<PAGE>
 
                                                                           1997
 
                      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, 1997

[_] 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                          18016-7699
       BETHLEHEM, PENNSYLVANIA                       (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE
              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)
6 7/8% Debentures. Due March 1, 1999          New York Stock Exchange
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. [_]
 
Aggregate Market Value of Voting Stock held by Non-Affiliates: $1,690,740,420
 
  The amount shown is based on the closing price of Bethlehem Common Stock on
the New York Stock Exchange Composite Tape on April 3, 1998. 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 April 3, 1998: 113,283,652
 
                     DOCUMENTS INCORPORATED BY REFERENCE:
 
  Selected portions of the 1997 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 1998 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.
 
  For financial reporting purposes, Bethlehem reports the results of its
operations and other financial information in two segments, Basic Steel
Operations and Steel Related Operations. Note B to the Consolidated Financial
Statements contains financial information relating to Bethlehem's industry
segments for 1997, 1996 and 1995. The following table shows the percentage of
net sales of each segment and of major classes of products:
 
<TABLE>
<CAPTION>
                                                           1997   1996   1995
                                                           -----  -----  -----
<S>                                                        <C>    <C>    <C>
Basic Steel Operations
 Steel mill products:
  Hot rolled sheets.......................................  14.9%  14.3%  15.9%
  Cold rolled sheets......................................  17.2   16.2   14.4
  Coated sheets...........................................  31.5   32.3   29.7
  Plates..................................................  15.2   15.3   15.1
  Tin mill products.......................................   7.4    6.9    6.1
  Rail products...........................................   4.3    3.5    3.2
  Structural shapes and piling............................   1.3    3.8    6.7
 Other steel mill products................................   3.2    1.6    2.7
Other products and services (including raw materials).....   3.9    3.6    4.2
                                                           -----  -----  -----
                                                            98.9   97.5   98.0
Steel Related Operations..................................   1.1    2.5    2.0
                                                           -----  -----  -----
                                                           100.0% 100.0% 100.0%
                                                           =====  =====  =====
</TABLE>
 
BASIC STEEL OPERATIONS
 
Operations
 
  Bethlehem's Basic Steel Operations produces a wide variety of steel mill
products including hot rolled, cold rolled and coated sheets, plates, tin mill
products, rail, specialty blooms, carbon and alloy bars and large-diameter
pipe. Basic Steel Operations includes the Burns Harbor Division, the Sparrows
Point Division and Pennsylvania Steel Technologies, Inc. Also included in
Basic Steel Operations are 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>
                                                          1997   1996   1995
                                                          -----  -----  -----
   <S>                                                    <C>    <C>    <C>
   Domestic steel industry raw steel production
    capability (million of net tons)....................  121.4  116.0  112.0
   Domestic steel industry raw steel production (million
    of net tons)........................................  107.5* 105.3  104.9
   Domestic steel industry average utilization rate.....     89%    91%    93%
   Bethlehem's raw steel production capability (million
    of net tons)........................................   10.5   10.5   11.5
   Bethlehem's raw steel production (million of net
    tons)...............................................    9.6    9.4   10.4
   Bethlehem's average utilization rate.................     91%    90%    91%
   Bethlehem's production as a percent of the domestic
    steel industry......................................    8.9%   9.1%  10.0%
</TABLE>
--------
* Preliminary
 
  Of Bethlehem's 1997 raw steel production, 92 percent was produced by basic
oxygen furnaces and 8 percent by electric furnaces. Bethlehem's three
continuous slab casters for light flat rolled products and plates produced
about 91 percent of the slabs needed for these products in 1997 compared with
81 percent in 1996 and 84 percent in 1995.
 
  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's Basic Steel Operations to each of its
principal markets, including shipments to its own manufacturing operations:
 
<TABLE>
<CAPTION>
                                                         1997   1996   1995
                                                         -----  -----  -----
   <S>                                                   <C>    <C>    <C>
   Service Centers, Distributors, Processors and
    Converters (including semifinished).................  46.9%  45.2%  41.0%
   Transportation (including automotive)................  24.9   26.0   24.8
   Construction.........................................  11.0   12.6   14.2
   Containers...........................................   5.8    5.2    5.2
   Machinery............................................   4.7    5.1    5.2
   Other................................................   6.7    5.9    9.6
                                                         -----  -----  -----
                                                         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 for Basic Steel Operations were 2 percent of total sales in 1997, 3
percent in 1996 and 5 percent in 1995.
 
  Trade orders on hand for Basic Steel Operations were about $1.2 billion at
both December 31, 1997 and 1996. Substantially all of the orders on hand at
December 31, 1997, are expected to be filled in 1998.
 
                                       2
<PAGE>
 
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 8.8 million net tons of steel products and
recorded net sales of $4.6 billion during 1997, implying an average realized
price per ton of about $530. A one percent increase or decrease in this
implied average realized price during 1997 would, on a pro forma basis, have
resulted in an increase or decrease in net sales and pre-tax income of about
$46 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.
 
