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

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-873-2
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ARMCO INC.
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(Exact name of registrant as specified in its charter)

Ohio 31-0200500
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

One Oxford Centre, 301 Grant Street, Pittsburgh, Pennsylvania 15219-1415
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 412/255-9800

Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Class A Preferred Stock, without par value New York Stock Exchange
Class B Preferred Stock, $1 par value each New York Stock Exchange
Common Stock, $.01 par value each/ New York Stock Exchange
Rights to Purchase Participating Preferred
Stock of Class A Preferred Stock New York Stock Exchange
Sinking Fund Debentures: New York Stock Exchange
9.20%, due 2000
8.50%, due 2001
11.375% Notes, due 1999 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of voting stock held by nonaffiliates of
Armco Inc. (assuming solely for purposes of this Form, that all members of
registrant's Board of Directors are "affiliates") was approximately
$586,171,889 as of February 28, 1997.

As of the close of business on February 29, 1996, there were 106,457,166
shares of Common Stock outstanding.
Documents incorporated by reference herein include:

Annual Report to Shareholders for the year ended December 31, 1996 --
Parts I, II, and IV of this report.
Proxy Statement for the 1997 Annual Meeting of Shareholders filed with
the Commission under Rule 14a-6 of the Securities Exchange Act of 1934 in
connection with the Company's 1997 Annual Meeting of Shareholders -- Part III
of this report.

PART I

ITEM 1. BUSINESS

General

Armco Inc. ("Armco" or the "Company") was incorporated as an Ohio
corporation in 1917 as a successor to a New Jersey corporation incorporated in
1899. Based on sales revenues, Armco is the second largest domestic producer
of stainless steels and is the largest domestic producer of electrical steels.
Armco's Sawhill Tubular Division manufactures a wide range of steel pipe and
tubing products for use in the construction, industrial and plumbing fields.
The Company also owns Douglas Dynamics, L.L.C. ("Douglas Dynamics"), the
largest North American manufacturer of snowplows for four-wheel drive pick-up
trucks and utility vehicles.

As part of its strategy to focus on the production of specialty flat-
rolled steel, Armco has continued to evaluate the growth potential and
profitability of its businesses and investments, and to rationalize or divest
those that do not represent a strategic fit or offer growth potential or
positive cash flow. In 1994, 1995 and 1996 Armco divested or otherwise
rationalized certain unprofitable or nonstrategic operations.

Business Segments

The information on the amounts of revenue, operating results and
identifiable assets attributable to each of Armco's business segments, set
forth in Note 7 of the Notes to Financial Statements in Armco's Annual Report
to Shareholders for the year ended December 31, 1996, is incorporated by
reference herein.

Additional information about Armco's business segments is set forth in
Management's Discussion and Analysis in Armco's Annual Report to Shareholders
for the year ended December 31, 1996, which is incorporated by reference
herein.

Specialty Flat-Rolled Steels Segment

Armco's Specialty Flat-Rolled Steels businesses produce and finish flat-
rolled stainless, electrical and carbon steels at manufacturing operations
located in Butler, Pennsylvania, and Coshocton, Dover, Mansfield and
Zanesville, Ohio. The Butler and Mansfield Operations produce both semi-
finished and finished stainless and electrical steels in sheet and hot band
form. The Coshocton Operations finish stainless steel in strip and sheet form
and the Zanesville Operations finish stainless and electrical strip and sheet.
In addition, the Mansfield Operations produce commodity grades of carbon steel
sheet, most of which is coated at a galvanizing facility at the Dover
Operations. The segment also includes the results of European trading
companies that buy and sell steel and manufactured steel products.

Under a plan to upgrade the facilities at Mansfield to enhance their
steel production capability and improve the operating performance of both the
Mansfield and Dover Operations, Armco installed a thin-slab caster and made
related plant modifications at Mansfield. The new state-of-the-art continuous
thin-slab caster is designed to produce three different types of steels
(stainless, electrical and carbon) with rapid switchover from one type to
another. The installation of the thin-slab caster, certain hot mill upgrades
and other modifications at the Mansfield Operations were made over a 15-month
period at a cost totaling approximately $140 million. The casting process
used at Mansfield helps to ensure consistently high quality because it
eliminates intermediate production steps and reduces the amount of rolling
required to achieve desired thickness. The new caster can produce slabs from
three to five inches thick, up to 50 inches wide, and up to 60 feet in length.

Improved results for this segment are dependent, in part, on steady
production from the Mansfield Operations. Based on fourth quarter 1996
results, Mansfield has demonstrated its ability to

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produce quality products at stable operating levels, providing this business
segment with the capacity and flexibility required to meet expected market
conditions.

The stainless and electrical steel industry is a relatively small but
distinct segment of the overall steel industry that represented approximately
2% of domestic steel tonnage but accounted for approximately 10% of domestic
steel revenues in 1996. These steels differ from basic carbon steel by their
metallurgical composition. Electrical steels have properties that make them
desirable in the generation, transportation and use of electricity. Stainless
steels are made with a high alloy content, which permits their use in
environments that demand exceptional hardness, toughness, strength and
resistance to heat, corrosion or abrasion or combinations thereof. Unlike
high-volume carbon steel, stainless and electrical steels are generally
produced in relatively small quantities utilizing special processing
techniques designed to meet more exacting specifications and tolerances.
Stainless and electrical steel products sell at higher prices and generate
higher average profit margins than carbon steel products.

Stainless steel contains elements such as chromium, nickel and molybdenum
that give it the unique qualities of resistance to rust, corrosion and heat;
high strength; good wear characteristics; natural attractiveness; and ease of
maintenance. Stainless steel is used in the automotive and aerospace
industries, and in the manufacture of food handling, chemical processing,
pollution control, medical and health equipment and other products where its
combination of strength, durability and attractiveness is desirable.
Electrical steels are iron-silicon alloys which, through special production
techniques, possess unique magnetic properties that make them desirable for
use as energy efficient material in such applications as electrical
transformers, motors and generators.

Armco expects that long-term demand for stainless steel will continue to
be positively affected by its increasing use in the manufacture of consumer
durable goods and industrial applications. Per capita stainless steel usage
in many developed countries significantly exceeds per capita usage in the
United States and Armco believes that this is an indication of the growth
potential of demand for stainless steel in the United States. In addition,
the 1990 amendments to the Clean Air Act have resulted in the increasing use
of corrosion-resistant materials in a number of applications for which
stainless steel is well suited, including industrial pollution control devices
and motor vehicle exhaust systems for use in the United States, where Armco
now has the leading market share. Another factor that Armco believes will
affect demand positively is the increasing issuance of new car bumper-to-
bumper warranties and the use of stainless steel in passenger restraint
systems and other functional components.

