<PAGE>
 
                                                                           1998
 
                      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 For the Fiscal Year Ended December 31, 1998
 
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities
   Exchange Act of 1934
 
                         Commission file number 1-1941
                          BETHLEHEM STEEL CORPORATION
            (Exact name of registrant as specified in its charter)
 
              DELAWARE                              24-0526133
      (State of Incorporation)         (I.R.S. Employer Identification No.)
 
         1170 Eighth Avenue
       BETHLEHEM, PENNSYLVANIA                      18016-7699
   (Address of principal executive                   (Zip Code)
              offices)
 
      Registrant's telephone number, including area code: (610) 694-2424
 
Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
      Title of each class            Name of each exchange on which registered
      -------------------            -----------------------------------------
<S>                                  <C>
Common Stock--$1 par value per                New York Stock Exchange
 share                                         Chicago Stock Exchange
Preference Stock Purchase Rights              New York Stock Exchange
                                               Chicago Stock Exchange
Preferred Stock -- $1 par value per
 share
  $5.00 Cumulative Convertible                New York Stock Exchange
  (stated value $50.00 per share)
  $2.50 Cumulative Convertible                New York Stock Exchange
  (stated value $25.00 per share)
8 3/8% Debentures. Due March 1,
 2001                                         New York Stock Exchange
8.45% Debentures. Due March 1, 2005           New York Stock Exchange
</TABLE>
 
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
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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]
 
Aggregate Market Value of Voting Stock held by Non-Affiliates: $1,157,741,902
 
  The amount shown is based on the closing price of Bethlehem Common Stock on
the New York Stock Exchange Composite Tape on March 15, 1999. Voting stock
held by directors and executive officers of Bethlehem is not included in the
computation. However, Bethlehem has made no determination that such
individuals are "affiliates" within the meaning of Rule 405 under the
Securities Act of 1933.
 
Number of Shares of Common Stock outstanding as of March 15, 1999: 130,370,007
 
                     DOCUMENTS INCORPORATED BY REFERENCE:
 
  Selected portions of the 1998 Annual Report to Stockholders of Bethlehem
Steel Corporation are incorporated by reference into Part I and Part II of
this Report on Form 10-K.
 
  Selected portions of the 1999 Proxy Statement of Bethlehem Steel Corporation
are incorporated by reference into Part III of this Report on Form 10-K.
<PAGE>
 
 
                                    PART I
 
ITEM 1. BUSINESS.
 
  Bethlehem/1/ manufactures and sells a wide variety of steel mill products
and produces and sells coke and iron ore. The following table shows the
percentage of net sales by major classes of product:
 
<TABLE>
<CAPTION>
                                                           1998   1997   1996
                                                           -----  -----  -----
<S>                                                        <C>    <C>    <C>
Steel mill products:
 Hot rolled sheets........................................  13.3%  14.9%  14.3%
 Cold rolled sheets.......................................  16.8   17.2   16.2
 Coated sheets............................................  28.6   31.5   32.3
 Tin mill products........................................   6.7    7.4    6.9
 Plates...................................................  22.3   15.2   15.3
 Rail products............................................   4.4    4.3    3.5
 Structural shapes and pilings............................   --     1.3    3.8
 Other steel mill products................................   4.5    3.2    1.6
Other products and services (including raw materials).....   3.4    5.0    6.1
                                                           -----  -----  -----
                                                           100.0% 100.0% 100.0%
                                                           =====  =====  =====
</TABLE>
 
Operations
 
  Bethlehem produces a wide variety of steel mill products including hot
rolled, cold rolled and coated sheets, tin mill products, carbon and alloy
plates, rail, specialty blooms, carbon and alloy bars and large-diameter pipe.
Bethlehem's operations include the Burns Harbor Division, the Sparrows Point
Division, Bethlehem Lukens Plate and Pennsylvania Steel Technologies, Inc.
Bethlehem also has iron ore operations (which provide raw materials to
Bethlehem's steelmaking facilities or sell such materials to trade customers),
railroad and trucking operations (which primarily transport raw materials and
semifinished steel products within various Bethlehem operations) and lake
shipping operations (which primarily transport raw materials to the Burns
Harbor Division). See "ITEM 2. PROPERTIES" of this Report for a description of
the facilities of these business units and operations.
 
 
--------
/1/ "Bethlehem" when used in this Report means Bethlehem Steel Corporation, a
 Delaware corporation, and where applicable includes its consolidated
 subsidiaries. Bethlehem was incorporated in Delaware in 1919.
 
                                       1
<PAGE>
 
  The following table shows production information for Bethlehem and for the
domestic steel industry. The information regarding the domestic steel industry
is based on data from the American Iron and Steel Institute ("AISI"):
 
<TABLE>
<CAPTION>
                                                            1998   1997   1996
                                                            -----  -----  -----
   <S>                                                      <C>    <C>    <C>
   Domestic steel industry raw steel production
    capability (million of net tons)....................... 125.3  121.4  116.0
   Domestic steel industry raw steel production
    (million of net tons).................................. 107.6* 108.6  105.3
   Domestic steel industry average raw steel
    utilization rate.......................................    86%    89%    91%
   Bethlehem's raw steel production
    capability (million of net tons).......................  10.9   10.5   10.5
   Bethlehem's raw steel production
    (million of net tons)..................................  10.2    9.6    9.4
   Bethlehem's average raw steel utilization rate..........    93%    91%    90%
   Bethlehem's production as a percent of the
    domestic steel industry................................   9.5%   8.9%   9.1%
</TABLE>
--------
* Preliminary
 
  Of Bethlehem's 1998 raw steel production, 88 percent was produced by basic
oxygen furnaces and 12 percent by electric furnaces.
 
  Bethlehem's operations are subject to planned and unplanned outages due to
required maintenance, equipment malfunctions, work stoppages, various hazards
(including explosions, fires and severe weather conditions) and the
availability of raw materials, supplies, utilities and other items needed for
the production of steel. These outages could result in reduced production and
increased costs.
 
Markets
 
  The following table shows the percentage of the total net tons of steel mill
products shipped by Bethlehem to each of its principal markets, including
shipments to its own manufacturing operations:
 
<TABLE>
<CAPTION>
                                                            1998   1997   1996
                                                            -----  -----  -----
   <S>                                                      <C>    <C>    <C>
   Service Centers, Processors and
    Converters (including semifinished)....................  46.9%  46.9%  45.2%
   Transportation (including automotive)...................  23.0   24.9   26.0
   Construction............................................  12.1   11.0   12.6
   Containers..............................................   5.2    5.8    5.2
   Machinery...............................................   4.9    4.7    5.1
   Other...................................................   7.9    6.7    5.9
                                                            -----  -----  -----
                                                            100.0% 100.0% 100.0%
                                                            =====  =====  =====
</TABLE>
 
  Many of the markets Bethlehem supplies, such as automotive, machinery and
construction, are highly cyclical and subject to downturns in the U.S.
economy. Also, many of Bethlehem's customers and suppliers are subject to
collective bargaining agreements, and their ability to operate could be
impacted by a strike or work stoppage.
 
  Bethlehem distributes steel products principally through its own sales
organization, which has sales offices at various locations in the United
States and Mexico, and through foreign sales agents. In addition to selling to
customers who consume steel products directly, Bethlehem sells steel products
to steel service centers, distributors, processors and converters. Export
sales were 4 percent of total sales in 1998, 2 percent in 1997 and 3 percent
in 1996.
 
                                       2
<PAGE>
 
  Trade orders on hand were about $900 million at December 31, 1998, and $1.2
billion at December 31, 1997. Substantially all of the orders on hand at
December 31, 1998, are expected to be filled in 1999.
 
