Form 10-Q
                           UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                                           


       [ 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. 1-4778


                      TALLEY INDUSTRIES, INC.
      (Exact name of registrant as specified in its charter)

             Delaware                             86-0180396
   (State or other jurisdiction of             (I.R.S. Employer
    incorporation or organization)            Identification No.)
                                                                         
      2702 North 44th Street, Phoenix, Arizona       85008  
      (Address of principal executive offices)     (Zip Code)

 Registrant's telephone number, including area code:(602) 957-7711

(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, and (2) has been subject to such
filing requirement for the past 90 days.

       YES[ X ]                                  NO[   ]   

 Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

                                                 Outstanding at
Class of Common Stock                            March 31, 1997  
 $1.00 par value                                   14,280,453

                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
<PAGE>                                                                         


             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES



                               INDEX



                                                           Page No.

Part I  Financial Information


   Consolidated Balance Sheet -
     March 31, 1997 and December 31, 1996                    1

   Consolidated Statement of Earnings -
     Three Months Ended March 31, 1997 and 1996              2

   Consolidated Statement of Cash Flows -  
     Three Months Ended March 31, 1997 and 1996              3

   Consolidated Statement of Changes in Stockholders'
     Equity - Three Months Ended March 31, 1997 and 1996     4

   Notes to Consolidated Financial Statements               5-7

   Management's Discussion and Analysis                     8-15





Part II  Other Information


   Legal Proceedings                                        16 

   Exhibits and Reports on Form 8-K                         16  

   Signatures                                               17
















<PAGE>


                  PART I - FINANCIAL INFORMATION

             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
                    Consolidated Balance Sheet
                           (thousands)
                                                   March 31,   December 31,
ASSETS                                               1997         1996  
                                                   --------    -----------
  Cash and cash equivalents                        $ 45,133     $ 48,758 
  Accounts receivable, net of allowance for
    doubtful accounts of $919 at March 31,
    1997 and $925 at December 31, 1996               53,112       53,090 
  Inventories, net                                   62,556       64,684 
  Deferred income taxes                               3,400        3,660 
  Prepaid expenses                                    6,346        6,100 
                                                   --------     --------
    Current assets                                  170,547      176,292 

  Long-term receivables                               6,860        6,517 
  Property, plant and equipment, net                 51,386       49,324 
  Intangibles                                        41,626       41,965 
  Other assets                                        6,085        6,287 
                                                   --------     --------
    Total assets                                   $276,504     $280,385 
                                                   ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Current maturities of long-term debt             $  4,962     $  5,160 
  Current maturities of realty debt                     301          362 
  Accounts payable                                   22,193       20,116 
  Accrued expenses                                   41,066       44,189 
                                                   --------     --------
     Current liabilities                             68,522       69,827 

  Long-term debt                                    122,421      123,185 
  Deferred income taxes                               1,762        2,179 
  Other liabilities                                  10,452       10,708 

  Stockholders' equity:
    Preferred stock, $1 par value,
      authorized 5,000,000 shares:
        Series A                                         14           14 
        Series B                                        750          750 
        Series D                                          -            - 
    Common stock, $1 par value,         
      authorized 20,000,000 shares                   14,280       14,618 
  Capital in excess of par value                     77,090       79,884 
  Foreign currency translation adjustment              (640)        (562)
  Accumulated deficit                               (18,147)     (20,218)
                                                   --------     --------
      Total stockholders' equity                     73,347       74,486 
        Total liabilities and                      --------     --------
          stockholders' equity                     $276,504     $280,385 
                                                   ========     ========

The accompanying notes are an integral part of the financial statements.