Armco produces flat-rolled stainless steel and electrical steel strip and
sheet products that are used in a diverse range of consumer durables and
industrial applications. During the last three years, approximately 79% of
Armco's sales of specialty flat-rolled steel has been stainless and electrical
steels, 9% has been specialty semi-finished and 8% has been carbon steel. The
remaining sales in this segment of Armco's business is primarily related to
the foreign subsidiaries that buy, warehouse, and sell specialty steel
products. Major markets served are industrial machinery and electrical
equipment, automotive, construction and service centers.

In the stainless steel market, Armco is the leading producer of chrome
grades used primarily in the domestic market for automotive exhaust
components. Stainless steel, which formerly was not used in parts of the
exhaust system other than the catalytic converter, is now used in the entire
exhaust system from manifold to tailpipe by many auto manufacturers. Armco
has developed a number of specialty grades for this application. Armco is
also known for its "bright anneal" chrome grade finishes utilized for
automotive and appliance trim and other chrome grades used for cutlery,
kitchen utensils, scissors and surgical instruments. Specialty chrome nickel
grades produced by Armco are used in household cookware, restaurant and food
processing equipment and medical equipment. Other Armco stainless products
include functional stainless steel manufactured for automotive, agricultural,
heating, air conditioning and various industrial uses.

Armco is the only United States manufacturer of a complete line of flat-
rolled electrical steel products. It is also the only domestic manufacturer
utilizing laser scribing technology. In this process, the surface of
electrical steel is etched with high-technology lasers that refine the
magnetic
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domains of the steels, resulting in superior electrical efficiency. Major
electrical product categories are: Regular Grain Oriented ("RGO"), used in
the cores of power and distribution transformers; Cold Rolled Non-Oriented
("CRNO"), used for electrical motors, generators and lighting ballasts; and
TRAN COR[registered tradmark]H, which is used in power transformers and is the
only high permeability electrical steel made domestically.

Additionally, Armco produces a full range of hot-dipped galvanized
products primarily for use in the heating, ventilation and air conditioning
("HVAC") market.

Armco's order backlog for its Specialty Flat-Rolled Steels segment was
$227.4 million at December 31, 1996, and $231.9 million at December 31, 1995.
While substantially all of the orders on hand at year-end 1996 are expected to
be shipped in 1997, such orders, as is customary in the industry, are subject
to modification, extension or cancellation.

Armco's specialty steelmaking operations are located in Pennsylvania and
Ohio, which permits cost-efficient materials flow between plants. Armco's
Butler, Pennsylvania facility, which is situated on 1,300 acres with 3.2
million square feet of buildings, continuously casts 100% of its steel. At
Butler, melting takes place in three 170-ton electric arc furnaces that feed
the world's largest (175-ton) argon-oxygen decarburization unit and a 170-ton
vacuum degassing unit for refining molten metal that, in turn, feed two double
strand continuous casters. The melt capacity at Butler was approximately
945,000 cast tons by year-end 1996. Butler operates a hot-strip mill, anneal
and pickle units and two fully-automated tandem cold-rolling mills. It also
has various intermediate and finishing operations for both stainless and
electrical steels.

The finishing plant in Coshocton, Ohio, located on 650 acres, is housed
in a 600,000 square-foot plant and has three Sendzimer mills, four anneal and
pickle lines, three bright anneal lines, two 4-high mills for cold reduction
and other processing equipment, including temper rolling, slitting and
packaging facilities.

The Mansfield, Ohio plant consists of a 1.4 million square-foot facility,
including a melt shop with two electric arc furnaces (170-ton and 120-ton), a
120-ton argon-oxygen decarburization unit, a thin-slab continuous caster, a
six-stand hot strip mill, a five-stand tandem cold rolling mill and a pickle
line.

The Dover, Ohio plant consists of a 600,000 square foot facility
including a galvanizing line, stack anneal furnaces and a temper mill.

Armco's Zanesville, Ohio plant, with 508,000 square feet of buildings on
88 acres, is a finishing plant for some of the steel produced at Butler and
Mansfield and has a Sendzimer cold-rolling mill, anneal and pickle lines, high
temperature box anneal and other decarburization and coating units.

In the fourth quarter of 1994, Armco announced an extensive capital
improvement program under which it spent $95 million over a two-year period to
upgrade and expand its stainless and electrical steel finishing facilities.
The program was initiated to reduce existing production constraints and
increase specialty steel finishing capacity by approximately 180,000 tons per
year, particularly in electrical steels, specialty strip and sheet products
and chrome stainless. The strategic facilities upgrades were completed during
1996 and Armco believes that it is now positioned to operate its plants
without major disruption throughout 1997. Armco plans to focus on improving
productivity and quality at its specialty steels operations and anticipates
further cost reductions as these improvements are made.

Fabricated Products Segment

The businesses currently included in the Fabricated Products segment are
described below:

-- Douglas Dynamics is the largest North American manufacturer of
snowplows for four-wheel drive pick-up trucks and utility vehicles. Douglas
Dynamics, which is headquartered in
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Milwaukee, Wisconsin, and has manufacturing plants in Rockland, Maine,
Milwaukee, Wisconsin and Johnson City, Tennessee, sells its snowplows and ice
control products under the names Western Products and Fisher Engineering
through independent distributors in the United States and Canada.

-- Sawhill Tubular manufactures a wide range of steel pipe and
tubular products for use in the construction, industrial and plumbing markets
at plants in Sharon and Wheatland, Pennsylvania and Warren, Ohio.

Armco's order backlog for its Fabricated Products segment was $34 million
at December 31, 1996 and $16.4 million at December 31, 1995. The segment's
backlog increased in 1996 primarily as a result of increased demand for steel
pipe and tubing. While substantially all of the orders on hand at year-end
1996 are expected to be shipped in 1997, such orders, as is customary in these
industries, are subject to modification, extension or cancellation.

Employees

At December 31, 1996, Armco had approximately 6,000 employees. Most of
Armco's domestic production and maintenance employees are represented by
international, national or independent local unions, although some operations
are not unionized.

Armco has agreements with independent unions at the specialty steel
plants in Butler, Pennsylvania and Zanesville, Ohio. In May of 1996, members
of the Zanesville Armco Independent Organization ratified a new four-year
labor agreement. In October of 1996, members of the Butler Armco Independent
Union ratified a new five-year labor agreement. Armco has agreements with the
United Steelworkers of America at Sawhill Tubular plants, and in February,
1996, employees at Sawhill's Wheatland plant ratified a new four-year
agreement.

