<PAGE>

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                    U.S. 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 December 31, 1999

                        Commission file number 1-12657

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

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

<TABLE>
<CAPTION>
                   DELAWARE                                      04-2258582
<S>                                            <C>
       (State or other jurisdiction of                        (I.R.S. Employer
       incorporation or organization)                      Identification Number)
</TABLE>

                         3 New England Executive Park
                     Burlington, Massachusetts 01803-5087
              (Address of principal executive offices) (Zip code)

      Registrant's telephone number, including area code: (781) 272-6100

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

   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  [_]

   At January 15, 2000 there were 122,094,029 shares of common stock of the
registrant outstanding.

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<PAGE>

                         PART I. Financial Information

Item 1. Financial Statements

                              DYNATECH CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                         Three Months
                                             Ended         Nine Months Ended
                                         December 31,        December 31,
                                       ------------------  ------------------
                                         1999      1998      1999      1998
                                       --------  --------  --------  --------
<S>                                    <C>       <C>       <C>       <C>
Sales................................. $160,206  $136,781  $477,125  $369,525
Cost of sales.........................   64,619    60,050   205,900   158,868
                                       --------  --------  --------  --------
Gross profit..........................   95,587    76,731   271,225   210,657
Selling, general & administrative
 expense..............................   49,233    36,331   131,604   107,517
Product development expense...........   19,936    13,239    51,628    40,306
Recapitalization-related costs........      --        --     13,259    43,386
Amortization of intangibles...........    3,896     1,625     7,053     4,697
Amortization of unearned
 compensation.........................      599       574     1,451       977
                                       --------  --------  --------  --------
    Total operating expenses..........   73,664    51,769   204,995   196,883
                                       --------  --------  --------  --------
Operating income......................   21,923    24,962    66,230    13,774
Interest expense......................  (12,990)  (13,125)  (38,433)  (33,106)
Interest income.......................      571       782     1,874     2,870
Gain on sale of subsidiary............      --        --        --     15,900
Other income (expense)................      (17)     (208)       11      (275)
                                       --------  --------  --------  --------
Income (loss) before income taxes.....    9,487    12,411    29,682      (837)
Income tax provision..................    4,734     5,462    12,812       486
                                       --------  --------  --------  --------
Net income (loss)..................... $  4,753  $  6,949  $ 16,870  $ (1,323)
                                       ========  ========  ========  ========
Income (loss) per common share:
  Basic............................... $   0.04  $   0.06  $   0.14  $  (0.01)
  Diluted............................. $   0.04  $   0.05  $   0.13  $  (0.01)
                                       ========  ========  ========  ========
Weighted average number of common
 shares:
  Basic...............................  122,061   120,313   121,310   101,480
  Diluted.............................  134,549   127,657   131,366   101,480
                                       ========  ========  ========  ========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       2
<PAGE>

