<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D. C.   20549

                                   FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED JANUARY 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 NUMBER:   33-67532

                          SHEFFIELD STEEL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 DELAWARE                             74-2191557
             (State or other                       (I.R.S. Employer
       jurisdiction of incorporation)             identification No.)

                           220 NORTH JEFFERSON STREET
                             SAND SPRINGS, OK 74063
                    (Address of principal executive offices)
                                 (918) 245-1335
                (Registrant's telephone number, including area code)



   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 such
filing requirements for the past 90 days.

Yes __X__  No _____
                  



   At the date of this filing, there were 3,375,000 shares of the Registrant's
$.01 par value Common Stock outstanding.  The aggregate market value of voting
stock held by nonaffiliates is unknown as the Registrant's stock is not traded
on an established public trading market.
<PAGE>
 
                          SHEFFIELD STEEL CORPORATION
                                   FORM 10-Q

                                      INDEX

                                                                    PAGE
                                                                    ----
PART I.  FINANCIAL INFORMATION                             
<TABLE>
<CAPTION>
<S>                           <C>                                    <C>
Item 1.  Financial Statements
         Consolidated Condensed Balance Sheets as of
         January 31, 1997 and April 30,  1996                          3
 
         Consolidated Condensed Statements of Operations
         for the three months and nine months ended
         January 31, 1997 and January 31, 1996                         4  
 
         Consolidated Condensed Statements of Cash Flows
         for the nine months ended January 31, 1997 and
         January 31, 1996                                              5
 
         Notes to Consolidated Condensed Financial Statements        6-7
 
Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations              8-13
 
 PART II. OTHER INFORMATION
 
Item 1.  Legal Proceedings                                            14
 
Item 4.  Submission of Matters to a Vote of Security Holders          14
 
Item 6.  Exhibits and Reports on Form 8-K                             14
 
Signature                                                             15
 
</TABLE>

                                       2
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                            January 31,
                                               1997      April 30,
                 ASSETS                     Unaudited      1996
                 ------                     ---------    ---------
<S>                                       <C>           <C>
 
Current assets:
 Cash and equivalents                       $      18          46
 Accounts receivable, less allowance
  for doubtful accounts
  of $838 and $658 at January 31,
  1997 and April 30, 1996,
  respectively                                 16,755      21,607
 Inventories                                   39,346      40,321
 Other current assets                           3,736       3,630
                                              -------     -------
     Total current assets                      59,855      65,604
 
Property, plant and equipment, net             66,689      68,461
Intangible assets, net                          3,428       3,818
Other assets                                    3,480       3,509
Deferred income tax asset, net                  2,039       1,790
                                              -------     -------
 
     Total assets                           $ 135,491     143,182
                                              =======     =======
 
 LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------
 
Current liabilities:
 Current portion of long-term debt          $     717         717
 Accounts payable                              11,478      20,495
 Accrued interest payable                       2,250       4,500
 Accrued liabilities                            5,833       6,328
                                              -------     -------
 
     Total current liabilities                 20,278      32,040
 
Long-term debt, excluding current
  portion,
  less unamortized discount of $1,732
  and $1,840
  at January 31, 1997 and April 30,           
  1996, respectively                          103,334      96,324
Other liabilities                              10,558       8,433
                                              -------     -------
 
     Total liabilities                        134,170     136,797
                                              -------     -------
 
Stockholders' equity:
 Common stock                                      34          34
 Additional paid-in capital                     2,536       3,591
 Retained earnings                               (319)      4,037
                                              -------     -------
 
     Total stockholders' equity                 2,251       7,662
 
     Less loans to stockholders                   930       1,277
                                              -------     -------
 
                                                1,321       6,385
                                              -------     -------
 
     Total liabilities and                   
     stockholders' equity                   $ 135,491     143,182
                                              =======     =======
 
See accompanying notes to consolidated condensed financial statements.