Cyclicality
 
  The domestic steel industry is highly cyclical in nature. Domestic
integrated producers suffered substantial losses in the first half of the
1980s. During the second half of the 1980s, domestic steel producers benefited
from improved industry conditions, and in 1988, domestic industry earnings
reached record levels. Steel demand and pricing declined between 1989 and
1992, and the domestic industry reported substantial losses. Since 1993, there
has been a recovery in steel markets, and domestic steel producers have
reported improved results. Although Bethlehem believes that domestic steel
markets will be relatively strong in 1998, there can be no assurance as to the
extent of any future improvement in domestic steel industry earnings.
 
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, many 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 up to
10 million tons over 1997 levels.
 
  Mini-mill Producers. Domestic integrated producers, such as Bethlehem, have
lost market share in recent years to domestic mini-mill producers. These
producers provide significant competition in certain product lines, including
hot rolled sheet products. Mini-mill producers are relatively efficient, low-
cost producers that produce steel from scrap in electric furnaces (which are
less expensive to build than integrated facilities), have low employment and
environmental costs per ton shipped and target regional markets. Through the
use of iron substitutes and thin slab casting technology, mini-mill producers
are increasingly able to compete directly with producers of higher value
products, including cold rolled and coated sheets. Most of the new flat rolled
facilities that will be constructed over the next several years will be
electric furnace facilities.
 
  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 18 percent of the domestic market in 1997 and
about 17 percent in both 1996 and 1995.
 
                                       3
<PAGE>
 
  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>
                                                                  1997  1996  1995
                                                                  ----  ----  ----
   <S>                                                            <C>   <C>   <C>
   Rail..........................................................  26%   26%   28%
   Plates........................................................  21    26    22
   Tin mill products.............................................  15    14    15
   Hot rolled and cold rolled sheets.............................  22    19    19
   Coated sheets.................................................  11    10     9
   All products*.................................................  24    23    21
</TABLE>
--------
* Excludes steel imported in the form of manufactured goods, such as
  automobiles, but includes semifinished steel.
 
  Excluding semifinished steel, imports of steel mill products were about 24.8
million tons in 1997, 21.6 million tons in 1996 and 19.2 million tons in 1995.
 
  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. Imports of flat
rolled steel from countries not subject to orders, including particularly the
Commonwealth of Independent States (formerly the USSR), eastern European
countries and the People's Republic of China, have increased significantly. In
December 1997, the International Trade Commission ruled that imports of cut-
to-length plate from the People's Republic of China, Russia, the Ukraine and
South Africa were causing or threatening to cause material injury to the
domestic steel industry. Antidumping duty orders covering imports of cut-to-
length plate from these countries were suspended by agreements limiting the
quantity of plate imports for a five-year period, except for South Africa,
which is subject to a price floor. Violation of the suspension agreements by
these countries would result in the antidumping duty orders becoming
effective. Bethlehem continues to be concerned about the high levels of
unfairly traded imports which could adversely affect the profitability of
Bethlehem.
 
  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. Increased imports of finished products met the remaining
demand, which could not be met by domestic rolling 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.
 
STEEL RELATED OPERATIONS
 
  Bethlehem's Steel Related Operations included BethForge, Inc. and CENTEC
Roll Corporation, which manufactured and fabricated forged steel and cast iron
products, and BethShip, Inc., which repaired and serviced ships and fabricated
industrial products. All of these facilities were sold during 1997.
 
GENERAL
 
Capital Expenditures
 
  Capital expenditures were $228 million in 1997 compared with $259 million in
1996 and $267 million in 1995. Capital expenditures for 1998 are currently
estimated to be about $300 million.
 
                                       4
<PAGE>
 
  Major projects during 1997 included improvements at Burns Harbor's hot strip
mill and 160-inch plate mill.
 
  About $630 million of capital expenditures were authorized in 1997 including
the construction of a $300 million cold rolling mill complex at Sparrows
Point. At December 31, 1997, the estimated cost of completing authorized
capital expenditures was about $751 million compared with $386 million at
December 31, 1996. Such authorized capital expenditures are expected to be
completed during the 1998-2000 period.
 
  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, 1997, Bethlehem spent about $160 million for environmental
control equipment. Expenditures for new environmental control equipment
totaled about $15 million in 1997, $29 million in 1996 and $36 million in
1995. The costs incurred in 1997 to operate and maintain existing
environmental control equipment were about $112 million (excluding interest
costs but including depreciation charges of $14 million) compared with $115
million in 1996 and $120 million in 1995. In addition, Bethlehem has been
required to pay various fines and penalties relating to violations or alleged
violations of laws and regulations in the environmental control area.
Bethlehem paid about $830,000 in 1997, $160,000 in 1996 and $5.9 million in
1995 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 by March 31, 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 $20 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 the 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 received EPA
 
                                       5
<PAGE>
 
approval of its proposed scope of work for an RFI which 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.
 
