<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, 1999
                               --------------------------------------
                                           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         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, 1999:  108,692,326


<PAGE>
                                  ARMCO INC.
                                    INDEX
                                                                         Pages
                                                                         -----

Part I.   Financial Information

  Condensed Consolidated Balance Sheets -
    March 31, 1999 and December 31, 1998                                     2

  Condensed Consolidated Statements of Income and Accumulated Deficit -
    Three Months Ended March 31, 1999 and 1998                               3

  Condensed Consolidated Statements of Cash Flows - 
    Three Months Ended March 31, 1999 and 1998                               4

  Notes to Condensed Consolidated Financial Statements                     5-7

  Management's Discussion and Analysis of the Condensed
    Consolidated Financial Statements                                     7-11

  Segment Report                                                            12


Part II.  Other Information

  Item 1.  Legal Proceedings                                                13

  Item 4.  Submission of Matters to a Vote of Security Holders              13

  Item 6.  Exhibits and Reports on Form 8-K                                 14

  Signatures                                                                15

                                      -1-
<PAGE>
<TABLE>
                                  ARMCO INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
<CAPTION>
(Dollars in millions)                              March 31,      December 31,
                                                     1999             1998
                                                  ------------    ------------
<S>                                                 <C>           <C>
ASSETS            
Current assets            
   Cash and cash equivalents                        $  145.5       $  263.8 
   Short-term liquid investments                        10.7            7.0 
   Receivables, less allowance for doubtful accounts   190.9          157.9 
   Inventories (Note 2)                                264.3          250.7 
   Other                                                12.2           13.4 
----------------------------------------------------------------------------
Total current assets                                   623.6          692.8 
            
Investments            
   Investment in Armco Financial Services Group 
     (Note 6)                                           85.6           85.6 
   Other, less allowance for impairment                 26.3           28.4 
            
Property, plant and equipment                        1,341.7        1,336.1 
Accumulated depreciation                              (730.9)        (714.3)
Property, plant and equipment - net                    610.8          621.8 
            
Deferred tax asset                                     312.8          315.8 
Goodwill and other intangible assets                   127.1          128.6 
Other assets                                            21.6           20.8 
----------------------------------------------------------------------------
Total assets                                        $1,807.8       $1,893.8 
============================================================================
            
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
   Trade accounts and notes payable                 $  130.5       $  115.7 
   Employment-related obligations                      119.9          128.0 
   Other current liabilities                            53.2           56.5 
   Current portion of long-term debt                     5.9          116.9 
----------------------------------------------------------------------------
Total current liabilities                              309.5          417.1 
            
Long-term debt, less current portion                   250.5          250.7 
Long-term employee benefit obligations                 889.7          898.0 
Other long-term liabilities                            158.9          149.3 
Commitments and contingencies (Note 6)            
Shareholders' equity            
   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                          975.9          972.0 
   Accumulated deficit                                (957.9)        (975.8)
   Other                                                (5.8)          (4.5)
----------------------------------------------------------------------------
Total shareholders' equity                              199.2         178.7 
----------------------------------------------------------------------------
Total liabilities and shareholders' equity           $1,807.8      $1,893.8 
============================================================================
<FN>
See Notes to Condensed Consolidated Financial Statements. 
</TABLE>
                                     -2-
<PAGE>
<TABLE>
                                  ARMCO INC.          
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME          
                          AND ACCUMULATED DEFICIT          
                                 (Unaudited)          
<CAPTION>
 (Dollars and shares in millions,                          Three Months Ended 
   except per share amounts)                                    March 31,    
                                                           -------------------
                                                             1999       1998 
                                                           --------   --------
<S>                                                        <C>      <C>
 Net sales                                                 $ 407.9  $   447.7 
         
 Cost of products sold                                      (353.7)    (404.4)
 Selling and administrative expenses                         (25.9)     (22.0)
------------------------------------------------------------------------------
 Operating profit                                             28.3       21.3 
         
 Interest income                                               2.4        2.5 
 Interest expense                                             (5.8)      (7.6)
 Sundry other - net (Note 3)                                   4.7        5.9 
------------------------------------------------------------------------------
 Income before income taxes                                   29.6       22.1 
         