</TABLE>

                                       3
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                            Three Months Ended        Nine Months Ended
                                                January 31,              January 31,
                                          ---------------------      -------------------
                                             1997         1996        1997         1996
                                             ----         ----        ----         ----
<S>                                       <C>          <C>         <C>         <C>
Sales                                     $   34,909      38,956     124,835       124,660
Cost of sales                                 29,374      33,584     103,713       104,153
                                          ----------   ---------   ---------     ---------
 
     Gross profit                              5,535       5,372      21,122        20,507
 
Selling, general and administrative            2,928       2,805       9,422         8,831
 expense
Depreciation and amortization expense          1,698       1,597       5,126         4,840
Postretirement benefit expense                   642         904       2,119         2,712
                                          ----------   ---------   ---------     ---------
 
     Operating income                            267          66       4,455         4,124
 
Interest expense                              (2,956)     (2,992)     (8,810)       (8,730)
Other Income                                       -           -           -           500
                                          ----------   ---------   ---------     ---------
 
     Loss from operations before              (2,689)     (2,926)     (4,355)       (4,106)
       income tax benefit
 
Income tax benefit                                 -       1,141           -         1,610
                                          ----------   ---------   ---------     ---------
 
        Net loss                          $   (2,689)     (1,785)     (4,355)       (2,496)
                                          ==========   =========   =========     =========
 
Net loss per common share                 $    (.797)      (.529)      (1.29)        (.740)
                                          ==========   =========   =========     =========
 
Dividends per common share                $       -            -           -          .172
                                          ==========   =========   =========     =========
 
Common shares outstanding                  3,375,000   3,375,000   3,375,000     3,375,000
                                          ==========   =========   =========     =========
 
  
</TABLE>

See accompanying notes to consolidated condensed financial statements.

                                       4
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                              Nine Months Ended
                                                 January 31,
                                              -----------------
                                                1997      1996
                                                ----      ---- 
<S>                                        <C>          <C>
 
Cash flows from operating activities:
   Net loss                                   $(4,355)   (2,496)
   Depreciation and amortization                5,234     4,948
   Gain on sale of idle equipment                   -      (500)
   Accrual of postretirement
    benefits other than pensions,
    net of cash paid                            1,403     2,232
   Changes in assets and liabilities           (5,824)   (7,467)
                                               -------   -------
 
       Net cash used in operations             (3,542)   (3,283)
                                               -------   -------
 
Cash flows from investing activities:
   Capital expenditures                        (2,964)   (4,016)
   Proceeds from sale of idle                       -       500
    equipment                                  -------   -------
 
       Net cash used in                        (2,964)   (3,516)
        investing activities                   -------   -------
 
Cash flows from financing activities:
   Net increase in long-term debt               6,902     9,224
   Repurchase of bond warrants                      -       (94)
   Payment of debt issuance costs                           (75)
   Payments in respect of stock                  (424)     (507)
   appreciation rights
   Dividends paid                                   -    (1,749)
                                               -------   -------
 
       Net cash provided by                     6,478     6,799
        financing activities                   -------   -------
 
Net decrease in cash                              (28)        -
 
Cash at beginning of period                        46        26
                                               -------   -------
 
Cash at end of period                         $    18        26
                                               =======   =======
 
Supplemental disclosure of cash flow
------------------------------------
information
-----------
 
Cash paid during the period for:
   Interest                                   $ 11,060    10,872
                                               =======   =======
   Income taxes                               $     -       175
                                               =======   =======
 
Noncash items related to stock
 repurchase:

   Decrease in paid-in capital                $  1,055        -
                                               =======   =======
   Increase in other liabilities              $    662        -
                                               =======   =======
   Decrease in loans to stockholders          $    393        -
                                               =======   =======
 </TABLE>

See accompanying notes to consolidated condensed financial statements.