  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 25 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.
 
  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 1997 through its Strategic Sourcing
initiatives and expects further progress in 1998. Strategic Sourcing's
objectives are to forge a strong, competitive base of supply partners who
share Bethlehem's commitment to deliver superior value to customers; to
realize significant, immediate and sustainable improvements in the total cost,
quality and value of purchased goods and services; and to establish mutual
commitments to continuous improvement. See "ITEM 2. PROPERTIES --  Properties
Relating to the Basic Steel Operations Segment -- 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
 
  Bethlehem performs research to improve existing products, develop new
products and make operating processes more efficient. During 1997, 1996 and
1995, Bethlehem spent about $22 million, $25 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 1997, 13 U.S. patents covering a variety of new developments were
awarded to Bethlehem. However, Bethlehem believes that no single or group of
patents or licenses is of material importance in 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.
 
  In 1994, Bethlehem and U. S. Steel Group, a unit of USX Corporation, entered
into a Cooperative Research and Development Agreement. During 1997, Bethlehem
and U. S. Steel Group continued to conduct joint research and development
activities under the Agreement in the field of basic ironmaking and
steelmaking technologies and processes, such as primary iron and steel process
development, finishing process development and process instrumentation
development. Bethlehem believes that the joint research and development
activities meet the
 
                                       6
<PAGE>
 
Agreement's goals, including expediting technological developments and
improvements, enhancing Bethlehem's domestic and worldwide competitiveness and
reducing research and development costs and time periods. Bethlehem,
therefore, intends to continue the joint research and development activities
in 1998 and has filed appropriate notices.
 
  Bethlehem is taking steps to address the "Year 2000" computer issue. The
issue involves the once common programming practice of storing date
information using only the last two digits to indicate the year. Storing the
year 2000 as "00" could cause errors in sorting, comparing or manipulating
information. Bethlehem anticipates being substantially Year 2000 compliant by
the end of 1998. It is also working with its customers and suppliers to assess
their compliance. Bethlehem's costs associated with solving the Year 2000
issue will not be material.
 
Employment
 
  At the end of 1997, Bethlehem had about 15,600 employees, three-quarters of
whom are covered by agreements with the United Steelworkers of America
("USWA"). The agreement covering most of Bethlehem's USWA represented
employees expires in 1999. A strike or work stoppage could impact Bethlehem's
ability to operate if it is unable to negotiate a new agreement with its
represented employees when the existing agreement expires in 1999. 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 with regard to Bethlehem's employment-related
matters, see "Employment" under "Financial Review and Operating Analysis" in
Bethlehem's 1997 Annual Report to Stockholders. As set forth on page 14 of
this Report, such discussion is incorporated herein by reference.
 
Employee Postretirement Obligations
 
  Bethlehem has substantial financial obligations related to its employee
postretirement plans for pensions and healthcare. Moreover, due to the excess
of projected benefit obligations over pension fund assets, Bethlehem's annual
pension expense is higher on a per ton basis than that of most other domestic
steel producers. This pension expense, combined with postretirement healthcare
expense, puts Bethlehem at a competitive disadvantage with respect to such
costs compared to most other domestic steel producers. As of December 31,
1997, Bethlehem's consolidated balance sheet reflected liabilities of $440
million and $1,595 million, recognized in accordance with generally accepted
accounting principles, for postretirement pensions and benefits other than
pensions, respectively. The calculation of the actuarial present value of the
accumulated benefit obligations and recorded liabilities for active employees
assumes continued employment with projections for retirements, deaths,
resignations and discharges. If actual terminations of active employees occur
significantly earlier than projected (as a result of facility shutdowns,
restructurings or other reasons), the accumulated benefit obligations and
recorded liabilities would increase substantially. The charges for employees
terminated as a result of facility shutdowns or restructurings vary depending
upon the demographics of the workforce, but could be $100,000 per employee.
The recording of these charges could result in a material adverse impact on
Bethlehem's financial condition because of the increase in recorded
liabilities, decrease in stockholders' equity and increases in required
contributions to the pension fund and retiree healthcare payments.
 
  Bethlehem has contributed amounts to its pension fund substantially in
excess of amounts required under current law and regulations. As a result,
Bethlehem currently has a funding standard credit balance which would allow it
under current laws and regulations to defer all pension funding for more than
two years, although it presently has no plans to do so.
 
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.
 
                                       7
<PAGE>
 
  Merger with Lukens Inc. Bethlehem will acquire Lukens Inc. in a merger
transaction expected to close by early second quarter 1998, subject to
approval by Lukens' stockholders and regulatory authorities. For further
information regarding the merger, see "Financial Review and Operating
Analysis" in Bethlehem's 1997 Annual Report to Stockholders. As set forth on
page 14 of this Report, such discussion is incorporated herein by reference.
Also see "Capital Structure" below.
 