Competition

Armco faces intense competition from within the domestic steel industry,
from manufacturers of competing products other than steel, including aluminum,
plastics, composites and ceramics, and from foreign steel producers as well as
foreign producers of components and other products. Many of these foreign
producers have lower labor costs and are subsidized by their governments.
Their decisions with regard to production and sales may be influenced more by
political and social considerations than prevailing market forces. Many
foreign steel producers continue to ship into the United States market despite
decreasing profit margins or losses. Depending on a number of market factors,
including the strength of the dollar, import levels, and the effectiveness of
our nation's trade laws, pricing of the Company's products could be adversely
affected. Competition is based primarily on price, with factors such as
reliability of supply, service and quality also being important in certain
segments.

Foreign imports of stainless strip and sheet and electrical steels
accounted for approximately 20% of apparent consumption of these products in
1996 and 1995.

In 1995, led by the Specialty Steel Industry of North America, the
industry's trade organization, a major initiative was begun with European
specialty steel producers to attempt to reach a consensus on a Multilateral
Specialty Steel Agreement ("MSSA") for specialty steel producers only. During
1996, framework terms for the MSSA were agreed to by U.S. specialty steel
producers and specialty steel producers in Europe. The outline of the
agreement has been submitted to the respective governments which are
attempting to negotiate the terms of the final agreement, although there can
be no assurance that a final agreement can be achieved.

Competition is also presented by North American producers, including the
so-called "mini-mills", which generally have smaller, non-unionized workforces
and are relatively free of many of the employee, environmental and other
obligations that traditionally have burdened steel producers. In 1995, Nucor
Corporation, a mini-mill steel company, entered the automotive chrome
stainless steel business, with the addition of an argon-oxygen decarburization
(AOD) vessel at its Crawfordsville, Indiana melt shop. Nucor produced 16,000
tons and approximately 35,000 tons in 1995 and 1996

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respectively of automotive exhaust stainless. Nucor's entry will intensify
competition in the automotive exhaust stainless market, which totals about
400,000 tons per year. Competition is also presented, to a lesser degree, by
foreign producers. Armco is currently the leading U.S. producer of automotive
exhaust stainless steel.

Raw Materials and Energy Sources

Raw materials represent a major component of production costs in the
steel industry. The principal raw materials used by Armco in the production
of steels are iron and carbon steel scrap, chrome and nickel and their
ferroalloys, stainless steel scrap, silicon, molybdenum and zinc. These
materials are purchased in the open market from various outside sources.
Since much of this purchased raw material is not covered by long-term
contracts, availability and price are subject to world market conditions.
Chrome, nickel and certain other materials in mined alloy form, can be
acquired only from foreign sources, many of them located in developing
countries that may be subject to unstable political and economic conditions
that might disrupt supplies or affect the price of these materials. A
significant portion of the chrome and nickel requirements, however, is
obtained from stainless steel scrap rather than mined alloys. While certain
raw materials have been in short supply from time to time, Armco currently is
not experiencing and does not anticipate any problems obtaining appropriate
materials in amounts sufficient to meet its production needs. Armco also uses
large amounts of electricity and natural gas in the manufacture of its
products. It is expected that such energy sources will continue to be
reasonably available in the foreseeable future.

Environmental Matters

Armco, in common with other United States manufacturers, is subject to
various federal, state and local requirements for environmental controls
relating to its operations. Armco has devoted, and will continue to devote,
significant resources to control air and water pollutants, to dispose of
wastes, and to remediate sites of past waste disposal. Armco estimates
capital expenditures for pollution control in its manufacturing operations
will aggregate about $20 million for the years 1997-2001, with the largest
expenditures being made in the Specialty Flat-Rolled Steels segment.
Approximately $7.5 million is related to control of air pollution pursuant to
regulations currently promulgated under the Clean Air Act, as amended, and
corresponding state laws. These projections, which have been prepared
internally and without independent engineering or other assistance, reflect
Armco's current analysis of probable required capital projects for pollution
control. During the period 1991 through 1996, Armco's capital expenditures
for pollution control projects aggregated approximately $35.8 million,
including $7.7 million in 1996. Statutory and regulatory requirements in this
area continue to evolve and, accordingly, the type and magnitude of
expenditures may change.

Armco has been named as a defendant, or identified as a potentially
responsible party, in various governmental proceedings regarding cleanup of
certain past waste disposal sites. Armco is also a defendant in various
private lawsuits alleging property damage and personal injury from waste
disposal sites. Joint and several liability could be imposed on Armco or
other parties for these matters; thus, theoretically, one party could be held
liable for all costs related to a site. While such governmental and private
actions are being contested, the outcome of individual matters cannot be
predicted with assurance. However, based on its experience with such cases
and a review of current claims, Armco expects that in most cases any ultimate
liability will be apportioned between Armco and other financially viable
parties.

From time to time, Armco has been and may be subject to penalties or
other requirements as a result of administrative actions by regulatory
agencies and to claims for indemnification for properties it has previously
owned or leased. In addition, environmental exit costs may be incurred if
Armco decides to dispose of additional properties. It is Armco's policy not
to accrue such costs until a decision is made to dispose of a property.

Based on current facts and circumstances known to Armco, Armco's
experience with site remediation, an understanding of current environmental
laws and regulations, environmental assessments, the existence of other
financially viable parties, expected remediation methods and the years in
which Armco is expected to make payments toward each remediation (which range
from the
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current year to 30 years or more in the future), Armco believes that the
ultimate liability for environmental remediation matters identified to date
will not materially affect its consolidated financial condition or liquidity.
However, it is possible that, due to fluctuations in Armco's results, future
developments with respect to such matters could have a material effect on the
results of operations of future interim or annual periods.

Furthermore, the identification of additional sites, changes in known
circumstances with respect to identified sites, the failure of other parties
to contribute their share of remediation costs, decisions to dispose of
additional properties and other changed circumstances may result in increased
costs to Armco, which could have a material effect on its consolidated
financial condition, liquidity and results of operations in future interim or
annual periods. However, it is not possible to determine whether additional
loss, due to changed circumstances, will occur or to reasonably estimate the
amount or range of any potential additional loss.

Statutes and regulations relating to the protection of the environment
have resulted in higher operating costs and capital investments by the
industries in which Armco operates. Although it cannot predict precisely how
changes in environmental requirements will affect its businesses, Armco does
not believe such requirements would adversely affect its competitive position.

Research and Development

Armco carries on a broad range of research and development activities
aimed at improving its existing products and manufacturing processes and
developing new products and processes. Armco's research and development
activities are carried out primarily at a central technology center located in
Middletown, Ohio. This center is engaged in applied materials research
related to iron and steel, non-ferrous materials and new materials. In
addition, the materials and metallurgy departments at each operating unit
develop and implement improvements to products and processes that are directly
connected with the activities of such operating unit. Armco spent $13.1
million, $14 million, and $12 million, respectively, on research in the years
1996, 1995 and 1994.