 Provision for income taxes                                   (4.4)      (1.8)
------------------------------------------------------------------------------
 Income from continuing operations before extraordinary loss          
    and cumulative effect of an accounting change             25.2       20.3 
         
 Extraordinary loss on retirement of debt (Note 4)            (2.8)       -  
 Cumulative effect of a change in accounting          
    for postretirement benefits (Note 1)                       -        237.5 
------------------------------------------------------------------------------
 Net income                                                   22.4      257.8 
         
 Accumulated deficit, beginning of period                   (975.8)  (1,305.0)
 Preferred stock dividends                                    (4.5)      (4.5)
------------------------------------------------------------------------------
 Accumulated deficit, end of period                        $(957.9) $(1,051.7)
==============================================================================
 Basic earnings per share (Note 5)          
    Weighted average shares                                   108.4     107.4 
    Income from continuing operations                         $0.19     $0.15 
    Extraordinary loss on retirement of debt                  (0.02)      -   
    Cumulative effect of a change in accounting                 -        2.21 
------------------------------------------------------------------------------
    Net income                                                $0.17     $2.36 
------------------------------------------------------------------------------
 Diluted earnings per share (Note 5)          
    Weighted average shares                                   126.8     125.7 
    Income from continuing operations                         $0.18     $0.15 
    Extraordinary loss on retirement of debt                  (0.02)      -   
    Cumulative effect of a change in accounting                 -        1.89 
------------------------------------------------------------------------------
    Net income                                                $0.16     $2.04 
------------------------------------------------------------------------------
 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>
 See Notes to Condensed Consolidated Financial Statements.          
</TABLE>
                                    -3-
<PAGE>
<TABLE>
                                  ARMCO INC.  
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
                                 (Unaudited)   
                  
(Dollars in millions)     
<CAPTION>
                                                          Three Months Ended 
                                                               March 31, 
                                                          --------------------
                                                            1999       1998
                                                          --------   ---------
<S>                                                        <C>        <C>
Cash flows from operating activities   
  Net income                                               $  22.4    $ 257.8 
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: 
    Depreciation expense                                      16.9       16.1 
    Loss on retirement of debt                                 2.8        -
    Cumulative effect of accounting change                     -       (237.5)
    Deferred income tax expense                                3.4        0.8 
    Other                                                      2.0        0.4 
    Change in assets and liabilities:  
      Trade accounts receivable                              (30.6)     (24.4)
      Inventories                                            (13.6)     (15.6)
      Payables and accrued operating expenses                 10.1      (14.5)
      Employee benefit obligations                            (8.8)     (12.4)
      Other assets and liabilities - net                       1.2        4.9 
------------------------------------------------------------------------------
  Net cash provided by (used in) operating activities          5.8      (24.4)
------------------------------------------------------------------------------
Cash flows from investing activities 
  Net proceeds from the sale of assets                         0.6        0.4 
  Proceeds from the sale and maturity of liquid investments    7.0        -
  Proceeds from the sale of investments                        2.2        6.1 
  Purchase of liquid investments                             (10.7)      (5.0)
  Capital expenditures                                        (6.1)      (4.2)
  Other                                                        1.0        0.3 
------------------------------------------------------------------------------
  Net cash used in investing activities                       (6.0)      (2.4)
------------------------------------------------------------------------------
Cash flows from financing activities                  
  Payments on debt                                          (113.2)     (31.4)
  Dividends paid on preferred stock                           (4.5)      (4.5)
  Other                                                       (0.4)      (0.6)
------------------------------------------------------------------------------
  Net cash used in financing activities                     (118.1)     (36.5)
------------------------------------------------------------------------------
Net change in cash and cash equivalents                     (118.3)     (63.3)
Cash and cash equivalents: 
  Beginning of period                                        263.8      189.9 
------------------------------------------------------------------------------
  End of period                                            $ 145.5    $ 126.6 
------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:  
  Cash paid during the period for:  
    Interest (net of capitalized interest)                  $  9.0     $  8.8 
    Income taxes                                               0.3        0.3 
Supplemental schedule of non-cash investing and
   financing activities: 
  Issuance of restricted stock                                 3.9        4.0 
<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 accompanying 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, 1998. 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, 1999, and results of operations and cash 
flows for the three months ended March 31, 1999 and 1998. The results of 
operations for the three months ended March 31, 1999 are not necessarily 
indicative of the results to be expected for the full year 1999.

