<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended March 31, 1998


                         Commission file number 33-96190


                                AEARO CORPORATION
             (Exact name of registrant as specified in its charter)


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


                Delaware                                        13-3840450
    (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                         Identification No.)

   One Washington Mall, Eighth Floor
         Boston, Massachusetts                                  02108-2610
(Address of principal executive offices)                        (Zip Code)

                                 (617) 371-4200
              (Registrant's telephone number, including area code)

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


    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes X      No
                                              ---       ---

<PAGE>   2


                                AEARO CORPORATION

                                TABLE OF CONTENTS

                       FORM 10-Q FOR THE QUARTERLY PERIOD
                              ENDED MARCH 31, 1998


PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

         CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
         MARCH 31, 1998 (UNAUDITED) AND SEPTEMBER 30, 1997                 3-4

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
         (UNAUDITED) FOR THE THREE MONTH AND SIX MONTH PERIODS 
         ENDED MARCH 31, 1998 AND 1997                                     5

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         (UNAUDITED) FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997      6

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
         (UNAUDITED)                                                       7-9

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS            10-17

PART II.          OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS                                        18

ITEM 2.           CHANGES IN SECURITIES                                    18

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES                          18

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS      19

ITEM 5.           OTHER INFORMATION                                        19

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K                         19


SIGNATURE PAGE                                                             20


<PAGE>   3


                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

                                AEARO CORPORATION

                  CONDENSED CONSOLIDATED BALANCE SHEETS--ASSETS

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               MARCH 31,           SEPTEMBER 30,
                                                                                 1998                  1997
                                                                               ---------           -------------
                                                                              (Unaudited)

<S>                                                                             <C>                  <C>     
CURRENT ASSETS:
   Cash and cash equivalents                                                    $  5,271             $  5,476
   Accounts receivable (net of reserve for doubtful accounts of $1,456
         and $1,301, respectively)                                                39,955               45,876
   Inventories                                                                    40,441               36,693
   Deferred and prepaid expenses                                                   3,172                3,397
                                                                                --------             --------

         Total current assets                                                     88,839               91,442
                                                                                --------             --------

PROPERTY, PLANT AND EQUIPMENT, NET                                                61,637               64,948

INTANGIBLE ASSETS, NET                                                           140,476              146,906

OTHER ASSETS                                                                       6,629                7,580
                                                                                --------             --------

         Total assets                                                           $297,581             $310,876
                                                                                ========             ========
</TABLE>






   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>   4


                                AEARO CORPORATION

   CONDENSED CONSOLIDATED BALANCE SHEETS--LIABILITIES AND STOCKHOLDERS' EQUITY
                                   (COMBINED)

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            MARCH 31,             SEPTEMBER 30,
                                                                              1998                    1997
                                                                            ---------             -------------
                                                                           (Unaudited)
<S>                                                                         <C>                     <C>     
CURRENT LIABILITIES:
   Current portion of long-term debt                                        $ 12,256                $ 10,937
   Accounts payable and accrued liabilities                                   33,497                  36,186
   Accrued interest                                                            3,791                   3,769
   U.S. and foreign income taxes                                               3,110                   2,734
                                                                            --------                --------

         Total current liabilities                                            52,654                  53,626
                                                                            --------                --------

LONG-TERM DEBT                                                               227,165                 233,729

DEFERRED INCOME TAXES                                                            920                     883

OTHER LIABILITIES                                                              2,653                   2,688

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value-
     Authorized--200,000 shares
     Issued and outstanding--45,000 shares                                         -                       -
   Common stock, $.01 par value-
     Authorized--200,000 shares
     Issued and outstanding--101,537.5 and 96,810 shares at
     March 31, 1998 and September 30, 1997, respectively                           1                       1
   Additional paid-in capital                                                 32,313                  32,476
   Retained  deficit                                                          (7,205)                 (5,269)
   Cumulative foreign currency translation adjustments                       (10,920)                 (7,258)
                                                                            --------                --------

         Total stockholders' equity                                           14,189                  19,950
                                                                            --------                --------

         Total liabilities and stockholders' equity                         $297,581                $310,876
                                                                            ========                ========
</TABLE>











   The accompanying notes are an integral part of these financial statements.

                                        4
<PAGE>   5


                                AEARO CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS ENDED              FOR THE SIX MONTHS ENDED
                                                           MARCH 31,                             MARCH 31,
                                                 --------------------------            ----------------------------
                                                   1998               1997               1998                1997
                                                 -------            -------            --------            --------

<S>                                              <C>                <C>                <C>                 <C>     
NET SALES                                        $71,779            $69,596            $141,491            $136,185

COST OF SALES                                     39,799             41,123              78,861              79,722
                                                 -------            -------            --------            --------

         Gross profit                             31,980             28,473              62,630              56,463

SELLING AND ADMINISTRATIVE                        23,382             21,361              44,897              41,829

RESEARCH AND TECHNICAL SERVICES                    1,040              1,270               2,311               2,597

AMORTIZATION OF INTANGIBLES                        1,699              2,125               3,423               4,316

OTHER CHARGES (INCOME), NET                         (205)             1,529                (643)              1,979
                                                 -------            -------            --------            --------

         Operating income                          6,064              2,188              12,642               5,742

INTEREST EXPENSE, NET                              6,604              6,703              13,262              13,246
                                                 -------            -------            --------            --------

         Income (loss) before provision
         (benefit) for income taxes                 (540)            (4,515)               (620)             (7,504)

PROVISION (BENEFIT) FOR INCOME TAXES                 647             (1,403)              1,316              (1,823)
                                                 -------            -------            --------            --------

         Net income (loss)                        (1,187)            (3,112)             (1,936)             (5,681)