Other Investments

North American Stainless ("NAS")

Armco and Acerinox S.A. of Spain each previously owned a 50% partnership
interest in NAS through their respective subsidiaries, First Stainless, Inc.
and Stainless Steel Invest, Inc. In 1994, Armco's subsidiary sold 90% of its
50% equity interest in NAS to its partner for $73 million in cash. Armco
maintains a small limited partnership interest in NAS. In connection with the
transaction, Armco entered into an annual supply contract with NAS to provide
the former joint venture with semi-finished stainless steel at market prices.

Discontinued Operations

National-Oilwell

Armco, through a wholly owned subsidiary, had a 50% partnership interest
in National-Oilwell, which was formed in 1987 when Armco and USX Corporation
each contributed their oil field equipment operations to National-Oilwell in
exchange for equal interests in the new partnership. On January 16, 1996,
Armco sold its partnership interest in National-Oilwell to an entity formed by
Duff & Phelps/Inverness and First Reserve Funds along with certain members of
National-Oilwell's management. Armco received $77 million in cash and
receivables with a face value of $13 million. The receivables were recorded
at a discounted value of $10.6 million.

The terms of the NAS and National-Oilwell transactions described in
"Other Investments" and "Discontinued Operations", above, were the result of
arm's-length negotiation among the parties.

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Armco Financial Services Group ("AFSG")

AFSG consists of insurance companies that have ceased writing new
business and are being runoff. These companies have not written any new
business for retention except for an immaterial amount of guaranteed renewable
accident and health business since 1986. The number of policyholders of this
business has decreased from approximately 4,000 at December 31, 1986 to 1,007
at December 31, 1995 and 870 at December 31, 1996.

Claims are paid by using AFSG's investment portfolio and the related
investment income from such portfolio. The portfolio had a market value of
$172.3 million at December 31, 1996. The runoff companies believe the
existing invested assets, related future income and other assets will provide
sufficient funds to meet all future claims payments.

AFSG estimates that 60% of future claims will be paid in the next five
years and that substantially all of the claims will be paid by the year 2017.
The ultimate amount of the claims as well as the timing of the claims payments
are estimated based on the annual review of loss reserves performed by AFSG's
independent and consulting actuaries. While there have been no charges
recorded with respect to these companies since 1990, in the future there may
be further adverse developments with respect to the AFSG companies, which, if
not otherwise offset through favorable commutations or other actions, will
require additional charges to income. Armco does not believe that any such
charges would have a material adverse effect on its liquidity or financial
condition.

ITEM 2. PROPERTIES

Armco owns and leases property primarily in the United States. This
property includes manufacturing facilities, offices and undeveloped property.
The locations of Armco's principal plants and materially important physical
properties are described in ITEM 1. "BUSINESS". Armco believes that all its
operating facilities are being adequately maintained and are in good operating
condition.

ITEM 3. LEGAL PROCEEDINGS

There are various claims pending against Armco and its subsidiaries
involving product liability, reinsurance and insurance arrangements,
environmental, antitrust, employee benefits and other matters arising out of
the conduct of the business of Armco.

Reserve Mining Litigation. In August 1992, an action styled Warner,
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Donovan, et al. v. Armco was filed in the U.S. District Court, District of
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Minnesota by members of the United Steelworkers of America ("USWA") who
declined to participate in the USWA v. Armco settlement. The complaint
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alleges breaches of the Basic Labor Agreement, Supplemental Unemployment
Benefit Plan, Insurance Agreement, Pension Agreement and Program of Hospital-
Medical Benefits for Pensioners and Surviving Spouses and seeks an unspecified
amount of damages. On February 17, 1993, the Court granted Armco's motion to
dismiss plaintiffs' state law claims. The plaintiffs' claims based on the
labor agreements remain pending. Plaintiffs filed an amended complaint, in
response to which Armco filed a motion to dismiss certain claims therein. On
October 22, 1993, the Court granted Armco's motion. On November 8, 1993,
Armco filed an answer to the allegations in the amended complaint not subject
to the motion to dismiss.

On April 25, 1994, an action entitled Larry B. Ricke, Trustee v. Armco
--------------------------------
was filed in the United States District Court for the District of Minnesota by
the Trustee appointed by the Pension Benefit Guaranty Corporation ("PBGC") for
the purpose of recovering from Reserve Mining Company ("Reserve") assets to
satisfy Reserve's liability for pension benefit entitlements which are in
addition to those guaranteed by the PBGC. The complaint alleges that Armco is
liable for the unfunded nonguaranteed benefits under the Pension Plan of
Reserve in the amount of $9.2 million plus interest. The pension benefits
which are the subject of this action were part of the class settlement of USWA
----
v. Armco. Approximately fifteen hundred members of the class signed
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individual releases (19 members who did not are plaintiffs in Warner, Donovan,
---------------
et al. v. Armco Inc.) releasing Armco from
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all claims, liabilities, etc. based upon or which arise out of any Reserve
Employee Pension Benefit Plan. Armco filed a motion to dismiss the complaint
on the basis of said releases, which the court denied on March 28, 1995.
Armco filed a motion seeking interlocutory appellate review. This motion was
granted on June 6, 1995. The U.S. Court of Appeals affirmed the District's
Court's decision denying Armco's motion for summary judgment on August 13,
1996. Armco filed a petition for rehearing on September 26, 1996, which was
denied on October 21, 1996.

A joint pretrial conference with counsel for Armco and Ricke and Warner
----- ------
plaintiffs was held on November 27, 1996. All pretrial discovery for Ricke
-----
and Warner will be done on a consolidated basis and must be completed by
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December 31, 1997. The court further ordered that the claims of the Warner
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plaintiffs for pension benefits in addition to those guaranteed by the PBGC
may be brought only in the Ricke case. Further, as a result of the Court's
-----
decision in Ricke concerning non-PBGC guaranteed pension benefits, the only
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claims remaining in Warner are for welfare benefits (e.g. medical benefits,
------
SUB benefits, life insurance benefits, vacation pay, etc.) under collective
bargaining agreements.

Eastern Stainless Corporation ("Eastern") Shareholder Litigation. On or
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about March 13, 1995, an action styled Pension Benefit Guaranty Corporation v.
---------------------------------------
Armco Inc. and Eastern Stainless Corporation was filed in the United States
- --------------------------------------------
District Court for the Southern District of Ohio by the PBGC as a Class B
shareholder of Eastern. The complaint was captioned as a shareholder
derivative and class action on behalf of all Class B shareholders. The
plaintiff alleged breach of fiduciary duty as well as certain other claims
arising from Armco's status as a majority shareholder of Eastern. The damages
were alleged to be in excess of $12 million. The Class B shares were
redeemable by Eastern Stainless for $1 a share, or approximately $13 million.
On March 15, 1995, Eastern was dissolved without any shareholder distribution.
In accordance with Virginia corporation law, a special independent committee
of the Board of Directors of Eastern ("Committee") was appointed to evaluate
the merits of plaintiff's derivative claims. Armco filed a motion to dismiss
the direct claims, stay the derivative claims and stay discovery pending
completion of the Committee's investigation. Plaintiff filed a motion for
class certification. The court denied Armco's motion to dismiss the direct
claims and stay discovery, and granted Armco's motion to stay the derivative
claims and plaintiff's motion for class certification. Armco filed an answer
to the complaint.