Steel Price Sensitivity
 
  Bethlehem's financial results are significantly affected by relatively small
(on a percentage basis) variations in the realized prices for its products.
For example, Bethlehem shipped 8.7 million net tons of steel products and
recorded net sales of $4.5 billion during 1998, implying an average realized
price per ton of about $516. A one percent increase or decrease in this
implied average realized price during 1998 would, on a pro forma basis, have
resulted in an increase or decrease in net sales and pre-tax income of about
$45 million. Competitive pressures in the steel industry are severe. These
pressures could limit Bethlehem's ability to obtain price increases or could
lead to a decline in prices, which could have a material adverse effect upon
Bethlehem.
 
Competition
 
  The domestic steel industry is highly competitive. This competition affects
the prices that Bethlehem can charge for its products, the utilization of its
production facilities, its ability to sell higher value products and
ultimately its profitability.
 
  Capacity. There is excess world capacity for many of the products produced
by Bethlehem. Moreover, some foreign steel producers are owned, controlled or
subsidized by foreign governments. Decisions by these foreign producers to
continue marginal facilities may be influenced to a greater degree by
political and economic policy considerations than by prevailing market
conditions. In addition, overcapacity has been perpetuated by the continued
operation, modernization and upgrading of marginal domestic facilities through
bankruptcy reorganization proceedings and by the sale of marginal domestic
facilities to new owners, which operate such facilities with a lower cost
structure. Over the next several years, construction of additional flat rolled
production facilities could result in increased domestic capability of 6
million tons over 1998 levels.
 
  Electric Furnace Producers. Domestic integrated producers, such as
Bethlehem, have lost market share in recent years to domestic electric furnace
producers. These companies are relatively efficient, low-cost producers that
make steel from scrap in electric furnaces (which are less expensive to build
than integrated facilities), have lower employment and environmental costs per
ton shipped and target regional markets. Through the use of various higher
quality raw materials and thin slab casting technology, electric furnace
producers are increasingly able to compete directly with producers of higher
value products, including cold rolled and coated sheets.
 
  Imports. Domestic steel producers also face significant competition from
foreign producers and have been, and may continue to be, adversely affected by
unfairly traded imports. In certain cases, foreign producers may be pricing
their products below their production costs. Imports of finished steel
products accounted for about 26 percent of the domestic market in 1998, 18
percent in 1997 and 17 percent in 1996.
 
  The following table, which is based on data reported by the AISI, shows the
percentage of the domestic apparent consumption of steel mill products
supplied by imports for various classes of products.
 
<TABLE>
<CAPTION>
                                                                 1998* 1997  1996
                                                                 ----- ----  ----
   <S>                                                           <C>   <C>   <C>
   Rail.........................................................   31%  26%   26%
   Plates.......................................................   29   21    26
   Tin mill products............................................   16   15    14
   Hot rolled and cold rolled sheets............................   31   22    19
   Coated sheets................................................   10   11    10
   All products**...............................................   30   24    23
</TABLE>
--------
*Preliminary
** Excludes steel imported in the form of manufactured goods, such as
 automobiles, but includes semifinished  steel.
 
                                       3
<PAGE>
 
  Excluding semifinished steel, imports of steel mill products were about 34.6
million tons in 1998, 24.8 million tons in 1997 and 21.6 million tons in 1996.
 
  Antidumping and countervailing duty orders covering imports of corrosion-
resistant sheet from six countries, cold rolled sheet from three countries and
plates from 11 countries, which resulted from unfair trade cases filed by
Bethlehem and 11 other companies in 1992, remain in place. Suspension
agreements are also in place limiting the volume of cut-to-length plate from
Russia, the Ukraine and the People's Republic of China and setting a price
floor for South Africa for a five-year period from 1998. In February 1999, the
Commerce Department announced substantial preliminary antidumping margins
covering hot rolled sheet from Japan, Brazil and Russia and also announced its
intention to enter into (i) a suspension agreement limiting the volume of hot
rolled sheet from Russia for five years, and (ii) a comprehensive agreement to
limit the volume of other steel products from Russia to essentially 1997
levels. Also in February 1999, Bethlehem and four other producers filed new
antidumping and countervailing duty petitions covering cut-to-length plate
from Japan, Korea, India, Indonesia, France, Italy, the Czech Republic and
Macedonia.
 
  For further information on trade-related matters, see "International Steel
Trade" under the "Chairman's Letter" in Bethlehem's 1998 Annual Report to
Stockholders.
 
  The major restructuring of the domestic steel industry, which began in the
late 1970s and early 1980s, has removed the steelmaking capacity that once
existed to meet market demand during peak periods. During the last few years,
domestic producers have met a portion of the demand that exceeded steelmaking
capacity by importing semifinished slabs for rolling into finished products in
their own mills.
 
  Substitute Materials. For many steel products, there is substantial
competition from manufacturers of products other than steel, including
aluminum, ceramics, concrete, glass, plastic and wood. Changes to the relative
competitiveness of these substitute materials and the emergence of additional
substitute materials could adversely affect future prices and demand for
Bethlehem's products.
 
Capital Expenditures
 
  Capital expenditures were $328 million in 1998 (excluding the acquisition of
Lukens Inc.) compared with $228 million in 1997 and $259 million in 1996.
Capital expenditures for 1999 are currently estimated to be about $450
million. During 1998, Bethlehem started construction of Sparrows Point's new
continuous cold rolling mill complex. This $300 million complex, which is
scheduled to begin production early in 2000, is expected to lower costs,
improve quality and enhance capabilities.
 
  About $256 million of capital expenditures were authorized in 1998. At
December 31, 1998, the estimated cost of completing authorized capital
expenditures was about $640 million compared with $750 million at December 31,
1997. Bethlehem expects to complete these authorized capital expenditures
during 1999 to 2001.
 
  The domestic integrated steel industry is very capital intensive. As
discussed under "ITEM 2. PROPERTIES -- General" of this Report, Bethlehem's
principal operations and facilities are of varying ages, technologies and
operating efficiencies. Bethlehem will need to continue to make significant
capital expenditures in the future to maintain and improve the competitiveness
of its operations and facilities.
 
Environment
 
  Bethlehem is subject to various federal, state and local environmental laws
and regulations concerning, among other things, air emissions, waste water
discharges and solid and hazardous waste disposal. During the five years ended
December 31, 1998, Bethlehem spent about $136 million for environmental
control equipment. Expenditures for new environmental control equipment
totaled about $13 million in 1998, $15 million in 1997 and $29 million in
1996. The costs incurred in 1998 to operate and maintain existing
environmental control equipment were about $114 million (excluding interest
costs but including depreciation charges of $14 million) compared with $112
million in 1997 and $115 million in 1996. In addition, Bethlehem has been
required to pay
 
                                       4
<PAGE>
 
various fines and penalties relating to violations or alleged violations of
laws and regulations in the environmental control area. Bethlehem paid about
$910,000 in 1998, $830,000 in 1997 and $160,000 in 1996 for such fines and
penalties.
 
  Under the Clean Air Act, as amended, coke-making facilities will have to
meet progressively more stringent standards over the next 25 years. Bethlehem
currently operates coke-making facilities in Burns Harbor, Indiana and
Lackawanna, New York. Operations at the Coke Division in Bethlehem,
Pennsylvania were discontinued in March, 1998. Bethlehem will continue to
evaluate the impact of future emission control regulations on its Burns Harbor
and Lackawanna operations but believes that these operations will be able to
comply.
 
  Bethlehem and federal and state regulatory agencies conduct negotiations to
resolve differences in interpretation of environmental control requirements.
In some instances, those negotiations are held in connection with the
resolution of pending environmental proceedings. Bethlehem believes there will
not be any significant curtailment or interruptions of any of its important
operations as a result of these proceedings and negotiations.
 
