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

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

                               FORM 10-Q

[X]         Quarterly Report Pursuant to Section 13 or 15(d) of
                     The Securities Exchange Act of 1934

            For the quarterly period ended: December 31, 1997
                                  or

[ ]         Transition Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                        Commission File No.  1-11474

                           BREED TECHNOLOGIES, INC.
                (Exact name of registrant as specified in charter)

         Delaware                                        22-2767118
(State of Incorporation)                   (I.R.S. Employer Identification No.)

     5300 Old Tampa Highway                       Lakeland, Florida 33811
(Address of principal executive offices)                (Zip Code)

                                                  (941) 668-6000
                (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 __.

         As of February 12, 1998,  31,712,608 shares of the registrant's  common
stock, par value $.01 per share, were outstanding.



<PAGE>



                                                      INDEX


PART I.           FINANCIAL INFORMATION                                    Page


Item 1.  Financial Statements

                  Consolidated Condensed Balance Sheets - December 31, 1997
                      (Unaudited)and June 30, 1997 ..........                 1

                  Consolidated Condensed Statements of Earnings (Unaudited)
                      Three and six months ended December 31, 1997 and 1996   3

                  Consolidated Condensed Statements of Cash Flows (Unaudited)
                      Six months ended December 31, 1997 and 1996 .....       4

                  Consolidated Statement of Stockholders Equity (Unaudited).. 5

                  Notes to Consolidated Condensed Financial Statements
                      (Unaudited) .....................................       6

Item 2.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations ................      12


PART II.  OTHER INFORMATION


Item 4. Submission of Matters to a Vote of Security Holders............      16

Item 6. Exhibits and Reports on Form 8-K ..............................      17

Signatures ............................................................      18









<PAGE>





                                          PART I - FINANCIAL INFORMATION


Item 1.           Financial Statements



Breed Technologies, Inc.
Consolidated Condensed Balance Sheets
In Millions, except per share data
<TABLE>
<CAPTION>


                                                                  December 31,        June 30,
                                                                     1997              1997
                                                                  (Unaudited)
<S>                                                                 <C>             <C>

ASSETS
Current Assets:
   Cash and cash equivalents                                         $    32.3      $     18.7
   Accounts receivable, principally trade                                287.1           208.0
   Inventories:
     Raw materials                                                        56.1            24.8
     Work in process                                                      30.3            23.4
     Finished goods                                                       34.9            27.1
                                                                     ---------      ----------
         Total Inventories                                               121.3            75.3
                                                                     ---------      ----------
   Prepaid expenses and other current assets                              61.9            13.5
                                                                     ---------      ----------

         Total Current Assets                                            502.6           315.5

Property, plant and equipment, net                                       347.4           276.5
Intangibles, net                                                         744.9           221.0
Net assets held for sale                                                  22.2            52.6
Other assets                                                              48.3            11.6
                                                                     ---------      ----------
                                     Total Assets                    $  1,665.4    $     877.2
                                                                     =========      ==========
</TABLE>

See Notes to Consolidated Condensed Financial Statements.






<PAGE>




Breed Technologies, Inc.
Consolidated Condensed Balance Sheets
In Millions, except per share data
<TABLE>

<CAPTION>

                                                                  December 31,        June 30,
                                                                          1997           1997
                                                                   (Unaudited)



<S>                                                                  <C>            <C>

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Notes payable and current portion of long-term debt (Note 3)      $    819.0    $     191.7
   Accounts payable                                                      262.4           121.5
   Accrued expenses                                                      240.9            49.5
                                                                     ---------      ----------
         Total Current Liabilities                                      1322.3           362.7
                                                                     ---------      ----------

Long-term debt                                                            31.9           231.7
Other long-term liabilities                                               29.8            16.3
                                                                     ---------      ----------
         Total Liabilities                                              1384.0           610.7
                                                                     ---------      ----------

Company obligated mandatorily redeemable convertible preferred
   securities (Note 5)                                                   250.0             ---
Stockholders' Equity:
   Common stock,  par value  $0.01,  authorized  50,000,000  shares,  issued and
     outstanding 31,712,608 and 31,679,442 shares at
     December 31, 1997 and June 30, 1997, respectively                     0.3             0.3
   Series A Preference Stock par value $0.001, authorized 5,000,000
        shares, issued and outstanding 4,883,227 shares at December
        31, 1997 (Note 4)                                                115.0             ---
   Additional paid-in capital                                             78.0            77.5
   Warrants (Note 3)                                                       1.9             ---
   Retained earnings                                                   (139.3)           208.0
   Foreign currency translation adjustments                             (24.2)          (18.8)
   Unearned compensation                                                 (0.3)           (0.5)
                                                                     ---------      ----------
     Total Stockholders' Equity                                           31.4           266.5
                                                                     ---------      ----------
         Total Liabilities and Stockholders' Equity                  $  1,665.4     $     877.2
                                                                     =========      ==========

</TABLE>


See Notes to Consolidated Condensed Financial Statements.








<PAGE>



Breed Technologies, Inc.
Consolidated Condensed Statements of Operations (Unaudited) In millions,  except
earnings per share <TABLE> <CAPTION>

                                                        Three Months Ended        Six Months Ended
                                                           December 31,             December 31,
                                                       ---------------------    ---------------------
                                                            1997        1996         1997        1996
<S>                                                    <C>          <C>         <C>         <C>
Net sales                                              $   340.7    $  182.6    $   535.9   $   341.2

Cost of sales (Note 6)                                     312.9       145.9        479.7       262.4
                                                       ---------    --------    ---------   ---------
Gross profit                                                27.8        36.7         56.2        78.8
Operating expenses:
   Selling, general and administrative expenses             21.3        16.7         37.6        32.2
   Research, development and engineering expenses           18.6         9.9         27.5        17.8
   Repositioning charges (Note 6)                          244.0         ---        244.0         ---
   In-process research and development expenses (Note 6)    77.5         ---         77.5         ---
   Amortization of intangibles                               4.0         0.8          6.0         2.1
                                                       ---------    --------    ---------   ---------
     Total operating expenses                              365.4        27.4        392.6        52.1
                                                       ---------    --------    ---------   ---------
         Operating income (loss)                         (337.6)         9.3      (336.4)        26.7
Interest expense                                            27.1         6.7         35.4        11.1
Other income (expense), net                                  0.4         2.3        (0.1)         2.5
                                                       ---------    --------    ---------   ---------
         Earnings   (loss)  before  income  taxes,   distributions   on  Company
         obligation mandatorily redeemable convertible preferred
         securities and extraordinary item               (364.3)         4.9      (371.9)        18.1
Income taxes (benefit) (Note 7)                           (46.5)         1.8       (49.9)         7.1
Distributions on Company obligation mandatorily
   redeemable convertible preferred securities (Note 5)      1.4         ---          1.4         ---
                                                       ---------    --------    ---------   ---------
         Earnings (loss) before extraordinary loss       (319.2)         3.1      (323.4)        11.0
Extraordinary loss, net of tax benefit of $0.4 million     (0.7)         ---        (0.7)         ---
                                                       ---------    --------    ---------   ---------

         Net earnings (loss)                            $(319.9)    $    3.1     $(324.1)   $    11.0
                                                        =========    ========    =========   ========

Basic earning (loss) per common share (Note 8):
   Earnings (loss) before extraordinary loss            $(10.07)    $   0.10     $(10.20)   $    0.35
   Extraordinary loss                                     (0.02)         ---       (0.02)         ---
                                                       ---------    --------    ---------   ---------
         Net earnings (loss)                            $(10.09)    $   0.10     $(10.22)   $    0.35
                                                       =========    ========    =========   =========
Diluted earnings (loss) per common share:
   Earnings (loss) before extraordinary loss            $(10.07)    $   0.10     $(10.20)   $    0.34
   Extraordinary loss                                     (0.02)         ---       (0.02)         ---
                                                       ---------    --------    ---------   ---------
         Net earnings (loss) - assuming dilution        $(10.09)    $   0.10     $(10.22)   $    0.34
                                                       =========    ========    =========   =========
</TABLE>


See Notes to Consolidated Condensed Financial Statements.







