.1
Net income (loss) per
common share - primary (0.04) 0.20 0.23 0.52
</TABLE>
Net sales in the three months ended September 30, 1995 were higher than in the
same period last year, despite the divestiture of Eastern Stainless
Corporation (Eastern Stainless), which had $15.2 of sales in the third quarter
of 1994. Excluding Eastern Stainless sales, Armco's third quarter net sales
increased 15% as a result of continued strong demand for specialty steel
products and the restart of the Mansfield and Dover Operations. Year-to-date
sales excluding Eastern Stainless increased 11% as higher sales at most units
were partially offset by lower sales at the Mansfield and Dover Operations,
which were idle during all of the first quarter of 1995.
As a result of the decision to idle and restructure the Mansfield and Dover
Operations, Armco recognized a $20.0 special charge in the first quarter of
1994. In the third quarter of 1994, Eastern Stainless announced its decision
to sell substantially all of its assets to Avesta Sheffield Holding Company
and, as a result, Armco recognized a $15.0 special charge, primarily for
employee benefit obligations, losses through the date of disposal and asset
writedowns. Also in the third quarter of 1994, operating profit included a
$4.5 charge to increase environmental reserves. Absent the Eastern Stainless
special charge, the operating losses recorded by Eastern Stainless and the
environmental reserve charge in the third quarter of 1994, operating profit
decreased 53% as strong third quarter 1995 operating profits for stainless and
electrical steel operations were offset by increased losses at Mansfield and
Dover. During the third quarter of 1995, equipment outages at the Butler and
Mansfield Operations also adversely affected results. Year-to-date operating
profit, excluding the special charges, Eastern Stainless operating losses and
environmental charge, decreased 5% as improved profits in the Specialty Flat-
Rolled segment failed to offset higher losses at Mansfield and Dover.
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<PAGE> 11
In the nine months ended September 30, 1995, net income included a gain of
$27.2 on the sale of Armco's investment in AK Steel Holding Corporation (AK
Steel). In the three and nine months ended September 30, 1994, net income
included a gain of $26.1 recorded on the sale of 90% of Armco's investment in
North American Stainless (NAS), a formerly 50%-owned joint venture. In the
nine months ended September 30, 1994, net income also included $36.5 as a
pretax gain and $30.0 of tax gains related to the initial public offering and
recapitalization of AK Steel. These transactions are more fully described
below in EQUITY AND OTHER INVESTMENTS.
On April 7, 1995, the sale of the Armco Financial Services Group ongoing
insurance companies was completed. Armco and USX Corporation entered into a
definitive agreement, dated September 22, 1995, to sell their respective
interests in National-Oilwell. The sale of the ongoing insurance companies
and the agreement to sell National-Oilwell are more fully described in
DISCONTINUED OPERATIONS, below.
Net income (loss) per common share reflects a deduction of $4.5 for the third
quarter and $13.4 for the first nine months of each year for preferred stock
dividends declared.
BUSINESS SEGMENT RESULTS
- ------------------------
Specialty Flat-Rolled Steel
- ---------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ 302.8 $ 279.1 $ 896.9 $ 811.5
Special charge -- (15.0) -- (15.0)
Operating profit 46.0 27.5 146.6 92.3
Shipments (tons 000s) 180 182 550 533
Raw steel produced (tons 000s) 239 225 713 663
</TABLE>
Excluding Eastern Stainless sales of $15.2 and shipments of 7,000 tons,
customer sales and tons shipped increased by 15% and 3%, respectively, in the
third quarter of 1995 versus 1994, as strong market demand for substantially
all product lines in this business segment continued. The relatively low
increase in shipments was due primarily to operational problems at the Butler
Operations, where the failure of a generator on one stand of the hot strip
mill reduced operating efficiency during a six week period in the quarter.
Year-to-date 1995 shipments exceeded the first nine months of 1994 primarily
due to increased demand for automotive chrome stainless, specialty sheet and
strip, and electrical steels.
Strong market conditions continued to support prices in all major product
lines. Prices for products containing molybdenum, nickel and chrome have also
been favorably impacted by raw material price surcharges placed in effect in
the first quarter of 1995.