  Bethlehem cannot predict the future specific environmental control
requirements. Based on existing and anticipated regulations under current
legislation, Bethlehem estimates that capital expenditures for new
environmental control equipment will average about $10 million per year over
the next two years. However, estimates of future capital expenditures and
operating costs required for environmental compliance are subject to numerous
uncertainties, including the evolving nature of regulations, possible
imposition of more stringent requirements, availability of new technologies
and the timing of expenditures.
 
  Under the Resource Conservation and Recovery Act, as amended ("RCRA"), the
owners of certain facilities that managed hazardous waste after 1980 are
required to investigate and, if appropriate, remediate certain historic
environmental contamination found at the facility. All of Bethlehem's major
facilities may be subject to this "Corrective Action Program", and Bethlehem
has implemented or is currently implementing this program at its facilities
located in Steelton, Pennsylvania; Lackawanna, New York; Burns Harbor,
Indiana; and Sparrows Point, Maryland. At Steelton, Bethlehem completed a RCRA
Facility Investigation ("RFI"), a Corrective Measures Study ("CMS") and a
remediation program approved by the United States Environmental Protection
Agency (the "EPA") and completed the remediation in 1994. At Lackawanna,
Bethlehem is conducting an RFI which is expected to be completed later this
year. At Burns Harbor, Bethlehem is conducting an RFI in accordance with an
EPA approved work plan that will require several years to complete. At
Sparrows Point, Bethlehem, the EPA and the Maryland Department of the
Environment have agreed to a phased RFI as part of a comprehensive multimedia
pollution prevention agreement which was entered by the U. S. District Court
for Maryland on October 8, 1997. The potential costs for possible remediation
activities, if any, at Lackawanna, Burns Harbor and Sparrows Point and the
timeframe for implementation of these activities cannot be reasonably
estimated until the RFIs, and possibly the CMSs, have been completed and
approved.
 
  At its former plant in Bethlehem, Pennsylvania, Bethlehem is conducting
remedial investigations pursuant to the Pennsylvania Land Recycling
("Brownfields") Program in conjunction with comprehensive redevelopment plans.
These investigations are being performed with input and oversight from both
the Pennsylvania Department of Environmental Protection and the EPA Region III
corrective action staff to ensure that the actions taken are acceptable to
both state and federal regulatory authorities.
 
  Bethlehem does not believe that the operations it acquired as part of the
Lukens merger in 1998 are subject to the RCRA Corrective Action Program and,
therefore, any remediation associated with those facilities will be addressed
as appropriate in the ongoing course of business. Bethlehem may have some
residual liability for remediation associated with historic Lukens facilities
or those that have been sold or shut down since the merger, but any such
liabilities are not anticipated to be material. For example, the electric arc
furnace flue dust disposal site at the Coatesville, Pennsylvania, facility
that was discussed by Lukens in its 1997 Form 10-K is continuing to be
investigated by Bethlehem for remediation pursuant to the Pennsylvania
Brownfields program. Bethlehem does not have any information at this time
suggesting that the $3 million liability that had been recognized by Lukens
for that site is not appropriate.
 
                                       5
<PAGE>
 
  Under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA", also known as "Superfund"), the EPA can
impose liability for site remediation on generators and transporters of waste,
as well as past and present owners and operators of the sites where the waste
was disposed of, regardless of fault or the legality of the disposal
activities. Bethlehem is actively involved at 26 sites where it has been
advised that it may be considered a potentially responsible party under CERCLA
or corresponding State Superfund legislation. Based on its experience
regarding site remediation and its knowledge of and extent of involvement in
such sites, Bethlehem expects that its share of the costs for remediation of
these sites will not be material.
 
  In its 1997 Form 10-K, Lukens discussed two CERCLA sites in which it was
involved. Subsequent to that discussion, the Helen Kramer site settlement was
consummated and Lukens paid its settlement amount of approximately $5.6
million before the merger of Bethlehem and Lukens. With regard to the
Douglassville site, Lukens and Bethlehem were identified as separate de-
minimis potentially responsible parties and are signatories to a consent
decree which has been lodged with, but not yet entered by, the U.S. District
Court for the Eastern District of Pennsylvania. Within 60 days following entry
of the consent decree, payment of approximately $204,000 on behalf of Lukens
and $125,000 on behalf of Bethlehem will be made in full resolution of those
liabilities.
 
  Although it is possible that Bethlehem's future quarterly or annual results
of operations could be materially affected by the future costs of
environmental compliance, Bethlehem believes that the future costs of
environmental compliance will not have a material adverse effect on its
consolidated financial position or on its competitive position with respect to
other integrated domestic steelmakers that are subject to the same
environmental requirements. To the extent that competitors are not required to
undertake equivalent costs, Bethlehem's competitive position could be
adversely affected.
 
Purchased Materials and Services
 
  Bethlehem purchases about $3 billion per year of raw materials, energy,
equipment, goods and services from commercial sources in about 40 countries.
Bethlehem's profitability could be affected by difficulties in obtaining these
items and the prices paid for them. These difficulties could include such
things as labor strikes, political instability and natural disasters.
Bethlehem made significant progress in 1998 through its Strategic Sourcing
initiatives and expects further progress in 1999. See "ITEM 2. PROPERTIES --
Raw Material Properties and Interests" of this Report for a further
description of the sources of raw materials essential to Bethlehem's
steelmaking business.
 
Technology
 
  Research and Development. Bethlehem performs research to improve existing
products, develop new products and make operating processes more efficient.
During 1998, 1997 and 1996, Bethlehem spent about $23 million, $22 million and
$25 million, respectively, for research and development. Bethlehem owns a
number of U.S. and foreign patents that relate to a wide variety of products
and processes, has pending patent applications and is licensed under a number
of patents. During 1998, 11 U.S. patents covering a variety of new
developments were awarded to Bethlehem. However, Bethlehem believes that no
single patent or license or group of patents or licenses is of material
importance to its overall business. Bethlehem also owns registered trademarks
for certain of its products and service marks for certain of its services
which, unlike patents and licenses, are renewable so long as they are
continued in use and properly protected.
 
  Year 2000 Computer Issue. Problems created by the once common programming
practice of storing date information using only the last two digits to
indicate the year will impact all businesses and government organizations as
we approach the year 2000. The scope of Bethlehem's Year 2000 Program includes
both information technology and non-information technology systems, such as
business and manufacturing computer systems, personal computers, technical
infrastructure and facilities as well as the Year 2000 readiness of key
suppliers, agents, service providers and customers.
 
 
                                       6
<PAGE>
 
  Bethlehem has been actively working on resolving its Year 2000 problem for
over four years. The effort was initiated with a pilot project in late 1994
during which 5 percent of Bethlehem's business applications were converted to
be Year 2000 compliant. The pilot project allowed Bethlehem to develop a
methodology for solving its Year 2000 problem as well as a structure for
effective management and timely correction of the problem within its systems.
The major elements of the program are inventory, risk assessment, remediation,
testing and contingency planning.
 
  In late 1997, Bethlehem conducted a 45-day test of the operability and
inter-operability of all converted business applications for Business Unit and
Corporate systems as well as all operating system software in a full
simulation of the Year 2000. Bethlehem reset the system clock for various
dates and tested the processing of date information before and after December
31, 1999, as well as the processing of the Year 2000 as a leap year. This test
was completed successfully and validated Bethlehem's processes and methods for
addressing its Year 2000 problem. Two additional full-scale tests were
conducted in December 1998 and January 1999 to test applications not evaluated
during the 1997 test and the main frame applications acquired in Bethlehem's
merger with Lukens. The results of these additional tests were positive and
reinforced the approach for addressing the Year 2000 problem.
 