<PAGE>



Breed Technologies, Inc.
Consolidated Condensed Statements of Cash Flows (Unaudited)
In millions
<TABLE>
<CAPTION>
                          Six Months Ended December 31
                                                                      ---------------------------------
                                                                          1997                     1996
                                                                      -------------         -----------
Cash Flows from Operating Activities:
<S>                                                                     <C>                     <C>
   Net earnings (loss)                                                  $  (324.1)              $11.0
Adjustments  to  reconcile  net  earnings  to net cash  provided  by  (used  in)
   operating activities:
   Depreciation and amortization                                             27.1                21.5
   Non-cash items included in repositioning and other special charges       195.9                 ---
   Accrual for repositioning and other special charges                       76.5                 ---
   Changes in working capital items and other                                 3.6                39.9
                                                                      -------------         ---------
         Net cash provided by (used in) operating activities                (21.0)               72.4
                                                                      -------------         ---------

Cash Flows from Investing Activities:
   Cost of acquisition, net of cash acquired (Note 2)                      (710.0)            (211.0)
   Purchases of property, plant and equipment                               (23.4)             (41.7)
   Proceeds from sale of assets                                               2.6                 ---
                                                                      -------------         ---------
         Net cash used in investing activities                             (730.8)            (252.7)
                                                                      -------------        ----------

Cash Flows from Financing Activities:
   Proceeds from (repayment of) debt, net                                   427.5               119.0
   Proceeds from Series A Preference Stock issuance                         115.0                 ---
   Proceeds from Series B Preference Stock issuance                         200.0                 ---
   Fees associated with Series B Preference Stock issunce                   (10.0)                ---
   Redemption of Series B Preference Stock issuance                        (200.0)                ---
   Proceeds from Company obligated mandatorily redeemable
     convertible preferred securities, less relatedees                      239.0                 ---
   Cash dividends paid                                                       (2.2)              (4.4)
   Proceeds from common stock issued                                          0.7                 0.6
                                                                      -------------         ---------
         Net cash provided by financing activies                            770.0               115.2
                                                                      -------------         ---------

Effect of exchange rate changes on cash                                      (4.6)              (0.5)
                                                                      -------------        ----------

Net increase/(decrease) in cash and cash eqvalents                           13.6              (65.6)
Cash and cash equivalents at beginning oferiod                               18.7                95.8
                                                                      -------------        ----------
Cash and cash equivalents at end of period                            $      32.3      $         30.2
                                                                      =============        ==========

Cost of Acquisition:
Working capital, net of cash acquired                                 $      39.5      $      (44.2)
Property, plant and equipment                                              (140.3)           (151.2)
Cost in excess of net assets acquired                                      (683.3)            (72.9)
Intangibles-write-off of in-process research and development costs           77.5                ---
Investments and other assets                                                (11.8)            (19.0)
Long-term debt                                                               ---                33.9
Other long-term liabilities                                                   8.4               42.4
                                                                      -------------        ---------
Net cost of acquisition                                               $    (710.0)       $   (211.0)
                                                                      =============        =========
</TABLE>

See Notes to Consolidated Condensed Financial Statements.








<PAGE>





Breed Technologies, Inc.
Consolidated Statement of Stockholders Equity (Unaudited)
In Millions, except per share data
<TABLE>
<CAPTION>





                                                                 Series A       Series B     Additional
                                          Common Stock          Preference     Preference      Paid-In                    Retained
                                        Shares            Amount   Stock          Stock        Capital       Warrants     Earnings
                                  ---------------------------- -------------  ------------- -------------  ------------ ------------
<S>                                    <C>         <C>               <C>           <C>       <C>             <C>         <C>
Balance at June 30, 1997               31,679,442  $       0.3           ---           ---   $       77.5           ---  $     208.0
   Net loss                                                                                                                  (324.1)
   Translation adjustments
   Issue Series A Preference
   Stock, (Note 4)                                                     115.0
   Issue Series B Preference
   Stock, (including fees),                                                           200.0                                   (10.0)
    (Note 5)
   Redemption of Series B
   Preference Stock, (Note 5)                                                       (200.0)
   Fees associated with
   Company obligated
   mandatorily redeemable
   convertible preferred
   securities                                                                                                                 (11.0)
   Warrants issued with Credit
   Facility, (Note 3)                                                                                               1.9
   Shares issued under Stock
   Option Plans                            39,692                                                     0.7
   Shares terminated under Stock
   Incentive Plan, net of granted
   Shares                                 (6,526)                                                   (0.2)
   Cash dividends                                                                                                              (2.2)
                                  ---------------  ----------- -------------  ------------- -------------  ------------ ------------
Balance at December 31, 1997           31,712,608  $       0.3   $     115.0            ---  $       78.0  $        1.9   $  (139.3)
                                  ===============  =========== =============  ============= =============  ============ ============

</TABLE>




                                        Foreign
                                       Currency
                                      Translation       Unearned
                                      Adjustments     Compensation      Total
                                    --------------- ----------------- ----------
Balance at June 30, 1997             $       (18.8)     $       (0.5)    $ 266.5
  Net Loss                                                               (324.1)
  Translation adjustments                     (5.4)                        (5.4)
  Issue Series A Preference
  Stock, (Note 4)                                                          115.0
  Issue Series B Preference
  Stock, (including fees),
  (Note 5)                                                                 190.0
  Redemption of Series B
  Preference Stock, (Note 5)                                             (200.0)
  Fees associated with
  Company obligated
  mandatorily redeemable
  convertible preferred
  securities                                                              (11.0)
  Warrants issued with Credit
  Facility, (Note 3)                                                         1.9
  Shares issued under Stock
  Option Plans                                                    0.2        0.9
  Shares terminated under Stock
  Incentive Plan, net of granted
  Shares                                                                   (0.2)
  Cash dividends                                                           (2.2)
                                    --------------- ----------------- ----------
Balance at December 31, 1997         $       (24.2)     $       (0.3)   $   31.4
                                    =============== ================= ==========











<PAGE>




      Notes to Consolidated Condensed Financial Statements
                           (Unaudited)