Restructuring Activities
 
  Facility Shutdowns and Restructurings. During the last five years, Bethlehem
has shut down or restructured several facilities and operations. Since 1993,
Bethlehem recorded charges of $815 million in connection with these actions
including restructuring charges of $465 million ($382 million after-tax) in
1996 for the exit of Bethlehem Structural, the Eagle Nest coal operation,
BethForge, CENTEC and BethShip and the write-off of the assets of the Coke
Division located in Bethlehem, Pennsylvania as an impaired asset. Eagle Nest,
BethForge, CENTEC and BethShip were sold and Bethlehem Structural ended
operations by the end of 1997. Also during 1997, Bethlehem sold its High Power
Mountain coal assets and its equity interest in Iron Ore Company of Canada.
Operations at the Bethlehem Coke Division were discontinued by March 31, 1998.
If it becomes necessary for Bethlehem to exit or restructure additional
businesses and operations in the future, it could incur substantial additional
charges in the process. 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 heathcare payments.
Except as previously announced, Bethlehem does not currently anticipate any
additional facility shutdowns, restructurings or other reasons why active
Bethlehem employees might be terminated. Bethlehem anticipates further
workforce reductions in the range of 900 employees at its Sparrows Point
Division over the next three to four years as part of its previously-announced
comprehensive plan to achieve and sustain a superior rate of return on the
capital invested at this facility.
 
  In connection with the proposed Lukens merger, Bethlehem currently intends
to close Lukens' Coatesville 206" plate mill and Bethlehem's Sparrows Point
160" plate mill, and increase the output of existing facilities at Bethlehem's
Burns Harbor Division and Lukens' 110" Conshohocken Steckel mill, both of
which are currently underutilized, at a future time that will be determined on
a basis consistent with customer requirements and other factors. The existing
Lukens workforce will be reduced as a result of increased operating and
administrative efficiencies. The timing and extent of the reductions will not
be finalized until after the merger.
 
Capital Structure
 
  Bethlehem's capital structure is highly leveraged reflecting its recorded
liabilities for pensions and other postretirement obligations. 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 in the future.
 
  Bethlehem expects to finance the cash consideration to be paid in connection
with the Lukens' merger discussed above with available cash and with the sale
of Lukens' stainless and distribution businesses. Bethlehem has already signed
an agreement to sell certain assets of Lukens to Allegheny Teledyne
Incorporated for $175 million. If the sale of assets contemplated by the
agreement with Allegheny and/or the potential sales of other Lukens assets are
not consummated at or prior to the closing of the Lukens' merger, Bethlehem
may incur additional debt by entering into a short-term borrowing arrangement
and by drawing on its current revolving credit arrangement to finance the
remaining portion of the cash consideration to be paid in connection with the
merger.
 
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.
 
                                       8
<PAGE>
 
  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 highly cyclical nature of the domestic steel industry and many of
     the markets supplied by Bethlehem and the effect of that cyclicality on
     prices and volume;
 
  .  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 mini-mill facilities,
     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 restructuring activities;
 
  .  Bethlehem's highly leveraged capital structure;
 
  .  the effect of Bethlehem's customers and suppliers not becoming Year 2000
     compliant in a timely manner; 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.
 
PROPERTIES RELATING TO THE BASIC STEEL OPERATIONS SEGMENT
 
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,
corrosion-resistant coated sheet and plates. Its principal markets include
automotive, service centers, construction, machinery and appliance.
 
  Principal facilities: A sintering plant, two coke oven batteries, 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, a 50 x 90-inch
slabbing mill, two sheared plate mills (110-inch and 160-inch), 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 to make steel plates. Burns Harbor's utilization of raw steel
production capability was 92 percent during 1997.
 
                                       9
<PAGE>
 
Sparrows Point Division
 
  Location: On the Chesapeake Bay near Baltimore, Maryland.
 
  Principal products and markets: Hot rolled sheet, cold rolled sheet,
corrosion-resistant coated sheet (e.g., galvanized sheet, Galvalume(R) sheet),
tin mill products and plates. 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 with an annual production
capability of about 3.7 million tons, a 160-inch sheared plate mill, 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 102 percent during 1997.
 
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 1.2 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 59 percent during
1997.
 
Joint Ventures
 
  Bethlehem participates in a joint venture, known as Double G Coatings
Company, L.P., which operates a 270,000 ton per year sheet coating line near
Jackson, Mississippi. The line 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 capacity and is responsible
for marketing its share of the finished product.
 
  Bethlehem also participates in a joint venture which owns and operates a
400,000 ton per year electrogalvanizing line at Walbridge, Ohio. This facility
produces corrosion-resistant sheet steel primarily for the automobile industry
and other consumer durables markets. Burns Harbor provides cold rolled coils
for 75 percent of Walbridge's annual capacity and is responsible for marketing
its share of the finished product.
 