Excluding the results of Eastern Stainless, operating profit as a percent of
sales for the three months ended September 30, 1995 was 15% compared to 17%
for the same period in 1994. The lower margins resulted from the hot strip
mill failure at the Butler Operations which caused the operations to use
alternative, and more costly, product routings. Excluding Eastern Stainless,
1995 year-to-date operating profit was slightly higher than last year as
overall improved pricing, volume, productivity and mix were partially offset
by higher raw material costs and the production problem in the last two
months.
Outlook: Until Mansfield becomes fully operational, adding to Armco's
specialty steel capacity, demand is expected to exceed Armco's ability to
supply. At September 30, 1995, order backlog for all products was 16% higher
than September 30, 1994, though some recent weakness has occurred for orders
in select markets, particularly specialty sheet and strip.
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<PAGE> 12
The generator failure experienced at the Butler Operations in the third
quarter has been corrected. However, Armco still holds some product in
inventory, which will require more expensive product routings in the fourth
quarter. Operating profit in the quarter will be adversely impacted as this
inventory is processed and sold. During the remainder of the year, shipments
will be constrained by Armco's scheduled maintenance outages, as well as
outages for planned finishing facilities upgrades. As discussed in the Other
Steel and Fabricated Products segment, an extended restart of Mansfield's
revamped and modernized hot strip mill and an outage due to problems with a
reheat furnace have delayed this operation's return to full production. As a
result, Armco does not expect Mansfield to contribute significantly to the
Specialty Flat-Rolled Steel segment until 1996. For the fourth quarter of
1995, Armco anticipates that shipments will be near third quarter levels.
In 1994, Armco announced an expanded capital improvement program under which
it would spend up to $95.0 over the next two years to upgrade and expand its
specialty steel finishing facilities. The program is intended to reduce
existing production constraints by increasing specialty steel finishing
capacity by approximately 180,000 tons per year, particularly in electrical
steels, specialty sheet and strip products and chrome stainless.
Implementation of this strategic facilities upgrade should be largely complete
by mid-1996.
Other Steel and Fabricated Products
- -----------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ 101.3 $ 88.9 $ 266.2 $ 291.0
Special charge -- -- -- (20.0)
Operating loss (22.0) (4.6) (65.8) (51.8)
</TABLE>
Net sales increased by 14% in the third quarter of 1995 compared to the same
period in 1994, primarily due to the restart of operations at Mansfield,
partially offset by slightly lower sales at Sawhill Tubular and Douglas
Dynamics LLC (Douglas Dynamics). The Mansfield and Dover Operations were
idled at the beginning of the second quarter last year, after which Mansfield
was selling only on-hand coil inventory. During the third quarter of 1995,
Mansfield was not operating at full capacity as start-up of the new thin-slab
caster and modernized hot strip mill was delayed by process control system
difficulties and the failure of the refractory lining and a skid in the new
walking beam furnace. The furnace problems necessitated an unscheduled 17-day
outage, halting the steel melting and casting operations at Mansfield. Armco
had planned an outage in December to repair the skid, which had buckled in
June. However, the refractory failure forced repairs beginning in late
August. Sales for the first nine months of 1995 were 9% below sales for the
same period in 1994, reflecting a $44.6 decline in sales at the Mansfield and
Dover Operations during the first quarter of 1995, when these operations were
idle, and the slower than expected progress during the ramp up. Year-to-date
sales at Sawhill Tubular and Douglas Dynamics exceeded last year's sales.
Mansfield and Dover recorded operating losses in the three and nine months
ended September 30, 1995 of $32.7 and $82.8, respectively. These losses were
higher than the 1994 operating losses of $13.3 and $72.8 for the three and
nine month periods, respectively. The nine-month 1994 amount includes the
$20.0 idling charge. Higher losses in the current year versus 1994, when the
plants were idled to reduce costs, were the result of normal start-up
expenses, the slower than expected ramp up, operating difficulties, including
problems with the process control systems, and the outage related to the
reheat furnace failure.
Douglas Dynamics' third quarter operating profit was lower than last year
primarily because of a decrease in snowplow shipments, due to the lower
snowfall last winter, and higher overheads related to aggressive new product
development efforts. Sawhill Tubular's third quarter sales decreased slightly
from last year's level, but increased 5% in the nine month comparison.