                              DYNATECH CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         December 31, March 31,
                                                             1999       1999
                                                         ------------ ---------
                                                         (Unaudited)
<S>                                                      <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................  $  39,016   $  70,362
  Accounts receivable, net..............................     88,813      70,996
Inventories:
   Raw materials........................................     21,577      16,680
   Work in process......................................     18,054      13,644
   Finished goods.......................................     11,613      16,947
                                                          ---------   ---------
    Total inventory.....................................     51,244      47,271
  Other current assets..................................     27,670      22,150
                                                          ---------   ---------
    Total current assets................................    206,743     210,779
Property and equipment, net.............................     32,781      25,619
Intangible assets, net..................................     92,769      56,768
Other assets............................................     74,704      54,938
                                                          ---------   ---------
                                                          $ 406,997   $ 348,104
                                                          =========   =========
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
  Notes payable & current portion of long-term debt.....  $   6,398   $  23,191
  Accounts payable......................................     32,647      34,317
  Income taxes payable..................................     12,326      10,772
  Accrued expenses:
   Compensation and benefits............................     28,271      24,420
   Deferred revenue.....................................     37,332      27,141
   Interest.............................................      3,432      10,129
   Other................................................     19,579      25,311
                                                          ---------   ---------
    Total current liabilities...........................    139,985     155,281
Long-term debt..........................................    560,198     504,151
Deferred compensation...................................      7,145       5,112
Stockholders' Deficit:
   Common stock.........................................      1,221         --
   Additional paid-in capital...........................    321,865     322,746
   Retained earnings (deficit)..........................   (613,071)   (629,941)
   Unearned compensation................................     (8,686)     (7,563)
   Other comprehensive loss.............................     (1,660)     (1,682)
                                                          ---------   ---------
    Total stockholders' deficit.........................   (300,331)   (316,440)
                                                          ---------   ---------
                                                          $ 406,997   $ 348,104
                                                          =========   =========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                              DYNATECH CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                           Nine Months Ended
                                                              December 31,
                                                           -------------------
                                                             1999      1998
                                                           --------  ---------
<S>                                                        <C>       <C>
Operating activities:
  Net income (loss)....................................... $ 16,870  $  (1,323)
  Adjustments to net income (loss):
   Depreciation...........................................    9,103      8,874
   Amortization of intangibles............................    7,053      4,697
   Gain on sale of subsidiary.............................      --     (15,900)
   Recapitalization-related costs.........................      --      14,640
   Amortization of unearned compensation..................    1,451        977
   Amortization of deferred debt issuance costs...........    2,424      1,716
   Other..................................................       84         75
  Change in deferred income tax asset.....................      --      (5,757)
  Change in operating assets and liabilities..............  (19,615)     8,591
                                                           --------  ---------
  Net cash flows provided by continuing operations........   17,370     16,590
  Net cash flows used in discontinued operations..........   (1,668)      (200)
                                                           --------  ---------
Net cash flows provided by operating activities...........   15,702     16,390
Investing activities:
  Purchases of property and equipment.....................  (12,960)    (7,425)
  Proceeds from disposals of property and equipment.......      --         246
  Proceeds from sale of business..........................      --      21,000
  Businesses acquired in purchase transaction, net of cash
   acquired...............................................  (73,394)   (19,615)
  Other...................................................   (3,660)    (5,043)
                                                           --------  ---------
Net cash flows used in investing activities...............  (90,014)   (10,837)
                                                           --------  ---------
Financing activities:
  Net borrowings of debt..................................   39,595    536,000
  Repayment of notes payable..............................      --      (2,156)
  Repayment of capital lease obligations..................     (341)      (132)
  Financing fees..........................................      --     (39,608)
  Proceeds from issuance of stock.........................    3,149    277,000
  Proceeds from exercise of stock options.................      455      1,800
  Purchases of treasury stock and stock outstanding.......      --    (806,508)
                                                           --------  ---------
Net cash flows provided by (used in) financing
 activities...............................................   42,858    (33,604)
Effect of exchange rate on cash...........................      108       (354)
                                                           --------  ---------
Decrease in cash and cash equivalents.....................  (31,346)   (28,405)
Cash and cash equivalents at beginning of year............   70,362     64,904
                                                           --------  ---------
Cash and cash equivalents at end of period................ $ 39,016  $  36,499
                                                           ========  =========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       4
<PAGE>

                             DYNATECH CORPORATION

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. Basis of Presentation and Results of Operations

   Dynatech Corporation (the "Company") was organized in 1959 and its
   operations are conducted primarily by wholly owned subsidiaries located
   principally in the United States with distribution and sales offices in
   Germany, England, France, and the Pacific Rim.

   The Company operates in three business segments: communications test,
   industrial computing and communications, and visual communications. The
   communications test segment provides communications test instruments to
   communications service providers and long-distance companies, among others.
   The industrial computing and communications segment provides computer
   products to the ruggedized computer market. The visual communications
   segment manufactures (1) airplane passenger cabin video information display
   systems and information services, and (2) digital color enhancement systems
   used in the process of transferring film images into electronic signals.

   The Company operates on a fiscal year ended March 31 in the calendar year
   indicated (e.g., references to fiscal 2000 are references to the Company's
   fiscal year which began April 1, 1999 and will end March 31, 2000).

B. Condensed Consolidated Financial Statements

   In the opinion of management, the unaudited condensed consolidated balance
   sheet at December 31, 1999, and the unaudited consolidated statements of
   operations and unaudited consolidated condensed statements of cash flows
   for the interim periods ended December 31, 1999 and 1998 include all
   adjustments (consisting only of normal recurring adjustments) necessary to
   present fairly these financial statements.

   Certain information and footnote disclosures normally included in financial
   statements prepared in accordance with generally accepted accounting
   principles have been condensed or omitted. The year-end balance sheet data
   was derived from audited financial statements, but does not include
   disclosures required by generally accepted accounting principles. It is
   suggested that these condensed statements be read in conjunction with the
   Company's most recent Form 10-K as of March 31, 1999.

   The preparation of financial statements in conformity with generally
   accepted accounting principles requires management to make certain
   estimates and assumptions that affect the reported amount 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 reported period. Significant estimates in these
   financial statements include allowances for accounts receivable, net
   realizable value of inventories, warranty accruals and tax valuation
   reserves. Actual results could differ from those estimates.

C.  Acquisitions

   Sierra Design Labs

   On September 10, 1999 the Company, through one of its wholly owned
   subsidiaries, purchased the outstanding stock of Sierra Design Labs
   ("Sierra"), a Nevada corporation. The purchase price was $6.3 million,
   which resulted in $4.9 million of goodwill. The purchase method of
   accounting was applied to the acquisition, and the excess purchase price
   will be amortized over 10 years. Sierra designs, manufactures, and markets
   uncompressed, real-time videodisk recorders and will be included in the
   Company's visual communications segment. The Company has not presented
   separate pro forma financial information for the acquisition of Sierra due
   to the immateriality of such pro forma effects on the consolidated
   financial statements of the Company.