  Bethlehem also participates in two joint ventures with facilities located
adjacent to the Burns Harbor operations: Indiana Pickling and Processing
Company that operates a pickling line and Chicago Cold Rolling, L.L.C. that
operates a reversing cold mill complex.
 
  In 1997, Bethlehem entered into two new joint ventures. One is with TWB
Company, located in Michigan, which operates the largest plant in North
America producing laser-welded blanks for the automotive industry. The second
is Steel Construction Systems, a joint venture with CSR Rinker, the largest
building materials company in Florida, to expand the use of steel in
residential and light commercial buildings.
 
  Bethlehem also has indirect equity interests in various iron ore properties.
See "Raw Material Properties and Interests" below.
 
                                      10
<PAGE>
 
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, 1997,
sufficient to produce at least 16 million tons of direct shipping iron ore
from properties located in Brazil and 199 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 will continue as a
customer of IOC and will purchase 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, 1997, sufficient
to produce at least 16 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.
 
  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 7.7 million tons in 1997 and 13.9 million tons in 1996. In addition to
these sources, Bethlehem purchased 4.8 million tons of iron ore in 1997 and
1.7 million tons of iron ore in 1996 from sources in which it had no ownership
interests. In 1997, Bethlehem obtained about 61 percent of its iron ore
requirements from operations in which it had ownership interests compared with
86 percent in 1996.
 
  Bethlehem had trade sales of iron ore in 1997 of .3 million tons and 1.2
million tons in 1996. No iron ore trade sales commitments exist for 1998 or
beyond.
 
  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. During 1997, Bethlehem sold the remainder of its coal
operating properties. Bethlehem owns and leases undeveloped or nonoperating
coal properties in Pennsylvania, which it estimates contained recoverable
reserves at December 31, 1997, sufficient to produce at least 161 million tons
of coal, of which about 89 percent and 11 percent, respectively, are
metallurgical and steam coal.
 
  Bethlehem's coal operations produced 0.3 million tons of coal in 1997 and
1.9 million tons in 1996. Trade shipments of coal were 0.3 million tons in
1997 compared with 1.2 million tons in 1996.
 
  In 1997, Bethlehem obtained none of its coal from its own mines, compared
with 13 percent in 1996. In 1997, all of the coal 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. As mentioned above, the facilities in Bethlehem,
Pennsylvania, were discontinued by March 31, 1998.
 
  Other Raw Materials. Bethlehem purchases its other raw material requirements
from commercial sources.
 
Transportation
 
  Bethlehem owns five 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.
 
                                      11
<PAGE>
 
  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.
 
PROPERTIES RELATING TO THE STEEL RELATED OPERATIONS SEGMENT
 
  As discussed under "ITEM 1. BUSINESS -- Facility Shutdowns and
Restructurings", all of the properties of the Steel Related Operations Segment
have been sold.
 
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 --
 General -- 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. 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.
 
ITEM 3. LEGAL PROCEEDINGS.
 
  Bethlehem is a party to numerous legal proceedings incurred in the ordinary
course of its business, including the matters specifically discussed below.
 
  On March 29, 1996, the U.S. Department of Justice, on behalf of the EPA,
brought a civil action against Bethlehem in the U.S. District Court for the
Northern District of Indiana for alleged violations of the Clean Water Act and
the Safe Drinking Water Act at the Burns Harbor Division. The Complaint
alleges that, from November 1992 to April 1994, the Division discharged
pollutants from its dock wall without a permit as required by the Clean Water
Act and failed to meet certain requirements of an underground injection well
permit. On January 15, 1998, a Consent Decree to which the parties had agreed
was entered by the Court in final resolution of this action. The Consent
Decree requires Bethlehem to pay a civil penalty of $441,300 and to take
certain remedial actions to insure continued compliance with the Clean Water
Act and the Safe Drinking Water Act.
 
  On February 14, 1997, the EPA issued a notice alleging violations by
Bethlehem Structural Products Corporation ("BSPC"), a subsidiary of Bethlehem,
of the Clean Air Act, based on emissions from Coke Oven Battery A at BSPC on
various days in 1996 exceeding those allowed under the Pennsylvania State
Implementation Plan (the "SIP"). Settlement negotiations were initiated among
BSPC, the EPA and the Pennsylvania Department of Environmental Protection (the
"DEP") to resolve Battery A compliance issues under the National Emissions
Standards for coke oven emissions (the "NESHAP"), as well as under the SIP. On
December 22, 1997, a proposed Consent Decree to which the parties had agreed
was lodged with the U. S. District Court for the Eastern District of
Pennsylvania. Upon entry by the Court, the Consent Decree will be a final
resolution of this matter. It will require BSPC to pay civil penalties of
$178,500 to the United States and $119,000 to the DEP and to take certain
remedial actions to insure continued compliance with the SIP and the NESHAP.
 