Effective January 1, 1998, Armco changed its method of amortizing unrecognized 
net gains and losses related to its obligations for pensions and other 
postretirement benefits. In the three months ended March 31, 1998, Armco 
recognized income of $237.5 for the cumulative effect of this accounting 
change.
 
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,
                                                       1999         1998  
                                                     --------     --------
    <S>                                               <C>          <C>
    Finished and semi-finished                        $284.9       $267.0
    Raw materials                                       18.1         20.9
                                                       -----        -----
        Total cost                                     303.0        287.9
    Adjustment to state inventories at LIFO value      (38.7)       (37.2)
                                                       -----        -----
        Net inventories                               $264.3       $250.7
                                                       =====        =====
</TABLE>
3.  Sundry other - net in the Condensed Consolidated Statements of Income and 
Accumulated Deficit includes income of $5.3 and $6.1 for the three months 
ended March 31, 1999 and 1998, respectively, for employee benefit obligations 
related to facilities that have been shut down or divested.

4.  In the three months ended March 31, 1999, Armco recognized a $2.8 
extraordinary loss on the early retirement of its 9-3/8% Senior Notes due 
2000.

5.  The following information was used in the calculation of basic and diluted 
earnings per share in accordance with Statement of Financial Accounting 
Standards No. 128, Earnings Per Share.

                                   -5-
<PAGE>
<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,  
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
<S>                                                       <C>       <C>
Income from continuing operations
Income as reported                                        $25.2     $20.3
Preferred stock dividends                                  (4.5)     (4.5)
                                                          -----     -----
Income available to common 
  shareholders - Basic                                     20.7      15.8
Assumed conversion of $3.625 
  Class A Preferred Stock                                   2.4       2.4
                                                          -----     -----
Income available to common 
  shareholders - Diluted                                  $23.1     $18.2
                                                          =====     =====
Common shares (in millions)
Weighted average shares 
  outstanding - Basic                                     108.4     107.4
Assumed exercise of stock options                           0.1       -
Assumed conversion of $3.625 
  Class A Preferred Stock                                  18.3      18.3
                                                          -----     -----
Weighted average shares 
  outstanding - Diluted                                   126.8     125.7
                                                          =====     =====
</TABLE>
6.  There are various claims pending involving Armco and its subsidiaries 
regarding product liability, antitrust, patent, employee benefits, taxes, 
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 an 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) companies, 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, North Atlantic Insurance Company, a group of international 
insurance companies previously affiliated with AFSG but sold in 1991, filed an 
application for voluntary liquidation in the United Kingdom. As a result of 
this voluntary liquidation filing, certain claims have been asserted against 
NNIC by insureds of North Atlantic. NNIC is defending these claims as well as 
pursuing related claims against third parties and North Atlantic.

Armco believes that its ultimate liability for pending claims, contingent 
liabilities, environmental matters and matters related to AFSG, including the 
liquidation of North Atlantic, identified to date will not materially affect 
its consolidated financial condition or liquidity. However, it is possible 
that 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 periods.

                                     -6-
<PAGE>

At March 31, 1999, Armco had recorded in its Condensed Consolidated Balance 
Sheets legal and environmental reserves totaling $61.4, of which $11.3 was 
classified as a current liability.

7.  Effective January 1, 1998, Armco adopted Statement of Financial Accounting 
Standards No. 130, Reporting Comprehensive Income (SFAS No. 130). SFAS No. 130 
requires Armco to report "other comprehensive income," as defined in the 
standard. For the three months ended March 31, 1999 and 1998, comprehensive 
income was as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,  
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
<S>                                                       <C>       <C>
Net income                                                $22.4     $257.8
Foreign currency translation adjustment                    (0.4)      (0.7)
                                                          -----     ------
Comprehensive income                                      $22.0     $257.1
                                                          =====     ======
</TABLE>
8.  Information relating to Armco's industry segments can be found on page 12.