  Bethlehem has completed the inventory and risk assessment for Year 2000
components in all areas of its business. The risk assessment showed that less
than 15 percent of Bethlehem's computer components needed to be fixed or
replaced. Remediation and testing of business systems and technical
infrastructure are complete except for a few planned replacement systems and
upgrades. For manufacturing and environmental (e.g., HVAC, security, etc.)
operations, Bethlehem has completed or scheduled all remediation activities. A
few replacement systems are planned. In the end-user computing area, Bethlehem
has installed hardware patches and standard software upgrades to most systems
where necessary. Bethlehem is currently focusing on other personal computer
software and user-written applications, spreadsheets and other end-user files.
Bethlehem is over 95 percent complete with the entire remediation effort.
Remaining remediation and testing will continue throughout the first half of
1999.
 
  Bethlehem continues to evaluate the readiness of its key suppliers and
customers. Starting in April 1998, Bethlehem surveyed key suppliers, outside
processors, warehousers and electronic data interchange trading partners. To
date, responses have been received from 650 suppliers. Bethlehem has sent
follow-up letters asking those suppliers who indicated compliance by the end
of 1998 (54 percent) to confirm their compliance. Additionally, Bethlehem has
received correspondence from over 500 key customers regarding their Year 2000
readiness and it will continue to review their readiness during the next two
quarters.
 
  During 1999, Bethlehem will continue to develop Year 2000 contingency plans
for all areas of its business. Bethlehem's contingency plans will address both
internal (staffing, computer systems and inventory) and external (suppliers,
service providers, agents and customers) risks. Bethlehem's strategies for
eliminating internal risk include the development of staffing plans for the
Year 2000 roll-over, backup and/or alternate procedures and inventory levels
based on anticipated customer and supplier assessments. One of Bethlehem's
strategies for reducing external risk is to develop alternate plans for
significant areas of its business where a vendor may not be Year 2000
compliant. Bethlehem's target is to develop, during the first half of 1999,
contingency plans for critical business processes.
 
  The costs associated with Bethlehem's Year 2000 Program continue to be at
planned levels. The total estimated incremental cost of this activity is
approximately $7 million. The cost will continue to be charged to normal
operating expenses. Bethlehem does not expect to incur any extraordinary
charges associated with the effort and no major information service projects
have been deferred because of its Year 2000 Program.
 
  Bethlehem believes that it is taking all reasonable steps to ensure Year
2000 readiness. Bethlehem's ability to meet its projected goals depends, to an
extent, on the Year 2000 readiness of its key suppliers and customers, the
completion of its final remediation and testing efforts and the successful
development and implementation of contingency plans. These and other
unanticipated Year 2000 issues could have a material adverse effect on
Bethlehem's results of operations or financial condition.
 
                                       7
<PAGE>
 
Employment
 
  At the end of 1998, Bethlehem had about 17,000 employees, three-quarters of
whom are covered by agreements with the United Steelworkers of America
("USWA"). Two agreements covering most of Bethlehem's USWA represented
employees expire in 1999. A strike or work stoppage could impact Bethlehem's
ability to operate if it is unable to negotiate new agreements with its
represented employees when the existing agreements expire. Also, Bethlehem's
profitability could be adversely affected if increased costs associated with
any future contract are not recoverable through productivity improvements or
price increases.
 
  For further information on Bethlehem's employment-related matters, see
"Employment" under "Financial Review and Operating Analysis" in Bethlehem's
1998 Annual Report to Stockholders.
 
Employee Postretirement Obligations
 
  At December 31, 1998, Bethlehem had recorded a liability of $415 million for
pensions. For further discussion of Bethlehem's pension funding and
obligations, see "Liquidity and Capital Structure" under "Financial Review and
Operating Analysis" in Bethlehem's 1998 Annual Report to Stockholders.
 
  Bethlehem provides health care and life insurance benefits to most retirees
and their dependents. Most of these future benefits have not been funded and,
therefore, Bethlehem has substantial financial obligations on its balance
sheet. At December 31, 1998, Bethlehem had recorded a liability of $1,790
million for postretirement benefits other than pensions. To the extent
competitors do not have similar obligations, Bethlehem could be placed at a
competitive disadvantage. Also, increases in health care costs could adversely
affect Bethlehem's profitability.
 
Joint Ventures, Partnerships, Facility Sharing Arrangements and Mergers
 
  Bethlehem has considered, and discussed with others, various opportunities
for joint ventures, partnerships, facility sharing arrangements and mergers of
all or part of Bethlehem. Bethlehem will continue to explore such
opportunities. See "ITEM 2. PROPERTIES." of this Report for a description of
joint ventures in which Bethlehem participates.
 
  Merger with Lukens Inc. Bethlehem acquired Lukens Inc. in a merger
transaction which closed during the second quarter of 1998. For further
information regarding the merger, see "Financial Review and Operating
Analysis" in Bethlehem's 1998 Annual Report to Stockholders.
 
Businesses Exited
 
  In recent years, Bethlehem has shut down or sold several facilities and
operations. Since 1996, Bethlehem recorded net charges of $365 million in
connection with these actions. During the fourth quarter of 1998, Bethlehem
closed Sparrows Point's 160-inch plate mill and increased the output at
existing underutilized facilities at Burns Harbor, Coatesville and
Conshohocken. Bethlehem recorded a charge of $35 million ($29 million after-
tax) during the second quarter of 1998 to write off the book value of
equipment to be dismantled and to recognize employee benefit related costs.
Bethlehem also sold certain stainless assets to Allegheny Teledyne
Incorporated and announced the closing of the former Lukens operations in
Massillon, Ohio, and Washington, Pennsylvania. During the first quarter of
1999, Bethlehem sold Washington Specialty Metals Corporation, Lukens' former
distribution business, to Ryerson Tull for $70 million.
 
  If it becomes necessary for Bethlehem to exit or reduce employment at
additional businesses and operations in the future, it could incur substantial
additional charges in the process. The charges for employees terminated as a
result of facility shutdowns or sales vary depending upon the demographics of
the workforce but could be $100,000 per employee. The recording of these
charges could have a material adverse impact on Bethlehem's financial
condition because of the increase in recorded liabilities, decrease in
stockholders' equity and possible increases in required contributions to the
pension fund and retiree health care payments. Except as discussed above or
previously announced, Bethlehem does not currently anticipate any additional
facility shutdowns or other reasons why active Bethlehem employees might be
terminated.
 
                                       8
<PAGE>
 
Capital Structure
 
  Bethlehem's capital structure is highly leveraged. Although Bethlehem
believes it has sufficient access to funds for the operation of its business,
its existing obligations and below investment grade credit ratings may limit
its ability to raise capital at reasonable cost and terms in the future.
 
Forward-Looking Statements
 
  Bethlehem and its representatives may from time to time make forward-looking
statements in reports filed with the Securities and Exchange Commission,
reports to stockholders, press releases, other written documents and oral
presentations. These forward-looking statements may include, among others,
statements concerning projected levels of sales, shipments and income, pricing
trends, cost-reduction strategies, product mix, anticipated capital
expenditures and other future plans and strategies.
 
