<PAGE>
                                  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        March 31, 1997
                               --------------------------------------
                                           OR

      [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                   
                              -----------------    ------------------
Commission File No. 1-873-2
                   --------------------------------------------------
                                 ARMCO INC.
                                 ----------
          (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
         -----------------------------------------------------------
             (Address of principal executive offices, Zip Code)

                                (412) 255-9800
                ----------------------------------------------------
                (Registrant's telephone number, including area code)

                ----------------------------------------------------
                (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
                               -------    ------
             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
                               -------    ------
                   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 March 31, 1997:  107,051,408
<PAGE>


                                 ARMCO INC.

                                   INDEX



                                                                         Page


Part I.   Financial Information

          Condensed Statement of Consolidated Financial Position -
             March 31, 1997 and December 31, 1996                          2

          Condensed Statement of Consolidated Income and 
             Accumulated Deficit - Three Months Ended 
             March 31, 1997 and 1996                                       3

          Condensed Statement of Consolidated Cash Flows - 
             Three Months Ended March 31, 1997 and 1996                    4

          Notes to Condensed Consolidated Financial Statements           5-6

          Management's Discussion and Analysis of the Condensed
             Consolidated Financial Statements                          7-10

          Segment Report                                                  11


Part II.  Other Information

          Item 1.   Legal Proceedings                                     12

          Item 4.   Submission of Matters to a Vote of 
                       Security Holders                                   12

          Item 6.   Exhibits and Reports on Form 8-K                      12

          Signatures                                                      13

          Exhibit 11   Computation of Earnings Per Common Share

                                     -1-
<PAGE>

<TABLE>
                                   ARMCO INC.
            CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
                                  (Unaudited)
<CAPTION>
(Dollars in millions)                                 March 31,   December 31,
                                                        1997          1996
                                                      ---------     ---------
<S>                                                   <C>           <C>
ASSETS 
Current assets 
   Cash and cash equivalents                          $  151.9      $  168.9 
   Receivables, less allowance for doubtful accounts     183.0         149.6 
   Inventories (Note 2)                                  262.7         246.9 
   Other                                                   6.0           6.4 
-----------------------------------------------------------------------------
Total current assets                                     603.6         571.8 

Investments
   Investment in Armco Financial Services Group 
      (Note 6)                                            85.6          85.6 
   Other, less allowance for impairment                   48.5          52.4 

Property, plant and equipment                          1,278.3       1,267.7 
Accumulated depreciation                                (612.6)       (597.6)
-----------------------------------------------------------------------------
Property, plant and equipment - net                      665.7         670.1 

Deferred tax asset                                       325.8         325.8 
Goodwill and other intangible assets                     143.2         144.8 
Other assets                                              13.9          17.3 
-----------------------------------------------------------------------------
Total assets                                          $1,886.3      $1,867.8 
-----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' DEFICIT 
Current liabilities 
   Trade accounts and notes payable                  $   150.1     $   136.3 
   Employment-related obligations                        119.8         115.1 
   Other liabilities                                      76.0          79.6 
   Current portion of long-term debt                      25.7          27.2 
-----------------------------------------------------------------------------
Total current liabilities                                371.6         358.2 

Long-term debt, less current portion                     341.2         344.3 
Long-term employee benefit obligations                 1,201.5       1,200.2 
Other liabilities                                        179.0         177.1 
Commitments and contingencies (Note 6)
Shareholders' deficit (Note 7) 
   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                            967.4         965.0 
   Accumulated deficit                                (1,359.0)     (1,363.9)
   Other                                                  (2.4)         (0.1)
-----------------------------------------------------------------------------
Total shareholders' deficit                             (207.0)       (212.0)
-----------------------------------------------------------------------------
Total liabilities and shareholders' deficit          $ 1,886.3     $ 1,867.8 
-----------------------------------------------------------------------------
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
                                    -2-
<PAGE>