                                    -1-
<PAGE>                                    

             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
                Consolidated Statement of Earnings
              (thousands, except per share amounts)

                                                    Three Months
                                                       Ended
                                                      March 31,     
                                                  -----------------
                                                   1997      1996  
                                                  -------   -------

Sales                                             $66,933   $72,742
Services                                           21,191    14,920
Royalties                                             207     7,465
                                                  -------   -------
                                                   88,331    95,127
                                                  -------   -------
Cost of sales                                      49,070    55,378
Cost of services                                   19,000    13,021
Selling, general, and administrative expenses      14,932    16,119
                                                  -------   -------
                                                   83,002    84,518
                                                  -------   -------

Earnings from operations                            5,329    10,609
Other income (expense), net                           532      (952)
                                                  -------   -------
                                                    5,861     9,657
                                                  -------   -------

Interest expense                                    3,677     7,181
                                                  -------   -------

Earnings before income taxes                        2,184     2,476
Income tax provision                                  113       560
                                                  -------   -------
    Net earnings                                  $ 2,071   $ 1,916
                                                  =======   =======

Earnings (loss) applicable to common shares       $ 1,880   $(3,196)
                                                  =======   =======
Earnings (loss) per share of common
  stock and common stock equivalents:

Net earnings before consideration for
  induced conversion of preferred stock               .13       .13
Assumed value of conversion inducement                  -      (.42)
                                                  -------   -------

    Earnings (loss) applicable to common shares   $   .13   $  (.29)
                                                  =======   =======


The accompanying notes are an integral part of the financial statements.


                             -2-
                             
<PAGE>                             
             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
               Consolidated Statement of Cash Flows
                           (thousands)
                                                    Three Months Ended
                                                         March 31,     
                                                   --------------------
                                                     1997        1996  
                                                   --------    --------
Cash and cash equivalents at beginning of year     $ 48,758    $ 10,475
Cash flows from operating activities:              --------    --------
  Net earnings                                        2,071       1,916 
  Adjustments to reconcile net income
    to cash flows from operating activities:
     Change in deferred income taxes                   (157)      1,201 
     Depreciation and amortization                    2,200       2,200
     Original discount amortization                       -       2,713
     Gain on sale of property and equipment              (1)        (38) 
     Other                                              (37)         97
  Changes in assets and liabilities, net of
    effects from acquired businesses:
     Increase in accounts receivable                 (2,489)       (983)
     Increase in inventories                         (1,695)     (7,061)
     Increase in prepaid expenses                      (301)       (465)
     Decrease in realty assets                            -       1,854
     Increase in accounts payable                     2,077       5,984 
     Decrease in accrued expenses                    (2,622)       (937)
     Increase (decrease) in other liabilities         1,281        (461)
     Other, net                                           -         (16)
                                                   --------    --------
      Cash flows from operating activities              327       6,004 

Cash flows from investing activities:
  Proceeds from sale of subsidiary                    4,097           -
  Purchase of assets of acquired business                 -      (3,876)
  Purchases of property and equipment                (3,916)     (1,466)
  Reduction of long-term receivables                     15         278
  Increase in long-term receivables                       -        (474)
  Proceeds from sale of property and equipment            7          52
                                                   --------    --------
   Cash flows from investing activities                 203      (5,486)

Cash flows from financing activities:
  Preferred stock conversion cost                         -        (213)
  Payment of dividends                                 (191)          -
  Purchase of common stock                           (2,941)          -
  Redemption of Discount Debentures                    (242)          -
  Repayment of long-term debt                          (720)   (120,774)  
  Repayment of realty debt                              (61)       (684)
  Proceeds from new long-term debt                        -     120,285
                                                   --------    --------
   Cash flows from financing activities              (4,155)     (1,386) 
Net decrease in cash and cash equivalents            (3,625)       (868)
                                                   --------    --------
Total cash and cash equivalents at March 31        $ 45,133    $  9,607
                                                   ========    ========

The accompanying notes are an integral part of the financial statements.