Sawhill Tubular returned to profitability in the third quarter of this year as
operating results improved marginally in the 1995 periods versus the three and
nine months ended September 30, 1994.
-11-
<PAGE> 13
Outlook: As discussed, the ramp up at Mansfield was delayed by problems
incurred in integrating the new process control systems and the unexpected
outage to repair the reheat furnace. Both situations have been resolved, but
the currently low operating levels and continued high operating costs, due to
the longer than anticipated hot mill restart and the plant outage, are
expected to extend operating losses into the fourth quarter. Armco expects to
increase operating levels throughout the fourth quarter and be near full
production by the end of the year. However, weakness in the carbon steel
markets will hurt Mansfield's results in this business segment.
While expecting to maintain market share and margins, Douglas Dynamics
anticipates lower snowplow sales over the next twelve months compared to the
last twelve months, though the extent of the reduction depends on four-wheel
drive truck sales and snowfalls this winter. Operating results will be
adversely affected by the lower level of snowplow sales and by higher
overheads as a result of increased efforts in new product development. Sales
of other Douglas Dynamics product lines, including a pickup truck lift system,
tool box and ice control spreaders, are expected to partially offset the
adverse pressure on operating profit. Sawhill Tubular's sales are expected to
remain level over the next year with cost reductions improving results.
EQUITY AND OTHER INVESTMENTS
- ----------------------------
Net income in 1994 included the results of, and commission income from, NAS, a
former 50%-owned joint venture with Acerinox S.A. In the third quarter of
1994, Armco sold 90% of its investment in NAS to Acerinox and stopped
recording its portion of NAS's income.
On May 4, 1995, Armco announced that it had completed a series of transactions
resulting in the sale of 1,023,987 shares of AK Steel common stock. Armco had
received the stock, which represented approximately 4% of the outstanding
common stock of AK Steel, in April 1994 as part of the initial public offering
and recapitalization of that company. With the completion of these
transactions, Armco no longer owns any stock in AK Steel. Armco received
total net proceeds of $27.2 and, since its basis in the shares was zero,
recognized a gain in the same amount. Armco will use available capital loss
carryforwards to offset federal and state income taxes on this gain.
DISCONTINUED OPERATIONS
- -----------------------
National-Oilwell
- ----------------
Armco owns a 50% interest in National-Oilwell, an oil field equipment and
supply joint venture. USX Corporation holds the other 50% ownership interest.
Armco and USX Corporation reached a definitive agreement, dated September 22,
1995, to sell their respective partnership interests in National-Oilwell to an
investor group including Duff & Phelps/Inverness LLC, Bain Capital and
National-Oilwell management. The sale, which is subject to several
contingencies, including the buyers obtaining financing for the purchase, is
expected to close by the end of this year. The results of National-Oilwell
are reported in Discontinued operations and, at September 30, 1995, Armco's
investment in the joint venture, totaling $85.5, is reported in Net assets
held for sale in the Condensed Statement of Consolidated Financial Position.
Armco does not expect to recognize a gain or loss on the sale.
National-Oilwell's net revenues for the three and nine months ended September
30, 1995, were $133.6 and $400.1, respectively, compared to $161.2 and $422.6
for the same respective periods in 1994. Armco recorded equity income from
National-Oilwell of $2.0 and $6.3 for the three and nine months ended
September 30, 1995; and $2.6 and $7.8 for the three and nine months ended
September 30, 1994. In the first quarter of 1995, Armco received a $1.0 cash
dividend from National-Oilwell.
-12-
<PAGE> 14
Armco Financial Services Group
- ------------------------------
At December 31, 1994, the Armco Financial Services Group consisted primarily
of insurance companies which Armco intended to sell and which continued
underwriting policies (AFSG companies to be sold) and insurance companies that
have stopped writing new business and are being liquidated (runoff companies).