<TABLE>
                                  ARMCO INC. 
                  CONDENSED STATEMENT OF CONSOLIDATED INCOME 
                           AND ACCUMULATED DEFICIT 
                                (Unaudited) 
(Dollars and shares in millions, 
  except per share amounts) 
<CAPTION>
                                                          Three Months Ended
                                                               March 31,
                                                          --------------------
                                                            1997        1996
                                                          --------    --------
<S>                                                      <C>         <C>
Net sales                                               $   441.3   $   430.4 
 
Cost of products sold (Note 3)                             (397.5)     (391.3)
Selling and administrative expenses                         (24.6)      (24.0)
------------------------------------------------------------------------------
Operating profit                                             19.2        15.1 
------------------------------------------------------------------------------

Interest income                                               2.5         3.0 
Interest expense                                             (8.7)       (9.2)
Sundry other - net (Note 4)                                  (3.4)       (1.6)
------------------------------------------------------------------------------
Income before income taxes                                    9.6         7.3 

Provision for income taxes                                   (0.2)       (0.4)
------------------------------------------------------------------------------
Net income                                                    9.4         6.9 

Accumulated deficit, beginning of period                 (1,363.9)   (1,378.5)
Preferred stock dividends                                    (4.5)       (4.5)
------------------------------------------------------------------------------
Accumulated deficit, end of period                      $(1,359.0)  $(1,376.1)
------------------------------------------------------------------------------

Weighted average number of common and common 
   equivalent shares outstanding - primary                  106.7       106.4 
Net income applicable to common stock                   $     4.9   $     2.4 

Earnings per common share - primary                     $    0.05   $    0.02 
Earnings per common share - fully diluted                     *           *  

Cash dividends per share 
   $2.10 Class A                                        $   0.525   $   0.525 
   $3.625 Class A                                           0.906       0.906 
   $4.50 Class B                                            1.125       1.125 
<FN>
*   Antidilutive or dilution less than 3%

See Notes to Condensed Consolidated Financial Statements. 
</TABLE>
                                    -3-
<PAGE>

<TABLE>
                                   ARMCO INC. 
                CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS 
                                  (Unaudited) 

(Dollars in millions)
<CAPTION>
                                                         Three Months Ended 
                                                              March 31, 
                                                         -------------------
                                                           1997        1996
                                                         -------     -------
<S>                                                      <C>         <C>
Cash flows from operating activities: 
Net income                                               $  9.4      $  6.9 
Adjustments to reconcile net income to net cash 
   (used in) provided by operating activities: 
   Depreciation expense                                    15.4        14.6 
   Net gain on sales of investments and facilities          -          (1.4)
   Other                                                    2.5        (3.7)
Change in assets and liabilities: 
   Trade accounts and notes receivable                    (36.8)       (1.9)
   Inventory                                              (15.8)      (10.4)
   Payables and accrued operating expenses                 16.3        24.0 
   Employee benefit obligations                             0.8         7.0 
   Other assets and liabilities - net                       7.3        (7.2)
----------------------------------------------------------------------------
Net cash (used in) provided by operating activities        (0.9)       27.9 
----------------------------------------------------------------------------
Cash flows from investing activities: 
Net proceeds from the sale of businesses and assets         0.1         3.1 
Proceeds from the sale of investments                       0.3        77.2 
Contributions to investees                                  -          (1.6)
Capital expenditures                                       (7.5)      (11.6)
Other                                                      (0.3)       (2.8)
----------------------------------------------------------------------------
Net cash (used in) provided by investing activities        (7.4)       64.3 
----------------------------------------------------------------------------
Cash flows from financing activities: 
Proceeds from drawdown of debt                              1.1         -
Principal payments on debt                                 (4.7)        -
Dividends paid                                             (4.5)       (4.5)
Other                                                      (0.6)       (0.6)
----------------------------------------------------------------------------
Net cash used in financing activities                      (8.7)       (5.1)
----------------------------------------------------------------------------
Net change in cash and cash equivalents                   (17.0)       87.1 
Cash and cash equivalents:  
Beginning of period                                       168.9       136.8 
----------------------------------------------------------------------------
End of period                                            $151.9      $223.9 
----------------------------------------------------------------------------