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

GENERAL
-------
Armco's consolidated results for the three months ended March 31, 1999 and 
1998 were as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,  
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
<S>                                                       <C>       <C>
Net sales                                                 $407.9    $447.7
Operating profit                                            28.3      21.3
Provision for income taxes                                  (4.4)     (1.8)
Income from continuing operations before 
  extraordinary loss and cumulative effect 
  of an accounting change                                   25.2      20.3
Extraordinary loss on retirement of debt                    (2.8)      -
Cumulative effect of a change in 
  accounting for postretirement benefits                     -       237.5
Net income                                                  22.4     257.8
Basic earnings per share -
  Income from continuing operations                         0.19      0.15
  Net income                                                0.17      2.36
Diluted earnings per share -
  Income from continuing operations                         0.18      0.15
  Net income                                                0.16      2.04
</TABLE>
                                     -7-
<PAGE>

Net sales in the three months ended March 31, 1999 were $39.8 lower than in 
the same period last year, primarily due to lower pricing across all steel 
product lines and lower volume in specialty flat-rolled and specialty semi-
finished steels, partially offset by higher snow and ice control product 
sales.

Excluding a $2.5 business interruption insurance recovery recorded in 1999, 
operating profit in the three months ended March 31, 1999 was 21% higher than 
the amount reported in the same period last year, reflecting improved 
operating results at the Specialty Flat-Rolled Steels segment and the higher 
snow and ice control product sales. 

The 1999 provision for income taxes increased $2.6 on higher first quarter 
earnings and an increase in the effective tax rate.

In the three months ended March 31, 1999, Armco recognized a $2.8 
extraordinary loss for the early retirement of its 9-3/8% Senior Notes due 
2000.

Effective January 1, 1998, Armco changed its method of amortizing unrecognized 
net gains and losses related to its obligations for pensions and other 
postretirement benefits. In the three months ended March 31, 1998, Armco 
recognized income of $237.5 for the cumulative effect of this accounting 
change. 

BUSINESS SEGMENT RESULTS
------------------------
Specialty Flat-Rolled Steels
----------------------------
<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,  
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
<S>                                                       <C>       <C>
Net sales                                                 $347.9    $391.4
Income from continuing operations                           33.1      27.5
</TABLE>
In the three months ended March 31, 1999, net sales for the segment were 11% 
lower than in the same period one year ago, primarily as a result of reduced 
specialty steel pricing and lower volumes of specialty flat-rolled and 
specialty semi-finished steels. Overall, 1999 first quarter average sales per 
ton decreased 4% compared to 1998, as imports continue to depress pricing 
across most stainless and electrical steel product lines.

Net sales and shipments by major product line were as follows:
<TABLE>
<CAPTION>
                                                  Three Months Ended March 31,
                                                  ----------------------------
                                                      1999            1998  
                                                  ------------    ------------
(tons in thousands)                               Sales   Tons    Sales   Tons
                                                  -----   ----    -----   ----
<S>                                              <C>       <C>   <C>       <C>
Specialty flat-rolled                            $287.2    211   $306.1    223
Specialty semi-finished                            25.3     31     47.9     44
Galvanized carbon                                  27.1     56     29.8     55
Other                                               8.3      -      7.6      -
                                                  -----    ---    -----    ---
     Total                                       $347.9    298   $391.4    322
                                                  =====    ===    =====    ===
</TABLE>
In the first three months of 1999, shipments of specialty flat-rolled steel 
products, which include automotive exhaust stainless, electrical steel and 
stainless sheet and strip, decreased 5% from the levels shipped in the first 
three months of 1998. The decline in stainless steel shipments reflected 
competitive pressures from an increased supply of imported steel delivered in 
advance of the trade cases.

                                     -8-
<PAGE>

Specialty semi-finished shipments and average sales per ton decreased 
substantially in the first three months of 1999 versus the same period in 1998 
reflecting worldwide market softness and the effect of imports.

Galvanized carbon steel shipments, produced by the Dover Operations from 
purchased steel coils, were equal to 1998 levels; however, as a result of 
increases in domestic competition and low-priced imports, sales per ton were 
down 11%. Armco continues in negotiations for the sale of Dover. However, no 
assurance can be given that a sale will be completed.