                                       5
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                           JANUARY 31, 1997 AND 1996
                                  (UNAUDITED)

 1)  BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

     The consolidated financial statements of Sheffield Steel Corporation (the
     Company) include the accounts of its divisions, Sheffield Steel-Sand
     Springs (Sand Springs), Sheffield Steel-Kansas City (Kansas City), and
     Sheffield Steel-Joliet (Joliet) and its wholly owned subsidiaries,
     Sheffield Steel Corporation-Oklahoma City (Oklahoma City), and Sand Springs
     Railway Company (the Railway). HMK Enterprises, Inc. (HMK) owns
     approximately 95% of the currently issued and outstanding common stock. All
     material intercompany transactions and balances have been eliminated in
     consolidation. The Company's primary business is the production of concrete
     reinforcing bar, merchant and special bar quality steel products, specialty
     steel products, and fence posts. The Company's products are sold throughout
     the continental United States.

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles for
     interim financial information and with the instructions to Form 10-Q and
     Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements and should be read in
     conjunction with the financial statements contained in the Company's Form
     10-K, for the year ended April 30, 1996. In the opinion of management, all
     adjustments (consisting of normal recurring accruals) considered necessary
     for a fair presentation have been included. Operating results for the
     quarter and nine months ended January 31, 1997 are not necessarily
     indicative of the results that may be expected for the year ending April
     30, 1997.

 2)  NET LOSS PER SHARE OF COMMON STOCK

     Loss per share of common stock is computed by dividing net loss applicable
     to common stock by the weighted average number of common shares and
     dilutive common stock equivalents outstanding each period. All options and
     warrants were excluded from per-share computations since their effect on
     loss per common share was anti-dilutive.


<TABLE>
<CAPTION>
 
3)   INVENTORIES

     The components of inventories are as follows:

                                           January 31,
                                              1997     April 30,
                                           Unaudited     1996                             
                                           ---------   ---------
<S>                                       <C>       <C>
       Raw materials and storeroom          
         supplies                          $ 11,271     10,823            
       Work in process                       10,555     15,640
       Finished goods                        17,520     13,858
                                             ------     ------
 
                                           $ 39,346     40,321
                                             ======     ======
</TABLE>

                                       6
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED

4) RELATED PARTY TRANSACTIONS

   On September 30, 1996, the Company finalized the terms of an agreement to
   repurchase 50,625 shares of the Company's common stock from two minority
   shareholders who formerly were officers of the Company. The stock repurchase
   is pursuant to the Amended and Restated Stockholder's Agreement dated
   September 15, 1993 and the stock purchase price was calculated in accordance
   with said agreement. Certain payments, including those to reacquire the
   Company's common stock, are currently not permitted under the terms of the
   Company's Indenture. As a result of this transaction, $393 of notes
   receivable from the former shareholders was satisfied, the Company recorded a
   note payable in the amount of $662 and decreased paid-in capital by $1,055.
   The note payable will accrue simple interest at 6.02% and will be repaid in
   five annual installments beginning when, and only when, the purchase of the
   shares is permitted under the Indenture.

                                       7
<PAGE>
 
                 SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

 ITEM 2.         Management's Discussion and Analysis of
                 Financial Condition and Results of Operations
                 ---------------------------------------------
  
      The following discussion should be read in conjunction with the
 Consolidated Condensed Financial Statements of the Company and the notes
 thereto elsewhere in this Form 10-Q.

      This Quarterly Report on Form 10-Q may contain forward-looking
 statements as that term is defined in the Private Securities Litigation Reform
 Act of 1995.  Such statements are based on management's current expectations
 and are subject to a number of factors and uncertainties which could cause
 results to differ materially from those described in the forward-looking
 statements.  There can be no assurance that actual results or business
 conditions will not differ materially from those anticipated or suggested in
 such forward-looking statements as a result of various factors, including, but
 not limited to, the following:  the size and timing of significant orders, as
 well as deferral of orders, over which the Company has no control; the
 variation in the Company's sales cycles from customer to customer; increased
 competition posed by other mini-mill producers; changes in pricing policies by
 the Company and its competitors; the need to secure or build manufacturing
 capacity in order to meet demand for the Company's products; the Company's
 success in expanding its sales programs and its ability to gain increased
 market acceptance for its existing product lines; the ability to scale up and
 successfully produce its products; the potential for significant quarterly
 variations in the mix of sales among the Company's products; the gain or loss
 of significant customers; shortages in the availability of raw materials from
 the Company's suppliers; fluctuations in energy costs; the costs of
 environmental compliance and the impact of government regulations; the
 Company's relationship with its work force; the restrictive covenants and tests
 contained in the Company's debt instruments, which could limit the Company's
 operating and financial flexibility; and general economic conditions.