Supplemental disclosures of cash flow information:
Cash paid during the period for:
   Interest (net of capitalized interest)                 $ 4.7      $  5.5 
Supplemental schedule of noncash investing and
   financing activities:

   Issuance of restricted stock                             2.4         3.2 
   Note received in partial payment for asset sale          -          10.6 
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
                                     -4-
<PAGE>

                                   ARMCO INC.
               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
(Dollars in millions, 
except per share amounts)



1.  The condensed consolidated financial statements of Armco Inc. should be 
read in conjunction with the financial statements in Armco's Annual Report to 
Shareholders for the year ended December 31, 1996.  In the opinion of Armco's 
management, the accompanying condensed consolidated financial statements 
contain all adjustments, which are of a normal recurring nature, necessary to 
present fairly, in all material respects, Armco's financial position as of 
March 31, 1997, and its results of operations and cash flows for the three 
months ended March 31, 1997 and 1996.  The results of operations for the three 
months ended March 31, 1997 are not necessarily indicative of the results to 
be expected for the year 1997.

Certain amounts in the prior year financial statements have been reclassified 
to conform to the 1997 presentation.

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>
                                                March 31,    December 31,
                                                  1997           1996
                                               --------        --------
<S>                                            <C>             <C>
Inventories on LIFO:
  Finished and semi-finished                   $ 268.1         $ 259.0
  Raw materials and supplies                      25.2            21.4
  Adjustment to state inventories at LIFO value  (53.8)          (52.8)
                                                ------          ------
      Total                                      239.5           227.6
                                                ------          ------
Inventories on average cost:
  Finished and semi-finished                      17.9            11.9
  Raw materials and supplies                       5.3             7.4
                                                ------          ------
      Total                                       23.2            19.3
                                                ------          ------
      Total inventories                        $ 262.7         $ 246.9
                                                ======          ======
</TABLE>
3.  Cost of products sold for the three months ended March 31, 1997 and 1996 
includes income of $2.0 and $4.2, respectively, for the partial settlements of 
a business interruption insurance claim.

4.  Sundry other - net in Armco's Condensed Statement of Consolidated Income 
and Accumulated Deficit includes expenses of $1.6 and $7.9 for the three 
months ended March 31, 1997 and 1996, respectively, for interest on employee 
benefit obligations related to facilities that have been divested.  The 
reduction in expense in 1997 is primarily due to favorable investment returns 
in 1996 on pension plan assets.

In the three months ended March 31, 1996, Sundry other - net included a gain 
of $6.3, which resulted from the recognition of gains previously deferred in 
connection with asset sales at the Greens Port Industrial Park, which is owned 
by Armco.  

5.  Effective January 1, 1997, having reevaluated its plan to sell the 
remaining assets of the Greens Port Industrial Park as a single entity, Armco 
began to report the consolidated results of the operations of the park in its 
Fabricated Products business segment.  Greens Port operates a loading dock on 
the Houston Ship Channel, and leases buildings and land located on its 
property.  In the first three months of 1996, while Armco discussed selling 
Greens Port with 

                                     -5-
<PAGE>

several potential buyers, $1.1 of operating profit generated by the park was 
reported in Sundry other - net.  Greens Port had revenues of $1.8 in the 
quarter ended March 31, 1996.  Future operating profit will include gains or 
losses from the sale of miscellaneous assets and properties which may, from 
time to time, be sold.  

6.  There are various claims pending involving Armco and its subsidiaries 
regarding product liability, antitrust, patent, employee benefits, 
environmental, reinsurance and insurance arrangements, 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 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.  

There are various pending matters relating to litigation, arbitration and 
regulatory affairs arising out of the runoff operations of the Armco Financial 
Services Group (AFSG), including matters related to Northwestern National 
Insurance Company (NNIC), a runoff company currently involved in, among other 
matters, litigation with respect to certain reinsurance programs.

In March 1997, a group of international insurance companies, previously 
affiliated with AFSG and sold in 1991, filed an application for voluntary 
liquidation in the United Kingdom.  NNIC is currently investigating its 
exposure with respect to reinsurance transactions entered into with these 
companies.  Armco believes, based on current facts and circumstances, that the 
liquidation of the international insurance companies will not have a material 
effect on its investment in AFSG.