AFSG companies to be sold
On April 7, 1995, Armco completed the sale of the AFSG companies to be sold to
Vik Brothers Insurance Inc., a privately held, North Carolina-based property
and casualty insurance holding company. The proceeds from the sale consisted
of $64.2 in cash at the closing and $15.0 to be received in April 1998. The
latter amount is subject to potential adjustment for adverse experience in
certain insurance reserves. Substantially all of the proceeds have been
pledged as security for certain note obligations due to the runoff companies
and will be retained in the investment portfolio of those companies.
Runoff companies
The addition of the proceeds from the sale of the AFSG companies to be sold to
the investment portfolio of the runoff companies is expected to have a long-
term positive effect on the liquidity and future strength of these companies.
In 1993, Armco recorded reserves totaling approximately $11.5, primarily for
employee benefit liabilities Armco expected to retain after the sale of the
AFSG companies to be sold. As part of the sale agreement, Armco received $4.2
in cash from the former companies to be sold and assumed an equal amount of
additional employee benefit obligations from them. Armco transferred the cash
and all of the above liabilities to the runoff companies in the second quarter
of 1995, concurrent with the closing of the sale of the AFSG companies to be
sold. As a result of this transfer, Armco reduced its investment in the
runoff companies by $11.5 in the second quarter of 1995.
Armco management continues to believe, based on current facts and
circumstances and the views of outside counsel and advisors, that future
charges, if any, resulting from the runoff companies will not be material to
Armco's consolidated financial condition or liquidity. However, it is
possible that due to fluctuations in Armco's results, future developments
could have a material effect on the results of one or more future interim or
annual periods.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1995, Armco held $119.7 of cash and cash equivalents compared
to $202.8 at December 31, 1994. In addition, Armco had $6.5 and $25.8 of
short-term liquid investments at September 30, 1995 and December 31, 1994,
respectively. Cash and cash equivalents decreased $83.1 during the first nine
months of 1995, including $54.8 of cash used for a pension contribution,
$110.2 for capital expenditures and $16.4 for preferred stock dividends.
Offsetting these cash outflows were net receipts of $71.9 on the sale of
businesses, assets and investments, and cash inflows from operations,
excluding the pension contribution.
Capital expenditures for the first nine months of 1995 totaled $126.4. This
amount included $16.2 of assets acquired through direct project financing
related to the Mansfield thin-slab caster and $110.2 of assets acquired with
cash, as discussed above.
In addition to the cash on hand, Armco has a $170.0 revolving credit facility
that expires on December 31, 1995. At September 30, 1995, $75.7 of the credit
facility was used as support for letters of credit and $94.3 was available for
borrowing. Borrowings under the credit facility are secured by certain of
Armco's inventories and receivables. As amended in 1994, the credit agreement
requires Armco to be in compliance with several covenants and meet certain
ratio requirements. Based on its current financial condition and internal
forecasts, Armco believes that it will remain in compliance with these
covenants through the termination of the current facility. Armco and its bank
-13-
<PAGE> 15
group have begun discussions aimed at reaching agreement on a new $170.0
revolving credit facility. Armco expects that the new facility will be in
place prior to the end of the year.
As discussed above, Armco completed the divestments of Eastern Stainless and
the AFSG companies to be sold in 1995. Eastern Stainless received $10.1 in
cash, which is being used to satisfy a portion of the approximately $60.0 of
liabilities of Eastern Stainless that Armco assumed. Proceeds from the sale
of the AFSG companies to be sold, totaling $64.2, have been retained in the
investment portfolio of the runoff companies and will not be available to
Armco.
During the first nine months of 1995, working capital (receivables and
inventories less current liabilities, excluding debt) increased $71.1. The
increase is related to higher receivables and inventories, partially offset by
higher payables, resulting from increased operating levels in the Specialty
Flat-Rolled Steel segment and the restart of operations at Mansfield and
Dover, and higher receivables at Douglas Dynamics, due to the normal financing
of preseason sales. Through the remainder of the year, working capital is
expected to decrease slightly with reductions in receivables and inventories
mostly offset by liability reductions.
Armco anticipates that its 1995 cash expenditures for capital projects will
total approximately $161.0, including $52.0 for expenditures to complete the
thin-slab caster and renovate the hot strip mill at Mansfield, $61.0 of the
$95.0 expanded capital improvement program and the remainder for normal
replacement, environmental and expansion programs. In addition, a total of
$16.2 of capital expenditures for the thin-slab caster was funded through
direct project financing. Armco anticipates that 1996 cash expenditures for
capital projects will be between $50.0 and $75.0.