PREFERRED STOCK DIVIDEND ACCRUED                   1,954              1,721               3,888               3,424
                                                 -------            -------            --------            --------

         Earnings (loss) applicable to
         Common Shareholders                     $(3,141)           $(4,833)           $ (5,824)           $ (9,105)
                                                 =======            =======            ========            ========


EARNINGS (LOSS) PER COMMON SHARE                 $(32.16)           $(49.03)           $ (59.80)           $ (91.98)
                                                 =======            =======            ========            ========

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING                                97,669             98,574              97,399              98,986
                                                 =======            =======            ========            ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       5




<PAGE>   6


                                AEARO CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   FOR THE SIX MONTHS ENDED
                                                                                            MARCH 31,
                                                                                 -----------------------------
                                                                                   1998                  1997
                                                                                 -------               -------
<S>                                                                              <C>                   <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                      $(1,936)              $(5,681)
   Adjustments to reconcile net loss to cash provided (used) by
   operating activities-
     Depreciation                                                                  5,873                 4,693
     Amortization of intangible assets and deferred financing costs                4,377                 5,265
     Deferred income taxes                                                           214                   215
     Other, net                                                                        5                   393
     Changes in assets and liabilities-
        Accounts receivable                                                        5,879                 2,449
        Inventory                                                                 (3,983)               (2,889)
        Accounts payable and accruals                                             (2,459)               (4,681)
        Other, net                                                                   511                (4,455)
                                                                                 -------               -------

               Net cash provided (used) by operating activities                    8,481                (4,691)
                                                                                 -------               -------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment                                     (3,217)               (3,904)
   Proceeds provided by disposals of property, plant and equipment                     2                   811
   Purchase of Shoplyne assets                                                        --                  (242)
                                                                                 -------               -------

               Net cash used by investing activities                              (3,215)               (3,335)
                                                                                 -------               -------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from (repayment of) revolving credit facility, net                      (200)                8,450
   Repayment of term loans                                                        (4,982)               (3,866)
   Repayment of external long-term debt                                              (93)                 (620)
   Sale of common stock, net                                                         943                    37
   Decrease (increase) in shareholder notes, net                                  (1,107)                  147
                                                                                 -------               -------

               Net cash provided (used) by financing activities                   (5,439)                4,148
                                                                                 -------               -------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                              (32)                  356
                                                                                 -------               -------

DECREASE IN CASH AND CASH EQUIVALENTS                                               (205)               (3,522)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                     5,476                 8,540
                                                                                 -------               -------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $ 5,271               $ 5,018
                                                                                 =======               =======

CASH PAID FOR:
   Interest                                                                      $12,374               $12,350
                                                                                 =======               =======
   Income taxes                                                                  $   792               $ 1,323
                                                                                 =======               =======
</TABLE>




   The accompanying notes are an integral part of these financial statements.

                                       6
<PAGE>   7


                                AEARO CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998
                                   (UNAUDITED)


(1)    CONSOLIDATED FINANCIAL STATEMENTS

       In the opinion of management, the accompanying unaudited condensed
       consolidated financial statements contain all adjustments necessary to
       present fairly, in accordance with generally accepted accounting
       principles, the Company's financial position, results of operations and
       cash flows for the interim periods presented. Such adjustments consisted
       of only normal recurring items. The results of operations for the interim
       periods shown in this report are not necessarily indicative of results
       for any future interim period or for the entire year. These condensed
       consolidated financial statements do not include all disclosures
       associated with annual financial statements and accordingly should be
       read in conjunction with the consolidated financial statements and notes
       thereto included in the Company's Annual Report on Form 10K.

(2)    FORMATION ACQUISITION AND FINANCING

       Aearo Corporation was formed by Vestar Equity Partners, L.P. (Vestar) in
       June, 1995 to effect the acquisition (the Formation Acquisition) of
       substantially all of the assets and liabilities of Aearo Company
       (formerly Cabot Safety Corporation) and certain affiliates (the
       Predecessor). The Predecessor was wholly owned by Cabot Corporation
       (Cabot) prior to the Formation Acquisition. The Formation Acquisition
       closed on July 11, 1995, when Aearo Corporation acquired substantially
       all of the assets and certain liabilities of the Predecessor for cash,
       preferred stock and a 42.5% common equity interest in Aearo Corporation.
       Aearo Corporation immediately contributed the acquired assets and
       liabilities to Aearo Company, a wholly owned subsidiary of Aearo
       Corporation, pursuant to an asset transfer agreement dated June 13, 1995.
       Aearo Corporation has no other material assets, liabilities or operations
       other than those that result from its ownership of the common stock of
       Aearo Company.

       The Formation Acquisition has been accounted for as a purchase
       transaction effective as of July 11, 1995, in accordance with Accounting
       Principles Board Opinion No. 16, Business Combinations, and EITF Issue
       No. 88-16, Basis in Leveraged Buyout Transactions, and accordingly, the
       consolidated financial statements for the periods subsequent to July 11,
       1995 reflect the purchase price, including transaction costs, allocated
       to tangible and intangible assets acquired and liabilities assumed, based
       on a portion of their estimated fair values as of July 11, 1995. The
       valuation of assets and liabilities acquired reflect carryover basis for
       the percentage ownership retained by Cabot.

(3)    USE OF ESTIMATES

       The preparation of financial statements in conformity with generally
       accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities
       and disclosure of contingent assets and liabilities at the date of the
       financial statements and the reported amounts of revenues and expenses
       during the reporting period. Actual results could differ from those
       estimates.


                                       7
<PAGE>   8


                                AEARO CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1998
                                   (UNAUDITED)

(4)    SIGNIFICANT ACCOUNTING POLICIES

       Income Taxes. Deferred tax assets and liabilities are determined based on
       the difference between the financial statement and tax bases of assets
       and liabilities using enacted tax rates in effect for the year in which
       the differences are expected to reverse.