  As permitted by the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Bethlehem is identifying in this Report
important factors that could cause Bethlehem's actual results to differ
materially from those projected in these forward-looking statements. These
factors include, but are not necessarily limited to:
 
  .  the effect of planned and unplanned outages on Bethlehem's operations;
 
  .  the potential impact of strikes or work stoppages at facilities of
     Bethlehem's customers and suppliers;
 
  .  the sensitivity of Bethlehem's results to relatively small changes in
     the prices obtained by Bethlehem for its products;
 
  .  intense competition due to world steel overcapacity, new domestic
     capacity over the next several years, low-cost electric furnace
     facilities, imports (especially unfairly traded imports) and substitute
     materials;
 
  .  the high capital requirements associated with integrated steel
     facilities;
 
  .  the significant costs associated with environmental controls and
     remediation expenditures and the uncertainty of future environmental
     control requirements;
 
  .  availability and prices associated with raw materials, supplies,
     utilities and other services and items required by Bethlehem's
     operations;
 
  .  employment matters, including costs and uncertainties associated with
     Bethlehem's collective bargaining agreements, and employee
     postretirement obligations;
 
  .  the effect of possible future closure or exit of businesses;
 
  .  Bethlehem's highly leveraged capital structure;
 
  .  the effect of Bethlehem's customers and suppliers not becoming Year
     2000 compliant in a timely manner, the effect of Bethlehem not
     completing its final remediation and testing efforts and the effect of
     Bethlehem not successfully developing and implementing contingency
     plans; and
 
  .  the effect of existing and possible future lawsuits filed against
     Bethlehem.
 
  "ITEM 1. BUSINESS" and "ITEM 3. LEGAL PROCEEDINGS" of this Report discuss
these factors in more detail and are incorporated by reference into this
section. Bethlehem does not undertake to update any forward-looking statements
that may be made from time to time by Bethlehem or its representatives.
 
ITEM 2. PROPERTIES.
 
Burns Harbor Division
 
  Location: In Indiana, on Lake Michigan, about 50 miles southeast of Chicago,
Illinois.
 
  Principal products and markets: Hot rolled sheet, cold rolled sheet and
corrosion-resistant coated sheet, coke and semifinished steel to Bethlehem
Lukens Plate. Its principal markets include automotive, service centers,
construction, machinery and appliance.
 
                                       9
<PAGE>
 
  Principal facilities: A sintering plant, a coke oven battery (Burns Harbor
operates a second coke oven battery for the battery's owner), two blast
furnaces, including coal injection facilities, three basic oxygen furnaces
with a combined annual raw steel production capability of about 5.6 million
tons, a vacuum degassing facility, two continuous slab casters with a combined
annual production capability of about 4.0 million tons, an 80-inch hot-strip
mill, two continuous pickling lines, an 80-inch five-stand cold reducing mill,
sheet finishing mills, a continuous heat treating line, batch annealing
facilities and a 72-inch hot-dip galvanizing line. Burns Harbor operates a
cold reducing mill, a continuous pickling line, a galvanizing line and two
coke oven batteries in Lackawanna, New York.
 
  Burns Harbor continuously casts about 80 percent of its total production
volume, with the remaining 20 percent being ingot cast. Ingot cast slabs are
used primarily by Bethlehem Lukens Plate to make steel plates. Burns Harbor's
utilization of raw steel production capability was 94 percent during 1998.
 
Sparrows Point Division
 
  Location: On the Chesapeake Bay, near Baltimore, Maryland.
 
  Principal products and markets: Hot rolled, cold rolled, hot-dip galvanized
and Galvalume(R) sheet, tin mill products and semifinished steel to Bethlehem
Lukens Plate. Its principal markets include construction, containers and
service centers.
 
  Principal facilities: A sintering plant, a large blast furnace, two basic
oxygen furnaces with an annual raw steel production capability of about 3.7
million tons, a two-strand continuous slab caster, a 68-inch hot-strip mill,
three continuous pickling lines, three cold reducing mills (66-inch, 56-inch
and 48-inch), continuous and batch annealing facilities, two galvanizing
lines, a Galvalume(R) line, a 48-inch hot-dip galvanizing/Galvalume(R) line
and tin mill facilities that include tin and chrome plating lines.
 
  Sparrows Point continuously casts essentially 100 percent of its total
production volume. Sparrows Point's utilization of raw steel production
capability was 99 percent during 1998.
 
Pennsylvania Steel Technologies, Inc. ("PST")
 
  Location: In Steelton, Pennsylvania, south of Harrisburg, Pennsylvania.
 
  Principal products and markets: Railroad rails, specialty blooms and flat
bars. It is one of only two rail producers in the United States. PST also
produces large-diameter pipe for the oil and gas industries.
 
  Principal facilities: A DC electric arc furnace with an annual raw steel
production capability of about 1.1 million tons, a ladle furnace, a vacuum
degassing facility, a continuous bloom caster, a 44-inch blooming mill, a 28-
inch rail mill, in-line rail head-hardening facilities, finishing and shipping
facilities for long-length (80-foot) rails, a 20-inch bar mill and an electric
fusion welded pipe mill.
 
  PST's utilization of raw steel production capability was 67 percent during
1998.
 
Bethlehem Lukens Plate
 
  Location: In Coatesville and Conshohocken, Pennsylvania; Burns Harbor,
Indiana.
 
  Principal products and markets: Carbon plate, high-strength, low alloy
plate, commercial alloy plate, military alloy plate, coiled and cut plate and
clad plate. Its principal markets include service centers, transportation,
infrastructure, machinery, equipment, environmental and engineering.
 
  Principal facilities: Coatesville: an electric arc furnace with an annual
raw steel production capability of about 900,000 tons, two plate mills (140-
inch and 206-inch) and heat treating facilities. Conshohocken: a 110-inch
Steckel mill, two reheat furnaces, a roughing mill, an on-line cooling and
cut-to-length line, a quench and temper line and a batch heat-treating system.
Burns Harbor: a 50 x 90-inch slabbing mill, a 110-inch sheared
 
                                      10
<PAGE>
 
plate mill including two continuous reheat furnaces, a roughing mill, a
finishing mill and a normalizing furnace, and a 160-inch sheared plate mill
including two continuous reheat furnaces, four batch reheat furnaces, a
roughing mill, a finishing mill, an in-line accelerated cooling facility, a
quench and temper line and a batch normalizing furnace.
 
  Bethlehem Lukens Plates' utilization of raw steel production capability was
94 percent during the portion of 1998 that it was operated as a part of
Bethlehem.
 
Joint Ventures
 
  Bethlehem participates in the following joint ventures:
 
  .  Double G Coatings Company, L.P. (located near Jackson, Mississippi) --
     operates a 270,000 ton per year sheet coating line that produces
     galvanized and Galvalume(R) coated sheets primarily for the construction
     market. Sparrows Point provides cold rolled coils for about half of
     Double G's annual capability and is responsible for marketing its share
     of the finished product.
 
  .  Steel Construction Systems (located in Orlando, Florida) -- a joint
     venture with CSR Rinker, the largest building materials company in
     Florida. Steel Construction Systems manufactures residential and light
     commercial buildings.
 
  .  Walbridge Coatings (located in Walbridge, Ohio) -- owns and operates a
     400,000 ton per year electrogalvanizing line. This facility produces
     corrosion-resistant sheet steel primarily for the automobile industry
     and other consumer durables markets. Burns Harbor provides cold rolled
     coils for 85 percent of Walbridge's annual capability and is responsible
     for marketing its share of the finished product.
 
  .  Indiana Pickling and Processing Company (located in northern Indiana) --
     operates a pickling line.
 
  .  Chicago Cold Rolling, L.L.C. (located in northern Indiana) -- operates a
     reversing cold mill complex.
 
  .  TWB Company (located in Michigan) -- operates the largest plant in North
     America producing laser-welded blanks for the automotive industry.
 
  Bethlehem also has indirect equity interests in various iron ore properties.
See "Raw Material Properties and Interests" below.
 