Note 1 - Basis of Presentation
     The accompanying  unaudited  consolidated condensed financial statements of
Breed  Technologies,  Inc.  (the  "Company"or  "Breed")  have been  prepared  in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly,  they do not include all of the information and notes required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three and six months ended  December 31, 1997 are not
necessarily  indicative  of the results that may be expected for the year ending
June 30, 1998. The  consolidated  financial  statements  include the accounts of
Breed and all majority owned subsidiaries. All significant intercompany accounts
and transactions  have been eliminated.  For further  information,  refer to the
consolidated  financial  statements and notes thereto  included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1997.
     Note 2 -  Acquisition  On  October  30,  1997  the  Company  completed  the
acquisition of certain  assets and the assumption of certain  liabilities of the
"Safety Restraints Systems" business unit of AlliedSignal,  Inc. and 100% of the
outstanding    shares   of    capital    stock   of   ICSRD    Rueckhaltesysteme
Fahrzeugsicherheit  GmbH, a German company,  BSRD Limited,  an English  company,
AlliedSignal  India,  Inc.,  a  Delaware  company,   Sistemas   AlliedSignal  de
Seguridad,  S.A. de C.V., a Mexican  company,  and  AlliedSignal  Cinturones  de
Seguridad,   S.A.  de  C.V.,  a  Mexican  company  (collectively,   "SRS").  The
acquisition  was made  pursuant to the Asset  Purchase  Agreement  ("Agreement")
dated  August 27,  1997  among  AlliedSignal,  Inc.  (and  certain  subsidiaries
identified in the Agreement) and Breed (and certain  subsidiaries  identified in
the Agreement).
     SRS produces  seatbelts and airbags with principal  locations in Knoxville,
Tennessee;  Maryville,   Tennessee;   Greenville,  Alabama;  St.  Clair  Shores,
Michigan; Sterling Heights, Michigan; Douglas, Arizona;  Brownsville,  Texas; El
Paso,  Texas;  Aqua Prieta,  Mexico;  Juarez,  Mexico;  Valle  Hermoso,  Mexico;
Carlisle, England; Colleferro, Italy; Turin, Italy; Siena, Italy; Arzano, Italy;
and Barcelona, Spain.
     The purchase price for the SRS acquisition  was $710.0  million,  which was
financed with  borrowings  under a revolving and term credit  facility,  the net
proceeds  from the  issuance  and sale of  Series B  Preference  Securities  (as
defined in Note 5) and the net  proceeds  from the issuance and sale of Series A
Preference Shares to Siemens AG.
     The allocation of the purchase price is preliminary  and subject to change.
In addition, the purchase price is subject to post-closing  adjustments based on
the net book value of the acquired business, retained cash balances, if any, and
any amounts paid with respect to certain intercompany  obligations.  The initial
purchase  price shall be  increased  or decreased by the amount by which the net
book  value  of SRS as of the  closing  date  is  greater  than  or  less  than,
respectively,  $175.3 million. The Company has submitted to AlliedSignal, Inc. a
post closing  purchase  price  adjustment  in  accordance  with the terms of the
agreement.  The final adjustment will be determined in accordance with the terms
of the Agreement.
     The pro forma  unaudited  results of  operations  for the six months  ended
December 31, 1997 and 1996, assuming the acquisition of SRS had been consummated
as of July 1, 1996, are as follows:

                                                          Six Months Ended
                                                            December 31,
In millions, except per share data                   1997                1996
--------------------------------------------------------------------------------
Net sales                                        $  813.5            $     852.3
Net loss                                         $ (389.9)           $    (13.5)
Net loss per share - basic and diluted           $ (12.30)           $    (0.43)







<PAGE>




Note 3 - Borrowings
     On October 30, 1997, in connection with the acquisition of SRS, the Company
and NationsBank  entered into a new revolving and term credit facility  ("Credit
Facility") pursuant to which the Company has $900 million of aggregate borrowing
availability. At December 31, 1997, the Company had an aggregate of $810 million
of borrowings  outstanding  under the Credit Facility  (including  approximately
$10.0  million of letters of credit) and the weighted  average  interest rate on
such borrowings was approximately 8.76% per annum.
     The credit facility consists of a $600 million term loan and a $300 million
revolver  (with  $75  million  multicurrency  and $25  million  letter of credit
sublimits).  Both credit  facilities have a 366 day term which expire on October
31, 1998. Borrowings under the Credit Facility bear interest at a per annum rate
equal to, at the election of the  Company,  either (i) the higher of the Federal
Funds Rate plus 0.5% or the  NationsBank  prime rate plus,  in either  case,  an
additional  margin  ranging  from 2.0% to 5.0%  based on the  length of time the
Credit  Facility  is in  existence,  or  (ii) a  rate  based  on the  prevailing
interbank offered rate plus an additional margin ranging from 3.0% to 6.0% based
on the length of time the Credit Facility is in existence.  The letter of credit
fee  ranges  from  3.0% to 6.0% and,  when  there is more  than one  Lender,  an
additional  0.125% for the issuing  bank.  The Company is also required to pay a
quarterly  unused facility fee. In addition,  the Company paid a commitment fee,
upon  the  execution  of the  Credit  Facility,  equal  to 3% of  the  aggregate
available  borrowings  under the  Credit  Facility  ($27  million).  The  Credit
Facility has a 1.5% take-out fee ($13.5 million), subject to certain conditions,
which is payable  upon  repayment in full of all amounts  outstanding  under the
Credit Facility.
     The Credit  Facility  is secured by (i) a security  interest  in all of the
personal  property  and  assets  (including   inventory,   accounts  receivable,
intellectual  property,  mortgages on all real property owned by the Company and
the assets acquired  pursuant to the SRS acquisition) of the Company and certain
subsidiaries,  (ii) a stock  pledge by the Company and certain  subsidiaries  of
their  stock in  certain  domestic  subsidiaries  and at least 65% of the voting
stock and 100% of the non- voting stock of foreign subsidiaries,  (iii) a pledge
of the common stock owned by A. Breed, L.P., a Texas limited  partnership and J.
Breed, L.P., a Texas limited  partnership,  (iv) an assignment of certain leases
for  facilities  of the  Company  and  certain  subsidiaries,  (v) a pledge  and
subordination of intercompany  notes, (vi) an assignment of certain  partnership
interests,  and (vii) an  assignment  of a trademark  licensing  agreement.  The
Credit Facility is guaranteed by certain of the Company's subsidiaries.
     The Credit  Facility  requires  compliance  with  certain  covenants by the
Company and its subsidiaries,  including, among other things: (i) maintenance of
certain  financial  ratios  and  compliance  with  certain  financial  tests and
limitations;  (ii)  limitations  on the  payment  of  dividends,  incurrence  of
additional indebtedness and granting of certain liens; and (iii) restrictions on
mergers, acquisitions, and investments. At December 31, 1997, the Company was in
compliance with all covenants.
     In  connection  with the Credit  Facility,  the Company also entered into a
warrant agreement with NationsBank  providing for the issuance by the Company of
a warrant to  purchase  common  stock.  The warrant is  exercisable  for 250,000
common  shares at an exercise  price of $23.125  per share.  The  warrants  were
valued at $1.9 million using the Black- Shoals model as recommended by Financial
Accounting  Standards  Statement  No.  123.  The  number of shares for which the
warrant is exercisable may be increased to a maximum of 3,000,000  shares if the
Company  fails to  fulfill  certain  obligations  prior to July  26,  1998.  The
exercise  price for such  additional  shares  shall be the  market  price of the
common  stock on the day such warrant  shares  become  exercisable.  The warrant
agreement and the warrant expire on October 30, 2000. NationsBank may elect that
the warrant shares be included in certain  registration  statements filed by the
Company  under the  Securities  Act for the sale of common  stock of the Company
and,  until October 30, 2002,  may demand that the Company  register the warrant
shares on Form S-3.