   Applied Digital Access, Inc.

   On November 1, 1999 and subsequently on November 8, 1999, the Company,
   through one of its wholly owned subsidiaries, acquired all the outstanding
   stock of Applied Digital Access, Inc. ("ADA") for $5.37

                                       5
<PAGE>

                             DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   per outstanding share which approximated $81 million in the aggregate
   including acquisition costs. The purchase method of accounting was applied
   to the acquisition and generated approximately $36 million of goodwill
   which will be amortized over three years.

   The Company funded the purchase by expending from available funds $16
   million and by borrowing $65 million under its revolving credit facility.
   The Company subsequently repaid $9.0 million of its borrowings between the
   acquisition dates and December 31, 1999.

   ADA is headquartered in San Diego, CA and is a provider of network
   performance management products that include systems, software and services
   used to manage the quality, performance, availability and reliability of
   telecommunications service providers' networks. The results of operations
   of ADA are included with the Company's communications test business
   segment.

   The financial results of the Company included in this 10-Q include the
   results of operations of ADA since ADA was acquired: November 1, 1999
   through December 31, 1999. The following unaudited pro forma financial data
   summarizes the consolidated results of operations for the periods
   indicated, assuming the acquisition of ADA had taken place at the beginning
   of each of the periods presented.

<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                                December 31,
                                                              -----------------
                                                                1999     1998
                                                              -------- --------
   <S>                                                        <C>      <C>
   Net sales................................................. $501,719 $393,470
   Net income (loss).........................................    5,316  (21,633)
   Net income (loss) per common share:
     --Basic.................................................     0.04    (0.21)
     --Diluted...............................................     0.04    (0.21)
</TABLE>

   The unaudited pro forma financial data for the nine months ended December
   31, 1999 and 1998 was compiled by combining the unaudited historical
   consolidated statements of operations of the Company for the nine months
   ended December 31, 1999 and 1998 and the unaudited historical statement of
   operations of ADA for the same periods. In addition, the Company has
   included adjustments to the combined financial data for the amortization of
   the excess purchase price and the elimination of redundant expenses. In
   addition, the financial data includes a lower interest income and
   additional interest expense due to the lower cash balance and additional
   debt incurred in connection with the acquisition. The pro forma information
   also includes a tax provision adjustment for the combined entity.

   This unaudited pro forma information does not purport to be indicative of
   the results of operations that would have been obtained if the acquisition
   had occurred at the beginning of the fiscal years presented, and it is not
   intended to be a projection of future results. This information should be
   read in conjunction with the audited financial statements of both
   organizations.

D. Change of Jurisdiction of Incorporation

   On September 8, 1999 the stockholders of the Company approved a proposal to
   change the jurisdiction of incorporation of the Company from the
   Commonwealth of Massachusetts to the State of Delaware and the jurisdiction
   of incorporation changed effective such date.

   The common stock of the Company issued when it was incorporated under the
   laws of the Commonwealth of Massachusetts had no par value per share.
   Therefore, the Company did not reflect a value for the common stock on the
   balance sheet. The common stock issued under the laws of the State of
   Delaware has a par

                                       6
<PAGE>

                             DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   value of $0.01 per share, and the balance sheet reflects a reclassification
   from additional paid-in capital of $1,214 (representing the par value of
   121,408,993 outstanding shares at September 30, 1999).

E. Recapitalization and Other Related Costs

   During the first nine months of fiscal 2000, the Company recorded a charge
   of $13.3 million, most of which amount related to the retirement of John F.
   Reno, former Chairman, President and Chief Executive Officer of the
   Company.

   In connection with the Merger in fiscal 1999, the Company incurred a charge
   of $43.4 million principally for the cancellation payments of employee
   stock options and compensation expense due to the acceleration of unvested
   stock options. The Company incurred an additional $41.3 million in
   expenses, of which $27.3 million was capitalized and will be amortized over
   the life of the Senior Secured Credit Facilities and Senior Subordinated
   Notes, and $14.0 million was charged directly to stockholders' equity.

F. Recapitalization And Merger

   On May 21, 1998, CDRD Merger Corporation ("MergerCo"), a nonsubstantive
   transitory merger vehicle, which was organized at the direction of Clayton,
   Dubilier & Rice, Inc., a private investment firm, was merged with and into
   the Company (the "Merger") with the Company continuing as the surviving
   corporation. In the Merger, (i) each then outstanding share of common
   stock, par value $0.20 per share, of the Company was converted into the
   right to receive $47.75 in cash and 0.5 shares of common stock, no par
   value, of the Company (the "Common Stock") and (ii) each then outstanding
   share of common stock of MergerCo was converted into one share of Common
   Stock.