Raw Material Properties and Interests
 
  Iron Ore. Bethlehem has indirect equity interests in various iron ore
operating properties, which (excluding tonnages applicable to interests owned
by others) it estimates contained recoverable reserves at December 31, 1998,
sufficient to produce at least 21 million tons of direct shipping iron ore
from properties located in Brazil and 191 million tons of iron ore pellets
from properties located in Minnesota. During 1997, Bethlehem sold its equity
interest in Iron Ore Company of Canada ("IOC"). Bethlehem continues as a
customer of IOC and purchases iron ore at prices which approximate market. In
addition to the estimated reserves at operating properties, Bethlehem also has
indirect equity interests in undeveloped or nonoperating iron ore properties,
which (excluding tonnages applicable to interests owned by others) it
estimates contained recoverable reserves at December 31, 1998, sufficient to
produce at least 9 million tons of direct shipping iron ore from properties
located in Brazil and 128 million tons of iron ore pellets from properties
located in Minnesota.
 
  The iron ore operating properties in which Bethlehem has interests have
mining and processing facilities which can supply a majority of Bethlehem's
current annual iron ore requirements. The location of Bethlehem's steel
operations and the iron ore products best suited to these facilities determine
when Bethlehem sells, exchanges and purchases iron ore. These purchases have
been from various sources, including sources in which it has ownership
interests, under a variety of arrangements.
 
                                      11
<PAGE>
 
  Bethlehem's share of the annual iron ore production by enterprises in which
it has ownership interests, for Bethlehem's use or sale to trade customers,
was 7.9 million tons in 1998 and 7.7 million tons in 1997. In addition to
these sources, Bethlehem purchased 5.1 million tons of iron ore in 1998 and
4.8 million tons of iron ore in 1997 from sources in which it had no ownership
interests. In 1998, Bethlehem obtained about 58 percent of its iron ore
requirements from operations in which it had ownership interests compared with
61 percent in 1997.
 
  Bethlehem had trade sales of iron ore of 0.3 million tons in 1998 and 1997.
Iron ore trade sales commitments for 1999 are 0.5 million tons and no sales
commitments exist beyond 1999.
 
  The interests in foreign iron ore properties described above are subject to
the risks associated with investments in foreign countries, including the risk
of nationalization.
 
  Coal and Coke. Bethlehem has sold all of its coal operating properties.
Bethlehem owns undeveloped or nonoperating coal properties in Pennsylvania,
which it estimates contained recoverable reserves at December 31, 1998,
sufficient to produce at least 158 million tons of coal, of which about 91
percent and 9 percent, respectively, are metallurgical and steam coal.
 
  In 1997 and 1998, all of the coal used by Bethlehem was purchased from
commercial sources. Through December 31, 2005, Bethlehem is committed to
satisfy certain of its coal requirements from a single supplier.
 
  Bethlehem operates coke-making facilities at Burns Harbor, Indiana and
Lackawanna, New York. Facilities in Bethlehem, Pennsylvania were discontinued
in March, 1998.
 
  Other Raw Materials. Bethlehem purchases its other raw material requirements
from commercial sources.
 
Transportation
 
  Bethlehem owns seven subsidiary shortline railroads which transport raw
materials and semifinished steel products within various Bethlehem operations
and serve other customers on their lines. Bethlehem manages an interstate
trucking company serving Bethlehem's operations and other facilities and will
manage a rail/truck intermodal facility in Bethlehem, Pennsylvania.
 
  The Burns Harbor Division operates two 1,000-foot ore vessels (one owned and
one under long-term charter), which are used for the transportation of iron
ore on the Great Lakes.
 
General
 
  While Bethlehem's principal operations and facilities are adequately
maintained, they are of varying ages, technologies and operating efficiencies.
Bethlehem believes that most of its operations and facilities currently are
competitive with the operations and facilities of its principal competitors.
Bethlehem will continue to make capital expenditures to improve and maintain
the competitiveness of its operations and facilities. See "ITEM 1. BUSINESS --
Capital Expenditures" of this Report for a discussion of Bethlehem's capital
expenditures.
 
  Bethlehem owns all principal operations and facilities except for two
continuous casters at Sparrows Point and Burns Harbor which are being leased
and were capitalized. During 1998, Bethlehem sold its No. 1 Coke Oven Battery
to an affiliate of DTE Energy Services, Inc., but Bethlehem will continue to
operate the facility for the new owner and purchase its output. Bethlehem
financed the construction of two hot-dip galvanizing lines at its Burns Harbor
and Sparrows Point Divisions. These two galvanizing lines are pledged as
collateral for the borrowings.
 
                                      12
<PAGE>
 
ITEM 3. LEGAL PROCEEDINGS.
 
  Bethlehem is a party to numerous legal proceedings incurred in the ordinary
course of its business, including the matter specifically discussed below.
 
  On December 3, 1997, the Indiana Department of Environmental Management
("IDEM") issued a notice alleging violations of Indiana Air Pollution Control
Regulations and operating permit conditions by Bethlehem at the Burns Harbor
Division. The alleged violations involve visible emissions from the basic
oxygen furnace roof monitor and iron beaching pits and failure to install
baghouses at various emission points. Settlement discussions intended to lead
to an agreed order resolving the matter are being held between Bethlehem and
IDEM. If settlement discussions are unsuccessful, Bethlehem believes it has
meritorious defenses and will vigorously defend the action.
 
  See "ITEM 1. BUSINESS -- Environment" of this Report for a discussion of
Bethlehem's potential responsibilities for environmental cleanup at certain
sites under RCRA and CERCLA.
 
  Bethlehem cannot predict with any certainty the outcome of any legal
proceedings to which it is a party. However, in the opinion of Bethlehem's
management, adequate reserves have been recorded for losses which are likely
to result from these proceedings. To the extent that such reserves prove to be
inadequate, Bethlehem would incur a charge to earnings which could be material
to its future results of operations in particular quarterly or annual periods.
The outcome of these proceedings, however, is not currently expected to have a
material adverse effect on Bethlehem's consolidated financial position.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
  There were no matters submitted to a vote of security holders during the
fourth quarter of 1998.
 
---------------------
 
 
                                      13
<PAGE>
 
Executive Officers of the Registrant.
 
  The executive officers of Bethlehem as of March 15, 1999, are as follows:
 
<TABLE>
<CAPTION>
    Name                       Age                   Position
    ----                       ---                   --------
 <C>                           <C> <S>
 Curtis H. Barnette             64 Chairman (Chief Executive Officer)
 Roger P. Penny                 62 President (Chief Operating Officer)
 Gary L. Millenbruch            61 Executive Vice President (Chief Financial
                                   Officer) and Treasurer
 Duane R. Dunham                57 Executive Vice President (Commercial and
                                   Business Development) and Chief Commercial
                                   Officer
 Dr. Augustine E. Moffitt, Jr.  53 Senior Vice President (Administration) and
                                   Chief Administrative Officer
 Lonnie A. Arnett               53 Vice President (Accounting) and Controller
 Dr. Walter N. Bargeron         56 President, Burns Harbor Division
 Stephen G. Donches             53 Vice President (Public Affairs)
 Andrew R. Futchko              56 President, Pennsylvania Steel Technologies,
                                   Inc.
 William H. Graham              53 Vice President (Law), General Counsel and
                                   Secretary
 Carl W. Johnson                57 President, Sparrows Point Division
 John L. Kluttz                 56 Vice President (Union Relations)
 Dr. Carl F. Meitzner           59 Vice President (Planning)
 Van R. Reiner                  50 President, Bethlehem Lukens Plate
 Dr. Malcolm J. Roberts         56 Vice President (Technology) and Chief
                                   Technology Officer
 Robert A. Rudzki               45 Vice President (Purchasing and
                                   Transportation) and Chief Procurement
                                   Officer
 Dorothy L. Stephenson          49 Vice President (Human Resources)
</TABLE>
 
  All of the executive officers have held responsible management or
professional positions with Bethlehem or its subsidiaries for more than the
past five years.
 