<PAGE>



Note 4-Siemens Investment Joint Venture Agreement
     On December 24, 1997,  the Company and Siemens  Aktiengesellschaft  (A.G.),
Automotive Systems Group ("Siemens") signed an agreement forming a joint venture
for the worldwide research, development,  engineering, assembly and marketing of
motor vehicle occupant safety restraint systems.
     The joint  venture  will be owned  effectively  50% by both the Company and
Siemens. Siemens will contribute to the joint venture its shares in the existing
Passive Restraint Systems ("PARS") GmbH. PARS operates crash test facilities and
develops  occupant  safety  systems.  It will serve as a center for the  design,
engineering,simulation,  testing and sales of integrated occupant safety systems
in  Europe.  Breed  will form a company  with its  headquarters  and  facilities
located in Michigan and will  contribute  various assets which are comparable to
those existing at PARS. This new entity will act in the same capacity as PARS in
North  America.  Breed will then  contribute  its ownership  interest in the new
company to the joint venture.
     The joint venture will be governed by a partners'  committee  consisting of
three  representatives  from each of the Company and Siemens.  The joint venture
will operate pursuant to an operating budget approved by the partners' committee
and subject to annual review.  No expenditures in excess of budgeted amounts may
be made without  consent of the  partners'  committee.  The parties will provide
funding to the joint venture to the extent revenues and external funding sources
are inadequate to cover budgeted  operating  expenses and capital  expenditures.
Neither  party can be compelled to provide  funding for  operating  expenses and
capital expenditures above budgeted amounts.
     Any technology generated by the joint venture (either by itself or with one
of the parties) will belong jointly to Siemens and the Company.  Each party will
be responsible for warranties and liabilities, including recall actions, arising
from its components marketed by the joint venture to customers.
     The term of the joint venture is not fixed.  However,  it is subject to the
right of either  party to  terminate  the  joint  venture  with six month  prior
written notice,  or sooner upon mutual  agreement,  after the sixth  anniversary
date of the formation of the joint venture.
     Stock Purchase Agreement and the Preference  Shares.  Pursuant to the Stock
Purchase  Agreement,  on October 30, 1997,  Siemens acquired  4,883,227 Series A
Preference Shares for an aggregate  purchase price of $115 million.  Pursuant to
the Stock  Purchase  Agreement,  the  Company  agreed to  indemnify  Siemens for
breaches of representations,  warranties, and covenants for a period of up to 18
months.  The  indemnification  obligations  of the Company are subject to a $1.5
million deductible and a cap of $30 million.
     Each Series A Preference Share represents one one-thousandth  (1/1000th) of
a share of 1997 Series A Convertible  Non- Voting Preferred Stock of the Company
and,  subject to adjustment,  each Series A Preference Share is convertible into
one share of common stock.  Except for voting rights required by law, and except
for the right to elect as a class one director of the Company  during the period
that begins on the date when any Series A Preference  Shares are converted  into
Common  Stock  and  ends on the  date  of the  termination  of the  stockholders
agreement,  the  holders  of shares of  Series A  Preference  Shares do not have
voting rights. All other rights of the holders of Series A Preference Shares are
equal to the right of the holders of common  stock and are shared  ratably on an
as-converted basis.
     On January 20, 1998, Siemens converted 4,883,226 of its Series A Preference
Shares into 4,883,226 shares of common stock.

     The Make-Whole  Agreement.  In connection with the Siemens Investment,  the
Company entered into a Make-Whole  Agreement (the  "Make-Whole  Agreement") with
Siemens.  Under the  Make-Whole  Agreement,  within 30 days after a  "Triggering
Event,"  Siemens  will have the right to require the Company,  at the  Company's
election  to either (i)  repurchase  the Series A  Preference  Shares  purchased
pursuant to the Stock Purchase Agreement (and any shares issuable





<PAGE>



     with  respect to such  shares) for a purchase  price equal to $115  million
plus $15,753 per day for each day between  December 15, 1997 and the exercise of
the right  (the"Make-Whole  Price"),  or (ii) if the net proceeds  from the bona
fide sale of such shares by Siemens to a third party financial  institution does
not  equal the  Make-Whole  Price,  to issue to  Siemens  such  number of shares
(subject to certain  limits) the net proceeds from the sale of which would equal
the amount of the deficit.  Under the Make-Whole Agreement, a "Triggering Event"
includes (a) the parties shall have been unable,  after  diligent and good faith
efforts,  to obtain the  governmental  approvals  required  with  respect to the
formation  of the Siemens  Joint  Venture;  or (b) the  formation of the Siemens
Joint Venture  shall not have been  completed by June 30, 1998.  The  Make-Whole
Agreement  terminates if (1) prior to Siemens'  delivery of a notice that it has
entered  into an  agreement  to sell  its  shares  to a  third  party  financial
institution as described above,  Siemens sells or otherwise transfers any of the
securities subject to the Make-Whole Agreement to any person other than a direct
or indirect subsidiary of Siemens or (2) Siemens has not delivered such a notice
by the later to occur of (x) July 31,  1998,  or (y) 45 days after a  Triggering
Event.
     Registration  Rights Agreement.  In connection with the Siemens Investment,
the Company  entered into a Registration  Rights  Agreement  (the  "Registration
Rights Agreement") with Siemens.  Pursuant to the Registration  Rights Agreement
with Siemens,  Siemens  shall have the right,  after June 1, 1998 and before the
tenth anniversary of the date of the Registration Rights Agreement with Siemens,
to require the  Company to file up to three  registration  statements  under the
Securities  Act to register any shares of common stock owned by Siemens for sale
to the public, subject to certain limitations.The Company is required to pay all
expenses  (other than discounts and  commissions) in connection with such demand
registrations.  In addition,  if the Company elects to register securities under
the  Securities  Act of  1933  for  its  account  or for the  account  of  other
stockholders, Siemens shall have the right to register its shares under any such
registration statement, subject to certain limitations.