In the first three months of 1999, income from continuing operations increased 
$5.6 over the same period in 1998, primarily as a result of lower costs and a 
$2.5 insurance recovery.

Outlook: Shipments and net sales for 1999 will depend on consumer demand for 
durable goods and the outcome of the trade cases discussed below. Shipment 
levels for the remainder of 1999 are expected to be somewhat higher than last 
year.

High levels of specialty steel imports continue to depress pricing. However, 
in June 1998, Armco and other domestic producers of flat-rolled stainless 
sheet and strip products filed petitions with the U.S. Department of Commerce 
and the International Trade Commission charging eight foreign countries with 
violations of U.S. trade laws. A finding that unfairly traded imports have 
caused injury to domestic producers could result in tariffs that may help 
reduce the level of imports, but probably not until mid to late 1999. Final 
antidumping determinations are expected to be announced in May, 1999. However, 
there can be no assurance of a successful final outcome and the imposition of 
tariffs on imports.

Tubular Products
----------------
<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,  
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
<S>                                                       <C>       <C>
Net sales                                                $ 43.4      $51.2
Income (loss) from continuing operations                   (1.2)       1.0
</TABLE>
Net sales in the three months ended March 31, 1999 decreased 15% on lower 
selling prices and volume, and higher operating costs. This segment's results 
continue to be adversely affected by a general oversupply in the market 
brought on by high levels of imported pipe.

Armco has been, and continues to be, in negotiations for the sale of Sawhill 
Tubular, the sole business in this segment.  However, no assurances can be 
given that a sale will be completed.

Other Businesses
----------------
<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,  
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
<S>                                                       <C>       <C>
Net sales                                                 $16.6     $ 5.1
Income (loss) from continuing operations                    3.8      (2.3)
</TABLE>
Net sales in the three months ended March 31, 1999 for this segment, which 
includes Douglas Dynamics LLC, a snow and ice control products manufacturer, 
and Greens Port Industrial Park, increased $11.5 compared to 1998. A 
substantial increase in shipments at Douglas Dynamics reflected higher average 
snowfall this past winter in many of its major markets and lower customer 
inventories compared to the previous year's mild winter and unusually high 
customer inventories. Income increased on the strength of the higher sales. 
Greens Port's revenues for 1999 were approximately equal to last year's first 
quarter, while income was slightly unfavorable.

                                     -9-
<PAGE>

Outlook: Douglas Dynamics' shipments and net sales for 1999, which are 
dependent on the amount of snowfall in its market areas and the strength of 
four wheel drive light truck sales, are expected to exceed those of last year. 
Greens Port is also expecting improved operating results.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 1999, Armco had $156.2 of cash, cash equivalents and liquid 
investments compared to $270.8 at December 31, 1998. Cash, cash equivalents 
and liquid investments decreased $114.6 during the first three months of 1999, 
primarily due to debt payments of $113.2, including $111.0 for the early 
retirement of the outstanding principal amount of Armco's 9-3/8% Senior Notes. 

In addition to cash on hand, Armco has two credit facilities with commitments 
totaling up to $170.0 for borrowings and letters of credit. Under a 
receivables facility, Armco Funding Corporation, a wholly owned subsidiary to 
which Armco sells substantially all of its receivables, may borrow, depending 
on its available borrowing base and the amount of letters of credit 
outstanding, up to $100.0 secured by those receivables. In addition, Armco can 
borrow, depending on its available borrowing base and the amount of letters of 
credit outstanding, up to $70.0 under a credit facility secured by certain of 
its inventories. At March 31, 1999, no borrowings were outstanding under 
either facility. However, Armco had outstanding $59.1 of letters of credit 
under the receivables facility and a combined total of $110.9 was available 
for borrowing under both facilities. 

Armco anticipates cash outlays of approximately $45.0 to $55.0 during the 
remainder of 1999 for capital expenditures, which it expects to be paid out of 
existing cash balances and cash generated from operations.