G. New Pronouncements

   On June 15, 1998, the Financial Accounting Standards Board issued Statement
   of Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for
   Derivative Instruments and Hedging Activities." FAS 133 was amended by
   Statement of Financial Accounting Standards No. 137 which modified the
   effective date of FAS 133 to all fiscal quarters of all fiscal years
   beginning after June 15, 2000. FAS 133, as amended, requires that all
   derivative instruments be recorded on the balance sheet at their fair
   value. Changes in the fair value of derivatives are to be recorded each
   period in current earnings or other comprehensive income, depending on
   whether a derivative is designated as part of a hedge transaction and, if
   it is, the type of hedge transaction. The Company is assessing the impact
   of the adoption of FAS 133 on its results of operations and its financial
   position.

H. Legal Proceedings

   Litigation. The Company is involved from time to time in routine legal
   matters incidental to its business. The Company believes that the
   resolution of such matters will not have a material adverse effect on the
   Company's financial condition or results of operations.

   On June 27, 1996, Cincinnati Microwave, Inc. ("CMI") filed an action in the
   United States District Court for the Southern District of Ohio against the
   Company and Whistler Corporation of Massachusetts ("Whistler"), alleging
   willful infringement of CMI's patent for a mute function in radar
   detectors. In 1994, the Company sold its radar detector business to
   Whistler. The Company and Whistler have asserted in response that they have
   not infringed, and that the patent is invalid and unenforceable. The
   Company obtained an opinion of counsel from Bromberg & Sunstein LLP in
   connection with the manufacture and sale

                                       7
<PAGE>

                             DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   of the Company's Whistler series radar detectors and will be offering the
   opinion, among other things, as evidence that any alleged infringement was
   not willful. On March 24, 1998, CMI, together with its co-plaintiff and
   patent assignee Escort, Inc., moved for summary judgment. The Company and
   Whistler have opposed the motion for summary judgment. Discovery in this
   matter closed on June 20, 1998. On May 27, 1999 Whistler filed a Chapter 11
   bankruptcy case in the United States Bankruptcy Court for the District of
   Massachusetts. The case is scheduled for trial in April 2000 and the
   Company intends to defend the lawsuit vigorously. The Company does not
   believe that the outcome of the litigation is likely to have a material
   adverse effect on the Company's financial condition, results of operations
   or liquidity.

   On September 7, 1999, the Company and ADA entered into an Agreement and
   Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement,
   a subsidiary of the Company commenced a cash tender offer to purchase all
   of the outstanding shares of ADA's common stock at a price of $5.37 per
   share. Following the public announcement of the Merger Agreement, four
   class action complaints were filed (three in Superior Court of California
   in San Diego and one in Delaware Chancery Court) asserting claims that ADA
   and certain of its directors breached their fiduciary duties to ADA's
   stockholders in connection with the Merger Agreement, and one of which
   asserted a claim that the Company aided and abetted in the ADA's directors'
   breach of fiduciary duties. In October, the California actions were
   consolidated and an amended consolidated complaint was served on the
   Company. On October 29, 1999 the Superior Court of California denied the
   plaintiff's motion for a preliminary injunction to enjoin the tender offer
   by the Company for all ADA's shares and the proposed merger of ADA with the
   Company. On December 3, 1999, the California plaintiffs served a second
   amended consolidated class action complaint in which they added claims
   against, among others, the Company and certain of its officers, alleging
   that material information was omitted from the Company's Offer to Purchase
   ADA shares, and that certain officers of the Company aided and abetted the
   ADA directors in a breach of their fiduciary duties to ADA stockholders. On
   January 13, 2000, the Company and certain officers filed a demurrer seeking
   judgment on the pleadings. In the Company's opinion, those lawsuits and
   four similar lawsuits filed against ADA have no merit and the Company
   intends to vigorously defend against them.

                                       8
<PAGE>

                              DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


I. Income (Loss) Per Share

   Income (loss) per share is calculated as follows (in thousands except per
share data):