                               -3-
<PAGE>                               
<TABLE>

<CAPTION>

                             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES

                     Consolidated Statement of Changes in Stockholders' Equity
                        For the Three Months Ended March 31, 1997 and 1996
                                            (thousands)



                                                                                 Capital in 
                                             Preferred Stock           Common    Excess of   Retained
                                      Series A   Series B   Series D    Stock    Par Value   Earnings
                                      --------   --------   --------   -------   ---------   --------
<S>                                   <C>        <C>        <C>        <C>       <C>         <C>                     
BALANCE AT DECEMBER 31, 1995          $   67      $1,548    $  120     $10,053    $86,035    $(38,959)
                                                                                
Net earnings                                                                                    1,916  
Conversion to Common stock                                    (120)      1,906     (1,999)          
                                      ------      ------    ------     -------    -------    --------
BALANCE AT MARCH 31, 1996             $   67      $1,548    $    -     $11,959    $84,036    $(37,043)


BALANCE AT DECEMBER 31, 1996          $   14      $  750    $    -     $14,618    $79,884    $(20,218)

Net earnings                                                                                    2,071
Dividends - Preferred stock                                                          (191)
Common stock retirements                                                  (338)    (2,603)          
                                      ------      ------    ------     -------    -------    --------
BALANCE AT MARCH 31, 1997             $   14      $  750    $    -     $14,280    $77,090    $(18,147)
                                      ======      ======    ======     =======    =======    ========

</TABLE>



The accompanying notes are an integral part of the financial statements.





















<PAGE>


             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements



Note 1 - General
----------------

    In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of March 31, 1997 and December 31,
1996 and the results of operations for the three-month period, and
cash flows and changes in stockholders' equity for the three-month
period ended March 31, 1997 and 1996.  Such results, however, may
not be indicative of the results for the full year.
    For additional information regarding significant accounting
policies, and accounting matters applicable to the Company,
reference should be made to the Company's Annual Report to
Shareholders for the year ended December 31, 1996.

Note 2 - Inventories
--------------------

   Inventories are summarized as follows (in thousands):

                                        March 31,  December 31,
                                          1997         1996    
                                        --------   -----------

   Raw materials and supplies           $11,605      $10,995
   Work-in-process                       11,865       11,564
   Finished goods                        23,854       26,158
   Inventories applicable to
     government contracts                15,232       15,967
                                        -------      -------
                                        $62,556      $64,684
                                        =======      =======
Note 3 - Earnings Per Share
---------------------------

   Earnings per share of Common stock and Common stock equivalents
has been computed on the basis of the average number of Common
shares outstanding during each period.  The average number of
shares has been adjusted for assumed exercise at the beginning of
the period (or date of grant, if later) for any dilutive stock
options, with funds obtained  thereby  used  to  purchase shares of





                               
                               
                               -5-
                               
<PAGE>                               

Note 3 - Earnings Per Share, continued
--------------------------------------

the Company's Common stock at the average price during the period,
and assumed conversion of all dilutive convertible preferred stock. 
Common stock equivalents that are anti-dilutive are excluded from
the computation of earnings per share and earnings are reduced by
the dividend requirements on such equivalents.

Note 4 - Acquisition and Dispositions
-------------------------------------

   In March 1997, the Company sold the assets of its Canadian
steel distributor.  Cash proceeds from the sale were $4.1 million. 
The purchaser assumed $2.3 million of liabilities.
   In January 1996, a subsidiary of the Company acquired certain
assets of Markel, a manufacturer of a silicone wire product line. 
The purchase price was approximately $4.3 million.