       Intangible Assets. Intangible assets consist primarily of the costs of
       goodwill, patents, and trademarks purchased in business acquisitions.
       Intangible assets are amortized on the straight-line basis over either 25
       years or an estimated useful life, whichever is shorter.

       Loss per Common Share. Loss per common share has been computed by
       dividing loss applicable to common shareholders for the period by the
       weighted average number of common shares outstanding during the period.

       On October 1, 1997, the Company adopted Statement of Financial Accounting
       Standards (SFAS) No. 128, Earnings per Share, which improves the earnings
       per share information provided in the financial statements by simplifying
       the existing computational guidelines, revising the disclosure
       requirements and increasing the comparability of earnings per share on an
       international basis. SFAS No. 128 requires restatement of all
       prior-period earnings per share data presented. Prior period earnings
       (loss) per share in these financial statements were not affected under
       this new pronouncement.

(5)    INVENTORIES

       Inventories consisted of the following (dollars in thousands):

                                           MARCH 31,      SEPTEMBER 30,
                                             1998             1997
                                           ---------      -------------
                                          (unaudited)

              Raw materials                 $11,111          $10,031
              Work in process                 9,547            9,982
              Finished goods                 19,783           16,680
                                            -------          -------
       
                                            $40,441          $36,693
                                            =======          =======

       Inventories are stated at the lower of cost or market, cost being
       determined using the first-in, first-out method.

(6)    DEBT

       The Company's debt structure includes $100.0 million of Senior
       Subordinated Notes (Notes) due 2005, as well as a senior bank facility
       comprised of (i) term loans denominated in U.S., Canadian, British and
       German currencies (Term Loans) and (ii) a revolving credit facility
       providing for up to $25.0 million (Revolving Credit Facility)
       (collectively, the Senior Bank Facilities). Under the terms of both the
       Senior Bank Facilities and the Notes indenture, Aearo Company is required
       to comply with certain financial covenants and restrictions, with which
       Aearo Company was in compliance at March 31, 1998. At March 31, 1998, the
       amounts outstanding on the Term Loans and the Revolving Credit Facility
       were $124.7 million and $10.0 million, respectively.


                                       8



<PAGE>   9

                                AEARO CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1998
                                   (UNAUDITED)


(7)    COMMITMENTS AND CONTINGENCIES

       The Company is a defendant in various lawsuits and administrative
       proceedings which are being handled in the ordinary course of business.
       In the opinion of management of the Company, these suits and claims
       should not result in final judgments or settlements which, in the
       aggregate, would have a material adverse effect on the Company's
       financial condition or results of operations.

       During fiscal 1997 the Company received a complaint from Gargoyles, Inc.
       alleging that one of the Company's recently introduced plano eyewear
       products (Fectoids) infringes a patented lens shape utilized in the
       plaintiff's sun and sporting glasses. The Company is defending this
       allegation vigorously and the matter is expected to go to trial in fiscal
       1998. The ultimate outcome of this case and its impact on the Company's
       financial condition and results of operations cannot currently be
       determined.


                                       9
<PAGE>   10



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Company, including notes thereto, appearing
elsewhere in this Report. This Report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company's actual results could differ
materially from those set forth in such forward-looking statements. The factors
that might cause such a difference include, among others, the following: risks
associated with indebtedness; risks related to acquisitions; risks associated
with the conversion to a new management information system; high level of
competition in the Company's markets; importance and costs of product
innovation; risks associated with international operations; product liability
exposure; unpredictability of patent protection and other intellectual property
issues; dependence on key personnel; the risk of adverse effect of economic and
regulatory conditions on sales; and risks associated with environmental matters.


                     1998 COMPARED TO 1997 RESULTS
                      THREE MONTHS ENDED MARCH 31
           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                  Three Months Ended           Three Months Ended               Change
                                             ---------------------------   -------------------------   Increase     (Decrease)
                                             March 31,        Percent of   March 31,      Percent of   -----------------------
                                               1998            Net Sales     1997         Net Sales     Amount        Percent

<S>                                           <C>                <C>        <C>             <C>        <C>            <C>
Net Sales
   Safety Products                            $61,639             85.9      $60,577          87.0      $ 1,062           1.8
   Specialty Composites                        10,140             14.1        9,019          13.0        1,121          12.4
                                              -------            -----      -------         -----      -------
     Total net sales                           71,779            100.0       69,596         100.0        2,183           3.1
Cost of Sales                                  39,799             55.4       41,123          59.1       (1,324)         (3.2)
                                              -------            -----      -------         -----      -------
   Gross profit                                31,980             44.6       28,473          40.9        3,507          12.3
Operating Expenses
   Selling and administrative                  23,382             32.6       21,361          30.7        2,021           9.5
   Research and technical services              1,040              1.5        1,270           1.8         (230)        (18.1)
   Amortization of intangibles                  1,699              2.4        2,125           3.1         (426)        (20.1)
   Other charges(income), net                    (205)            (0.3)       1,529           2.2       (1,734)       (113.4)
                                              -------            -----      -------         -----      -------
     Operating income                           6,064              8.4        2,188           3.1        3,876         177.2
Interest expense, net                           6,604              9.2        6,703           9.6          (99)         (1.5)
                                              -------            -----      -------         -----      -------
   Loss before provision (benefit)
   for income taxes                              (540)            (0.8)      (4,515)         (6.5)      (3,975)        (88.0)
Provision (benefit) for income taxes              647              0.9       (1,403)         (2.0)       2,050         146.1
                                              -------            -----      -------         -----      -------
Net loss                                       (1,187)            (1.7)      (3,112)         (4.5)      (1,925)        (61.9)
Preferred stock dividend accrued                1,954              2.7        1,721           2.4          233          13.5
                                              -------            -----      -------         -----      -------
Loss applicable to common shareholders        $(3,141)            (4.4)     $(4,833)         (6.9)     $ 1,692)        (35.0)
                                              =======            =====      =======         =====      =======
Loss per common share                         $(32.16)                      $(49.03)                   $(16.87)        (34.4)
                                              =======                       =======                    =======
EBITDA                                        $10,685             14.9      $ 7,179          10.3      $ 3,506          48.8
                                              =======            =====      =======         =====      =======
</TABLE>