  Bethlehem's By-laws provide that the Board of Directors annually chooses the
officers and that each officer holds office until his or her successor is
elected, or his or her death, resignation or removal.
 
                                      14
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS.
 
  As of March 15, 1999, about 34,000 stockholders held 130,370,007 shares of
Bethlehem Common Stock. The principal market for Bethlehem Common Stock is the
New York Stock Exchange. Bethlehem Common Stock is also listed on the Chicago
Stock Exchange. Dividends on Bethlehem Common Stock are paid quarterly when
declared by Bethlehem's Board of Directors.
 
  Under the provisions of Bethlehem's 10 3/8% Senior Notes due 2003,
Bethlehem's ability to pay dividends on its Common Stock is restricted. See
Note J to the Consolidated Financial Statements. At December 31, 1998, about
$520 million was available for the payment of Common Stock dividends under
these provisions.
 
  Bethlehem has not paid a dividend on its Common Stock since the fourth
quarter of 1991. Bethlehem's Board of Directors will determine whether to pay
any future dividends (subject to any applicable restrictions) based on
attained financial results and business outlook.
 
  The following table shows the high and low sales prices of Bethlehem Common
Stock as reported in the consolidated transaction reporting system. The
closing sale price of Bethlehem Common Stock on March 15, 1999, was $8.938.
 
<TABLE>
<CAPTION>
                                                       1998            1997
                                                  --------------- --------------
Period                                             Sales Prices    Sales Prices
------                                            --------------- --------------
                                                   High     Low    High    Low
                                                  ------- ------- ------- ------
<S>                                               <C>     <C>     <C>     <C>
First Quarter.................................... $15.500 $ 8.063 $ 9.375 $7.625
Second Quarter...................................  17.125  11.063  10.750  7.750
Third Quarter....................................  13.438   7.000  12.938  9.813
Fourth Quarter...................................  10.750   7.313  11.563  7.750
</TABLE>
 
ITEM 6. SELECTED FINANCIAL DATA.
 
  The information required by this Item is incorporated by reference from page
31 of Bethlehem's 1998 Annual Report to Stockholders.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.
 
  The information required by this Item is incorporated by reference from
pages 2 to 7 and 10 to 13 of Bethlehem's 1998 Annual Report to Stockholders.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
  The information required by this Item is incorporated by reference from
pages 14 to 28 of Bethlehem's 1998 Annual Report to Stockholders.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
  None.
 
                                      15
<PAGE>
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  In addition to the information under the caption "Executive Officers of the
Registrant" in Part I of this Report, the information required by this Item is
incorporated by reference from the material under the heading "Item 1 --
Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" from pages 3 to 9 and page 12 of Bethlehem's Proxy Statement for
the 1999 Annual Meeting of Stockholders.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
  The information required by this Item is incorporated by reference from
pages 13 to 19 of Bethlehem's Proxy Statement for the 1999 Annual Meeting of
Stockholders.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
  The information required by this Item is incorporated by reference from
pages 11 and 12 of Bethlehem's Proxy Statement for the 1999 Annual Meeting of
Stockholders.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
  The information required by this Item is incorporated by reference from the
material under the heading "Certain Business Relationships and Related
Transactions" on page 9 and under the heading "Indemnification Assurance
Agreements" on page 22 of Bethlehem's Proxy Statement for the 1999 Annual
Meeting of Stockholders.
 
  Except for those items specifically incorporated by reference, you should
not consider Bethlehem's 1998 Annual Report to Stockholders or Proxy Statement
for the 1999 Annual Meeting of Stockholders to be part of this Report.
 
                                      16
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a) Documents filed as part of this Report:
 
  The following is an index of the financial statements, schedules and
exhibits included in this Report or incorporated herein by reference.
 
  (1) Financial Statements.
 
           BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Consolidated Statements of Income for years 1998, 1997 and 1996..........    *
Consolidated Balance Sheets as of December 31, 1998, and 1997............    *
Consolidated Statements of Cash Flows for the years 1998, 1997 and 1996..    *
Notes to Consolidated Financial Statements (Including Quarterly Financial
 Data)...................................................................    *
 
  (2) Consolidated Financial Statement Schedules.
 
Report of Independent Auditors On Consolidated Financial Statement
 Schedule................................................................  F-1
  II -- Valuation and Qualifying Accounts and Reserves, years ended
   December 31, 1998, 1997 and 1996......................................  F-3
</TABLE>
--------
* Incorporated by reference from pages 14 to 28 of Bethlehem's 1998 Annual
  Report to Stockholders.
 
  The Consolidated Financial Statements, together with the report of
PricewaterhouseCoopers LLP dated January 27, 1999, on pages 14 to 29 of
Bethlehem's 1998 Annual Report to Stockholders are incorporated by reference
in this Form 10-K Annual Report. With the exception of those pages, you should
not consider Bethlehem's 1998 Annual Report to Stockholders as a part of this
Report for this Item. The Schedule listed above should be read in conjunction
with the consolidated financial statements in such 1998 Annual Report to
Stockholders.
 
  Schedules not included have been omitted because they are not applicable or
the required information is shown in the consolidated financial statements or
notes.
 
  Separate financial statements of subsidiaries not consolidated and 50
percent or less owned persons accounted for by the equity method have been
omitted because considered in the aggregate as a single subsidiary they do not
constitute a significant subsidiary.
 
  (3) Exhibits.
 
  The following is an index of the exhibits included in this Report or
incorporated herein by reference.
 
<TABLE>
 <C>    <S>
 (3)(a) Second Restated Certificate of Incorporation.
    (b) Amendment to Second Restated Certificate of Incorporation (Incorporated
        by reference from Exhibit 3(i) to Bethlehem's quarterly report on Form
        10-Q for the quarter ended June 30, 1995).
    (c) By-laws of Bethlehem Steel Corporation, as amended October 1, 1988.
 (4)(a) Rights Agreement, dated as of July 29, 1998, between Bethlehem Steel
        Corporation and First Chicago Trust Company of New York (Incorporated
        by reference from Bethlehem's Report on Form 8-K filed August 5, 1998).
</TABLE>
 