     Note  5-Convertible  Trust Preferred  Securities
     In connection  with the SRS  acquisition,  on October 30, 1997, the Company
issued and sold to Prudential  Securities Credit Corp.  ("PSCC") $200 million of
Series B Convertible  Preference  Stock of the Company (the "Series B Preference
Securities").  On November 25, 1997,  the Company issued and sold $250.0 million
of  6.50%  Convertible   Subordinated  Debentures  due  2027  (the  "Convertible
Debentures") of the Company to BTI Capital Trust which,  concurrently therewith,
issued and sold $250.0 million aggregate liquidation amount of its 6.50% Company
Obligated  Mandatorily  Redeemable  Convertible Trust Preferred  Securities (the
"Preferred  Securities")  (which are  guaranteed  by the  Company)  in a private
transaction  under Rule 144A under the  Securities Act of 1933. The Company used
the net proceeds from the issuance and sale of the Convertible Debentures to BTI
Capital Trust to redeem all of the outstanding Series B Preference Securities in
accordance with the terms thereof and for general corporate purposes. 
     Holders of the Preferred Securities are entitled to receive cumulative cash
distributions  at an annual rate of 6.50% of the  liquidation  amount of $50 per
Preferred  Security  accruing from, and including  November 25, 1997 and payable
quarterly in arrears commencing  February 15, 1998. The Company has the right at
any time and from time to time to defer  payments for a period not  exceeding 20
consecutive quarters.
     Each Preferred Security is convertible on or after January 25, 1998, at the
option of the holder, into shares of the Company's common stock, at a conversion
rate of 2.1973 shares of common stock for each  Preferred  Security,  subject to
adjustment  in  certain  circumstances.  The Trust  has the right to redeem  the
Preferred  Securities on or after  November 25, 2000, in whole or in part,  from
time to time,  subject to certain  conditions.  The Preferred  Securities do not
have any voting rights and rank pari passu with the common stock.

Note 6-Repositioning  and Other Special Charges
     Over the past three  years the Company has grown  rapidly  through  various
strategic acquisitions, increased market penetration in existing and new markets
and  internally  developed new  products.  The rapid growth  experienced  by the
Company  and the  demand  of  integrating  acquired  businesses  out  paced  the
development of the Company's corporate  infrastructure and systems. In the first
quarter  of the  fiscal  year,  management  initiated  a  review  of its  global
operations,  cost structure and balance sheet directed at reducing its operating
expenses, manufacturing costs and increasing

<PAGE>


     productivity.   This  review  focused  on  operational  and  organizational
structures and systems,  facilities  utilization,  product offerings,  inventory
valuation and other matters.  As a result,  in the second quarter ended December
31, 1997, the Company  recorded $349.9 million before taxes ($318.4 after taxes)
of  repositioning  charges (which  aggregated  $244.0 million) and other special
charges  (which  aggregated  $105.9  million),  which are  intended  to have the
following   objectives:   (i)  enhance   the   Company's   competitiveness   and
productivity,  (ii) reduce costs and increase  asset  control and (iii)  improve
processes and systems.  It is anticipated  that  approximately  $73.4 million of
these costs will result in cash outlays.  The repositioning  plan is expected to
be substantially completed within the next 12 to 18 months.
     Repositioning Charges- The repositioning charge taken in the second quarter
ending  December  31,  1997,  was  primarily  focused on  facility  utilization,
operational  systems and  organizational  structures.  The repositioning  charge
included  (i)  approximately  $30.8  million  relating to an  approximately  25%
reduction of the Company's global work force (or 4,900 employees) by eliminating
redundant and overlapping  positions  resulting from recent  acquisitions;  (ii)
approximately  $31.4  million  relating to the  consolidation  of the  Company's
manufacturing,  sales and  engineering  facilities  in North  America and Europe
through the  elimination  of  approximately  50% (or 32) and 33% (or 10) of such
facilities,  respectively;  (iii) $77.6  million  relating to the  write-down of
goodwill  associated with the disposal of long-lived assets;  (iv) approximately
$41.3  million  relating to the  write-down to net  realizable  value of certain
long-lived  assets relating to businesses being divested;  and (v) approximately
$62.9  million  relating  to the  write-down  of impaired  production  and other
equipment  and the  write-off  of  assets  used to  manufacture  products  being
replaced by new technologies.
     Other Special  Charges - With the  acquisition of SRS (Note 2), the Company
conducted an evaluation and review of the assets  acquired.  As a result of such
review,  the Company recorded a $77.5 million charge related to the write-off of
in- process  research and development for acquired  technology that has not been
established  as  technologically   feasible.   The  Company  also  reviewed  its
inventories for slow-moving and excess items in light of the SRS acquisition and
planned   realignment  of  its  manufacturing   operations.   The  Company  also
reevaluated  its  customer  contracts  relating to  products  lines that will be
discontinued.  As a result,  the  Company  recorded a $28.4  million  charge for
inventory and long-term contracts relating to manufacturing  processes that will
be exited (which is reflected as a charge to cost of sales).
Note 7 - IncomeTaxes
     The estimated fiscal 1998 annual effective tax rate has been revised from a
45% benefit estimated in the first quarter of fiscal 1998 to a 13% benefit. This
change is primarily the result of: (i) the impact of certain  repositioning  and
other special charges (see Note 6) taken in jurisdictions  where the Company may
not be able to recognize  the full income tax benefit and (ii) no tax benefit on
write-down  of  goodwill  included  in  the  repositioning   charge.   Financial
Accounting  Standards  Statement  No. 109 states that a valuation  allowance  is
recognized  if, it is more  likely  than not,  that some  portion  or all of the
deferred  tax  asset  will  not  be  realized.  Because  of  limitations  on the
utilization  of net  operating  losses from foreign  jurisdictions,  a valuation
allowance  for a portion  of the  deferred  income  tax  benefit  related to the
repositioning and the other special charges has been recorded.



Note 8 - Earning per Share
     The  following  table  sets  forth the  computation  of the  numerator  and
denominator of the basic and diluted per share calculations:
<TABLE>
<CAPTION>
                                                        Three Months Ended              Six Months Ended
                                                           December 31,                   December 31,
                                                   -----------------------------  ----------------------------
                                                            1997            1996           1997           1996







<PAGE>





Numerator:

<S>                                                 <C>            <C>             <C>            <C>
         Net earnings (loss)                        $    (319.9)   $         3.1   $    (324.1)   $        11.0
                                                    -------------   -------------  -------------   ------------
         Numerator for basic earnings per
           share-income available to common
           stockholders                                  (319.9)             3.1        (324.1)           11.0
                                                   -------------   -------------  -------------   ------------
         Effect of dilutive securities:
           Company obligated mandatorily
           redeemable convertible preferred
           securities , net of tax benefit                     *             ---              *            ---
                                                   -------------   -------------  -------------   ------------
           Numerator for diluted earnings per
              share-income available to
              common stockholders after
              assumed conversions                   $    (319.9)   $         3.1   $    (324.1)   $       11.0
                                                   -------------   -------------  -------------   ------------

Denominator:
         Denominator for basic earnings per
         share- weighted-average shares               31,705,492      31,640,199     31,693,537     31,633,894
                                                   -------------   -------------  -------------   ------------
Effect of dilutive securities:
         Employee stock options                                *         372,006              *        326,871
         Series A Preference Stock                             *             ---              *            ---
         Company obligated mandatorily                         *             ---              *            ---
           redeemable convertible preferred
           securities
                                                   -------------   -------------  -------------   ------------
         Dilutive potential common shares                    ---         372,006            ---        326,871
                                                   -------------   -------------  -------------   ------------
         Denominator for diluted earnings per
           share- adjusted weighted-average
           shares and assumed  conversions            31,705,492      32,012,205     31,693,537     31,960,765
                                                   =============   =============  =============   ============
</TABLE>

    * Items not assumed in the computation because their effect is antidilutive.