                                       10


<PAGE>   11

RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1997

Net Sales. Net sales in the three months ended March 31, 1998 increased 3.1% to
$71.8 million from $69.6 million in the three months ended March 31, 1997. Both
operating segments enjoyed growth with Safety Products net sales in the three
months ended March 31, 1998 increasing 1.8% to $61.6 million from $60.6 million
in the three months ended March 31, 1997 as growth with U.S. Consumer and North
American and European Industrial accounts more than offset the negative effect
of a stronger U.S. Dollar and decline in business with customers in Asia.
Specialty Composites' net sales in the three months ended March 31, 1998
increased 12.4% to $10.1 million from $9.0 million in the three months ended
March 31, 1997. The increase was primarily driven by the strengthening general
aviation and Class 8 truck markets.

Gross Profit. Gross profit in the three months ended March 31, 1998 increased
12.3% to $32.0 million from $28.5 million in the three months ended March 31,
1997. Gross Profit as a percentage of net sales in the three months ended March
31, 1998 was 44.6% as compared to 40.9% in the three months ended March 31,
1997. The Gross Profit amount was favorably impacted by the increased net sales,
and decreased cost of sales reflective of to the realization of operating
improvements as the Company overcame the difficulties triggered by the
conversion to a new management information system and the changes in
manufacturing processes at the Southbridge, Massachusetts facility. These
improvements have resulted in decreased spending at the Southbridge facility.
These decreased operating costs, as well as growth in Peltor products, were the
main determinants in the improvement in the gross profit as a percent of net
sales.

Selling and Administrative Expenses. Selling and administrative expenses in the
three months ended March 31, 1998 increased 9.5% to $23.4 million from $21.4
million in the three months ended March 31, 1997. Within this increase is a
reduction of $0.21 million of distribution expenses. Although net sales were up
3.1%, distribution expenses decreased as the Company continued to improve
service levels and overcame the difficulties triggered by the conversion to the
new management information system. Sales and marketing expenses decreased by
$0.25 million. These reductions were more than offset by normalized incentive
accruals as well as $1.6 million for severance and associated charges relative
to changes in senior management and the closing of the Company's Boston
headquarters in the current period compared to the year ago period. Selling and
administrative expenses as a percentage of net sales in the three months ended
March 31, 1998 increased to 32.6% of net sales as compared to 30.7% of net sales
in the three months ended March 31, 1997.

Research and Technical Services Expenses. Research and technical services
expenses in the three months ended March 31, 1998 decreased 18.1% to $1.04
million from $1.27 million in the three months ended March 31, 1997. This
decrease was due primarily to the timing of European development activities
during these interim periods, and to a lesser extent the effect of a stronger
U.S. dollar relative to the Swedish Krona.

Amortization of Intangibles. Amortization expense in the three months ended
March 31, 1998 decreased 20.1% to $1.7 million from $2.1 million in the three
months ended March 31, 1997. The decrease was due to final purchase accounting
adjustments associated with the acquisition of Peltor.

Other Charges (Income), Net. Other Charges (Income), Net improved to income of
$0.2 million for the three months ended March 31, 1998 as compared to expense of
$1.5 million for the three months ended March 31, 1997. This change was
primarily a result of foreign currency transaction gains in the three months
ended March 31, 1998 as compared to foreign currency transaction losses and
charges related to the abandonment of two automation related capital projects
totaling approximately $0.5 million at the Company's Indianapolis, Indiana
facility in the three months ended March 31, 1997.


                                       11



<PAGE>   12

Operating Income. Primarily as a result of the factors discussed above,
operating income increased 177.2% to $6.1 million in the three months ended
March 31, 1998 from $2.2 million in the three months ended March 31, 1997.
Operating income as a percentage of net sales in the three months ended March
31, 1998 was 8.5% as compared to 3.1% in the three months ended March 31, 1997.

Provision (Benefit) For Income Taxes. The provision for income taxes in the
three months ended March 31, 1998 was $0.6 million compared to a benefit of $1.4
million in the three months ended March 31, 1997. The Company's foreign
subsidiaries have taxable income in their jurisdictions, but the domestic
subsidiaries have a loss for income tax purposes in the U.S. In the results for
the three months ended March 31, 1998 the Company has not recognized any of the
tax benefits which will occur in future periods if there is taxable income in
the U.S.

Interest Expense, Net. Interest expense, net in the three months ended March 31,
1998 decreased 1.5% to $6.6 million from $6.7 million in the three months ended
March 31, 1997.

Net Loss. For the three months ended March 31, 1998 the Company had a net loss
of $1.2 million as compared to a net loss of $3.1 million for the three months
ended March 31, 1997.

EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and non-operating income or expense. Non-operating income or
expense is further defined as extraordinary gains or losses, or gains or losses
from sales of assets other than in the ordinary course of business. While the
Company believes EBITDA is a useful indicator of its ability to service debt,
EBITDA should not be considered as a substitute for net income determined in
accordance with generally accepted accounting principles as an indicator of
operating performance or as an alternative to cash flow as a measure of
liquidity. Investors should be aware that EBITDA as presented below may not be
comparable to similarly titled measures presented by other companies and
comparisons could be misleading unless all companies and analysts calculate this
measure in the same fashion.