  See "ITEM 1. BUSINESS -- General -- Environmental Control and Remediation
Expenditures" 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
 
                                      12
<PAGE>
 
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 1997.
 
---------------------------
 
EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  The executive officers of Bethlehem as of April 3, 1998, are as follows:
 
<TABLE>
<CAPTION>
  NAME                         AGE                  POSITION
  ----                         ---                  --------
<S>                            <C> <C>
Curtis H. Barnette              63 Chairman (Chief Executive Officer)
Roger P. Penny                  61 President (Chief Operating Officer)
Gary L. Millenbruch             60 Executive Vice President (Chief Financial
                                    Officer) and Treasurer
Dr. Augustine E. Moffitt, Jr.   52 Senior Vice President (Administration) and
                                    Chief Administrative Officer
David P. Post                   64 Senior Vice President (Commercial) and
                                    Chief Commercial Officer
Lonnie A. Arnett                52 Vice President (Accounting) and Controller
Dr. Walter N. Bargeron          55 President, Burns Harbor Division
Stephen G. Donches              52 Vice President (Public Affairs)
Duane R. Dunham                 56 President, Sparrows Point Division
Andrew R. Futchko               55 President, Pennsylvania Steel
                                    Technologies, Inc.
William H. Graham               52 Vice President (Law), General Counsel and
                                    Secretary
John L. Kluttz                  55 Vice President (Union Relations)
Dr. Carl F. Meitzner            58 Vice President (Planning)
Dr. Malcolm J. Roberts          55 Vice President (Technology) and Chief
                                    Technology Officer
Robert A. Rudzki                44 Vice President (Purchasing and
                                    Transportation) and Chief Procurement
                                    Officer
Dorothy L. Stephenson           48 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.
 
                                      13
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS.
 
  As of April 3, 1998, about 34,500 stockholders held 113,283,652 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 L to the Consolidated Financial Statements. At December 31, 1997, about
$485 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 results and the 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 April 3, 1998, was $15.000.
 
<TABLE>
<CAPTION>
                                                       1997           1996
                                                  -------------- ---------------
                                                   SALES PRICES   SALES PRICES
                                                  -------------- ---------------
PERIOD                                             HIGH    LOW    HIGH     LOW
------                                            ------- ------ ------- -------
<S>                                               <C>     <C>    <C>     <C>
First Quarter.................................... $ 9.375 $7.625 $15.875 $13.125
Second Quarter...................................  10.750  7.750  14.500  11.500
Third Quarter....................................  12.875  9.813  12.000   9.250
Fourth Quarter...................................  11.563  7.750  10.313   7.625
</TABLE>
 
ITEM 6. SELECTED FINANCIAL DATA.
 
  The information required by this Item is incorporated by reference from page
27 of Bethlehem's 1997 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 1 to 6 and 8 to 11 of Bethlehem's 1997 Annual Report to Stockholders as
amended as indicated on page F-4.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
  The information required by this Item is incorporated by reference from
pages 12 to 24 of Bethlehem's 1997 Annual Report to Stockholders as amended as
indicated on page F-4.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
  None.
 
                                      14
<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 "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" from
pages 2 to 9 of Bethlehem's Proxy Statement for the 1998 Annual Meeting of
Stockholders.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
  The information required by this Item is incorporated by reference from
pages 14 to 19 of Bethlehem's Proxy Statement for the 1998 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 7 and 20 of Bethlehem's Proxy Statement for the 1998 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" on page 8 and
under the heading "Indemnification Assurance Agreements" on page 20 of
Bethlehem's Proxy Statement for the 1998 Annual Meeting of Stockholders.
 
  Except for those items specifically incorporated by reference, you should
not consider our 1997 Annual Report or Proxy Statement to be part of this
Report.
 
                                      15
<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 1997, 1996 and 1995..........    *
Consolidated Balance Sheets as of December 31, 1997, and 1996............    *
Consolidated Statements of Cash Flows for the years 1997, 1996 and 1995..    *
Notes to Consolidated Financial Statements (Including Quarterly Financial
 Data)...................................................................    *
 
  (2) CONSOLIDATED FINANCIAL STATEMENTS SCHEDULES.
 
Report of Independent Auditors On Consolidated Financial Statement
 Schedule................................................................  F-1
  II -- Valuation and Qualifying Accounts and Reserves, years ended
   December 31, 1997, 1996
   and 1995..............................................................  F-3
</TABLE>
--------
* Incorporated by reference from pages 12 to 24 of Bethlehem's 1997 Annual
  Report to Stockholders as amended as indicated on page F-4.
 
  The Consolidated Financial Statements, together with the report of Price
Waterhouse LLP dated January 28, 1998, on pages 12 to 25 of the 1997 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 the 1997
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 1997 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.
 