On January 31, 1996, the Committee issued a report on its review and
evaluation of the derivative claims, which concluded that the Class B
shareholders were treated fairly by Armco and Eastern and that there was no
set of circumstances or assumptions under which the maintenance of the
litigation could serve the interests of Eastern or its Class B Shareholders.
Eastern filed on March 18, 1996, a motion to dismiss the derivative claims on
the basis of the Committee's findings. At a hearing on May 29, 1996, the
Court deferred ruling on Armco's and Eastern's motion to dismiss the
derivative claims and granted plaintiff 90 days to perform discovery regarding
the Committee's investigation. In November 1996, Armco renewed its motion to
dismiss the derivative claims and filed a motion for summary judgment with
respect to the direct claims. The Court denied the motion for summary
judgment and reserved ruling on the motion to dismiss the derivative claims.
On February 3, 1997, the parties agreed on a settlement of all claims, subject
to approval of the Court. Armco expects that the Court will approve the
settlement at a fairness hearing at a future date to be set by the Court.

Cornerstones Litigation. An action was filed by Cornerstones Municipal
------------------------
Utility District ("Cornerstones") and William St. John, as representative of a
class of owners of real property situated within Cornerstones, in the District
Court of Harris County, Texas, in July 1989, seeking damages in excess of $40
million for allegedly defective pipe supplied by Armco Construction Products
for a sanitary sewer system in three residential subdivisions. In May 1991,
the Cornerstones plaintiffs amended their petition to add owners of some 1,500
------------
residences within the Kingsbridge Municipal Utility District ("Kingsbridge").
Subsequently, the Kingsbridge claims were severed into a separate action. In
-----------
January 1992, the trial court granted Armco's motion for summary judgment,
dismissing all claims asserted by the Cornerstones plaintiffs as barred by the
------------
statute of limitations. In January 1993, the Court of Appeals reversed the
dismissal. Upon Armco's petition, the Supreme Court of Texas reversed and
summary judgment in favor of Armco was reinstated by the Court of Appeals in
November 1994. In March 1995, the Cornerstones plaintiffs sought writ of
------------
error to the Supreme
-8-

Court of Texas. On May 11, 1995, the Supreme Court of Texas denied
plaintiffs' application for writ of error, concluding the Cornerstones matter
------------
in favor of Armco. On February 22, 1996, the District Court of Harris County
granted summary judgment in favor of Armco in the severed Kingsbridge action.
-----------
On April 10, 1996, an amended summary judgment order was entered by the
District Court clarifying that summary judgment had been granted in favor of
Armco and against only the claims of Kingsbridge and John Kepplinger,
individually. A motion for class certification was denied by the court with
respect to the claims of the remaining homeowners in the Kingsbridge District.
The Kingsbridge homeowners have filed an appeal, which is currently pending
before the Court of Appeals in Houston, Texas.

In addition, there are three multiple-party homeowners actions that
remain pending on behalf of property owners in the Cornerstones Municipal
Utility District. The first of these actions, Vincent and Linda Adduci, et
----------------------------
al. v. Armco Steel Corporation, et al., was filed in the 127th District Court
- ---------------------------------------
of Harris County, Texas on or about April 3, 1992, by approximately 87
residents, including the lead plaintiffs, against the same defendants as in
the Cornerstones case. On or about September 11, 1992, Harris W. Arthur and
------------
other plaintiff homeowners commenced a similar action, styled Harris W.
---------
Arthur, et al. v. Monsanto Company, et al., in the 133rd Judicial District
- ------------------------------------------
Court of Harris County. On or about March 22, 1993, a third action, captioned
William C. Irons, et al. v. Turner, Collie & Braden, Inc., et al., was filed
- -----------------------------------------------------------------
in the 152nd Judicial District Court of Harris County by the lead plaintiff
and approximately 100 additional residents. All three cases are substantially
based upon the same theories as the Cornerstones case and were separately
------------
filed after an effort to have the Cornerstones complaints certified as a class
------------
action was denied by the court. These three actions each seek an unspecified
amount of damages. Arthur and Adduci have been consolidated into one case
------ ------
before the 127th District Court. On January 28, 1997, a majority of the
homeowners in Irons were nonsuited and dismissed their claims against Armco.
-----

Environmental Proceedings. Most environmental actions involving Armco
--------------------------
relate to alleged contamination at off-site treatment and disposal sites. In
many of these cases, Armco is one of several hundred companies who have been
identified as potentially responsible parties ("PRPs"). In a few instances,
Armco is one of only a few parties or is alleged to be solely liable. It is
routinely asserted that joint and several liability will be applied in such
cases; thus, a single party could be held liable for all costs related to a
site. However, Armco's experience has been that liability is apportioned on
the basis of volume and/or toxicity of materials sent to a site and Armco
expects that any ultimate liability will be apportioned among Armco and other
financially viable parties. Other claims sometimes arise from contractual
obligations for properties Armco previously owned or leased and from
regulatory actions. Armco intends to assert all meritorious legal and
equitable defenses that are available to it with respect to environmental
matters. See "Item 1- BUSINESS--Environmental Matters". The following
paragraphs provide information about unresolved environmental matters that
have been reported in previous Form 10-K or Form 10-Q filings and certain new
matters.

Armco has been one of four defendants in the case styled, Rosa Ann
--------
Barrett, et al. v. Atlantic Richfield Company, et al., which was filed in
- -----------------------------------------------------
January 1993, in the United States District Court for the Southern District of
Texas, Houston Division on behalf of certain residents near the French Limited
Site. In 1994, the court granted summary judgment against the plaintiffs,
with the exception of one property damage claim which is pending separately
before the trial court. The Barrett plaintiffs appealed to the Fifth Circuit
-------
which in a September 1996 opinion upheld the lower court's judgment against
them. Based on its experience to date with resolution of claims in this
matter, Armco does not believe its liability, if any, with regard to the
remaining claim will be material.