<TABLE>
<CAPTION>
                                         Three Months Ended  Nine Months Ended
                                            December 31,       December 31,
                                         ------------------- -----------------
                                           1999      1998      1999     1998
                                         --------- --------- -------- --------
   <S>                                   <C>       <C>       <C>      <C>
   Net income (loss)...................  $   4,753 $   6,949 $ 16,870 $ (1,323)
                                         ========= ========= ======== ========
   BASIC:
   Common stock outstanding, net of
    treasury stock, beginning of
    period.............................    121,409   120,251  120,665   16,864
   Weighted average common stock and
    treasury stock issued during the
    period.............................        652        62      645   98,788
   Weighted average common stock
    repurchased........................        --        --       --   (14,172)
                                         --------- --------- -------- --------
   Weighted average common stock
    outstanding, net of treasury stock,
    end of period......................    122,061   120,313  121,310  101,480
                                         ========= ========= ======== ========
   Income (loss) per common share......  $    0.04 $    0.06 $   0.14 $  (0.01)
                                         ========= ========= ======== ========
   DILUTED:
   Common stock outstanding, net of
    treasury stock, beginning of
    period.............................    121,409   120,251  120,665   16,864
   Weighted average common stock and
    treasury stock issued during the
    period.............................        652        62      645   98,788
   Weighted average of dilutive
    potential common stock(a)..........     12,488     7,344   10,056      --
   Weighted average common stock and
    treasury stock repurchased.........        --        --       --   (14,172)
                                         --------- --------- -------- --------
   Weighted average common stock
    outstanding, net of treasury stock,
    end of period......................    134,549   127,657  131,366  101,480
                                         ========= ========= ======== ========
   Income (loss) per common share......  $    0.04 $    0.05 $   0.13 $  (0.01)
                                         ========= ========= ======== ========
</TABLE>
--------
  (a) As of December 31, 1999, the Company had no options that were excluded
      from the diluted earnings per share calculation, since all options had
      a dilutive effect on earnings per share. As of December 31, 1999, the
      Company had options outstanding to purchase 32.0 million shares of
      common stock.

     As of December 31, 1998, the Company had options outstanding to purchase
     33.3 million shares of common stock that were excluded from the diluted
     earnings per share computation as the effect of their inclusion would
     have been antidilutive.

J. Comprehensive Income

   The following information shows adjustments to net income (loss) for other
   comprehensive income (loss) which consists primarily of foreign currency
   translation adjustments.

<TABLE>
<CAPTION>
                                        Three Months Ended   Nine Months Ended
                                           December 31,        December 31,
                                        -------------------- -----------------
                                          1999       1998      1999     1998
                                        ---------  --------- -------- --------
   <S>                                  <C>        <C>       <C>      <C>
   Net income (loss)..................  $   4,753  $   6,949 $ 16,870 $ (1,323)
   Other comprehensive income (loss)..       (232)       257       22       68
                                        ---------  --------- -------- --------
       Total comprehensive income
        (loss)........................  $   4,521  $   7,206 $ 16,892 $ (1,255)
                                        =========  ========= ======== ========
</TABLE>


                                       9
<PAGE>

                             DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

K. Intangible Assets

   Intangible assets acquired primarily from business acquisitions are
   summarized as follows:

<TABLE>
<CAPTION>
                                                          December 31, March 31,
                                                              1999       1999
                                                          ------------ ---------
   <S>                                                    <C>          <C>
   Product technology....................................   $ 17,608    $17,042
   Excess of cost over net assets acquired...............    101,667     55,878
   Other intangible assets...............................     13,307     13,307
                                                            --------    -------
                                                             132,582     86,227
   Less accumulated amortization.........................     39,813     29,459
                                                            --------    -------
   Intangible assets, net................................   $ 92,769    $56,768
                                                            ========    =======
</TABLE>

   On November 1, 1999 the Company, through one of its wholly owned
   subsidiaries, acquired all the outstanding stock of ADA for $5.37 per
   outstanding share which approximated $81 million in the aggregate including
   acquisition costs. The purchase method of accounting was applied to the
   acquisition and generated approximately $36 million of goodwill which will
   be amortized over three years.

   On September 10, 1999 the Company, through one of its wholly owned
   subsidiaries, purchased the outstanding stock of Sierra. The purchase price
   was $6.3 million which resulted in $4.9 million of goodwill.

   The purchase method of accounting was applied to the acquisition, and the
   excess purchase price will be amortized over 10 years.

L. Debt

   Long-term debt is summarized below:

<TABLE>
<CAPTION>
                                                          December 31, March 31,
                                                              1999       1999
                                                          ------------ ---------
   <S>                                                    <C>          <C>
   Senior secured credit facilities......................   $291,518   $252,000
   Senior subordinated notes.............................    275,000    275,000
   Capitalized leases....................................         78        342
                                                            --------   --------
       Total debt........................................    566,596    527,342
        Less current portion.............................      6,398     23,191
                                                            --------   --------
   Long-term debt........................................   $560,198   $504,151
                                                            ========   ========
</TABLE>

                                      10
<PAGE>

                             DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


M. Stockholders' Deficit

   The following is a summary of the change in stockholders' deficit for the
period ended December 31, 1999:

<TABLE>
<CAPTION>
                              Number
                             of Shares        Additional                             Other         Total
                              Common   Common  Paid-In   Retained     Unearned   Comprehensive Stockholders'
                               Stock   Stock   Capital    Deficit   Compensation     Loss         Deficit
                             --------- ------ ---------- ---------  ------------ ------------- -------------
   <S>                       <C>       <C>    <C>        <C>        <C>          <C>           <C>
   Balance, March 31,
    1999...................   120,665    --    $322,746  $(629,941)   $(7,563)      $(1,682)     $(316,440)
   Net income current
    year...................                                 16,870                                  16,870
   Translation adjustment..                                                              22             22
   Adjust unearned
    compensation...........                        (537)                  528                           (6)
   Stock option expense....                      (5,829)                                            (5,829)
   Amort of unearned comp..                                             1,451                        1,448
   Exercise of stock
    options and other
    issuances..............     1,397      7      3,597                                              3,604
   Unearned compensation
    from stock option
    grants.................                       3,102                (3,102)                         --
   Reclass of common stock
    par value..............            1,214     (1,214)                                               --
                              -------  -----   --------  ---------    -------       -------      ---------
   Balance, December 31,
    1999...................   122,062  1,221    321,865   (613,071)    (8,686)       (1,660)      (300,331)
                              =======  =====   ========  =========    =======       =======      =========
</TABLE>