Armco believes, based on current facts and circumstances, that its ultimate 
liability for pending claims, contingent liabilities, environmental matters 
and matters related to the AFSG 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 other matters could have a 
material effect on the results of its operations in future interim or annual 
periods.

At March 31, 1997, Armco had recorded in its Condensed Statement of 
Consolidated Financial Position, legal and environmental reserves of $83.4, of 
which $19.2 was classified as current.

7.  Under the terms of one of Armco's revolving credit facilities, which 
expires on December 31, 1998, 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 future.

At its April 25, 1997 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.

8.  Information relating to Armco's industry segments can be found on page 11.

                                     -6-
<PAGE>


                                  ARMCO INC.
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (Dollars in millions, except per share data)

GENERAL
-------
Armco's consolidated results for the three months ended March 31, 1997 and 
1996 were as follows:
<TABLE>
<CAPTION>
                                           Three Months Ended
                                                March 31,
                                           --------------------
                                             1997        1996
                                           --------    --------
<S>                                         <C>         <C>
Net sales                                   $441.3      $430.4
Operating profit                              19.2        15.1
Net income                                     9.4         6.9
Earnings per common share                     0.05        0.02
</TABLE>
Net sales in the three months ended March 31, 1997 were $10.9 higher than in 
the same period last year, primarily due to higher sales of tubular products 
in the Fabricated Products segment as well as an increase in sales in the 
Specialty Flat-Rolled Steels segment.

In the three months ended March 31, 1997 and 1996, operating profit included 
income of $2.0 and $4.2, respectively, related to the partial settlements of a 
business interruption insurance claim.  Excluding these credits, operating 
profit increased by $6.3 or 58% from the first quarter of 1996 to the first 
quarter of 1997.  This increase was primarily due to improved performance at 
the Mansfield Operations of the Specialty Flat-Rolled Steels segment and the 
consolidation of Greens Port Industrial Park into the Fabricated Products 
business segment beginning on January 1, 1997.

Included in first quarter 1996 net income was the above-mentioned insurance 
settlement and a $6.3 gain, which resulted from the recognition of gains 
previously deferred in connection with asset sales at Greens Port Industrial 
Park which, at the time, was being held for sale.  Excluding these credits, 
net income improved $11.0 in 1997, primarily due to improved performance at 
Mansfield and a $6.3 reduction in expenses related to long-term benefit 
obligations for employees of Armco facilities that have been divested.  The 
reduction in expense in 1997 was primarily due to favorable investment returns 
on pension plan assets.

Earnings per common share reflects a deduction of $4.5 in each quarter for 
preferred stock dividends declared.


BUSINESS SEGMENT RESULTS
------------------------
Specialty Flat-Rolled Steels
----------------------------
<TABLE>
<CAPTION>
                                           Three Months Ended
                                                March 31,
                                           --------------------
                                             1997        1996
                                           --------    --------
<S>                                         <C>         <C>
Customer sales                              $375.0      $372.1
Operating profit                              22.4        20.0
</TABLE>
Customer sales for the segment were slightly higher in the first quarter of 
1997 than in the same period in 1996, primarily as a result of higher sales of 
specialty semi-finished products.  Segment average sales per ton in 1997 
increased from 1996 levels due to a shift in carbon steel product mix to 
galvanized products from lower priced hot bands.  This offset a 5% reduction 
in average sales per ton of specialty-flat rolled products and a 22% decrease 
in specialty semi-finished steels sales per ton. 