Armco has $23.6 of debt commitments maturing through September of next year
and it expects to make discretionary pension payments of between $23.0 and
$88.0 during the next 12 months. The capital expenditures, and debt and
pension payments will be paid out of existing cash balances and cash generated
from operations and asset disposals. Potential asset disposals include the
anticipated sale of an industrial park near Houston, Texas, from which Armco
anticipates recognizing a gain of between $15.0 and $20.0; and, the sale of
National-Oilwell, as discussed above. Both sales are expected to close before
year end and, in total, generate approximately $100.0 in cash.
On October 27, 1995, Armco's Board of Directors declared the regular quarterly
dividends of $.525 per share on the $2.10 Cumulative Convertible Preferred
Stock, Class A, and $.90625 per share on the $3.625 Cumulative Convertible
Preferred Stock, Class A, each payable December 29, 1995 to shareholders of
record on December 1, 1995. The Board of Directors also declared the regular
quarterly dividend of $1.125 per share on the $4.50 Cumulative Convertible
Preferred Stock, Class B, payable January 2, 1996, to shareholders of record
on December 1, 1995. Payment of dividends on Armco's common stock is
currently prohibited under the terms of certain of Armco's debt instruments
and under the terms of the amended bank credit agreement.
-14-
<PAGE> 16
<TABLE>
ARMCO INC.
SEGMENT REPORT
(Unaudited)
(Dollars in millions)
<CAPTION>
1995 1994
---------------------- ------------------------------
3rd 2nd 1st 4th 3rd 2nd 1st
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Specialty Flat-Rolled
Steel:
Customer sales $302.8 $300.8 $293.3 $237.0 $279.1 $269.2 $263.2
Special charge - - - - (15.0) - -
Operating profit 46.0 53.5 47.1 34.0 27.5 34.7 30.1
Other Steel and
Fabricated Products:
Customer sales 101.3 89.8 75.1 98.1 88.9 85.7 116.4
Special charge - - - - - - (20.0)
Operating loss (22.0) (20.7) (23.1) (3.1) (4.6) (13.1) (34.1)
Corporate General (7.2) (7.0) (7.5) (8.5) (9.2) (7.6) (6.9)
- ------------------------------------------------------------------------------
Total operating
profit (loss) 16.8 25.8 16.5 22.4 13.7 14.0 (10.9)
Interest income 3.0 3.2 3.7 3.3 3.4 1.9 1.9
Interest expense (8.7) (8.5) (7.5) (8.3) (8.2) (8.4) (8.9)
Gain on sale of
investments in
joint ventures
and related stock - 25.9 1.3 - 26.1 36.5 -
Sundry other - net (12.3) (12.7) (12.9) (11.4) (11.8) (8.9) (9.3)
Credit (provision) for
income taxes (0.9) (0.6) (0.2) (0.5) (0.4) 29.8 (0.2)
- ------------------------------------------------------------------------------
Income (loss) from
continuing operations (2.1) 33.1 0.9 5.5 22.8 64.9 (27.4)
Discontinued operation -
Equity in income of
National Oilwell 2.0 2.8 1.5 4.1 2.6 5.0 0.2
- ------------------------------------------------------------------------------
Net income (loss) $ (0.1) $ 35.9 $ 2.4 $ 9.6 $ 25.4 $ 69.9 $(27.2)
==============================================================================
<FN>
See Note to Condensed Consolidated Financial Statements.
</TABLE>
-15-
<PAGE> 17
Part II. Other Information
Item 1. Legal Proceedings
-----------------
There are various claims pending against Armco and its subsidiaries
involving product liability, antitrust, patent, insurance arrangements,
environmental and hazardous waste matters, employee benefits and other
matters arising out of the conduct of the business of Armco as previously
described in Armco's Annual Report on Form 10-K for the year ended
December 31, 1994 (the Form 10-K) and Armco's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1995 and June 30, 1995 (Forms 10-Q). The
following summarizes significant developments in previously reported matters
and any new claims asserted since June 30, 1995:
In the Adamson v. Armco action, on June 22, 1995, the plaintiffs petitioned
----------------
for certiorari to the U.S. Supreme Court. Armco filed its Brief in
Opposition on July 24, 1995. The petition for certiorari was denied by the
U.S. Supreme Court on October 2, 1995, thus conclusively resolving this
matter in favor of Armco.