   During the first nine months of fiscal 2000 the Company issued
   approximately 7.1 million options to employees and non-employee directors
   of which 1.8 million options were issued at an exercise price equal to the
   fair market value as determined by the Company's board of directors, but at
   a price lower than trading price on the open market on the dates of the
   grants. The Company, therefore, incurred a charge of approximately $3.1
   million for the difference between the trading price on the open market and
   the exercise price of the options and recorded this unearned compensation
   within stockholders' equity and will be amortized to expense over the
   options' vesting periods.

                                      11
<PAGE>

                             DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


N. Segment Information

   Sales, earnings before interest and taxes ("EBIT") and total assets for the
   three and nine months ended December 31, 1999 and 1998 are shown below (in
   thousands):

<TABLE>
<CAPTION>
                                     Three Months Ended    Nine Months Ended
                                        December 31,         December 31,
                                     --------------------  ------------------
                                       1999       1998       1999      1998
                                     ---------  ---------  --------  --------
   <S>                               <C>        <C>        <C>       <C>
   SEGMENT
   Communications test:
     Sales.......................... $  96,923  $  66,349  $241,442  $182,201
     EBIT........................... $  17,998  $  15,009  $ 42,034  $ 33,383
     Total Assets................... $ 180,275  $  81,415  $180,275  $ 81,415
   Industrial computing &
    communications:
     Sales..........................    37,981     46,563   160,317   119,686
     EBIT...........................       572      3,117    18,902     4,607
     Total Assets...................    75,631    100,658    75,631   100,658
   Visual communications:
     Sales..........................    25,302     23,869    75,366    67,638
     EBIT...........................     5,404      7,883    21,148    21,331
     Total Assets...................    52,040     37,497    52,040    37,497
   Corporate:
     EBIT...........................      (469)      (681)     (133)   (1,458)
     Total Assets...................    99,051     95,806    99,051    95,806
   Total:
     Sales.......................... $ 160,206  $ 136,781  $477,125  $369,525
     EBIT........................... $  23,505  $  25,328  $ 81,951  $ 57,863
     Total Assets................... $ 406,997  $ 315,376  $406,997  $315,376
</TABLE>


O. SUBSEQUENT EVENTS

   On February 14, 2000, the Company, DWW Acquisition Corporation, a Delaware
corporation and indirect subsidiary of the Company ("Mergerco"), and Wavetek
Wandel Goltermann, Inc., a Delaware corporation ("WWG"), entered into an
Agreement and Plan of Merger pursuant to which Mergerco would merge with WWG,
with WWG as the surviving corporation. The merger is subject to customary
closing conditions, including obtaining applicable competition law approvals.
In the merger, at the election of holders of WWG stock, each share of common
stock of WWG will be entitled to receive (i) $25.00 per share of common stock
of WWG or (ii) 4.49 shares of Common Stock of the Company per share of common
stock. The aggregate transaction value is approximately $600 million, which
includes approximately $245 million of WWG indebtedness.

   In connection with the merger, the Company intends to enter into a new
multi-currency senior credit facility with a syndicate of banks for an
aggregate principal amount of approximately $860 million including revolver
and term loans, and to sell newly-issued common stock to Clayton, Dubilier &
Rice Fund VI Limited Partnership ("Fund VI"), which is an affiliate of the
Company's controlling stockholder, at a price per share of $4.00. In addition,
the Company expects to make a rights offering to the Company's other
stockholders to purchase newly-issued shares at the same price offered to Fund
VI. It is anticipated that approximately $250 million of new equity will be
raised through the sale to Fund VI, the rights offering and the issuance of
Dynatech Stock in the merger. The Company's existing 9 3/4% senior
subordinated notes will not be affected by the proposed transaction.

                                      12
<PAGE>

                              DYNATECH CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



   On January 4, 2000 the Company purchased the remaining outstanding stock of
   ICS Advent (Europe) Ltd. ("ICSUK") for (Pounds)3.0 million (approximately
   $4.9 million). The Company previously owned approximately 25% of ICSUK.
   ICSUK is primarily a distributor of mission-critical computer systems to the
   defense, factory-automation, data and telecommunications markets within
   Europe as well as a distributor of rack-mounted computers supplied by the
   Company's ICS Advent subsidiary.