                                     -7-
<PAGE>

Customer sales and shipments by major product line and total cast production 
were as follows:
<TABLE>
<CAPTION>
                                     Three Months Ended March 31,
                                    ------------------------------
                                        1997              1996
                                    -------------    --------------
(tons in thousands)                 Sales    Tons     Sales    Tons
                                    -----    ----     -----    ----
<S>                                <C>        <C>    <C>        <C>
Specialty flat-rolled              $281.1     193    $287.0     187
Specialty semi-finished              40.1      34      31.6      21
Carbon                               46.0      86      44.2     108
Other                                 7.8      --       9.3      --
                                    -----     ---     -----     ---
     Total                         $375.0     313    $372.1     316

Cast production                               363               390
</TABLE>
Shipments of specialty flat-rolled products, which include automotive exhaust 
stainless, electrical steel and specialty strip and sheet, increased 3% from 
the first quarter of 1996 to the first quarter of 1997.  However, average 
realized prices declined 5%, reflecting elimination this year of raw material 
surcharges on stainless steel and increased import competition on certain 
grades of chrome nickel stainless steel and cold rolled non-oriented 
electrical steel.

Specialty semi-finished shipments increased 62% in the first quarter of 1997 
over the same period in 1996, primarily as a result of increased sales of 
chrome nickel hot bands.  However, a 22% reduction in average sales per ton 
reflected worldwide market softness and import competition.

Carbon steel shipments in the first quarter of 1997 decreased 20% due to the 
elimination of carbon hot band shipments and the increased use of Armco's melt 
capacity for specialty products.  In the first half of 1996, Armco began 
exiting the lower-priced hot band market, shifting the product mix to more 
profitable galvanized steel and increasing average sales per ton by 31% in the 
quarter-to-quarter comparison.

Specialty Flat-Rolled Steels' operating profit includes gains of $2.0 in the 
first quarter of 1997 and $4.2 in the first quarter of 1996 from the partial 
settlements of a business interruption insurance claim.  Excluding these 
credits, the increase in first quarter operating profit in 1997 over 1996 was 
primarily due to improved performance at Mansfield.

Outlook:  Demand for Armco's automotive exhaust stainless, specialty strip and 
sheet, electrical steel and carbon steel products remains relatively strong.  
Although demand for specialty semi-finished products has been weak and import 
competition has been intense, market conditions appear to be gradually 
improving.  Armco has announced a price increase of 5% on stainless cold-
rolled strip and sheet and stainless hot-rolled products, effective with 
shipments on May 5, 1997.  However, there can be no assurance that the stated 
price increase will be implemented.


Fabricated Products
-------------------
<TABLE>
<CAPTION>
                                           Three Months Ended
                                                March 31,
                                           --------------------
                                             1997        1996
                                           --------    --------
<S>                                         <C>         <C>
Customer sales                              $ 66.3      $ 58.3
Operating profit                               2.6         1.5
</TABLE>
First quarter customer sales increased $8.0 over last year's level, primarily 
due to higher sales at  Sawhill Tubular and the consolidation of Greens Port 
Industrial Park.  Greens Port recorded sales of $1.6 in the first three months 
of 1997 from loading dock fees and rental of land and buildings.  During the 
first three months of 1996, Greens Port had revenues of $1.8 but because, at 
that time, the park was held for sale, Armco did not include the results of 
this business in the Fabricated Products operating segment.  The 1997 higher 
customer sales at Sawhill were the result of volume increases 

                                     -8-
<PAGE>

along all major tubular product lines.  Douglas Dynamics' sales in the 
quarter-to-quarter comparison were approximately equal.

Despite the sales increase, Sawhill's operating profit was slightly lower in 
1997 primarily due to increased steel hot band costs.  This decrease was 
offset by a slight increase at Douglas Dynamics, resulting from reduced 
operating expenses following the decision in 1996 to exit certain unprofitable 
product lines.  The increase in this segment's operating profit was largely 
due to the consolidation of Greens Port.

Outlook:  The first quarter of the year is traditionally the slowest sales 
period for snowplows and ice control products.  Sales for the remainder of the 
year should increase, with preseason shipments in the second and third 
quarters and normal in-season selling beginning in the fourth quarter. 
However, Douglas Dynamics anticipates lower snowplow and parts sales over the 
next twelve months compared to the last twelve months as a result of lighter 
snowfall in populated areas.  Operating results for 1997 are expected to be 
commensurately lower than 1996, which was Douglas Dynamics' second highest 
snowplow sales year.