Note 5 - Preferred Stock Conversions
------------------------------------

   On February 16, 1996, the Company issued 1,905,849 shares of
Talley Common stock in connection with the conversion of  all of
the Company's Series D Preferred stock, 702,919 more shares than
originally designated.  The conversion automatically extinguished
all unpaid dividends on that stock, totaling approximately $2.6
million as of December 31, 1995.  
   On April 22, 1996, pursuant to a conversion offer with respect
to the Company's Series B and Series A Preferred stock,
approximately 798,000 shares or approximately 52% of the
outstanding shares of Series B and approximately 53,000 shares or
approximately 79% of the Series A were converted to Common stock.
Series B holders who converted received 2.5 shares of Common stock
for each outstanding Series B share.  Series A holders who
converted received 2.0 shares of Common stock for each outstanding
Series A share.  Common stock issued of approximately 1,995,000
shares in connection with the conversion  of  Series B Preferred
stock and approximately 106,000 in connection with the conversion
of Series A Preferred stock was approximately 948,000 and 56,000
more shares than issuable under the original conversion terms of
the respective series of preferred stock.  Prior to the  conversion
there were approximately 1,548,000 shares of Series B outstanding
and 67,000 shares of Series A outstanding.  The conversion
automatically extinguished all unpaid dividends on the Series B and
Series A shares that were converted totaling approximately $4.0
million ($5 per share) on the Series B Preferred stock and totaling
approximately $0.3 million ($5.50 per share) on the Series A
Preferred stock at March 31, 1996.


                               
                               
                               
                               
                               
                               -6-
                               
<PAGE>                               

Note 5 - Preferred Stock Conversions, continued
-----------------------------------------------

   The transactions do not impact the net earnings of the Company,
but "earnings applicable to common shares (after deduction of
preferred stock dividends)," as supplementally disclosed by the
Company, and the "earnings per share of common stock and common
stock equivalent share" have been reduced.  The excess of the fair
value of the common shares transferred in the transactions by the
Company, over the fair value of the common shares issuable,
pursuant to the original conversion terms, have been subtracted
from net earnings in the calculations of net earnings available to
common shareholders and earnings per share.

Note 6 - Bonds Repurchased
--------------------------

   During 1996, the Company repurchased $124.0 million aggregate
principal amount of the Senior Discount Debentures with an accreted
value of $97.4 million.  The purchase price of the debentures was
$106.0 million, including accrued interest and prepayment premiums. 
The Company recognized $12.1 million in extraordinary losses in
connection with the repurchases of the Senior Discount Debentures. 
This amount represents the prepayment premium and deferred debt
cost on the extinguished debt.

Note 7 - Repurchase of Common Stock
-----------------------------------

   In late 1996 and early 1997, the Board of Directors approved
the repurchase of up to 950,000 shares of the Company's Common
stock, on  the open market or in  negotiated  transactions, from
time to time, at prices deemed appropriate by the Company's
officers, with such shares to be retired as authorized but 
unissued  shares.  At December 31, 1996, the total number of shares
of common stock repurchased was 277,300 shares for a total cost of
approximately $2.1 million.  In January 1997, another 337,367
shares were repurchased for a total cost of approximately $2.9
million. 












                               
                               
                               
                               
                               
                               -7-
                               
<PAGE>                               

             TALLEY INDUSTRIES, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis
         of Financial Condition and Results of Operations


   The following is management's discussion and analysis of
certain significant factors which have affected the Company.  A
summary of period-to-period changes in the consolidated statement
of earnings is shown below (in thousands):
                                                Three Months
                                                   Ended
                                                  March 31,    
                                             ------------------
                                               1997      1996  
                                             --------  --------
REVENUES:
 Government Products and Services            $ 40,774  $ 31,619
 Airbag Royalties                                   -     7,250
 Stainless Steel Products                      30,263    38,935
 Industrial Products                           17,294    16,030
 Realty                                             -     1,293
                                             --------  --------
                                             $ 88,331  $ 95,127
                                             ========  ========

OPERATING INCOME:
 Government Products and Services            $  4,251  $  2,037
 Airbag Royalties                                   -     7,250
 Stainless Steel Products                       2,629     4,945
 Industrial Products                              987       632 
 Realty                                             -    (1,119)
                                             --------  --------
   Total operating income                       7,867    13,745
 Corporate expense                             (2,533)   (4,204)
 Non-segment interest income                      527       116
 Interest expense                              (3,677)   (7,181)
                                             --------  --------
   Earnings before income taxes              $  2,184  $  2,476 
                                             ========  ========