     For additional  disclosures  regarding the outstanding  Series A Preference
Stock see Note 4, and the Company obligated mandatorily  redeemable  convertible
preferred securities, see Note 5.
     Options to  purchase  1,755,489  shares of common  stock at prices  between
$20.375 and $32.25 per share were  outstanding  as of December 31, 1997 but were
not  included  in the  computation  of diluted  earnings  per share  because the
exercise  prices were greater than the average market price of the common shares
and, therefore, the effect would be anti- dilutive.
     As part of the  acquisition  of VTI in June  1995,  the  Company  issued to
certain of the former  stockholders  of VTI  warrants  to purchase up to 100,000
shares of common stock  between  July 1, 1998 and June 30, 2000,  at an exercise
price of $25.75 per share.  The 100,000  warrants  have not been included in the
computation  of diluted  earnings per share for the three and six month  periods
ended December 31, 1997 because the effect would be anti dilutive.
     In connection with its Credit Facility, the Company issued to NationsBank a
warrant to purchase 250,000 shares of common stock of the Company at an exercise
price of $23.125 per share.  The 250,000  warrants have not been included in the
computation  of diluted  earnings  per share for the three and six months  ended
December 31, 1997 because the effect would be anti-dilutive.





<PAGE>



     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations

Results of Operations

General
     Over the past three years the  Company has grown from a single  technology,
single market  company with gross  revenues of  approximately  $400 million to a
global provider of state-of-the-art occupant safety systems solutions with gross
revenues on a pro forma basis of  approximately  $1.8  billion.  This growth was
attained  principally through various strategic  acquisitions,  increased market
penetration in existing and new markets and internally developed new products.
     The rapid growth  experienced  by the Company and the demand of integrating
acquired  businesses  out  paced  the  development  of the  Company's  corporate
infrastructure  and systems.  In addition,  cost  structures and working capital
requirements  increased  to  unacceptable  levels.  In the first  quarter of the
fiscal  year,  management  initiated  a review of its  global  operations,  cost
structure  and  balance  sheet  directed  at reducing  its  operating  expenses,
manufacturing  costs  and  increasing  productivity.   This  review  focused  on
operational and organizational  structures and systems,  facilities utilization,
product offerings,  inventory  valuation and other matters.  As a result, in the
second  quarter ended  December 31, 1997,  the Company  recorded  $349.9 million
before taxes ($318.4  after taxes) of  repositioning  and other special  charges
which are intended to have the following  objectives:  (i) enhance the Company's
competitiveness  and productivity,  (ii) reduce costs and increase asset control
and (iii) improve  processes and systems.  It is anticipated that  approximately
$73.4 million of these costs will result in cash outlays.
     The repositioning plan is expected to be substantially completed within the
next 12 to 18 months,  and the Company  believes  the  provisions  recorded  are
adequate to cover the costs  associated  with the plan. The Company  expects the
repositioning  program  to  generate  approximately  $855  million of total cost
savings,  which will be phased in through  fiscal  2002.  Of the $855 million in
cost savings,  $780 million will be cash savings primarily related to salary and
benefit expense that will not be incurred in future years due to the anticipated
reduction  in  the  Company's   global   workforce  and  the   consolidation  of
manufacturing, sales and engineering facilities.
     Repositioning Charges- The repositioning charge taken in the second quarter
ending  December  31,  1997,  was  primarily  focused on  facility  utilization,
operational  systems and  organizational  structures.  The repositioning  charge
included  (i)  approximately  $30.8  million  relating to an  approximately  25%
reduction of the Company's global work force (or 4,900 employees) by eliminating
redundant and overlapping  positions  resulting from recent  acquisitions;  (ii)
approximately  $31.4  million  relating to the  consolidation  of the  Company's
manufacturing,  sales and  engineering  facilities  in North  America and Europe
through the  elimination  of  approximately  50% (or 32) and 33% (or 10) of such
facilities,  respectively;  (iii) $77.6  million  relating to the  write-down of
goodwill  associated with the disposal of long-lived assets;  (iv) approximately
$41.3  million  relating to the  write-down to net  realizable  value of certain
long-lived  assets relating to businesses being divested;  and (v) approximately
$62.9  million  relating  to the  write-down  of impaired  production  and other
equipment  and the  write-off  of  assets  used to  manufacture  products  being
replaced by new technologies.
     During  the  quarter  ended  December  31,  1997,  the  Company  started to
implement its repositioning plan. Net headcount was reduced by 725 people during
the quarter  ended  December 31, 1997,  primarily in North  America.  Also,  the
Company  closed three  manufacturing  facilities and announced the closure of an
additional facility and the relocation of a major portion of a Canadian facility
to Mexico.  
     Other Special Charges - With the acquisition of SRS, the Company  conducted
an evaluation and review of the assets acquired. As a result of such review, the
Company  recorded a $77.5 million  charge related to the write-off of in-process
research and development for acquired  technology that has not been  established
as  technologically  feasible.  The Company also  reviewed its  inventories  for
slow-moving  and  excess  items  in  light of the SRS  acquisition  and  planned
realignment of its  manufacturing  operations.  The Company also reevaluated its
customer contracts relating to products