 GENERAL
 --------

 On December 18, 1996, the Company experienced a failure in the transformer
 supporting its number one furnace at its Sand Springs facility.  A spare
 transformer was promptly installed which subsequently failed for unrelated
 reasons on January 5, 1997.  Normal melting operations are expected to resume
 by April 30, 1997.  The Company will continue to run its number two electric
 furnace at capacity and purchase billets to meet the semi-finished steel
 requirements of its Sand Springs and Joliet rolling mills.  The Company
 maintains property and business interruption insurance which is expected to
 cover substantially all of the costs associated with the repair of the
 transformers and increased operating costs incurred as a result of the one
 furnace operation. The Company has been able to satisfy rolling mill
 requirements by supplementing billet production with outside billet purchases.
 Shipments of finished goods to customers have not been, and are not expected to
 be, affected in any way.  The insurance policies have combined deductibles of
 $350,000 which were recorded in the third fiscal quarter.

                                       8
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

 During the third quarter, the Company restructured the operating functions at
 the Sand Springs facility resulting in a 14% reduction in the salaried
 workforce.  Severance costs of approximately $250 thousand were recognized and
 charged to selling, general and administrative expenses in the third quarter.

 The Company's collective bargaining agreement with the United Steelworkers of
 America (the Union), which covers approximately 310 hourly-paid production and
 maintenance employees at the Sand Springs facility, expired on March 1, 1997.
 The Company reached a tentative agreement with the Union effective March 2,
 1997, through March 1, 2000, which was ratified by the Union on March 8, 1997.
 The Union agreement provides for an increase in hourly wages of $1.00 an hour
 over the next three years and certain increased benefits. In conjunction with
 the agreement, the Company is eliminating approximately 70 hourly positions,
 primarily maintenance related. It is anticipated that the reduction in hourly
 positions will be accomplished through retirement offers and voluntary
 separation. The actual response to the offers and cost of such offers cannot be
 accurately determined at this time, however, the Company expects to accrue
 these severance and retirement costs in the fourth quarter.

 During the third fiscal quarter, the Company accepted final commissioning of
 the new mill at the Sand Springs facility and the final retainage was paid to
 the contractor.  The old mill, which was taken out of service in January, 1995,
 was fully depreciated and was scrapped with the exception of approximately $32
 thousand of equipment sold and approximately $143 thousand currently held for
 sale.

 RESULTS OF OPERATIONS
 Three month period ended January 31, 1997
 -----------------------------------------

      SALES. Net sales for the Company for the third quarter were approximately
 $34.9 million as compared to net sales of approximately $38.9 million in the
 third quarter of fiscal 1996, a decrease of approximately $4.1 million or 10%.
 Shipping levels in the third quarter decreased 18% to 92,909 tons from 112,835
 tons in the third quarter of fiscal 1996, primarily due to decreased rebar and
 semi-finished steel shipments. However, sales decreases were partially offset
 by an increase in average selling prices from $345 per ton in the third quarter
 of fiscal 1996 to $376 per ton in the third quarter of fiscal 1997 due
 primarily to product sales mix. Average net selling prices in the third fiscal
 quarter were lower for MBQ products and higher for rebar, fabricated products
 and semi-finished steel than in the same period in prior year.

      Shipments of rebar for the third quarter decreased 15.5% as compared to
 the same quarter in the prior year due to weaker market demand primarily caused
 by weather conditions in the south and southwest.  Shipments of MBQ products
 from Sand Springs increased 44% from the same period in the prior year due
 primarily to increased production of MBQ products.  Joliet shipments of MBQ
 products increased 4% over the same quarter in the prior year due to increased
 market demand.  Fabricated product sales increased 3% over the same period in
 the prior year due to a stronger market for fence posts.  Shipments of semi-
 finished steel for the third quarter decreased 72% due to the Company's
 decision to decrease melt shop production due to a weak billet market.