NEW ACCOUNTING STANDARD
-----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 133, Accounting for Derivative Instruments 
and Hedging Activities (SFAS No. 133). Armco intends to adopt the new standard 
when required in 2000. Armco does not expect that SFAS No. 133 will have a 
material effect on its financial statements; however, its effect, if any, will 
depend on Armco's exposure to derivative instruments at the time of adoption 
and thereafter.

THE YEAR 2000 ISSUE
-------------------
Many existing computer systems may not be able to appropriately interpret 
dates after December 31, 1999 because such systems allow only two digits to 
indicate a year in the date field. If not corrected, many computers and 
computer applications could fail or create erroneous results, causing safety, 
operational and financial problems. If such a failure were to occur to certain 
of its computer systems, Armco's manufacturing and financial systems could be 
temporarily shut down, resulting in a material adverse effect on its financial 
condition, liquidity and results of operations. In addition, the failure of 
vendor computer systems could cause interruption of deliveries of key supplies 
or utilities, which might result in similar material adverse impacts. Because 
of the complexity of the issues and the number of parties involved, Armco 
cannot reasonably predict with certainty the nature or likelihood of such 
impacts.

However, Armco, using its internal staff and outside consultants, is actively 
addressing this situation and anticipates that it will not experience a 
material adverse impact to its operations, liquidity or financial condition 
related to systems under its control. Armco has completed an assessment of 
substantially all business information, manufacturing and facility control 
systems to identify areas of concern. Armco is in the process of modifying or 
replacing noncompliant computer hardware and software used internally.

                                     -10-
<PAGE>

In addition, Armco has surveyed its suppliers with regard to their Year 2000 
preparations, focusing on those suppliers most critical to its operations. 
Armco intends to continue to monitor the Year 2000 compliance efforts of its 
suppliers and to obtain, to the extent possible, assurances that they will be 
able to deliver their products and services without interruption. 

To prepare for the reasonably likely worst case scenario, Armco is developing 
a contingency plan designed to mitigate the effects on its operations in case 
certain of its systems or suppliers fail to perform as planned. Completion of 
this plan is expected by the end of the second quarter of 1999. Contingency 
planning will consist of providing all required resources to repair internal 
systems should they fail at critical times, as well as establishing additional 
inventories and back-up procedures in the event suppliers are unable to 
deliver raw materials and services in a timely manner. 

Armco has prioritized its efforts, planning to complete work on noncompliant 
systems in the most critical areas first, with the expectation that virtually 
all Year 2000 compliance activities, including system testing, will be 
completed by September 30, 1999. In this process, Armco has redirected its 
systems resources from noncritical projects to Year 2000 compliance 
activities, resulting in an immaterial increase in expense. In the first three 
months of 1999, Armco spent approximately $4.0 on Year 2000 compliance 
activities and currently anticipates that it will spend an additional $7.0 
during the remainder of 1999. These expenditures, which are expected to 
consist primarily of capital expenditures, outside consultants and internal 
personnel costs, have been and will be funded out of operating cash flows.

FORWARD-LOOKING STATEMENTS
--------------------------

Certain statements made in this Management's Discussion and Analysis of the 
Condensed Consolidated Financial Statements and in the Notes to 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", the sections entitled NEW ACCOUNTING 
                                                               --------------
STANDARD and THE YEAR 2000 ISSUE, and Note 6 relating to contingencies.
--------     -------------------

As discussed in its Form 10-K for the year ended December 31, 1998, Armco 
cautions readers that such forward-looking statements involve risks and 
uncertainties that could cause actual results to differ materially from those 
currently expected by management. In addition to those risk factors 
specifically noted in the above referenced Management's Discussion and 
Analysis and Notes, such factors include, but are not limited to, the 
following:  risks of a downturn in the general economy or in the highly 
cyclical steel industry; volatility in financial markets, which may affect 
invested pension plan assets and the calculation of benefit plan liabilities 
and expenses; 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; actions by reinsurance companies 
with which AFSG does business or foreign or domestic insurance regulators; and 
changes in application or scope of environmental regulations applicable to 
Armco.