In the Eastern Stockholder Litigation, the Pension Benefit Guaranty
------------------------------
Corporation, on its own behalf and as class representative for all Class B
shareholders of Eastern Stainless Corporation (Eastern Stainless), filed
suit. In accordance with Virginia corporation law, a special independent
committee of the Board of Directors of Eastern Stainless has been appointed
to evaluate the merits of plaintiffs' derivative claims under the business
judgment rule. Armco filed a motion to dismiss the direct claims, stay the
derivative claims and stay discovery pending completion of the special
committee's investigation. Plaintiff filed a motion for class
certification. The court denied Armco's motion to dismiss the direct claims
and stay discovery, and granted Armco's motion to stay the derivative claims
and plaintiff's motion for class certification. Armco has filed an answer
to the complaint and discovery is in progress.
On September 29, 1995, the Fifth Circuit dismissed the Rhonda Sills v.
---------------
Atlantic Richfield Company, et al., action for failure of the appellant to
- ----------------------------------
file a brief.
On September 29, 1995, the United States Environmental Protection Agency
(USEPA) sent a letter confirming that Armco has completed all the work at
the King River Ltd. Site required by USEPA's Order.
In the matter involving the Fultz Landfill Superfund Site, the Department of
Justice filed a complaint against Armco in the U.S. District Court for the
Southern District of Ohio on July 21, 1995, seeking recovery of
approximately $4.5 million in costs under the Comprehensive Environmental
Responsibility, Compensation & Liability Act. Armco filed an answer,
affirmative defenses and counterclaim on September 27, 1995.
In the matter involving the Granville Solvents Site in Ohio, in August 1994,
USEPA entered into an Administrative Order on Consent (AOC) with a number of
potential responsible parties (PRPs). Armco did not sign the AOC because
the terms were deemed unacceptable. Four of the signatories to the AOC (who
claim to have an assignment of rights by other companies who signed the AOC)
initiated a contribution action in the U.S. District Court for the Southern
District of Ohio against all the PRPs, including Armco, who did not sign the
AOC. Armco filed an answer, affirmative defenses and counterclaim on
September 29, 1995, and is preparing a motion to stay proceedings while
settlement discussions take place.
The total liability on the foregoing claims and those other claims described
under ITEM 3. LEGAL PROCEEDINGS in the Form 10-K or under Item 1 in the
Forms 10-Q is not determinable; but in the opinion of management, the
ultimate liability resulting will not materially affect the consolidated
financial condition or liquidity of Armco and its subsidiaries; however, it
is possible that due to fluctuations in Armco's results, future developments
with respect to changes in the ultimate liability could have a material
effect on future interim or annual results of operations.
-16-
<PAGE>18
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. The following is an index of the exhibits included in the Form 10-Q:
Exhibit 11 Computation of Income (Loss) Per Common Share
B. No report on Form 8-K was filed by Armco since June 30, 1995.
-17-
<PAGE>19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on behalf of the registrant by the following
duly authorized persons.
Armco Inc.
------------------------------------
(Registrant)
Date November 7, 1995 /s/ David G. Harmer
----------------------- -------------------------------------
David G. Harmer
Corporate Vice President and Chief
Financial Officer
Date November 7, 1995 /s/ Peter G. Leemputte
----------------------- -------------------------------------
Peter G. Leemputte
Corporate Vice President and Controller
-18-
<PAGE>
EXHIBIT 11
<TABLE>
ARMCO INC.