Sawhill Tubular's 1997 sales and profitability are expected to be slightly 
higher than last year.  Prices for Sawhill's products have improved with price 
increases announced in February and April, though some discounting continues.   
In addition, volume increases in certain product lines have been experienced 
and should continue during the year.  However, any increase in operating 
profit as a result of higher sales may be substantially offset by the 
continued high cost of steel hot bands.


ARMCO FINANCIAL SERVICES GROUP (AFSG)
-------------------------------------
In March 1997, a group of international insurance companies, previously 
affiliated with AFSG and sold in 1991, filed an application for voluntary 
liquidation in the United Kingdom.  NNIC is currently investigating its 
exposure with respect to reinsurance transactions entered into with these 
companies.  Armco believes, based on current facts and circumstances, that the 
liquidation of the international insurance companies will not have a material 
effect on its investment in AFSG.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 1997, Armco had $151.9 of cash and cash equivalents compared to 
$168.9 at December 31, 1996.  Cash and cash equivalents decreased $17.0 during 
the first three months of 1997, primarily due to capital expenditures of $7.5, 
principal payments on debt of $4.7 and preferred stock dividends of $4.5.  

In addition to cash on hand, Armco has a receivables credit facility, under 
which Armco Funding Corporation, a wholly owned subsidiary to which Armco 
sells substantially all of its receivables, may borrow up to $120.0 secured by 
those receivables.  In addition, Armco can borrow up to $50.0 under a credit 
facility secured by certain of its inventories.  At March 31, 1997, $64.5 of 
the receivables facility was used as support for letters of credit, while no 
borrowings were outstanding under either facility.

Armco anticipates that cash expenditures for capital projects during the 
remainder of the year will total approximately $60.0.  In addition, Armco has 
$22.6 of debt maturing through December 1997. These expenditures will be paid 
out of existing cash balances and cash generated from operations.

On April 25, 1997, 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 June 30, 1997 to shareholders of record 
on May 30, 1997.  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 July 1, 1997 to shareholders of record on May 30, 
1997.  Payment of dividends on Armco's common stock is 

                                     -9-
<PAGE>

currently prohibited under the terms of certain of Armco's debt instruments 
and under the terms of its inventory credit facility.


FORWARD LOOKING STATEMENTS 
--------------------------
Certain statements made in this Management's Discussion & Analysis of the 
Condensed Consolidated Financial Statements and in the Notes to the Condensed 
Consolidated Financial Statements reflect management's estimates and beliefs 
and are intended to be, and are hereby identified as, "forward looking 
statements" for purposes of the safe harbor provisions of the Private 
Securities Litigation Reform Act of 1995.  These include statements in the 
foregoing paragraphs entitled "Outlook"  and ARMCO FINANCIAL SERVICES GROUP 
                                             ------------------------------
(AFSG), and in footnote No. 6 relating to contingencies.
------
As discussed in its Form 10-K for the year ended December 31, 1996, Armco 
cautions readers that such forward looking statements involve risks and 
uncertainties that could cause actual results to differ materially from those 
expected by management.  These factors include, but are not limited to, the 
following:  risks of a downturn in the general economy or in the highly 
cyclical steel industry; changes in demand for Armco's products; unplanned 
plant outages, equipment failures or labor difficulties; actions by Armco's 
foreign and domestic competitors; unexpected outcomes of major litigation and 
contingencies; changes in U.S. trade policy and actions respecting imports; 
disruptions in the supply of raw materials and changes in application or scope 
of environmental regulations applicable to Armco.