    Revenues for the three-month period ended March 31, 1997
decreased $6.8 million from $95.1 million to $88.3 million, when
compared with the corresponding period in the prior year. 
Royalties from automotive airbags ceased with the mid-1996
conclusion of the airbag royalties litigation.  Airbag royalties
recorded in the first quarter of 1996 were $7.3 million.  Revenue
increases from the Company's Government Products and Services
segment, primarily from the Company's naval architectural and
engineering unit, were offset by decreases in stainless steel
products, resulting primarily from lower steel prices, as
competitive pressures from domestic and foreign suppliers affected
the sales volume and sales prices.


                               
                               -8-
                               
<PAGE>                               

    Operating income from the Government Products and Services
segment increased from $2.0 million to $4.3 million.  Automotive
airbag royalties in the Airbag Royalty segment in the first quarter
of 1996 were $7.3 million.  There were no royalties in 1997,
following the mid-1996 conclusion of the airbag royalties
litigation.  Operating income from the Stainless Steel Products
segment for the three months ended March 31, 1997, when compared
with the first three months of 1996, was $2.3 million lower, while
operating income from the Company's Industrial Products segment
increased $.4 million.  Pursuant to the disposition of
substantially all of the Company's real estate in December of 1996,
losses in the Realty segment decreased by $1.1 million for the
first three months of 1997, when compared with the prior year.
    The gross profit percentage, excluding airbag royalties, of
22.9%, for the three months ended March 31, 1997 was up slightly
from the gross profit percentage of 22.2% for the comparable period
in 1996.  The slight increase from the prior year is primarily due
to higher margins on certain government contracts and an
improvement in the margin on industrial products, partially offset
by a lower margin on stainless steel products.  Earnings before
income taxes for the three months ended March 31, 1997 was $2.2
million compared with $2.5 million in the first three months of the
previous year.  Net earnings for the three months ended March 31,
1997 and 1996 were $2.1 million and $1.9 million, respectively.

    GOVERNMENT PRODUCTS AND SERVICES.  Revenue and operating
income for the three months ended March 31, 1997 increased by $9.2 
million and $2.2 million, respectively, when compared with the same
period in the prior year, primarily the result of an increase in
service revenues from the Company's naval architectural and
engineering unit and favorable results upon conclusion, or the
timing of completion, of certain other contracts.

    AIRBAG ROYALTIES.  As described in the Notes to the
Consolidated Financial Statements for the year ended December 31,
1996, the quarterly royalty payments ceased with the payments
received from TRW in the third quarter of 1996.  Airbag royalties
in the first quarter of 1996 were $7.3 million.

    STAINLESS STEEL PRODUCTS.  During the first three months of
1997, sales for the Stainless Steel Products segment decreased $8.7 
million, while operating income decreased $2.3 million, when
compared with the same period in 1996.  Revenue and earnings were
affected by lower prices, as competitive pressures from domestic
and foreign suppliers affected the sales volume and sales prices.



                               
                               
                               
                               
                               
                               
                               
                               
                               -9-
                               
<PAGE>                               

    INDUSTRIAL PRODUCTS.  In the three-month period ended March
31, 1997, Industrial Products sales increased $1.3 million while
operating income increased $.4 million, when compared with the same
period in 1996.  Increases in sales and operating income resulted
primarily from increased orders for insecticides and air
fresheners.

    REALTY.  In December of 1996 all real estate properties,
except for one, were sold.  The Company plans to dispose of the
single property not included in this bulk sale.  There were no
sales or earnings in 1997, compared with sales and operating losses
of $1.3 million and $1.1 million, respectively, in the first
quarter of 1996.