                                       9
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      COST OF SALES.  The cost of sales for the third quarter decreased to
 approximately  $29.3 million as compared to approximately $33.6 million for the
 same quarter in the prior year.  As a percentage of sales, cost of sales
 decreased from 86% of sales in the third quarter of the prior year to 84% of
 sales in the third quarter this year primarily due to product mix.  On an
 average per-ton basis, cost of sales increased from $297 per ton for the third
 quarter of fiscal 1996 to $316 per ton for the third quarter fiscal 1997.  The
 increase in cost of sales per ton is due to product mix, the costs associated
 with the transformer failure, new product development in the rolling mill and
 higher energy costs, primarily natural gas, in both the melt shop and rolling
 mill offset by slightly lower scrap raw material costs.

      GROSS PROFIT.  Gross profit for the Company for the third quarter was
 approximately $5.5 million as compared to a gross profit of approximately $5.4
 million for the same quarter in the prior year, an increase of approximately
 $0.1 million or 2%.  Gross profit for the Company as a percentage of sales was
 15.9% for the third quarter as compared to 13.8% for the same quarter in the
 prior year.  The increase in gross profit as a percentage of sales is a result
 of higher average selling prices partially offset by increased cost of sales
 per ton as discussed above.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSE.  Selling, general and
 administrative expenses for the Company for the third quarter were
 approximately $2.9 million as compared to approximately $2.8 million for the
 third quarter of fiscal 1996, an increase of approximately $0.1 million or 4%.
 The primary reason for the increase is severance costs recognized in
 conjunction with the reorganization of the salaried workforce at the Sand
 Springs facility.

      DEPRECIATION AND AMORTIZATION.  Depreciation and amortization increased in
 the third quarter approximately $0.1 million to $1.7 million, up from $1.6
 million for the third quarter in the prior year due to depreciation on capital
 expenditures incurred in the prior year and the current year.

      POSTRETIREMENT BENEFIT EXPENSE.  Postretirement benefit expense decreased
 in the third quarter approximately $0.3 million to $0.6 million, down from $0.9
 million for the third quarter in the prior year.  The decrease in estimated
 fiscal 1997 expense is due to a decrease in the health care cost trend rates as
 determined by an independent actuary.

      OPERATING INCOME.  Operating income for the third quarter was
 approximately $0.3 million as compared to approximately $70 thousand for same
 quarter in the prior year, an increase of approximately $0.2 million or 300%.
 Operating income for the Company as a percentage of sales for the third quarter
 was 0.76% as compared to 0.17% for the same quarter in the prior year.  The
 increase was primarily due to improved gross profit as discussed above.

      INTEREST EXPENSE.  Interest expense decreased slightly compared to the
 third quarter in the prior year.  This decrease was due to decreased average
 monthly borrowings under the Company's revolving credit facility to support a
 slightly lower investment in working capital in comparison to the same period
 in the prior year.

                                       10
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      INCOME TAX.  The Company has not recorded a benefit for income taxes as a
 result of the net loss.  A valuation allowance is required when it is more
 likely than not that all or a portion of the deferred tax assets will not be
 realized.  Accordingly, a valuation allowance has been recorded for a portion
 of the deferred tax asset at January 31, 1997. The amount of the deferred tax
 assets considered realizable, however, could change if estimates of future
 taxable income change.

 Nine month period ended January 31, 1997
 ----------------------------------------

      SALES.  Net sales for the nine months ended January 31, 1997 were
 approximately $124.8 million as compared to net sales of approximately $124.6
 million for the nine month period ended January 31, 1996,  an increase of
 approximately $0.2 million or 0.14%.  Shipping levels for the nine month period
 of 1997 increased 2% to 351,304 tons from 345,049 tons for the same period in
 the prior year, reflecting good rebar and MBQ product demand.   However,
 shipping increases were partially offset by a decrease in average selling
 prices from $361 per ton for the nine month period ending January 31, 1996 to
 $355 per ton for the same period in 1997.   The decrease in average selling
 prices is attributable primarily to market conditions and product mix.