                                       13
<PAGE>

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

   This Form 10-Q contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, product demand and market
acceptance risks, the effect of economic conditions, the impact of competitive
products and pricing, product development, commercialization and technological
difficulties, capacity and supply constraints or difficulties, availability of
capital resources, general business and economic conditions, the effect of the
Company's accounting policies, and other risks detailed in the Company's most
recent Form 10-K as of March 31, 1999.

Overview

   During the first nine months of fiscal 2000, the Company shipped products
at record levels, especially within the communications test segment. During
the previous fiscal year the Company's communications test and industrial
computing and communications segments had been experiencing certain order
delays due to the telecommunications equipment and service providers facing
capital market volatility, reduced financing availability, as well as an
overall economic slowdown in Asia. However, the Company cannot predict whether
this trend will continue due in part to the volatility of the global economy,
the unpredictability of the purchasing patterns of the Regional Bell Operating
Companies ("RBOCs"), and the timing and size of such customers' orders, among
other things.

   During the first quarter of fiscal 2000, certain of the Company's key
executives, including Mr. John F. Reno, former Chairman, President and Chief
Executive Officer, terminated their employment with the Company. In accordance
with the terms of certain agreements, the Company recorded a charge of $13.3
million.

   On November 1, 1999 and subsequently on November 8, 1999, the Company,
through one of its wholly owned subsidiaries, acquired all the outstanding
stock of Applied Digital Access, Inc. ("ADA") for $5.37 per outstanding share
which approximated $81 million in the aggregate including acquisition costs.
The purchase method of accounting was applied to the acquisition and generated
approximately $36 million of goodwill which will be amortized over three
years.

   The Company funded the purchase by expending from available funds $16
million and by borrowing $65 million under its revolving credit facility. The
Company subsequently repaid $9.0 million of its borrowings between the
acquisition dates and December 31, 1999.

   ADA is headquartered in San Diego, CA and is a provider of network
performance management products that include systems, software and services
used to manage the quality, performance, availability and reliability of
telecommunications service providers' networks. The results of operations of
ADA on a prospective basis will be included with the Company's communications
test business segment.

   On September 10, 1999 the Company, through one of its wholly owned
subsidiaries, purchased the outstanding stock of Sierra Design Labs
("Sierra"), a Nevada corporation. The purchase price was $6.3 million which
resulted in $4.9 million of goodwill. The purchase method of accounting was
applied to the acquisition, and the excess purchase price will be amortized
over 10 years. Sierra designs, manufactures, and markets uncompressed, real-
time videodisk recorders and will be included in the Company's visual
communications segment.

Results of Operations

For the Three Months Ended December 31, 1999 as Compared to Three Months Ended
December 31, 1998

   Sales. For the three months ended December 31, 1999 consolidated sales
increased $23.4 million or 17.1% to $160.2 million as compared to $136.8
million for the three months ended December 31, 1998. The increase occurred
within the communications test and visual communications segments and was
offset by a decrease in sales within the industrial computing and
communications segment.

                                      14
<PAGE>

   During the third quarter of fiscal 1999, the Company's Itronix subsidiary,
which is included in the industrial computing and communication segment,
received orders totaling more than $72 million from two RBOCs. Itronix shipped
the products under these and other purchase orders during the third and fourth
quarters of fiscal 1999 and the first and second quarters of fiscal 2000.
These purchase orders were received from certain RBOCs for ruggedized laptops
as the RBOCs initiated a program to replace their field-based workforce
computing systems with more up-to-date ruggedized computing solutions. Itronix
has recently been experiencing marketing challenges which include competition
from "semi-rugged" products that constrain the pricing of premium, ruggedized
products like those manufactured by Itronix. As a result, Itronix's results of
operations have varied significantly in the past and may vary significantly in
the future, on both a quarterly and annual basis.

   International sales (defined as sales outside of North America) were $15.4
million or 9.6% of consolidated sales for the three months ended December 31,
1999, as compared to $18.5 million or 13.5% of consolidated sales for the
three months ended December 31, 1998. The decrease in international sales is
primarily a result of the timing of orders within Europe and Asia for
communications test products.

   Gross Profit. Consolidated gross profit increased $18.9 million to $95.6
million or 59.7% of consolidated sales for the three months ended December 31,
1999, as compared to $76.7 million or 56.1% of consolidated sales for the
three months ended December 31, 1998. The increase was attributable to the
higher sales volume.

   Operating Expenses. Operating expenses consist of selling, general and
administrative expense; product development expense; amortization of
intangibles; and amortization of unearned compensation. Total operating
expenses were $73.7 million or 46.0% of consolidated sales for the three
months ended December 31, 1999, as compared to $51.8 million or 37.8% of
consolidated sales for the three months ended December 31, 1998. The increase
is a result of additional spending on product development programs as well as
additional selling expense related to variable compensation plans. Included in
the operating expenses for the quarter was $4.8 million related to the
operating expenses of ADA which were included with the Company's consolidated
results for November and December 1999.