    OTHER.  Interest expense for the three months ended March 31,
1997 decreased to $3.7 million, from $7.2 million in the comparable
period in 1996.  The decrease is primarily due to the repurchase of
a substantial portion of the Company's Senior Discount Debentures
and the paydown of the Company's revolving credit facility in the
second half of 1996.  The overhead expenses decreased in the first
three months of 1997 from $4.2 million to $2.5 million when
compared with the comparable period in 1996.  Corporate overhead
for 1996 was above historical levels primarily due to high costs
incurred in connection with the TRW litigation.  The income tax
provision for the first three months of 1997 was $.1 million
compared to $.6 million in the comparable period in 1996.  Due to
unrecognized federal tax carryforward benefits, primarily the
result of losses in the Company's real estate segment, the Company
has no Federal tax provision in 1996 or the first three months of
1997.  The tax provision in the first quarter of 1996 and 1997 is
primarily for state jurisdictions.

Financial Condition, Liquidity and Capital Resources
----------------------------------------------------

    At March 31, 1997, the Company had $45.1 million in cash and
cash equivalents and net working capital of $102.0 million.  Cash
generated from operating activities for the three months ended
March 31, 1997 was $.3 million.  The amount primarily reflects cash
generated from earnings and an increase in accounts payable, offset
in part by cash used to increase inventories, an increase in
accounts receivable and a decrease in accrued expenses.  Cash
generated from operations during the first three months of 1996 was
$6.0 million.  Cash generated from investing activities during the
quarter ended March 31, 1997 was $.2  million, consisting primarily 




                               
                               
                               
                               
                               
                               
                               
                               -10-
                               
<PAGE>                               

Financial Condition, Liquidity and Capital Resources, continued
---------------------------------------------------------------

of the sale of assets of a subsidiary, offset by capital
expenditures.  Cash used in financing activities of $4.2 million
reflects the repurchases of the Company's common stock and a
decrease in the Company's long-term debt.
    In October 1993, the Company completed a major refinancing
program.  This refinancing program included an offering of $185
million of debt securities, consisting of $70 million gross
proceeds of Senior Discount Debentures due 2005, issued by the
Company to yield 12.25% and $115 million of Senior Notes due 2003,
with an interest rate of 10.75% issued by a wholly owned subsidiary
of the Company, Talley Manufacturing and Technology, Inc. ("Talley
Manufacturing").  In connection with this refinancing, Talley
Manufacturing obtained a secured credit facility with institutional
lenders.  
    Borrowings under the secured credit facility may not exceed
the collateral base as defined in the governing credit agreement. 
The facility consists of a five-year revolving credit facility of
up to $40.0 million and a five-year  $20.0 million  term  loan 
facility.  At March 31, 1997 availability under the total facility
was approximately $50.5 million, of which approximately $10.5
million was borrowed. 
    The Company anticipates that the present capital structure
will support the long-term growth of the Company's core businesses. 
A substantial portion of the proceeds received in 1996 from the
sale of the assets of the real estate operations and from the
resolution of the automotive airbag royalties litigation, have been
used to reduce the Company's total indebtedness.
    As a holding company with no significant operating or income-
producing assets beyond its stock interests in Talley Manufacturing
and the subsidiaries holding its remaining real estate operations
(a single California property), the Company is dependent primarily
upon distributions from those subsidiaries in order to meet its
debt service and other obligations.  The Company is entitled to
receive certain distributions from Talley Manufacturing (absent
certain defaults under Talley Manufacturing indebtedness) until the
end of 1998, to be used to fund certain carrying and other costs
associated with the disposition of the Company's real estate
assets.
    Cash available to the Company is required to be used for 
specific purposes, and because certain debt covenants limit
the Company's ability to incur additional indebtedness, the Company 
will be dependent upon the payment of dividends from Talley 




                               
                               
                               
                               
                               
                               
                               
                               -11-
                               
<PAGE>                               

Financial Condition, Liquidity and Capital Resources, continued
---------------------------------------------------------------

Manufacturing (which payments will generally be limited by debt
covenants of Talley Manufacturing) and to future sales of equity
securities as  its  primary  sources  of  discretionary  liquidity. 
Nevertheless, and particularly in light of the absence of
requirements for the Company to make cash payments of interest on
its Senior Discount Debentures until April 15, 1999, and the
limited amount of outstanding Senior Discount Debentures, after the
repurchases of a substantial portion of the debentures in 1996, and
due to the current cash balances, the Company believes that funds
will be available in sufficient amounts, and at the required times,
to permit the Company to meet its obligations.