                          EBITDA CALCULATION
                         (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                               Three Months Ended                Change
                                                   March 31,             Favorable (Unfavorable)
                                               1998         1997         Amount         Percent
                                               ----         ----         ------         -------

<S>                                          <C>           <C>          <C>             <C>   
Operating Income                             $ 6,064       $2,188       $  3,876         177.2%
Add Backs:
     Depreciation                              2,952        2,387            565          23.7%
     Amortization of Intangibles               1,699        2,125           (426)        (20.1%)
     Non-operating Costs (Income) (1)            (30)         479           (509)       (106.3%)
                                             -------       ------       --------

EBITDA                                       $10,685       $7,179       $  3,506          48.8%
                                             =======       ======       ========


(1) Other Charges (Income), Net Summary:

   Non-operating Costs (Income), Net         $   (30)      $  479       $  (509)        (106.3%)
   Foreign Transaction (Gains) Losses           (175)       1,050        (1,225)        (116.7%)
                                             -------       ------       -------
Total Other Charges (Income), Net            $  (205)      $1,529       $(1,734)        (113.4%)
                                             =======       ======       =======
</TABLE>



EBITDA for the three months ended March 31, 1998 was $10.7 million as compared
to $7.2 million for the three months ended March 31, 1997. This increase was due
primarily to the increase in net sales, the Company's 



                                       12


<PAGE>   13

improved service levels, the changes in manufacturing at the Southbridge,
Massachusetts facility, and the income from foreign currency transaction gains
(as compared to losses in the three month period ended March 31, 1997), with
some offset due to the increases in selling and administrative, primarily due to
the $1.6 million severance and associated charges relative to changes in senior
management and the closing of the Company's Boston headquarters in the current
period. EBITDA as a percentage of net sales in the three months ended March 31,
1998 was 14.9% as compared to 10.3% in the three months ended March 31, 1997.
Excluding the $1.6 million charge, EBITDA would have been $12.3 million, or
17.1% of net sales for the three months ended March 31, 1998.


                          1998 COMPARED TO 1997 RESULTS
                            SIX MONTHS ENDED MARCH 31
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                 Six Months Ended           Six Months Ended               Change
                                             -----------------------    ------------------------   Increase      (Decrease)
                                             March 31,    Percent of    March 31,     Percent of   ------------------------
                                               1998        Net Sales      1997        Net Sales     Amount         Percent

<S>                                          <C>             <C>        <C>             <C>        <C>             <C>
Net Sales
   Safety Products                           $121,564         85.9      $118,642         87.1      $ 2,922            2.5
   Specialty Composites                        19,927         14.1        17,543         12.9        2,384           13.6
                                             --------        -----      --------        -----      -------
     Total net sales                          141,491        100.0       136,185        100.0        5,306            3.9
Cost of Sales                                  78,861         55.7        79,722         58.5         (861)          (1.1)
                                             --------        -----      --------        -----      -------
   Gross profit                                62,630         44.3        56,463         41.5        6,167           10.9
Operating Expenses-
   Selling and administrative                  44,897         31.7        41,829         30.7        3,068            7.3
   Research and technical services              2,311          1.7         2,597          1.9         (286)         (11.0)
   Amortization of intangibles                  3,423          2.4         4,316          3.2         (893)         (20.7)
   Other charges(income),net                     (643)        (0.4)        1,979          1.5       (2,622)        (132.5)
                                             --------        -----      --------        -----      -------
     Operating income                          12,642          8.9         5,742          4.2        6,900          120.2
Interest expense, net                          13,262          9.4        13,246          9.7           16            0.1
                                             --------        -----      --------        -----      -------
   Loss before provision (benefit)
   for income taxes                              (620)        (0.5)       (7,504)        (5.5)      (6,884)         (91.7)
Provision (benefit) for income taxes            1,316          0.9        (1,823)        (1.3)       3,139          172.2
                                             --------        -----      --------        -----      -------
Net loss                                       (1,936)        (1.4)       (5,681)        (4.2)      (3,745)         (65.9)
Preferred stock dividend accrued                3,888          2.7         3,424          2.5          464           13.6
                                             --------        -----      --------        -----      -------
Loss applicable to common
   shareholders                              $ (5,824)        (4.1)     $ (9,105)        (6.7)     $(3,281)         (36.0)
                                             ========        =====      ========        =====      =======
Loss per common share                        $ (59.80)                  $ (91.98)                  $(32.18)         (35.0)
                                             ========                   ========                   =======
EBITDA                                       $ 21,900         15.5      $ 15,220         11.2      $ 6,680           43.9
                                             ========        =====      ========        =====      =======
</TABLE>


RESULTS OF OPERATIONS -- SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS
ENDED MARCH 31, 1997

Net Sales. Net sales in the six months ended March 31, 1998 increased 3.9% to
$141.5 million from $136.2 million in the six months ended March 31, 1997. Both
operating segments enjoyed growth with Safety Products net sales in the six
months ended March 31, 1998 increasing 2.5% to $121.6 million from $118.6
million in the six months ended March 31, 1997 as growth with U.S. Consumer and
North American and European Industrial accounts more than offset the negative
effect of a stronger U.S. Dollar and decline in business with customers in Asia.
Specialty Composites' net sales in the six months ended March 31, 1998 increased
13.6% to $19.9 million from $17.5 million 



                                       13


<PAGE>   14

in the six months ended March 31, 1997. The increase was primarily driven by the
strengthening general aviation and Class 8 truck markets.