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(Dollars and shares in millions, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
PRIMARY September 30, September 30,
- ----------------------------------------------------------------------------
1995 1994 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations $ (2.1) $ 22.8 $ 31.9 $ 60.3
Preferred stock dividends (4.5) (4.5) (13.4) (13.4)
- ----------------------------------------------------------------------------
Income (loss) from continuing
operations applicable to common stock (6.6) 18.3 18.5 46.9
Income from discontinued operations 2.0 2.6 6.3 7.8
- ----------------------------------------------------------------------------
Net income (loss) applicable to
common stock $ (4.6) $ 20.9 $ 24.8 $ 54.7
- ----------------------------------------------------------------------------
Weighted average number of
common shares 106.1 104.8 105.9 104.5
Weighted average number of common
equivalent shares - 0.1 0.1 0.1
- ----------------------------------------------------------------------------
Average common shares outstanding
as adjusted 106.1 104.9 106.0 104.6
- ----------------------------------------------------------------------------
Income (loss) per share from
continuing operations $ (0.06) $ 0.17 $ 0.17 $ 0.45
Income per share from
discontinued operations 0.02 0.03 0.06 0.07
- ----------------------------------------------------------------------------
Net income (loss) per share $ (0.04) $ 0.20 $ 0.23 $ 0.52
- ----------------------------------------------------------------------------
FULLY DILUTED*
- --------------
Income (loss) from continuing
operations $ (2.1) $ 22.8 $ 31.9 $ 60.3
Preferred stock dividends (4.5) - - -
- ----------------------------------------------------------------------------
Income (loss) from continuing
operations applicable to common stock (6.6) 22.8 31.9 60.3
Income from discontinued operations 2.0 2.6 6.3 7.8
- ----------------------------------------------------------------------------
Net income (loss) applicable to
common stock $ (4.6) $ 25.4 $ 38.2 $ 68.1
- ----------------------------------------------------------------------------
Weighted average number of
common shares 106.1 104.8 105.9 104.5
Weighted average number of common
equivalent shares ** 0.1 0.1 0.1
Weighted average number of preferred
shares on an "if converted" basis ** 22.7 22.7 22.7
- ----------------------------------------------------------------------------
Average common shares outstanding
as adjusted 106.1 127.6 128.7 127.3
- ----------------------------------------------------------------------------
Income (loss) per share from
continuing operations $ (0.06) $ 0.18 $ 0.25 $ 0.47
Income per share from discontinued
operations 0.02 0.02 0.05 0.06
- ----------------------------------------------------------------------------
Net income (loss) per share $ (0.04) $ 0.20 $ 0.30 $ 0.53
- ----------------------------------------------------------------------------
Shares of stock outstanding at September 30
Common 106.1 104.9
Preferred - $2.10 Class A 1.7 1.7
Preferred - $3.625 Class A 2.7 2.7
Preferred - $4.50 Class B 1.0 1.0
<FN>
* Calculation of fully diluted income per share is submitted in accordance
with Securities Exchange Act of 1934 Release No. 9083, although it is contrary
to paragraph 40 of APB Opinion No. 15 because it produces an antidilutive
result, or is not required by footnote 2 to paragraph 14 of APB Opinion No. 15
because it results in dilution of less than 3%.
** Antidilutive
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE ARMCO INC. CONDENSED STATEMENT OF
CONSOLIDATED FINANCIAL POSITION AND CONDENSED STATEMENT
OF CONSOLIDATED OPERATIONS AND RETAINED DEFICIT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 119,700
<SECURITIES> 6,500
<RECEIVABLES> 228,500
<ALLOWANCES> 0
<INVENTORY> 208,200
<CURRENT-ASSETS> 662,000
<PP&E> 1,186,800
<DEPRECIATION> 537,700
<TOTAL-ASSETS> 1,914,600
<CURRENT-LIABILITIES> 420,300
<BONDS> 360,700
<COMMON> 964,300
0
185,900
<OTHER-SE> (1,367,700)
<TOTAL-LIABILITY-AND-EQUITY> 1,914,600
<SALES> 1,163,100
<TOTAL-REVENUES> 1,163,100
<CGS> 1,033,800
<TOTAL-COSTS> 1,033,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,700
<INCOME-PRETAX> 33,600
<INCOME-TAX> 1,700
<INCOME-CONTINUING> 31,900
<DISCONTINUED> 6,300
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,200
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.30
</TABLE>