      Shipments of rebar for the nine month period ending January 31, 1997
 increased 12% as compared to the same period in the prior year primarily due to
 increased market demand.  Shipments of MBQ Products from Sand Springs increased
 79% from the same period in the prior year due to increased production of MBQ
 products while Joliet shipments of MBQ products decreased 5% due to weaker
 market demand compared to the same period in the prior year.  Shipments of
 semi-finished steel decreased 26% from the same period in the prior year due
 primarily to decreased sales in the third fiscal quarter as discussed above.
 Shipments of fabricated products for the nine month period ending January 31,
 1997 did not fluctuate materially as compared to the same period in the prior
 year.

      COST OF SALES.  The cost of sales for the nine month period ended January
 31, 1997 decreased to approximately $103.7 million as compared to approximately
 $104.2 million for the same period in the prior year.  Cost of sales decreased
 as a percentage of sales to 83% compared with 83.5% for the same period in the
 prior year.  On an average per-ton basis, cost of sales decreased from $302 per
 ton for the nine month period ending January 31, 1996 to $295 per ton for the
 nine month period ending January 31, 1997.  The decrease in cost of sales per
 ton is due to a decrease in scrap raw material costs of approximately $8 per
 ton compared to the same period in the prior year.  However, the decrease in
 cost of sales per ton is partially offset by higher conversion costs per ton in
 the melt shop and rolling mill because of higher energy costs, the costs
 associated with the transformer failure and costs of new product development in
 the rolling mill in comparison to the same period in the prior year.

                                       11
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

      GROSS PROFIT.  Gross profit for the Company for the nine month period
 ending January 31, 1997 was approximately $21.1 million as compared to a gross
 profit of approximately $20.5 million for same period in the prior year, an
 increase of approximately $0.6 million or 3%.  Gross profit for the Company as
 a percentage of sales was 16.9% as compared to 16.5% for the same period in the
 prior year.  The increase in gross profit as a percentage of sales is a result
 of lower cost of sales per ton as discussed above.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSE.  Selling, general and
 administrative expenses for the Company for the nine month period ending
 January 31, 1997 were approximately $9.4 million as compared to approximately
 $8.8 million for the same period in the prior year, an increase of
 approximately $0.6 million or 6.7%.  The primary reason for the increase is
 severance costs recognized in conjunction with the reorganization of the salary
 workforce at the Sand Springs facility as well as selling expenses related to
 additional MBQ product sales.

      DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the nine
 month period ending January 31, 1997 increased approximately $0.3 million to
 approximately $5.1 million, up from approximately $4.8 million for the same
 period in the prior year due to depreciation on capital expenditures incurred
 in the prior year and current year.

      POSTRETIREMENT BENEFIT EXPENSE.  Postretirement benefit expense decreased
 for the nine months ended January 31, 1997 approximately $0.6 million to $2.1
 million, down from $2.7 million for the same period in the prior year.  The
 decrease in estimated fiscal 1997 expense is due to a decrease in the health
 care cost trend rates as determined by an independent actuary.

      OPERATING INCOME.  Operating income for the nine month period ending
 January 31, 1997 was approximately $4.5 million as compared to approximately
 $4.1 million for same period in the prior year, an increase of approximately
 $0.3 million or 8%.  Operating income for the Company as a percentage of sales
 increased to 3.6% up from 3.3% for the same period in the prior year.   The
 increase in operating income was primarily due to increased sales and gross
 profit offset by the additional selling, general and administrative expenses as
 discussed above.

      INTEREST EXPENSE.  Interest expense for the nine month period ending
 January 31, 1997 increased slightly compared to the same period in the prior
 year.  The increase was due to increased average borrowings under the Company's
 revolving credit facility during the nine months period in comparison to the
 same period in the prior year.
 
      INCOME TAX.  The Company has not recorded a benefit for income taxes as a
 result of the net loss.  A valuation allowance is required when it is more
 likely than not that all or a portion of the deferred tax assets will not be
 realized.  Accordingly, a valuation allowance has been recorded for a portion
 of the deferred tax asset at January 31, 1997.  The amount of the deferred tax
 assets considered realizable, however, could change if estimates of future
 taxable income change.