On July 21, 1995, the Department of Justice ("DOJ") filed a complaint in
the U.S. District Court for the Southern District of Ohio alleging Armco's
liability for remediation costs at the Fultz Landfill Superfund Site in
Byesville, Ohio. In late 1996 Armco filed a third-party complaint against
eight other PRPs. Discovery is continuing. The DOJ submitted a settlement
proposal under which three of the companies initially identified as PRPs by
the USEPA (Armco is not among them), plus their successors and certain other
companies, have agreed to undertake remediation of the site, which is
estimated to cost approximately $13 million. If this settlement is approved
by the Court, it is expected that the USEPA will continue to seek about $6
million in past costs from non-settling parties. Armco will not oppose the
settlement if the settling parties would be precluded from filing

-9-

future contribution actions against Armco and other non-settling parties. No
estimate of Armco's proportionate liability can be made at this time.

On July 22, 1993, Armco received a request from the Kansas Department of
Health and Environment ("KDHE") for information regarding a former Armco
Construction Products Division plant located in Topeka, Kansas and now owned
by Contech Construction Products, Inc. ("Contech"). Armco answered KDHE's
information request in August 1993. KDHE indicated it would pursue Contech
and two other parties regarding this matter, but to Armco's knowledge, no
action has been filed. Contech claims that Armco has an indemnification
obligation under the agreement conveying the property to Contech. Based on
the type of contamination at issue and the presence of other PRPs, Armco does
not believe its liability, if any, will be material.

In December 1993, Armco and one other company received a notice of
nonbinding preliminary allocation of proportionate responsibility from the
Pennsylvania Department of Environmental Protection ("PADEP") for the William
Taylor Estate site. In December, 1996, PADEP filed an action against two
other parties for recovery of about $400,000 in past costs. Armco has been
requested by the two named defendants to voluntarily join in a settlement of
this matter and to participate in investigation and remediation of the site.
Based on current information about the type of contamination and the presence
of other PRPs, Armco does not expect its liability, if any, to be material.

On September 9, 1994, four parties who signed a USEPA Administrative
Order on Consent ("AOC") for cleanup of the Granville Solvent site in Ohio,
initiated a contribution action in the U.S. District Court for the Southern
District of Ohio against all PRPs, including Armco, who did not sign the AOC.
In 1996 decisions, the court denied plaintiffs' claim for their costs related
to litigation or negotiation of the AOC and limited their action to one for
contribution rather than joint and several liability. Based on these
decisions, and on current information about remediation costs, Armco does not
expect its liability, if any, to be material. Trial has not been scheduled,
but is expected sometime in 1997.

On February 27, 1995, the Ohio Environmental Protection Agency issued a
Notice of Violation ("NOV") to Armco's Zanesville, Ohio operations alleging
noncompliance with both a 1993 Order and various state regulations regarding
hazardous waste management. Armco has instituted appropriate corrective
measures. No proposed penalties were included in the NOV and Armco cannot
reasonably estimate potential penalties, if any, based on current information.

On December 27, 1996, the Southern Ohio Port Authority filed a complaint
against Armco and 23 other defendants seeking an estimated $3 million to
recover costs of investigation and remediation at the former Empire-Detroit
facility in Portsmouth, Ohio. Armco is preparing its answer to the complaint.
Based on the estimated costs and the presence of other PRPs. Armco does not
expect its liability, if any, to be material.

In the opinion of management, the ultimate liability, if any, resulting
from the claims described in the preceding paragraphs in this "Legal
Proceedings" section will not materially affect the consolidated financial
position or liquidity of Armco and its subsidiaries; however, it is possible
that, due to fluctuations in Armco's operating results, future developments
with respect to such matters could have a material effect on its financial
condition, liquidity and results of operations in future interim or annual
periods.

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

There were no matters submitted to a vote of the security holders of
Armco during the fourth quarter of the year ended December 31, 1996.

-10-

Executive Officers of Armco

The executive officers of Armco as of March 14, 1997, were as follows:

Years
Age as of Tenure in of Service
Name March 14, 1997 Office Office (1) with Armco
- ---- -------------- ------ ----------- -----------

James F. Will 58 Chairman, President and
Chief Executive Officer (2) 1994 (2) 5

Jerry W. Albright 60 Vice President and 1997 (3) 0
Chief Financial Officer

James L. Bertsch 53 Vice President and Treasurer 1989 31

John B. Corey 53 Vice President 1994 18

John N. Davis 38 Vice President and Controller 1996 (4) 5

Gary R. Hildreth 58 Vice President, General Counsel
and Secretary 1993 26

Gary L. McDaniel 50 Vice President - Operations 1996 4

M. Dennis McGlone 47 Vice President - Commercial 1996 5

Pat J. Meneely 45 Vice President - Information
and Organizational
Effectiveness 1995 2

Daniel E. Smigielski 47 Vice President - Purchasing &
Traffic 1996 4
- -------------------------

<FN>

(1) All officers are elected annually by the Board of Directors and hold
office until their successors are elected and qualified. Each of the officers
named above has held responsible positions with Armco or its subsidiaries
during all of the past five years, with the exceptions of Messrs. Albright,
McDaniel, Meneely and Smigielski. Prior to joining Armco, Mr. Albright was a
consultant and small business owner. Prior to that he was Assistant to the
President of Armco Inc. and prior to that Mr. Albright was Vice President and
Chief Financial Officer of Cyclops Industries, Inc. Prior to joining Armco,
Mr. McDaniel was Division Manager of Maintenance and Services at the Indiana
Harbor Works of LTV Steel Company (producer of flat-rolled and tubular carbon
steel products). Immediately prior to joining Armco, Mr. Meneely worked as an
executive consultant and held executive positions with Sara Lee Hosiery (a
manufacturer of hosiery) and Wheeling-Pittsburgh Steel Corporation (a
manufacturer of steel). Mr. Smigielski was Director, Purchasing and Traffic
at Armco's Butler Operations. Prior to that, Mr. Smigielski was Project
Director at Krupp GMBH (an engineering company specializing in steel industry
equipment and processing facilities).

(2) Effective February 1, 1996, Mr. Will was elected Chairman of the Board
in addition to the positions of President and Chief Executive Officer.

(3) Effective January 1, 1997, Mr. Albright was elected Vice President and
Chief Financial Officer. Mr. Albright was employed with Armco from 1966 until
1988, and held numerous financial positions.

(4) Effective August 1, 1996, Mr. Davis was elected Vice President and
Controller.

-11-

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

Armco's common stock is sold principally on the New York Stock Exchange.
At February 28, 1997, there were 22,641 common stock shareholders of record.
Other information required by this item is incorporated herein by reference
from pages 32 and 37 of the Annual Report to Shareholders for the year ended
December 31, 1996.