  (3)(a)
     Second Restated Certificate of Incorporation (Incorporated by
     reference from Exhibit 3 to Bethlehem's quarterly report on Form 10-Q
     for the quarter ended March 31, 1994).
 
  (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
     (Incorporated by reference from Exhibit (3)(b) to Bethlehem's Annual
     Report on Form 10-K for the fiscal year ended December 31, 1993).
 
  (4)(a)
     Rights Agreement, dated as of September 28, 1988, between Bethlehem
     Steel Corporation and Morgan Shareholder Services Trust Company
     (Incorporated by reference from Exhibit (4)(a) to Bethlehem's Annual
     Report on Form 10-K for the fiscal year ended December 31, 1993).
 
                                      16
<PAGE>
 
     (b)  Amendment to Rights Agreement, dated as of November 1, 1995, between
          Bethlehem Steel Corporation and First Chicago Trust Company of New
          York (formerly Morgan Shareholder Services Trust Company)
          (Incorporated by reference from Exhibit 4(a) to Bethlehem's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1995).
 
     (c)  Bethlehem is a party to certain long-term debt agreements where the
          amount involved does not exceed 10% 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.
 
    *(b)  1988 Stock Incentive Plan of Bethlehem Steel Corporation.
 
    *(c)  1994 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 26,
          1994).
 
    *(d)  1994 Non-Employee Directors Stock Plan of Bethlehem Steel Corporation
          (Incorporated by reference from Exhibit 2 to Bethlehem's Proxy
          Statement in connection with its Annual Meeting of Shareholders held
          on April 26, 1994).
 
    *(e)  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.
 
    *(f)  Supplemental Benefits Plan of Bethlehem Steel Corporation and
          Subsidiary Companies, as amended September 20, 1995.
 
    *(g)  Post-Retirement Retainer Plan for Non-Officer Directors.
 
     (h)  Form of Indemnification Assurance Agreement between Bethlehem Steel
          Corporation and each of its directors and executive officers listed on
          Schedule A thereto.
 
  (11)    Statement regarding computation of earnings per share.
 
  (13)    Those portions of the 1997 Annual Report to Stockholders of Bethlehem
          Steel Corporation 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)(a) Financial Data Schedule for period ended December 31, 1997.
 
      (b) Restated Financial Data Schedule for periods ended December 31, 1996
          and December 31, 1995.
 
      (c) Restated Financial Data Schedule for periods ended March 31, 1997,
          June 30, 1997 and September 30, 1997.
 
      (d) Restated Financial Data Schedule for periods ended March 31, 1996,
          June 30, 1996 and September 30, 1996.
--------
* Compensatory plans in which Bethlehem's directors and executive officers
participate.
 
(b) REPORTS ON FORM 8-K.
 
  Bethlehem filed with the Securities and Exchange Commission a report on Form
8-K on December 15, 1997, regarding its proposed merger with Lukens Inc.
 
                                      17
<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 15TH DAY OF APRIL, 1998.
 
                                          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 15TH DAY
OF APRIL, 1998.
 
 
/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/ Robert McClements, Jr.
---------------------------------      ---------------------------------
  Gary L. Millenbruch                      Robert McClements, Jr.
  Executive Vice President, Treasurer      Director
  and Director
  (principal financial officer)
 
 
/s/ Lonnie A. Arnett                   /s/ Roger P. Penny
---------------------------------      ---------------------------------
  Lonnie A. Arnett                         Roger P. Penny
  Vice President and Controller            Director
  (principal accounting officer)
 
 
/s/ Benjamin R. Civiletti              /s/ Shirley D. Peterson
---------------------------------      ---------------------------------
  Benjamin R. Civiletti                    Shirley D. Peterson
  Director                                 Director
 
 
/s/ Worley H. Clark                    /s/ Dean P. Phypers
---------------------------------      ---------------------------------
  Worley H. Clark                          Dean P. Phypers
  Director                                 Director
 
 
/s/ John B. Curcio                     /s/ William A. Pogue
---------------------------------      ---------------------------------
  John B. Curcio                           William A. Pogue
  Director                                 Director
 
 
/s/ Lewis B. Kaden                     /s/ John F. Ruffle
---------------------------------      ---------------------------------
  Lewis B. Kaden                           John F. Ruffle
  Director                                 Director
 
                                      18
<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 28, 1998 appearing on page 25 of the 1997 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/ Price Waterhouse LLP
 
1177 Avenue of the Americas
New York, NY 10036
January 28, 1998
 
                                      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 and No. 33-60507) of Bethlehem Steel Corporation of our report dated
January 28, 1998 appearing on page 25 of the 1997 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/ Price Waterhouse LLP
 