                                     -10-
<PAGE>


<TABLE>
                                  ARMCO INC. 
                                SEGMENT REPORT 
                                 (Unaudited) 

(Dollars in millions) 


<CAPTION>
                                        1997                1996  
                                       ------  ------------------------------
                                        1st     4th     3rd     2nd     1st
                                        Qtr.    Qtr.    Qtr.    Qtr.    Qtr.
                                       ------  ------  ------  ------  ------
<S>                                    <C>     <C>     <C.     <C>     <C>
Specialty Flat-Rolled Steels: 
   Customer sales                      $375.0  $322.5  $350.5  $376.1  $372.1 
   Operating profit                      22.4    21.4    19.3    12.2    20.0 

Fabricated Products: 
   Customer sales                        66.3    91.1    78.7    74.7    58.3 
   Special charges                        -      (8.8)    -       -       -  
   Operating profit                       2.6     4.4    10.5     6.4     1.5 

Corporate general                        (5.8)   (2.6)   (5.6)   (6.4)   (6.4)
------------------------------------------------------------------------------
Total operating profit                   19.2    23.2    24.2    12.2    15.1 

Interest income                           2.5     2.1     2.2     2.8     3.0 
Interest expense                         (8.7)   (8.8)   (9.0)   (9.3)   (9.2)
Sundry other - net                       (3.4)   (2.8)   (7.2)   (9.5)   (1.6)
------------------------------------------------------------------------------
Income (loss) before income taxes         9.6    13.7    10.2    (3.8)    7.3 

Provision for income taxes               (0.2)   (0.5)   (0.3)   (0.2)   (0.4)
------------------------------------------------------------------------------
Income (loss) from continuing operations  9.4    13.2     9.9    (4.0)    6.9 

Discontinued operation -
   Gain on sale of Aerospace and
      Strategic Materials                 -       -       6.5     -       -  
------------------------------------------------------------------------------
Net income (loss)                      $  9.4  $ 13.2  $ 16.4  $ (4.0) $  6.9 
==============================================================================
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
                                 -11-
<PAGE>

Part II.     Other Information


Item 1.     Legal Proceedings
            ------------------

There are various claims pending against Armco and its subsidiaries involving 
product liability, patent, reinsurance and insurance arrangements, 
environmental, antitrust, 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, 1996 (the Form 10-K).  The 
following summarizes significant developments in previously reported matters 
and any material claims asserted since December 31, 1996:

In the Pension Benefit Guaranty Corporation v. Armco and Eastern Stainless
       -------------------------------------------------------------------
Corporation action, the parties agreed on a settlement of all claims, subject
-----------
to approval of the Court.  Armco expects that the Court will approve the 
settlement at a fairness hearing on June 19, 1997.

In the Southern Ohio Port Authority matter, Armco filed its answer and 
counterclaims in March, 1997.  Trial has been set for July, 1998.  Based on 
the estimated costs and the presence of other PRPs, Armco does not expect its 
liability, if any, to be material.

The total liability on the forgoing claims and those other claims described 
under ITEM 3. LEGAL PROCEEDINGS in the Form 10-K 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.


Item 4.     Submission of Matters to a Vote of Security Holders
            ---------------------------------------------------

The Annual Meeting of Shareholders was held on April 25, 1997, and all eight 
nominees to the Board of Directors named in Armco's Proxy Statement were 
elected.  Approximately 85% of the outstanding common, $2.10 Cumulative 
Convertible Preferred and $3.625 Cumulative Convertible Preferred shares were 
voted.  The vote on the election was as follows:


<TABLE>
<CAPTION>

      Name                         For              Withheld
      ----                         ---              ---------
      <S>                          <C>              <C>
      Paula H.J. Cholmondeley      90,637,619       3,958,139
      David A. Duke                90,733,145       3,862,613
      Dorothea C. Gilliam          90,742,780       3,852,978
      John C. Haley                90,634,453       3,961,305
      Bruce E. Robbins             90,780,761       3,814,997
      Burnell R. Roberts           90,751,591       3,844,167
      John D. Turner               90,826,376       3,769,382
      James F. Will                90,692,554       3,903,204

</TABLE>


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 Earnings Per Common Share

B.    No report on Form 8-K was filed by Armco since December 31, 1996.

                                       -12-
<PAGE>



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     April 30, 1997            /s/ Jerry W. Albright	
     -------------------------     -----------------------------------------
                                   Jerry W. Albright
                                   Vice President and Chief Financial Officer


Date     April 30, 1997            /s/ John N. Davis	
     -------------------------     -----------------------------------------
                                   John N. Davis
                                   Vice President and Controller

                                   -13-
<PAGE>