1996 Annual Report

Report of Independent Auditors
To the Board of Directors and Stockholders of Bethlehem Steel Corporation

We have audited the accompanying consolidated balance sheets of Bethlehem Steel Corporation and its subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income and of cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements audited by us present fairly, in all material respects, the financial position of Bethlehem Steel Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.

Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
January 31, 1996

Management Statement on Responsibility for Financial Information

The accompanying consolidated financial statements of Bethlehem Steel Corporation have been prepared in accordance with generally accepted accounting principles. Management has the primary responsibility for the information contained in the financial statements and in other sections of the Annual Report to Stockholders. In preparing the financial statements, management must make estimates and judgments based upon available information. To facilitate this financial reporting, management has communicated to all appropriate employees the requirements for accurate records and accounting.

Bethlehem maintains a system of internal accounting controls designed to provide reasonable assurance for the safeguarding of assets and the reliability of financial records. The system is subject to continuous review through a corporate-wide internal audit program with appropriate management follow-up action. Management recognizes the limits that are inherent in all systems of internal accounting control. Management believes, however, that through the careful selection of employees, the division of responsibilities and the application of formal policies and procedures, Bethlehem has an effective and responsive system of internal accounting controls.

Bethlehem’s independent auditors, Price Waterhouse LLP, examine Bethlehem’s financial statements in accordance with generally accepted auditing standards. They express their professional opinion, which is shown above. This examination includes evaluating our internal accounting control systems to establish the audit scope, testing our accounting records and transactions and performing such other audit procedures as they deem appropriate.

The Audit Committee of the Board of Directors is composed of non-employee directors of Bethlehem, who meet at appropriate times and met four times during 1996. The Audit Committee is responsible for recommending to the Board of Directors, subject to approval by the Board and ratification by stockholders, the independent auditors for Bethlehem; for reviewing with the independent auditors the scope of their examination of Bethlehem’s financial statements; for reviewing with Bethlehem’s internal auditors the scope of the plan of audit; for meeting with the independent auditors and Bethlehem’s internal auditors to review the results of their audits and Bethlehem’s internal accounting controls; and for reviewing other professional services performed for Bethlehem by the independent auditors. From time to time, the Audit Committee meets with the independent auditors and with Bethlehem’s internal auditors without members of Bethlehem’s management being present. The meetings permit the Audit Committee to have private communications with the independent auditors and the internal auditors about the results of their examinations, their evaluation of Bethlehem’s internal accounting controls, the overall quality of Bethlehem’s financial reporting and any other appropriate topics.

Management believes that the system of internal accounting controls, including Bethlehem’s Code of Business Conduct, provides reasonable assurances that (1) business activities are conducted in a manner consistent with Bethlehem’s commitment to a high standard of business conduct and (2) Bethlehem’s financial accounting system contains the integrity and objectivity necessary to maintain accountability for assets and to prepare Bethlehem’s financial statements in accordance with generally accepted accounting principles.

Financial Highlights Chairman's Letter
Business Units and Facilities
Financial Review and Operating Analysis
Financial Statements Financial Notes
Report of Auditors and Management Statement
Five-Year Financial and Operating Summaries
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