Gross Profit. Gross profit in the six months ended March 31, 1998 increased
10.9% to $62.6 million from $56.5 million in the six months ended March 31,
1997. Gross Profit as a percentage of net sales in the six months ended March
31, 1998 was 44.3% as compared to 41.5% in the six months ended March 31, 1997.
The Gross Profit amount was favorably impacted by the increased net sales, and
decreased cost of sales reflective of to the realization of operating
improvements as the Company overcame the difficulties triggered by the
conversion to a new management information system and the changes in
manufacturing processes at the Southbridge, Massachusetts facility. These
improvements have resulted in decreased spending at the Southbridge facility.
These decreased operating costs were the main determinants in the improvement in
the gross profit as a percent of net sales.

Selling and Administrative Expenses. Selling and administrative expenses in the
six months ended March 31, 1998 increased 7.3% to $44.9 million from $41.8
million in the six months ended March 31, 1997. Within this increase is a
reduction of $0.43 million of distribution expenses. Although net sales were up
3.9%, distribution expenses decreased as the Company continued to improve
service levels and overcame the difficulties triggered by the conversion to the
new management information system. Sales and marketing expenses decreased by
$0.8 million. These reductions were more than offset by normalized incentive
accruals as well as $1.6 million for severance and associated charges relative
to changes in senior management and the closing of the Company's Boston
headquarters in the current period compared to the year ago period. Selling and
administrative expenses as a percentage of net sales in the six months ended
March 31, 1998 increased to 31.7% of net sales as compared to 30.7% of net sales
in the six months ended March 31, 1997.

Research and Technical Services Expenses. Research and technical services
expenses in the six months ended March 31, 1998 decreased 11.0% to $2.31 million
from $2.60 million in the six months ended March 31, 1997. This decrease was due
primarily to the timing of European development activities during these interim
periods, and to a lesser extent the effect of a stronger U.S. dollar relative to
the Swedish Krona.

Amortization of Intangibles. Amortization expense in the six months ended March
31, 1998 decreased 20.7% to $3.4 million from $4.3 million in the six months
ended March 31, 1997. The decrease was due to final purchase accounting
adjustments associated with the acquisition of Peltor.

Other Charges (Income), Net. Other Charges (Income), Net improved to income of
$0.6 million for the six months ended March 31, 1998 as compared to expense of
$2.0 million for the six months ended March 31, 1997. This change was a result
of foreign currency transaction gains in the six months ended March 31, 1998 as
compared to foreign currency transaction losses and charges related to the
abandonment of two automation related capital projects totaling approximately
$0.5 million at the Company's Indianapolis, Indiana facility in the six months
ended March 31, 1997.

Operating Income. Primarily as a result of the factors discussed above,
operating income increased 120.2% to $12.6 million in the six months ended March
31, 1998 from $5.7 million in the six months ended March 31, 1997. Operating
income as a percentage of net sales in the six months ended March 31, 1998 was
8.9% as compared to 4.2% in the six months ended March 31, 1997.

Provision (Benefit) For Income Taxes. The provision for income taxes in the six
months ended March 31, 1998 was $1.3 million compared to a benefit of $1.8
million in the six months ended March 31, 1997. The Company's foreign
subsidiaries have taxable income in their jurisdictions, but the domestic
subsidiaries have a loss for income tax purposes in the U.S. In the results for
the six months ended March 31, 1998 the Company has not recognized any of the
tax benefits which will occur in future periods if there is taxable income in
the U.S.


                                       14



<PAGE>   15

Interest Expense, Net. Interest expense, net in the six months ended March 31,
1998 increased 0.1% to $13.26 million from $13.25 million in the six months
ended March 31, 1997.

Net Loss. For the six months ended March 31, 1998 the Company had a net loss of
$1.9 million as compared to a net loss of $5.7 million for the six months ended
March 31, 1997.

EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and non-operating income or expense. Non-operating income or
expense is further defined as extraordinary gains or losses, or gains or losses
from sales of assets other than in the ordinary course of business. While the
Company believes EBITDA is a useful indicator of its ability to service debt,
EBITDA should not be considered as a substitute for net income determined in
accordance with generally accepted accounting principles as an indicator of
operating performance or as an alternative to cash flow as a measure of
liquidity. Investors should be aware that EBITDA as presented below may not be
comparable to similarly titled measures presented by other companies and
comparisons could be misleading unless all companies and analysts calculate this
measure in the same fashion.

                               EBITDA CALCULATION
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                Six Months Ended                 Change
                                                    March 31,             Favorable (Unfavorable)
                                               1998          1997         Amount          Percent
                                               ----          ----         ------          -------

<S>                                          <C>           <C>           <C>              <C>   
Operating Income                             $12,642       $ 5,742       $ 6,900           120.2%
Add Backs:
     Depreciation                              5,873         4,693         1,180            25.1%
     Amortization of Intangibles               3,423         4,316          (893)          (20.7%)
     Non-operating Costs(Income) (1)             (38)          469          (507)         (108.1%)
                                             -------       -------       -------

EBITDA                                       $21,900       $15,220       $ 6,680            43.9%
                                             =======       =======       =======


(1) OTHER CHARGES (INCOME), NET SUMMARY:
   Non-operating Costs (Income), Net         $   (38)      $   469       $  (507)         (108.1%)
   Foreign Transaction (Gains) Losses           (605)        1,510        (2,115          (140.1%)
                                             -------       -------       -------
Total Other Charges (Income), Net            $  (643)      $ 1,979       $(2,622)         (132.5%)
                                             =======       =======       =======
</TABLE>



EBITDA for the six months ended March 31, 1998 was $21.9 million as compared to
$15.2 million for the six months ended March 31, 1997. This increase was due
primarily to the increase in net sales, the Company's improved service levels,
the changes in manufacturing at the Southbridge, Massachusetts facility, and the
income from foreign currency transaction gains (as compared to losses in the six
month period ended March 31, 1997), with some offset due to the increases in
selling and administrative, primarily due to the $1.6 million severance and
associated charges relative to changes in senior management and the closing of
the Company's Boston headquarters in the current period. EBITDA as a percentage
of net sales in the six months ended March 31, 1998 was 15.5% as compared to
11.2% in the six months ended March 31, 1997. Excluding the $1.6 million charge,
EBITDA would have been $23.5 million, or 16.6% of net sales for the six months
ended March 31, 1998.