Other Matters
-------------

  Litigation - TRW Inc.
  ---------------------

    A judgment in the Company's favor in the amount of $138.0
million was entered against TRW Inc. (TRW) by the United States
District Court for  the  District of Arizona in June 1995 following
a jury verdict that TRW had repudiated and breached the April 1989
Airbag Royalty Agreement with the Company.  The $138.0 million
damages amount represented the jury's calculation of the present
value of the remaining stream of Airbag Royalties which would  have 
been  payable by TRW through the April 2001 scheduled expiration
date of the Airbag Royalty Agreement had TRW not breached the
Agreement.  TRW appealed the judgment, and, during the pendency of
the appeal, was ordered by the District Court to  continue making
quarterly payments to the Company in the same amounts as if the
Airbag Royalty Agreement had not been terminated and repudiated by
TRW.  On June 19, 1996, the United States Court of Appeal for the
Ninth Circuit rejected TRW's appeal and affirmed the $138.0 million
judgment.  A petition for rehearing filed by TRW with the Court of
Appeals was denied on July 30, 1996.
    In August 1996 TRW made payments aggregating approximately
$133.1 million to the Company on account of TRW's obligations under
the judgment.  The payments represented the $138.0 million face
amount of  the  judgment  award, plus interest at the default rate
specified by the Airbag Royalty Agreement (prime plus 5%), less the
quarterly payments made by TRW pursuant to the District Court's
order during the pendency of the appeal.  A further payment was
made by TRW at the same time in the amount of approximately $6.7
million as that portion of a court-ordered reimbursement of
litigation fees and costs (and interest on the reimbursement amount
at the same default rate).


                               
                               
                               
                               
                               
                               -12-
                               
<PAGE>                               

Other Matters, continued
------------------------

  Litigation - TRW Inc., continued
  --------------------------------

    During  September  1996, claims  between  the  Company  and
TRW (which had been scheduled for trial) and all other matters in 
dispute with TRW were settled by the parties pursuant to a global
settlement agreement.  Under that settlement, TRW made a further
cash payment to the Company on September 3, 1996 in the aggregate
amount of $16.6 million.  Accordingly, all claims between the
parties have now been resolved, and cash payments have been made by
TRW aggregating $156.4 million.
    The litigation in which this judgment was entered arose out of
the Asset Purchase Agreement dated February 4, 1989 and the License
Agreement dated April 21, 1989, between TRW and the Company
pursuant to which TRW acquired the Company's airbag business.  The
court dismissed TRW's claims that the Company had breached a non-
compete provision contained in the Asset Purchase Agreement,
thereby entitling TRW to terminate airbag royalty payments to the
Company under the License Agreement (which it purported to do in
February 1994) and obtain a paid-up license to use the Company's
airbag technology.  The jury found in fact that TRW had improperly
terminated and repudiated the License Agreement.

  Recently Issued Accounting Standards
  ------------------------------------

    In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings per Share" which is effective for financial statements
issued for periods ending after December 15, 1997, including
interim periods.  Under the provisions of this new pronouncement,
the Company is required to present Basic Earnings per Share and
Diluted Earnings per Share.  Basic Earnings per Share is computed
by dividing income available to common stockholders (the numerator)
by the weighted-average number of common shares outstanding (the
denominator) during the period.  Income available to common
stockholders is computed by deducting both dividends declared in
the period on preferred stock (whether or not paid) and the
dividends accumulated for the period on cumulative preferred stock
(whether or not earned) from income from continuing operations and
also from net income.  Diluted Earnings per Share is computed
similar to Basic Earnings per Share, except that the denominator is
increased to include the  number of additional common shares that 