ITEM 6. SELECTED FINANCIAL DATA

(In millions, except per share amounts)

1996 1995 1994 1993 1992(2)
---- ---- ---- ---- -------

Net sales $1,724.0 $1,559.9 $1,437.6 $1,664.0 $1,673.2
Special charges - net (3) (8.8) -- (35.0) (165.5) (185.1)
Income (loss) from continuing
operations 26.0 23.5 65.8 (247.5) (402.2)
Income (loss) from continuing operations
per common share 0.08 0.05 0.46 (2.56) (4.17)
Total assets (4) 1,867.8 1,896.6 1,934.9 1,904.7 1,869.9
Long-term debt and lease obligations 344.3 361.6 363.8 379.7 401.0
Long-term employee benefit
obligations (4) 1,200.2 1,165.9 1,221.9 1,249.9 541.6
Class B common stock of subsidiary (5) -- -- -- 9.7 9.3

- -----------------------------------
<FN>

(1) The information in this Item should be read in conjunction with
Armco's financial statements and the notes thereto, which are incorporated
by reference in Item 8.

(2) In April 1992, Armco acquired Cyclops Industries, Inc. in a
transaction accounted for as a purchase.

(3) Special charges primarily relate to the shutdown, sale and/or
rationalization of operating facilities.

(4) In 1993, Armco adopted SFAS Nos. 106 and 109 which increased long-
term employee benefit obligations and total assets.

(5) The Class B common stock was issued by Eastern Stainless prior to
Armco's acquisition of this 84%-owned former subsidiary of Cyclops
Industries, Inc. In 1994, Eastern Stainless reached a decision to sell
substantially all of its assets and, as a result, Armco stopped
consolidating the results of Eastern Stainless. The asset sale was
completed on March 14, 1995.

-12-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Certain information required by this Item is incorporated herein by
reference from pages 16-21 following the caption "Management's Discussion and
Analysis" of the Consolidated Financial Statements in the Annual Report to
Shareholders for the year ended December 31, 1996.

Other

Certain statements made or incorporated by reference in this Form 10-K,
or made in press releases or in oral presentations made by Company employees,
reflect the Company's estimates and beliefs and are intended to be, and are
hereby identified as, 'forward looking statements' for the purposes of the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These include statements in the paragraphs entitled "Outlook" in the
section entitled "Management's Discussion & Analysis" of the Annual Report to
Shareholders, incorporated herein by reference.

The Company cautions readers that such forward looking statements involve
risks and uncertainties that could cause actual results to differ materially
from those expected by the Company or expressed in the Company's forward
looking statements. These factors include, but are not limited to, the
following: (1) risks of downturns in economic conditions generally, and in the
steel industry (a highly cyclical industry) specifically; (2) changes in
customer demand for the Company's products, particularly demand from the
automobile industry; (3) unplanned plant outages or equipment failures at the
Company's facilities; (4) collective bargaining agreement negotiations,
strikes, labor stoppages or other labor difficulties (as described further in
Item 1 "Business - Employees"); (5) actions by the Company's competitors, (as
described further in Item 1 "Business - Competition"), including domestic
steel producers and foreign steel producers (many of whom have lower labor
costs and are subsidized by their governments); (6) U.S. trade policy,
including U.S. government action with respect to importers of products
competitive with the Company's (as described further in Item 1 "Business -
Competition"); (7) unforeseen material adverse developments in insurance
runoff (as described further in Item 1 "Business - Discontinued Operations"
and Item 8 - Note 11 to the Consolidated Financial Statements); (8) disruption
in the supply of raw materials needed by the Company, such as iron and carbon
steel scrap, chrome and nickel, stainless steel scrap, silicon, molybdenum and
zinc, or changes in the pricing of such raw materials; and (9) changes in the
application and scope of environmental regulations applicable to the Company.

Readers are cautioned not to place undue reliance on forward looking
statements made or incorporated by reference in this Form 10-K, or made in
press releases or in oral presentations. Such forward looking statements
reflect management's analysis only as of the date such statements are made and
the Company undertakes no obligation to revise publicly these forward looking
statements to reflect events or circumstances that arise subsequently.
Readers should carefully review the risk factors set forth above and described
elsewhere in this document and in other documents the Company files from time
to time with the Securities and Exchange Commission.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is incorporated herein by reference
from pages 22-37 of the Annual Report to Shareholders for the year ended
December 31, 1996.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

-13-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item as to executive officers of Armco
is contained in Part I of this report under "Executive Officers of Armco" and
is incorporated herein by reference. The information required as to directors
is incorporated herein by reference from the information set forth under the
caption "ELECTION OF DIRECTORS" in the registrant's Proxy Statement for the
1997 Annual Meeting of Shareholders filed with the Securities and Exchange
Commission pursuant to Rule 14a-6 of the Securities Exchange Act of 1934, as
amended (the "Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference
from the information set forth in the Proxy Statement under the caption
"EXECUTIVE COMPENSATION".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The security ownership in Armco stock of directors, certain executive
officers and directors and executive officers as a group and of persons known
by Armco to be the beneficial owners of more than five percent of any class of
Armco's voting securities is incorporated herein by reference from the
information set forth in the Proxy Statement under the caption "MISCELLANEOUS
- -- Stock Ownership".

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K

I. Documents Filed as a Part of this Report

A. Financial Statements and Financial Statement Schedules Page

1. Statement of Consolidated Operations for the Years Ended
December 31,1996, 1995 and 1994 *

2. Statement of Consolidated Financial Position as of
December 31, 1996 and 1995 *

3. Statement of Consolidated Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 *

4. Notes to Financial Statements *

5. Independent Auditors' Report *

6. Independent Auditors' Report 19

-14-

7. Financial Statement Schedule for the Years Ended
December 31, 1996, 1995 and 1994

II-- Valuation and Qualifying Accounts 20

8. Responsibility for Financial Reporting *

- ----------------------

* Incorporated in this Annual Report on Form 10-K by reference to
pages 22-37 of the Annual Report to Shareholders for the year ended
December 31, 1996.

Financial Statements and Financial Statement Schedules Omitted

The financial statements and financial statement schedules for Armco Inc.
and subsidiaries, other than those listed above, are omitted because of the
absence of conditions under which they are required, or because the
information is set forth in the notes to financial statements.

B. Exhibits

The following is an index of the exhibits included in the Annual Report
on Form 10-K.

3(a). Articles of Incorporation of Armco Inc., as amended as of April
4, 1996 (1)

3(b). Regulations of Armco Inc. (2)

4. Armco hereby agrees to furnish to the Securities and Exchange
Commission, upon its request, a copy of each instrument defining the rights of
holders of long-term debt of Armco and its subsidiaries, omitted pursuant to
Item 601(b)(4)(iii) of Regulation S-K.