                                     -11-
<PAGE>

<TABLE>
                                  Armco Inc.  
                                Segment Report     
                                 (Unaudited)        
(Dollars in millions)    
<CAPTION>
                                 1999                       1998 
                               -------- -------------------------------------
                                  1Q      Total    4Q     3Q     2Q     1Q
                               -------- -------- ------ ------ ------ -------
<S>                             <C>     <C>      <C>    <C>    <C>    <C>
 Net Sales  
  Specialty Flat-Rolled Steels  $347.9  $1,418.9 $318.5 $332.8 $376.2 $391.4 
  Tubular Products                43.4     192.7   45.6   47.9   48.0   51.2 
  Other Businesses                16.6      94.9   29.2   34.7   25.9    5.1 
-----------------------------------------------------------------------------
  Total                         $407.9  $1,706.5 $393.3 $415.4 $450.1 $447.7 
-----------------------------------------------------------------------------
 Income from Continuing
  Operations 
  Specialty Flat-Rolled Steels   $33.1    $105.7  $28.2  $24.4  $25.6  $27.5 
  Tubular Products                (1.2)      2.4   (1.7)   1.3    1.8    1.0 
  Other Businesses                 3.8      28.2   10.0   12.6    7.9   (2.3)
  Corporate, interest,
    taxes, & other               (10.5)    (26.7)  (9.0)  (7.6)  (4.2)  (5.9)
-----------------------------------------------------------------------------
    Total                        $25.2    $109.6  $27.5  $30.7  $31.1  $20.3 
-----------------------------------------------------------------------------
Specialty Flat-Rolled
  Steels Shipments   
(tons 000s) 
  Specialty flat-rolled            211       826    195    195    213    223 
   Semi-finished                    31       125     20     24     37     44 
  Galvanized carbon                 56       245     56     66     68     55 
-----------------------------------------------------------------------------
  Total                            298     1,196    271    285    318    322
-----------------------------------------------------------------------------
</TABLE>
                                    -12-
<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, 1998.  The following 
summarizes significant developments in previously reported matters and any 
material claims asserted since December 31, 1998:

As previously reported, on September 30, 1998, Mansfield received an Order 
under Section 3013 of the Resource Conservation & Recovery ("RCRA") Act 
requiring Armco to develop a plan for investigation of eight areas of the 
plant which allegedly could be sources of contamination.  On October 30, 1998, 
Armco filed a complaint in U.S. District Court in Cleveland seeking pre-
enforcement review.  Armco's complaint challenged the legal basis for the 
Order, the lack of support in the administrative record for such an Order, and 
the lack of due process the Order provides to Armco in responding to 
modifications and expansions USEPA could make to the scope of work to be 
performed under the Order.  On April 1, 1999 the court dismissed Armco's 
action on the basis that the statute did not allow pre-enforcement review of 
such agency orders.  Armco is preparing a motion for reconsideration.

The total liability of those claims described under ITEM 3.  LEGAL PROCEEDINGS 
in the Form 10-K or under Item 1 in the Form 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.

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

The Annual Meeting of Shareholders was held on April 23, 1999, and all nine 
nominees to the Board of Directors named in Armco's Proxy Statement were 
elected.  Approximately 83% 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:

      Name                         For              Withheld
      ----                         ---              --------

     Dan R. Carmichael         92,337,395            792,872
     Paula H.J. Cholmondeley   92,235,644            894,623
     Dorothea C. Gilliam       92,297,857            832,410
     John C. Haley             92,273,317            856,950
     Charles J. Hora, Jr.      92,293,005            837,262
     Bruce E. Robbins          92,358,925            771,342
     Jan H. Suwinski           92,310,931            819,336
     John D. Turner            92,386,139            744,128
     James F. Will             92,291,289            838,978

                                -13-
<PAGE>

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

A.       The following is an index of the exhibits included in the Form 10-Q:

         None

B.       No Report on Form 8-K was filed by Armco during the quarter ended 
         March 31, 1999.

                                -14-
<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   May 3, 1999                 /s/ Jerry W. Albright 
      ---------------------        ---------------------------------------
                                   Jerry W. Albright
                                   Vice President and Chief Financial Officer



Date   May 3, 1999                 /s/ John N. Davis 
      ---------------------        ---------------------------------------
                                   John N. Davis
                                   Vice President and Controller

                                      -15-
<PAGE>