1177 Avenue of the Americas
New York, NY 10036
April 15, 1998
 
                                      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
                         12/31/96  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
<CAPTION>
                                    CHARGED
                        BALANCE AT (CREDITED)                       BALANCE AT
                         12/31/94  TO INCOME  DEDUCTIONS  OTHER      12/31/95
                        ---------- ---------- ----------  ------    ----------
<S>                     <C>        <C>        <C>         <C>       <C>
CLASSIFICATION
  Doubtful Receivables
   & Returns              $18.6      $ 1.2      ($0.3)(a) $   --      $19.5
  Long-term Receivables     4.5         --          --        --        4.5
  Deferred Income Tax
   Asset                  383.2      (37.0)         --     14.0 (c)   360.2
</TABLE>
 
(a) Amounts written-off less collections and reinstatements.
(b) Represents eliminating the valuation allowance recorded for a $82 million
    ($67 million after-tax) adjustment to equity at December 31, 1995 required
    to recognize the minimum pension liability. See Notes H and L to the
    Consolidated Financial Statements.
(c) Represents the valuation allowance for a $82 million ($67 million after-
    tax) charge to equity required to recognize the minimum pension liability.
    See Notes H and L to the Consolidated Financial Statements.
 
 
                                      F-3
<PAGE>
 
          AMENDMENT TO BETHLEHEM'S 1997 ANNUAL REPORT TO STOCKHOLDERS
 
A.Bethlehem's Consolidated Financial Statements included on pages 12 to 24 of
Bethlehem's 1997 Annual Report to Stockholders (which have been incorporated
into this Form 10-K Annual Report) are amended as follows:
 
  1. The following paragraphs are added to Note A. Accounting Policies:
 
    Asset Impairment--In accordance with FASB Statement No. 121, Accounting
  for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
  Disposed Of, Bethlehem periodically evaluates the carrying value of its
  property, plant and equipment to be held and used when events and
  circumstances warrant such a review. The carrying value for a logical
  grouping of separately identifiable property, plant and equipment is
  considered impaired when the anticipated undiscounted future cash flows
  from such logical grouping of assets is less than its carrying value. In
  that event, a loss is recognized based on the amount by which the carrying
  value exceeds the fair market value of the asset. If comparable market
  values are not available to determine fair market value, fair market value
  is determined by discounting the anticipated future cash flows at a rate
  commensurate with the risk involved. Losses, if any, on long-lived assets
  to be disposed of are determined in a similar manner, except fair market
  values are reduced for the estimated costs to dispose.
 
    Environmental Expenditures--Bethlehem accounts for environmental
  expenditures in accordance with FASB Statement No. 5, Accounting for
  Contingencies, and its related interpretations, including Staff Accounting
  Bulletins issued by the staff of the Securities and Exchange Commission.
  Accordingly, environmental expenditures that increase the life or
  efficiency of property, plant and equipment, or that reduce or prevent
  environmental contamination are capitalized. Expenditures that relate to
  existing conditions caused by past operations and which have no significant
  future economic benefit are expensed. Environmental expenses are accrued at
  the time the expenditure becomes probable and the costs can be reasonably
  estimated. Bethlehem's policy is to not discount any recorded obligations
  for future remediation expenditures to their present value nor to record
  recoveries of environmental remediation costs from insurance carriers and
  other third parties, if any, as assets until their receipt is deemed
  probable.
 
    Revenue Recognition--Bethlehem recognizes substantially all revenues when
  products are shipped to customers and risks of ownership change. Revenue
  and estimated profits under long-term contracts (related to the Steel
  Related Operations--refer to Note B. Industry Segment Information) are
  recognized using the percentage of completion method; however, losses are
  recognized when they are probable and can be reasonably estimated. Such
  long-term contracts have not been material in relation to Bethlehem's total
  sales and operating income.
 
  2. The following paragraph is added to Note C. Estimated Gain (Loss) on
Exiting Businesses and Impairment of Long-lived Assets:
 
    The businesses and assets disposed of or to be disposed of had trade
  sales of about $205 million and operating losses of about $60 million in
  1997. This is not necessarily indicative of the impact on consolidated
  results because Bethlehem Structural consumed steel produced by Bethlehem's
  Pennsylvania Steel Technologies Inc. Division, and Bethlehem Coke supplied
  a portion of the coke consumed by Bethlehem's Sparrows Point Division.
  Operating losses for BethForge, CENTEC and BethShip, representing the Steel
  Related Operations segment, are disclosed in Note B. Industry Segment
  Information.
 
  3. The Consolidated Statements of Cash Flows filed as part of this Form 10-K
Annual Report have been revised to present pension financing (funding) as an
operating activity rather than a financing activity.
 
B.To the extent incorporated in this Form 10-K Annual Report, any references
in Bethlehem's 1997 Annual Report to Stockholders to cash provided from
operating activities means cash provided from operating activities excluding
pensions. Any other statement contained in Bethlehem's 1997 Annual Report to
Stockholders incorporated by reference in this Report shall be deemed to be
modified or superseded for purposes of this Report to the extent that a
statement contained in this Report modifies or supersedes such statement.
 
                                      F-4