                                      17
<PAGE>
 
<TABLE>
 <C>      <S>
      (b) Amendment No. 1 to the Rights Agreement, dated as of March 17, 1999,
          between Bethlehem Steel Corporation and First Chicago Trust Company
          of New York (Incorporated by reference from Bethlehem's Amended
          Registration Statement on Form 8-A/A filed March 19, 1999).
      (c) Bethlehem is a party to certain long-term debt agreements where the
          amount involved does not exceed 10 percent of Bethlehem's total
          consolidated assets. Bethlehem agrees to furnish a copy of any such
          agreement to the Commission upon request.
 *(10)(a) Excess Benefit Plan of Bethlehem Steel Corporation and Subsidiary
          Companies, as amended September 20, 1995 (Incorporated by reference
          from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1997).
     *(b) 1988 Stock Incentive Plan of Bethlehem Steel Corporation
          (Incorporated by reference from Exhibit 10 to Bethlehem's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1997).
     *(c) 1994 Stock Incentive Plan of Bethlehem Steel Corporation.
     *(d) 1994 Non-Employee Directors Stock Plan of Bethlehem Steel
          Corporation.
     *(e) 1998 Stock Incentive Plan of Bethlehem Steel Corporation
          (Incorporated by reference from Exhibit 1 to Bethlehem's Proxy
          Statement in connection with its Annual Meeting of Shareholders held
          on April 28, 1998).
     *(f) Special Incentive Compensation Plan of Bethlehem Steel Corporation,
          which is contained in Article Seven of the Second Restated
          Certificate of Incorporation referred to in Exhibit 3(a) to this
          Report.
     *(g) Supplemental Benefits Plan of Bethlehem Steel Corporation and
          Subsidiary Companies, as amended September 20, 1995 (Incorporated by
          reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K
          for the fiscal year ended December 31, 1997).
     *(h) Post-Retirement Retainer Plan for Non-Officer Directors (Incorporated
          by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1997).
      (i) Form of Indemnification Assurance Agreement between Bethlehem Steel
          Corporation and each of its directors and executive officers listed
          on Schedule A thereto.
      (j) Form of Agreement between Bethlehem Steel Corporation and nine
          executive officers. Additional agreements have been entered into
          between Bethlehem Steel Corporation and eight other executive
          officers. These additional agreements are substantially in the form
          of said Agreement except for the amount of compensation upon
          termination, which is two rather than three times annual salary and
          bonus (Incorporated by reference from Exhibit 10 to Bethlehem's
          quarterly report on Form 10-Q for the quarter ended September 30,
          1998).
     (11) Statement regarding computation of earnings per share.
     (13) Those portions of Bethlehem's 1998 Annual Report to Stockholders
          which are incorporated by reference into this Form 10-K Annual
          Report.
     (23) Consent of Independent Auditors (included on page F-2 of this
          Report).
     (27) Financial Data Schedule for period ended December 31, 1998.
</TABLE>
--------
* Compensatory plans in which Bethlehem's directors and executive officers
participate.
 
(b) Reports on Form 8-K.
 
  Bethlehem did not file any reports on Form 8-K during the fourth quarter of
1998.
 
                                       18
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Bethlehem Steel Corporation has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 24th day of March, 1999.
 
                                          BETHLEHEM STEEL CORPORATION,
 
                                           /s/ Lonnie A. Arnett
                                          By: _________________________________
                                                Lonnie A. Arnett 
                                                Vice President and Controller
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf
of Bethlehem Steel Corporation and in the capacities indicated on the 24th day
of March, 1999.
 
 
 
/s/ Curtis H. Barnette                 /s/ Harry P. Kamen
---------------------------------      ---------------------------------
  Curtis H. Barnette                       Harry P. Kamen
  Chairman and Director                    Director
  (principal executive officer)
 
 
 
/s/ Gary L. Millenbruch                /s/ William M. Landuyt
---------------------------------      ---------------------------------
  Gary L. Millenbruch                      William M. Landuyt
  Executive Vice President, Treasurer      Director
  and Director
  (principal financial officer)
 
 
/s/ Lonnie A. Arnett                   /s/ Robert McClements, Jr.
---------------------------------      ---------------------------------
  Lonnie A. Arnett                         Robert McClements, Jr.
  Vice President and Controller            Director
  (principal accounting officer)
 
 
/s/ Benjamin R. Civiletti              /s/ Roger P. Penny
---------------------------------      ---------------------------------
  Benjamin R. Civiletti                    Roger P. Penny
  Director                                 Director
 
 
/s/ Worley H. Clark                    /s/ Shirley D. Peterson
---------------------------------      ---------------------------------
  Worley H. Clark                          Shirley D. Peterson
  Director                                 Director
 
 
/s/ John B. Curcio                     /s/  Dean P. Phypers
---------------------------------      ---------------------------------
  John B. Curcio                           Dean P. Phypers
  Director                                 Director
 
 
/s/ Lewis B. Kaden                     /s/ John F. Ruffle
---------------------------------      ---------------------------------
  Lewis B. Kaden                           John F. Ruffle
  Director                                 Director
 
                                      19
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
                        ON FINANCIAL STATEMENT SCHEDULE
 
To the Board of Directors
of Bethlehem Steel Corporation
 
  Our audits of the consolidated financial statements referred to in our
report dated January 27, 1999 appearing on page 29 of the 1998 Annual Report
to Stockholders of Bethlehem Steel Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed
in Item 14 (a)(2) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
 
/s/ PricewaterhouseCoopers LLP
 
1177 Avenue of the Americas
New York, NY 10036
January 27, 1999
 
                                      F-1
<PAGE>
 
                        CONSENT OF INDEPENDENT AUDITORS
 
  We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-90795, No. 2-71699, No. 2-53880, No. 2-90796,
No. 2-67314, No. 33-23516, No.33-23688, No. 33-52267, No. 33-58019, No. 33-
58021, No. 33-60507, No. 33-53895 and No. 33-57157) of Bethlehem Steel
Corporation of our report dated January 27, 1999 appearing on page 29 of the
1998 Annual Report to Stockholders which is incorporated in this Annual Report
on Form 10-K. We also consent to the incorporation by reference of our report
on the Financial Statement Schedule, which appears on page F-1 of this Form
10-K.
 
/s/ PricewaterhouseCoopers LLP
 
1177 Avenue of the Americas
New York, NY 10036
March 24, 1999
 
                                      F-2
<PAGE>
 
                          BETHLEHEM STEEL CORPORATION
 
                               10-K SCHEDULE II
                VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                ($ in Millions)
 
<TABLE>
<CAPTION>
                                     Charged
                         Balance at (Credited)                         Balance at
                          12/31/97  to Income  Deductions    Other      12/31/98
                         ---------- ---------- ----------    -----     ----------
<S>                      <C>        <C>        <C>           <C>       <C>
Classification
  Doubtful Receivables &
   Returns..............   $ 18.8     $ (0.4)   $   1.6 (a)    --        $ 20.0
  Long-term
   Receivables..........      2.0        --         --  (a)   (2.0)(c)      --
  Deferred Income Tax
   Asset................    350.0      (22.0)       --        (8.0)(d)    320.0
<CAPTION>
                                     Charged
                         Balance at (Credited)                         Balance at
                          12/31/96  to Income  Deductions    Other      12/31/97
                         ---------- ---------- ----------    -----     ----------
<S>                      <C>        <C>        <C>           <C>       <C>
Classification
  Doubtful Receivables &
   Returns..............   $ 20.8     $ (2.8)   $   0.8 (a)    --        $ 18.8
  Long-term
   Receivables..........      4.4        --        (2.4)(a)    --           2.0
  Deferred Income Tax
   Asset................    410.0      (60.0)       --         --         350.0
<CAPTION>
                                     Charged
                         Balance at (Credited)                         Balance at
                          12/31/95  to Income  Deductions    Other      12/31/96
                         ---------- ---------- ----------    -----     ----------
<S>                      <C>        <C>        <C>           <C>       <C>
Classification
  Doubtful Receivables &
   Returns..............   $ 19.5     $  0.1    $1.2 (a)       --        $ 20.8
  Long-term
   Receivables..........      4.5       (0.1)       --         --           4.4
  Deferred Income Tax
   Asset................    360.2       67.0        --       (17.2)(b)    410.0
</TABLE>
--------
(a) Amounts written-off less collections and reinstatements.
(b) Represents eliminating the valuation allowance recorded for an $82 million
    ($67 million after-tax) adjustment to equity at December 31, 1995 required
    to recognize the minimum pension liability. See Notes G and J to the
    Consolidated Financial Statements.
(c)  The property for which this receivable relates to was forclosed on by
     Bethlehem and the receivable and related allowance was included in the
     basis of the property.
(d)  Allowance on taxable temporary differences acquired through Bethlehem's
     purchase of Lukens.
 
                                      F-3