                                       15




<PAGE>   16

EFFECTS OF CHANGES IN EXCHANGE RATES

In general, the Company's results of operations are affected by changes in
exchange rates. Subject to market conditions, the Company prices its products in
Europe and Canada in local currency. While many of the Company's selling and
distribution costs are also denominated in these currencies, a large portion of
product costs are U.S. Dollar denominated. As a result, a decline in the value
of the U.S. Dollar relative to other currencies can have a favorable impact on
the profitability of the Company and an increase in the value of the U.S. Dollar
relative to these other currencies can have a negative effect on the
profitability of the Company. The Company's operations are also affected by
changes in exchange rates relative to the Swedish Krona. A decline in the value
of the Krona relative to other currencies can have a favorable impact on the
profitability of the Company and an increase in the value of the Krona relative
to other currencies can have a negative impact on the profitability of the
Company. During the fourth quarter of fiscal 1997, the Company initiated the use
of forward foreign currency contracts to mitigate the effects of changes in
foreign currency rates on profitability.


EFFECTS OF INFLATION

In recent years, inflation has been modest and has not had a material impact
upon the results of the Company's operations.


LIQUIDITY AND CAPITAL RESOURCES

The Company's sources of funds have consisted primarily of operating cash flow
and debt financing. The Company's uses of those funds consist principally of
debt service, capital expenditures and acquisitions.

The Company's debt structure includes $100.0 million of Senior Subordinated
Notes (Notes) due 2005, as well as a senior bank facility comprised of (i) term
loans denominated in U.S., Canadian, British and German currencies (Term Loans)
and (ii) a revolving credit facility providing for up to $25.0 million
(Revolving Credit Facility) (collectively, the Senior Bank Facilities). Under
the terms of both the Senior Bank Facilities and the Notes indenture, Aearo
Company is required to comply with certain financial covenants and restrictions,
with which Aearo Company was in compliance at March 31, 1998. At March 31, 1998,
the amounts outstanding on the Term Loans and the Revolving Credit Facility were
$124.7 million and $10.0 million, respectively.

Maturities under the Company's Term Loans are: $5.6 million for the remainder of
fiscal 1998, $13.0 million in fiscal 1999, $15.9 million in fiscal 2000, $20.7
million in fiscal 2001, $34.3 million in fiscal 2002 and $35.2 million in fiscal
2003. Other than upon a change of control or as a result of certain asset sales,
or in the event that certain excess funds exist at the end of a fiscal year, the
Company will not be required to make any principal payments in respect of the
Notes until maturity. The Company is required to make interest payments with
respect to both the Senior Bank Facilities and the Notes.

The Company's net cash provided by operating activities for the six months ended
March 31, 1998 totaled $8.5 million as compared to net cash used by operating
activities of $4.7 million for the six months ended March 31, 1997. The primary
factors leading to this improvement include: (i) improved operations which
decreased the net loss by $3.7 million, (ii) comparative improvements in
accounts receivable collections of $3.4 million, and (iii) a favorable $5.0
million change in other assets and liabilities primarily related to income taxes
payable in the year ago period. The Company realized improvements in working
capital in the current period as inventory management, shipping and billing
accuracy improved.


                                       16



<PAGE>   17

Net cash used by investing activities, primarily for capital expenditures, was
$3.2 million for the six months ended March 31, 1998 as compared to $3.3 million
for the six months ended March 31, 1997. The six months ended March 31, 1997
included proceeds of $0.8 million from the sale of the Rhode Island facility of
Peltor, Inc. as those operations were consolidated into the Company's
Southbridge, Massachusetts and Indianapolis, Indiana facilities. Generally, the
capital spending is of a relatively short duration, with the complete commitment
process typically involving less than one year. The major items included in
capital expenditures over the past three years were an aggregate of $5.4 million
for a casting line at the Newark, Delaware facility and $8.0 million for the new
management information system.

Net cash used by financing activities for the six months ended March 31, 1998
was $5.4 million as the Company reduced the borrowings under the Revolving
Credit Facility by $0.2 million and made scheduled principal repayments on the
Term Loans totalling $5.0 million. Net cash provided by financing activities for
the six months ended March 31, 1997 was $4.1 million as borrowings under the
Revolving Credit Facility increased by $8.5 million, more than offsetting the
scheduled principal repayments on the Term Loans of $3.9 million.

The Company has a substantial amount of indebtedness. The Company relies on
internally generated funds, and to the extent necessary, on borrowings under the
Revolving Credit Facility (subject to certain customary drawing conditions) to
meet its liquidity needs. Throughout most of fiscal 1997, borrowing levels
remained high until the difficulties associated with the conversion to the new
management information system were largely resolved and the improvements in
production planning were beginning to be realized. Management believes that
improvements will continue to be realized during the current fiscal year. The
Company anticipates that operating cash flow will be adequate to meet its debt
service and capital expenditure requirements for the next several years,
although there can be no assurances that existing levels of sales and normalized
profitability, and therefore cash flow, will be maintained in the future. Levels
of sales and profitability may be impacted by service levels, continued new
product development, worldwide economic conditions and competitive pressures. In
addition, the Company may make additional acquisitions in the future and would
rely on internally generated funds and, to the extent necessary, on borrowings
to finance such acquisitions.