                                       12
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES

 LIQUIDITY AND CAPITAL RESOURCES

      As of January 31, 1997, the Company's long-term indebtedness was
 approximately $103 million, excluding current portion of $0.7 million, after
 giving effect to an unamortized discount attributable to detachable stock
 warrants of approximately $1.7 million. The Company had approximately $8.2
 million of borrowing availability at January 31, 1997 under its revolving
 credit agreements.

      Cash flow used by operations was approximately $3.5 million for the nine
 month period ended January 31, 1997, as compared with cash flow used in
 operations of approximately $3.3 million for the nine month period ended
 January 31, 1996.  Cash used in investing activities in the nine months ended
 January 31, 1997 was approximately $3.0 million, consisting principally of
 required replacement of plant equipment.  For the nine month period ended
 January 31, 1997, cash provided by financing activities consisted of increased
 borrowings under the Company's revolving credit facility and contractual
 payments to retired executives of the Company in respect of their stock
 appreciation rights.

      The Company's cash flow from operations, borrowings under the Revolving
 Credit Facility and Railway Credit Facility, and recoveries of payments under
 the Company's property casualty and business interruption insurance policies
 for losses associated with the transformer failure are expected to be
 sufficient to fund the budget for capital improvements, and meet near-term
 working capital requirements.

      On a longer term basis, the Company has significant future debt service
 obligations.  The Company's ability to satisfy these obligations is dependent
 on its ability to generate adequate cash flow from operations.  The Company
 expects that its cash flow from operations, borrowings under its revolving
 credit facilities, and refinancing options for new credit facilities will be
 sufficient to fund the repayment of the long term debt and other investing
 activities.  The Company's future operating results are dependent on its
 overall operating performance and are subject to general business, financial
 and other factors affecting the Company and the domestic steel industry, as
 well as prevailing economic conditions, certain of which are beyond the control
 of the Company.

 CAPITAL EXPENDITURES

      Capital expenditures for the nine month period ended January 31, 1997 were
 approximately $3.0 million, consisting primarily of normal capital projects
 required or deemed economically attractive, throughout the Company.  The
 Company anticipates capital expenditures of approximately $.85 million during
 the fourth quarter of fiscal 1997, consisting of normal capital projects and
 expenditures related to an on-site oxygen plant which was placed in service
 late in the third quarter of fiscal 1997.  The Company's cash flow from
 operations and borrowings under its revolving credit facilities are expected to
 be sufficient to meet any near-term working capital requirements the Company
 may have and to fund anticipated capital improvements.

                                       13
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES


                          PART II.  OTHER INFORMATION

 ITEM 1.  LEGAL PROCEEDINGS

      The Company is not a party to any significant pending legal proceedings
 other than litigation incidental to its business which the Company believes
 will not materially affect its financial position, results of operations or
 liquidity.  Such claims against the Company are ordinarily covered by
 insurance.  There can be no assurance, however, that insurance will be
 available in the future at reasonable rates.

 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLERS

 
 ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 A.   Exhibits

 No exhibits.

 A.  Reports on Form 8-K

 No reports on Form 8-K were filed during the third quarter ended January 31,
 1997.

                                       14
<PAGE>
 
                  SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES



                                   SIGNATURES

 Pursuant to the requirements of the Securities Exchange Act of 1934, the
 Registrant has duly caused this report on Form 10-Q to be signed on its behalf
 by the undersigned thereunto duly authorized.

                                          SHEFFIELD STEEL CORPORATION


 Date:  March 13, 1997                    /s/ Robert W. Ackerman
        ------------------                -----------------------
                                          Robert W. Ackerman, President
                                          and Chief Executive Officer



 Date:  March 13, 1997                    /s/ Stephen R. Johnson
        ------------------                -----------------------
                                          Stephen R. Johnson, Vice President
                                          and Chief Financial Officer

                                       15