<PAGE>



     lines that will be discontinued.  As a result, the Company recorded a $28.4
million charge for inventory and long-term  contracts  relating to manufacturing
processes that will be exited (which is reflected as a charge to cost of sales).
     The  repositioning  and other special charges recorded in the quarter ended
December 31, 1997 do not include a provision for disruption  costs in accordance
with Generally Accepted  Accounting  Principles  ("GAAP").  Disruption costs are
expenses   incurred  in  connection  with  the  closing  and   consolidating  of
manufacturing,  engineering and sales facilities.  Disruption costs include; (1)
inefficiencies  associated  with  consolidating  manufacturing,  engineering and
sales  facilities;  (2) unabsorbed  fixed overhead;  (3) temporary  increases in
factory  labor;  (4) premium  freight and (5) excessive  inventory  scrap.  GAAP
require  that  disruption  costs be expensed as incurred and included in cost of
sales. The Company incurred  disruption costs of approximately  $2.8 million and
$4.5  million  for  the  quarter  and  six  months  ended   December  31,  1997,
respectively,  associated with the closing of three manufacturing facilities and
the ongoing relocation of a North America facility to Mexico.
     Three and Six Months Ended  December 31, 1997 (FY98)  Compared to Three and
Six Months Ended December 31, 1996 (FY97)
     Net sales for the  quarter  and six months  ended  December  31,  1997 were
$340.7 million and $535.9 million,  respectively,  an increase of $158.1 million
or 87%, and $194.7 million or 57%, respectively,  from the comparable periods of
the prior year.  The increase in net sales was  primarily due to growth from the
acquisition of United Steering Systems (USS) on October 25, 1996, Custom Trim on
February  25,  1997,  and SRS on October  30,  1997.  These  three  acquisitions
accounted for approximately $177.0 million and $235.2 million of the increase in
net sales for the three and six months ended  December  31, 1997,  respectively.
The  increases  were  partially  offset by a decline in sales of EMS sensors and
inflator and airbag systems products.
     EMS sensor  sales for the quarter and six months  ended  December  31, 1997
were $28.1 million and $54.7 million,  a decrease of 23% and 32%,  respectively,
from the  comparable  prior year periods.  These  decreases are primarily due to
lower demand as major customers continue to shift from EMS to electronic sensors
that are sourced internally.
     Inflator and airbag module sales decreased 18% and 37% to $18.7 million and
$35.3 million,  respectively,  for the quarter and six months ended December 31,
1997 as  compared  to the  comparable  prior  year  periods.  The  decrease  was
primarily  due to the planned  phase-out  of all  mechanical  airbag  systems at
Chrysler and Fiat, and the reduction of shipments into Asia of all inflators and
airbags.
     Net sales for the quarter ended December 31, 1997,  increased 75% to $340.7
million from $195.2  million in the first quarter ended  September 30, 1997. The
quarter over quarter  increase in net sales was  primarily  attributable  to the
acquisition  of SRS on October 30, 1997.  Excluding the  acquisition of SRS, net
sales for the quarter ended  December 31, 1997 would have  increased 4% over the
quarter ended September 30, 1997.
     Cost of sales for the quarter and six months  ended  December 31, 1997 were
$312.9 and  $479.7,  respectively,  as  compared  to $145.9  million  and $262.4
million,  respectively,  for the quarter and six months ended December 31, 1996.
The increase  primarily  reflected  the  additional  production  costs of $151.0
million and $203.7  million for the quarter and six months  ended  December  31,
1997,  resulting from the acquisitions of USS and Custom Trim during fiscal 1997
and the  acquisition  of SRS in fiscal 1998. In addition,  the Company  incurred
approximately  $2.8 million and $4.5  million  during the quarter and six months
ended December 31, 1997 related to disruption  costs associated with the closing
of three  manufacturing  facilities and the ongoing  relocation of a facility in
North  America to Mexico,  as well as a $28.4  million  charge  related to other
special charges (see "Repositioning and Other Special Charges" above).
     Gross profit as a percentage  of net sales was 8% and 10% for the three and
six months  ended  December  31,  1997,  respectively,  compared to 20% and 23%,
respectively,  for the  comparable  periods of the prior year.  The  decrease in
gross  margins was  primarily  attributable  to a shift in product mix from high
margin EMS sensors to those of lower


<PAGE>



     margin products acquired in recent acquisitions and certain special charges
aggregating  $28.4 million.  Excluding these special charges,  gross profit as a
percentage  of net sales  would  have been 17% and 16% for three and six  months
ended December 31, 1997, respectively.
     Selling,  general and administrative  expenses for the three and six months
ended  December 31, 1997 were $21.3  million and $37.6 million (6% and 7% of net
sales), respectively,  compared to $16.7 million and $32.2 million (in each case
9% of net sales) for the comparable periods of the prior year. Selling,  general
and administrative  expenses as a percentage of net sales decreased primarily as
a result of cost  improvements  associated  with the  reduction of headcount and
reduced spending.
     Research,  development  and  engineering  expenses  for the quarter and six
months  ended   December  31,  1997  were  $18.6  million  and  $27.5   million,
respectively,  as compared to $9.9 million and $17.8 million for the  comparable
periods in the prior year.  These  increases  reflected  costs  associated  with
acquired  businesses  of $9.3  million  and $10.1  million for the three and six
months ended December 31, 1997, respectively.
     Operating  income  (loss) for the three and six months  ended  December 31,
1997 decreased  significantly  from last year's comparable periods primarily due
to items  mentioned  above  and the  repositioning  and  other  special  charges
aggregating $349.9 million included in cost of sales and operating expenses (see
"Repositioning  and Other Special Charges"  above).  Exclusive of the effects of
the  repositioning  and other special charges,  operating income would have been
$12.3 million and $13.5 million for the three and six months ended  December 31,
1997, respectively.
     Operating  income before  repositioning  and other special  charges for the
three months ended  December 31, 1997  reflected an  improvement  over the three
months ended September 30, 1997. Operating income was $12.3 million or 4% of net
sales in the three months ended December 31, 1997 compared to $1.2 million or 1%
of net sales in the three months  ended  September  30,  1997.  The quarter over
quarter  increase in  operating  income was  primarily  attributable  to the SRS
acquisition,  higher sales volumes, and personnel reductions.  Excluding the SRS
acquisition,  operating income would have been  approximately $7.9 million or 4%
of net sales for the three months ended December 31, 1997. The operating  margin
improvement from 1% of net sales in the three months ended September 30, 1997 to
4% of net sales for the three  months  ended  December  31,  1997 was  primarily
attributable to personnel reductions resulting from the repositioning program.
     Interest  expense for the three and six months ended  December 31, 1997 was
$27.1 million and $35.4 million, an increase of $20.4 million and $24.3 million,
respectively,  from the comparative prior year periods. The increase in interest
expense was primarily due to the increase in average outstanding borrowings as a
result of the  acquisitions  of USS and  Custom  Trim in fiscal  1997 and SRS in
fiscal  1998.  In  addition  the  fees   associated  with  the  Credit  Facility
(approximately $30.0 million) are being amortized over a six month period.
     The estimated fiscal 1998 annual effective tax rate has been revised from a
45% benefit  estimated  in the three months  ended  September  30, 1997 to a 13%
benefit to reflect the impact of certain repositioning and other special charges
(i) taken in  jurisdictions  where the Company may not be able to recognize  the
full income tax  benefit  due to  limitations  imposed by  Financial  Accounting
Standards  Statement No. 109 (SFAS 109) and (ii) no tax benefit on write-down of
goodwill included in the repositioning  charge. SFAS 109 states that a valuation
allowance is recognized if, it is more likely than not, that some portion or all
of the deferred tax asset will not be realized.  Because of  limitations  on the
utilization  of net  operating  losses from foreign  jurisdictions,  a valuation
allowance  for a portion  of the  deferred  income  tax  benefit  related to the
repositioning and the other special charges has been recorded.
     The extraordinary loss recorded in the three months ended December 31, 1997
related to the write-off of  unamortized  debt costs of the previous bank credit
facility.