                                       17
<PAGE>   18


                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

Various lawsuits and claims arise against the Company in the ordinary course of
its business. Most of these lawsuits and claims relate to the Company's safety
eyewear and respiratory product lines and primarily involve accidents and/or
exposures occurring after the Company's predecessor acquired the AOSafety
Division from American Optical Corporation in April 1990. The Company is
contingently liable with respect to numerous lawsuits involving respirators
manufactured by American Optical Corporation prior to the acquisition of the
AOSafety Division in April 1990. These lawsuits typically involve plaintiffs
alleging that they suffer from asbestosis or silicosis, and that such condition
results in part from respirators which were negligently designed or
manufactured. The defendants in these lawsuits are often numerous, and include,
in addition to respirator manufacturers, employers of the plaintiffs and
manufacturers of sand (used in sand blasting) and asbestos. Responsibility for
legal costs, as well as for settlements and judgments, is shared contractually
by the Company, American Optical Corporation and a prior owner of American
Optical Corporation. The Company and Cabot have entered into an arrangement
relating to certain respirator claims asserted after July 11, 1995 (the date of
the Company's formation) whereby, so long as the Company pays to Cabot an annual
fee of $400,000, which the Company has elected to pay, Cabot will retain
responsibility and liability for, and indemnify the Company against, certain
legal claims alleged to arise out of the use of respirators manufactured prior
to July 1995. The Company has the right to discontinue the payment of such
annual fee at any time, in which case the Company will assume responsibility for
and indemnify Cabot with respect to such claims.

During fiscal 1997 the Company received a complaint from Gargoyles, Inc.
alleging that one of the Company's recently introduced plano eyewear products
(Fectoids) infringes a patented lens shape utilized in the plaintiff's sun and
sporting glasses. The Company is defending this allegation vigorously and the
matter is expected to go to trial in fiscal 1998. The ultimate outcome of this
case and its impact on the Company's financial condition and results of
operations cannot currently be determined.

ITEM 2.  CHANGES IN SECURITIES

Effective March 31, 1998 the Company adjusted the preliminary fair market value
of the shares of its common stock sold in the first quarter of this fiscal year.
The preliminary per share sales price of $300 was adjusted to $200 and affected
a total of 865 shares.

Also effective March 31, 1998, the Company exercised its right to repurchase a
total of 3,137.5 shares of its common stock from former members of management
for an aggregate consideration of $627,500.

In addition, effective March 31, 1998 the Company sold 4,050 shares of its
common stock to Michael A. McLain, its President and Chief Executive Officer.
The Company also sold 1,000 shares of common stock each to Joseph C. Marlette,
its Vice President, Manufacturing, James H. Floyd, its Vice President,
Logistics, and Rahul Kapur, its Vice President, Corporate Development. All such
purchases were at a purchase price per share of $200 in a combination of cash
and loans from the Company. The loans are secured by the purchased shares, have
a term of 5 years and bear interest at an annual rate of 7%. The issuance of the
above shares was made pursuant to the Company's 1995 Employee Stock Purchase
Plan and was exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), by virtue of Section 4(2) of the Act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

                 None.



                                       18


<PAGE>   19


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

                 None.

ITEM 5.  OTHER INFORMATION


On February 3, 1998, the Company announced the appointment of Michael A. McLain
as President and Chief Executive Officer. Mr. McLain also joined the Company's
Board of Directors. Mr. McLain, who succeeds John D. Curtin, Jr., was formerly
President and Chief Executive Officer of DowBrands Inc., of Indianapolis,
Indiana, a large manufacturer of household consumer products with annual
revenues of approximately $1 billion.

Mr. Curtin has retired from his role as Chairman and Chief Executive Officer of
the Company, but will continue to serve on the Board and remain active with the
Company as a consultant. Norman W. Alpert, a member of the Company's Board of
Director's and a managing director of Vestar Capital Partners, has assumed the
position of Chairman.

On March 25, 1998, the Company announced plans to close the Boston headquarters
and relocate it to Indianapolis, where the Company has substantial operations.

Effective March 30, 1998, James Jandl, Director of Human Resources, Steven F.
Scott, Vice President, General Counsel, and Mark H. Hague, Vice President,
Operations, have left their positions with the Company. Coinciding with these
departures were the appointments of Joseph C. Marlette as Vice President,
Manufacturing, James H. Floyd as Vice President, Logistics, and Rahul Kapur as
Vice President, Corporate Development. Messrs. Marlette, Floyd, and Kapur were
formerly with DowBrands Inc., of Indianapolis.

On April 7, 1998, John W. Priesing resigned from the Company's Board of
Directors.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits

        10.1   --   Employment Agreement between Aearo Corporation and 
                    Michael A. McLain
        10.2   --   Agreement between Aearo Corporation and John D. Curtin, Jr.
        27.1   --   Financial Data Schedule.

        (b)  Reports on Form 8-K

             None.





                                       19
<PAGE>   20





                                   SIGNATURES

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

Date: May 4, 1998                   AEARO CORPORATION

                                    /s/ Bryan J. Carey
                                    --------------------------------------------
                                    Bryan J. Carey
                                    Vice President, Chief Financial Officer,
                                    Treasurer and Assistant Secretary







                                       20

<PAGE>   21



                                  EXHIBIT INDEX


EXHIBITS           DESCRIPTION
--------           -----------
                   
  10.1      --     Employment Agreement between Aearo Corporation and Michael A.
                   McLain.
  10.2      --     Agreement between Aearo Corporation and John D. Curtin, Jr.
  27.1      --     Financial Data Schedule.













                                       21