                               
                               
                               
                               
                               
                               -13-
                               
<PAGE>                               

Other Matters, continued
------------------------

  Recently Issued Accounting Standards, continued
  -----------------------------------------------

would have been outstanding if the dilutive potential common shares
had been issued.  Under this new pronouncement, the Company is
required to disclose a reconciliation of the numerators and the
denominators of the basic and diluted per-share computations for
income from continuing operations, the effect that has been given
to preferred dividends in arriving at income available to common
stockholders in computing basic EPS, and securities that could
potentially dilute basic EPS in the future that were not included 
in the computation of diluted EPS because to do so would have been
anti-dilutive for the period(s) presented.
    Had this Statement been effective for the quarter ending March
31, 1997, the Basic Earnings per share and the Diluted Earnings per
share would have been $.13 and $.13, respectively.

Forward-Looking Statements
--------------------------

    This Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this
Quarterly Report contain forward-looking statements that are based
on current expectations, estimates and projections about the
industries in which the Company operates.  Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and variations of such words and similar expressions
are intended to identify such forward-looking statements.  These
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions which are difficult to
predict.  Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-
looking statements.  The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
    Factors affecting the future include, but are not limited to,
increasing prices and product/service competition by foreign and
domestic competitors, including new entrants; rapid technological
developments and changes; the ability to continue to introduce
competitive new products and services on a timely and cost
effective basis; the mix of products/services; the achievement of
lower costs and expenses; domestic and foreign governmental and
public policy changes including environmental regulations;
protection and validity of patent and other intellectual property
rights; reliance on large customers; the cyclical nature of certain 



                               
                               
                               
                               
                               
                               -14-
                               
<PAGE>                               

Forward-Looking Statements, continued
-------------------------------------

of the Company's businesses; the outcome of pending and future
litigation and governmental proceedings and continued availability
of financing, and financial resources in the amounts, at the times 
and on the terms required to support future business.  In addition,
such statements could be affected by general industry and market
conditions and growth rates, general domestic and international
economic conditions including interest rate and currency exchange
rate fluctuations and other factors.






































                               
                               
                               
                               
                               
                               
                               
                               -15-
                               
<PAGE>                               

                   PART II - OTHER INFORMATION


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

  Litigation - TRW Inc.
  ---------------------

    For a description of legal proceedings involving the Company, 
see "Other Matters" within Management's Discussion and Analysis.


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

(a)  Exhibits:

        11*      Computation of Earnings per Common and Common
                 Equivalent Share.

        27*      Financial Data Schedule for Talley Industries,
                 Inc., March 31, 1997.

      99.1*      Consent and Sixth Amendment to the Loan and
                 Security Agreement dated March 24, 1997 by and
                 among Talley Manufacturing and Technology, Inc.,
                 Talley Canada, Inc. and Transamerica Business
                 Credit Corporation, as agent.

      99.2*      Third Amendment to Talley Savings Plus, an
                 employee stock purchase plan for the employees of
                 Talley Industries, Inc. and Affiliated Companies,
                 dated March 20, 1997.

*   Documents marked with an asterisk are filed with this report.


(b) Reports on Form 8-K:

     There were no reports filed on Form 8-K for the three months
     ended March 31, 1997.









                               
                               
                               
                               
                               
                               -16-
                               
<PAGE>                               

                            SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.



                                   TALLEY INDUSTRIES, INC.   
                                   -------------------------------
                                   (Registrant)






Date:     May 13, 1997             By Kenneth May                
     ----------------------           ----------------------------
                                      Kenneth May
                                      Vice President, Controller
                                      Principal Accounting
                                      Officer





Date:     May 13, 1997             By Mark S. Dickerson          
     ----------------------           ----------------------------
                                      Mark S. Dickerson
                                      Vice President 
                                      and Secretary
                                   














                               
                               
                               
                               
                               
                               -17-