Liquidity and Capital Resources



<PAGE>



     The Company's  primary cash  requirements are for working capital,  capital
expenditures  and interest  payments on  outstanding  indebtedness.  The Company
believes that cash generated from  operations,  borrowings  available  under the
Credit  Facility and net proceeds  received in  connection  with the issuance of
debt and equity  securities  will be sufficient  to meet the  Company's  working
capital, capital expenditures and debt service needs for the foreseeable future.
     Cash flows from operating  activities for the six months ended December 31,
1997, were a deficit of $21.0 million  compared with a $72.4 million surplus for
the six months ended December 31, 1996. The decrease in cash flows was primarily
attributed to the net loss of $324.1 and changes in working capital items.
     Capital  expenditures  aggregated  $23.4  million for the six months  ended
December 31, 1997. The Company  continues to invest  capital to expand  capacity
and tool new products.  Investments  continue to be made to support productivity
improvements, cost reduction programs, and added capability for existing and new
products.   Although  the  Credit  Facility  restricts  the  amount  of  capital
expenditures  the Company can incur in any given  quarter,  the Company does not
believe  that  this  covenant  will  adversely  affect  the  Company's   capital
expenditure plans .
     On October 30, 1997, in connection with the acquisition of SRS, the Company
and NationsBank entered into the Credit Facility,  pursuant to which the Company
has $900 million of aggregate borrowing availability.  At December 31, 1997, the
Company had an  aggregate of $810 million of  borrowings  outstanding  under the
Credit Facility (including  approximately $10.0 million letters of credit),  and
the weighted  average interest rate on such borrowings was  approximately  8.76%
per annum. The Credit Facility  consists of a 366-day  revolving credit facility
providing up to $300 million of  availablity,  including a $25 million  sublimit
for the  issuance of standby  letters of credit and a $75 million  sublimit  for
multi-currency  borrowings, and a 366-day $600 million term loan. The Company is
currently in negotiations  with a number of financial  institutions,  to replace
the current  credit  facility  with longer term credit  facilities.  The Company
expects to replace the existing credit facility during its third quarter.
     On October  14,  1997,  the  Company  and  Siemens  entered  into the Stock
Purchase  Agreement  pursuant to which,  on October 30, 1997, the Company issued
and sold  4,883,227  Series A  Preference  Shares to  Siemens  for an  aggregate
purchase  price of $115.0  million.  The $115.0  million of proceeds was used to
fund a portion of the  purchase  price for the SRS  acquisition.  On January 20,
1998,  Siemens  converted  4,883,226  of its  Series A  Preference  Shares  into
4,883,226 shares of common stock.
     In connection  with the SRS  acquisition,  on October 30, 1997, the Company
issued  and sold to PSCC $200  million  of Series B  Preference  Securities.  On
November 25, 1997,  the Company  issued and sold $250.0  million of  Convertible
Debentures to BTI Capital Trust which,  concurrently therewith,  issued and sold
$250.0 million aggregate  liquidation amount of Preferred  Securities (which are
guaranteed  by the Company) in a private  transaction  under Rule 144A under the
Securities  Act of 1933. The Company used the net proceeds from the issuance and
sale of the  Convertible  Debentures  to BTI Capital  Trust to redeem all of the
outstanding Series B Preference  Securities in accordance with the terms thereof
and for general corporate purposes.

Forward Looking Statements
     Based  on a  recent  assessment,  the  company  determined  that it will be
required  to modify or replace  portions of its  software  so that its  computer
systems  will  function  properly  with  respect  to dates in the year  2000 and
thereafter.  The Company presently  believes that with modifications to existing
software  and  conversions  to new  software,  the Year 2000 issue will not pose
significant  operational  problems for its computer  systems.  However,  if such
modifications and conversions are not made, or are not timely completed, the
     Year 2000  Issue  could  have a material  impact on the  operations  of the
Company.  Statements  herein regarding  estimated cost savings and the Company's
anticipated performance in future periods constitute  forward-looking statements
within the meaning of the Securities Act of 1933 and the Securities Exchange Act
of 1934.  Such  statements are subject to certain risks and  uncertainties  that
could cause actual amounts to differ


<PAGE>



     materially  from those  projected.  With respect to estimated cost savings,
management has made  assumptions  regarding,  among other things,  the timing of
plant closures,  the amount and timing of expected  short-term  operating losses
and reductions in fixed labor costs.  The realization of cost savings is subject
to certain  risks,  including,  among  other  things,  the risks  that  expected
operating  losses have been  underestimated,  expected cost reductions have been
overestimated,  unexpected  costs and expenses will be incurred and  anticipated
operating  efficiencies  will  not  be  achieved.   Further,  statements  herein
regarding  the  Company's  performance  in future  periods  are subject to risks
relating  to,  among  other  things,   difficulties   in  integrating   acquired
businesses,  deterioration of relationships  with material  customers,  possible
significant  product  liability  claims,  decreases in demand for the  Company's
products  and  adverse  changes  in  general  market  and  industry  conditions.
Management believes these  forward-looking  statements are reasonable;  however,
undue reliance should not be placed on such  forward-looking  statements,  which
are based on current expectations.


                        PART II - OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

     At the Company's Annual Meeting of Stockholders  held on November 20, 1997,
the following proposal was adopted by the votes specified below:

<TABLE>
                                                                                                                       Broker
<CAPTION>
Proposal                                                    For         Against       Withheld        Abstain         Nonvotes
Election of Directors:
<S>                                                        <C>          <C>            <C>              <C>              <C>
    Allen K. Breed                                         28,236,791        --        72,118            --               --
    Johnnie Breed                                          28,236,724        --        72,185            --               --
    Larry W.  McCurdy                                      28,242,144        --        66,765            --               --
    Charles J. Speranzella                                 28,241,290        --        67,619            --               --
    Robert W. Shower                                       28,241,602        --        67,307            --               --
    Fred J. Musone                                         28,237,926        --        70,983            --               --
    Alberto Negro                                          28,237,622        --        71,287            --               --
    Dr. Ing. Franz Wressnigg                               28,238,510        --        70,399            --               --
An increase in the number of shares of Common Stock available for issuance under
the 1994 Stock Incentive Plan from
2,500,000 to 3,700,000 shares                              27,621,781   598,656           --             88,472            --
</TABLE>


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

     10.1 Stock Purchase Agreement, dated as of October 14, 1997, by and between
Breed Technologies,


<PAGE>



     Inc.,  a Delaware  corporation  and Siemens  Akfiengesellschaft,  a company
organized under the laws of the Federal Republic of Germany

     10.1.1 Make-Whole  Agreement,  dated as of October 14, 1997, by and between
Breed Technologies, Inc., a Delaware corporation and Siemens Akfiengesellschaft,
a company organized under the laws of the Federal Republic of Germany

     10.1.2 Registration Rights Agreement, dated as of October 14, 1997, between
Breed    Technologies,    Inc.,    a   Delaware    corporation,    and   Siemens
Akfiengesellschaft,  a company  organized under the laws of the Federal Republic
of Germany

     10.1.3  Stockholders  Agreement,  dated as of October 14, 1997, among Breed
Technologies, Inc. and certain of its subsidiaries.

     10.2 Credit  Agreement,  dated as of October 30,  1997,  by and among Breed
Technologies,  Inc. and certain  subsidiaries  designated  as Borrowers  herein,
NationsBank  National  Association  as agent and as lender and the lenders party
hereto from time to time. 10.3 Warrant Agreement,  dated as of October 30, 1997,
between NationsBank, N.A. and Breed Technologies, Inc.

     10.4 Joint  Venture  Agreement,  dated as of  December  24,  1997,  between
Siemens Akfiengesellschaft and Breed Technologies, Inc.

     (b) Reports on Form 8-K - The Company  filed Form 8-K/A on January 13, 1998
amending the original filing that reported the acquisition of certain assets and
assumption of certain liabilities of the "Safety Restraints Systems" business of
AlliedSignal,  Inc. to include Financial  Statements of business  acquired,  Pro
Forma Financial Information and Exhibits as required under Item 7.


                               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.

                                            Breed Technologies, Inc.
                                                 (Registrant)

February 12, 1998

                                            By:   /s/ Frank J. Gnisci
                                                  Frank J. Gnisci
                                                  Executive Vice President and
                                                  Chief Financial Officer