10(a). Deferred Compensation Plan for Directors*

10(b). 1993 Long-Term Incentive Plan of Armco Inc. (3)*

10(c). Severance Agreements (4)*

10(d). 1988 Restricted Stock Plan (5)*

10(e). Executive Supplemental Deferred Compensation Plan Trust (6)*

10(f). Executive Supplemental Deferred Compensation Plan (7)*

10(g). Pension Plan for Outside Directors (8)*

10(h). Key Management Severance Policy (9)*

10(i). Minimum Pension Plan (10)*

10(j). Stainless Steel Toll Rolling Services Agreement (11)

10(k). Equity Exchange Agreement (12)

10(l). Stock Purchase Agreement among Armco Inc., Armco Financial Services
Corporation and Vik Brothers Insurance, Inc. dated as of August 2, 1994 (13)

-15-

10(m). Asset Sale Agreement By and Among Armco Inc., Eastern Stainless
Corporation, Avesta Sheffield East, Inc. and Avesta Sheffield Holding Co.
dated as of February 9, 1995 (14)

10(n). Purchase Agreement, as amended, among Oilwell, Inc., National Supply
Company, Inc., USX Corporation, Armco Inc. and NOW Holdings, Inc. (15)

10(o). Rights Agreement dated as of February 23, 1996 between Armco Inc. and
Fifth Third Bank (16)

11. Computation of Income (Loss) Per Share

13. Annual Report to Shareholders for the year ended December 31, 1996.
(Filed for information only, except for those portions that are specifically
incorporated in this Form 10-K Annual Report for the year ended December 31,
1996.)

21. List of subsidiaries of Armco Inc.

23. Independent Auditors' Consents

27. Financial Data Schedule

99. Description of Armco Capital Stock

The annual reports (Form 11-K) for the year ended December 31, 1996 for
the Armco Inc. Retirement and Savings Plan and the Armco Inc. Thrift Plan for
Hourly Employees will be filed by amendment as exhibits hereto, as permitted
under Rule 15d-21.

* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Annual Report on Form 10-K pursuant to Item 14(c)
of Form 10-K.

- ---------------------

(1) Incorporated by reference from Exhibit 3.1 to Armco's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993.

(2) Incorporated by reference from Exhibit 3.2 to Armco's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994.

(3) Incorporated by reference from Exhibit 10 to Armco's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993.

(4) Incorporated by reference from Exhibit 10(a) to Armco's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1988 (SEC File No. 001-00873).

(5) Incorporated by reference from Exhibit 10(i) to Armco's Annual Report on
Form 10-K for the year ended December 31, 1988 (SEC File No. 001-00873).

(6) Incorporated by reference from Exhibit 10(b) to Armco's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1988 (SEC File No. 001-00873).

(7) Incorporated by reference from Exhibit 10(c) to Armco's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1988 (SEC File No. 001-00873).

(8) Incorporated by reference from Exhibit 10(p) to Armco's Annual Report on
Form 10-K for the year ended December 31, 1989 (SEC File No. 001-00873).

-16-

(9) Incorporated by reference from Exhibit 10(p) to Armco's Annual Report on
Form 10-K for the year ended December 31, 1990.

(10) Incorporated by reference from Exhibit 10(r) to Armco's Annual Report on
Form 10-K for the year ended December 31, 1991.

(11) Incorporated by reference from Exhibit 10(s) to Armco's Annual Report on
Form 10-K for the year ended December 31, 1993.

(12) Incorporated by reference from Exhibit 2 to Armco's Form 8-K dated April
7, 1994.

(13) Incorporated by reference from Exhibit 10 to Armco's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.

(14) Incorporated by reference from Exhibit 2 to Armco's Form 8-K dated March
14, 1995.

(15) Incorporated by reference from Exhibit 2 to Armco's Form 8-K dated
January 16, 1996.

(16) Incorporated by reference from Exhibit 10(p) to Armco's Form 10-K for
the year ended December 31, 1995.

- ------------------------

II. Reports on Form 8-K

No reports on Form 8-K were filed by Armco since September 30, 1996.

-17-

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 AS OF MARCH 21,
1997.

ARMCO INC.

By JAMES F. WILL
-----------------------------------------
James F. Will
Chairman of the Board, President and
Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED AS OF MARCH 21, 1997.

By JAMES F. WILL By DAVID A. DUKE
- -------------------------------------- -------------------------------
James F. Will John C. Haley
Chairman of the Board, President, Director
Chief Executive Officer
and Director

By JERRY W. ALBRIGHT By JOHN C. HALEY
- -------------------------------------- ------------------------------
Jerry W. Albright John C. Haley
Vice President and Director
Chief Financial Officer

By JOHN N. DAVIS By BRUCE E. ROBBINS
- ------------------------------------- ------------------------------
John N. Davis Bruce E. Robbins
Vice President and Controller Director

By By BURNELL R. ROBERTS
- ------------------------------------- ------------------------------
John J. Burns, Jr. Burnell R. Roberts
Director Director

By PAULA H.J. CHOLMONDELEY By JOHN D. TURNER
- -------------------------------------- ------------------------------
Paula H.J. Cholmondeley John D. Turner
Director Director

-18-

Armco Inc.:

We have audited the consolidated financial statements of Armco Inc. and
subsidiaries as of December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996, and have issued our report thereon
dated February 5, 1997. Such consolidated financial statements and report are
included in Armco's 1996 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedule of Armco Inc. and subsidiaries, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.

DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
February 5, 1997

-19-

SCHEDULE II
ARMCO INC. AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in Millions)

==========================================================================================
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------
Deductions
from Reserves
Additions for Purposes
Balance at Charged to for which
Beginning Costs and Reserves were Other Balance at
Description of Year Expenses Provided Changes End of Year
- ------------------------------------------------------------------------------------------

For the Year Ended
December 31, 1994:

Allowance for doubtful accounts $ 4.0 $0.8 $0.4 $(0.3)(B) $ 4.1

Allowance for impairment of
investments 20.0 0.1 1.4 -- 18.7
- ------------------------------------------------------------------------------------------
For the Year Ended
December 31, 1995:

Allowance for doubtful accounts $ 4.1 $0.3 $1.0 $ 0.6 (A) $ 4.4
0.3 (B)
0.1 (C)

Allowance for impairment of
investments 18.7 -- 2.0 -- 16.7
- ------------------------------------------------------------------------------------------
For the Year Ended
December 31, 1996:

Allowance for doubtful accounts $ 4.4 $1.4 $1.2 $(0.1)(A) $ 3.8
(0.7)(B)

Allowance for impairment of
investments 16.7 2.3 -- (6.3)(A) 12.7
- ------------------------------------------------------------------------------------------
<FN>
NOTES:

(A) Written off to the income statement.
(B) Net balances of consolidated subsidiaries purchased (divested).
(C) Collections on bad debt items.

-20-