   Selling, general and administrative expense was $49.2 million or 30.7% of
consolidated sales for the three months ended December 31, 1999, as compared
to $36.3 million or 26.6% of consolidated sales for the three months ended
December 31, 1998. The increase is partially a result of increased selling
expense due to higher sales commission rates in which sales personnel receive
higher commission rates when new orders received are in excess of budgeted new
orders. In addition the Company sold to certain of its non-employee directors
shares of the Company's outstanding stock at a price lower than the price
equal to the fair market value as determined by the Company's board of
directors, but at a price lower than the trading price in the open market.
These non-employee directors purchased 615,384 shares which resulted in a
charge of $1.0 million.

   Product development expense was $19.9 million or 12.4% of consolidated
sales for the three months ended December 31, 1999 as compared to $13.2
million or 9.7% of consolidated sales for the same period a year ago. The
Company continues to invest in product development and enhancement within all
three segments. In addition the Company's communications business segment has
invested an additional $3.2 million during the third quarter of fiscal 2000 as
compared to the same period last year for the development of the next
generation of communications test equipment.

   Amortization of intangibles was $3.9 million for the three months ended
December 31, 1999, an increase of $2.3 million as compared to the same period
a year ago. The increase is attributable to the amortization of goodwill as a
result of the acquisition of ADA.

   Amortization of unearned compensation of $0.6 million for the three months
ended December 31, 1999 and for the same period a year ago relates to the
recognition of the unearned compensation recorded within shareholders' deficit
related to the stock options that were issued at a grant price equal to the
fair market value as determined by the Company's board of directors, but at a
price lower than the trading price in the open market.

                                      15
<PAGE>

   Operating income. Operating income decreased 12.2% to $21.9 million or
13.7% of consolidated sales for the three months ended December 31, 1999 as
compared to $25.0 million or 18.2% of consolidated sales for the same period a
year ago. The decrease was primarily the result of higher operating expenses
offset slightly by the increase in gross profit as compared to the same period
last year, as discussed above.

   Interest. Interest expense, net of interest income, was $12.4 million for
the three months ended December 31, 1999 as compared to $12.3 million for the
same period a year ago.

   Taxes. The effective tax rate increased for the three months ended December
31, 1999 to 49.9% from 44.0% for the same period a year ago, primarily due to
the permanent book/tax differences that arose as a result of the accounting
for the acquisition of ADA (primarily to non-deductible goodwill).

   Net income. Net income was $4.8 million or $0.04 per share on a diluted
basis for the three months ended December 31, 1999 as compared to $6.9 million
or $0.05 per share on a diluted basis for the same period a year ago. The
decrease was primarily attributable to the higher operating expenses offset
slightly by the increase in gross profit as compared to the same period last
year.

 Nine Months Ended December 31, 1999 as Compared to Nine Months Ended
 December 31, 1998

   Sales. For the nine months ended December 31, 1999 consolidated sales
increased $107.6 million or 29.1% to $477.1 million as compared to $369.5
million for the nine months ended December 31, 1998. The increase occurred
within all three business segments but primarily within the communications
test and industrial computing and communications segments.

   International sales (defined as sales outside of North America) were $47.4
million or 9.9% of consolidated sales for the nine months ended December 31,
1999, as compared to $48.9 million or 13.2% of consolidated sales for the nine
months ended December 31, 1998. The slight dollar decrease in international
sales was a result of lower sales of the Company's communications test and
visual communications products in Europe. The percentage decrease was a result
of the increase in sales to customers within the United States.

   Gross Profit. Consolidated gross profit increased $60.6 million to $271.2
million or 56.8% of consolidated sales for the nine months ended December 31,
1999 as compared to $210.7 million or 57.0% of consolidated sales for the nine
months ended December 31, 1998. The dollar increase was directly related to
the increase in sales. The slight percentage decrease was attributable to a
change in the sales mix within the consolidated group along with lower gross
margins within the Company's industrial computing and communications segment.

   Operating Expenses. Operating expenses consist of selling, general and
administrative expense; product development expense; recapitalization and
other related costs; amortization of intangibles; and amortization of unearned
compensation. Total operating expenses were $205.0 million or 43.0% of
consolidated sales for the nine months ended December 31, 1999, as compared to
$196.9 million or 53.3% of consolidated sales for the nine months ended
December 31, 1998. Included in the operating expenses was $4.8 million related
to ADA operating expense for November and December 1999. Excluding the impact
of the recapitalization and other related costs, total operating expenses were
$191.7 million or 40.2% of consolidated sales and $153.5 million or 41.5% of
consolidated sales for the nine months ended December 31, 1999 and 1998,
respectively. The percentage decrease in total operating expenses excluding
the recapitalization and other related expenses is due primarily to operating
expenses increasing at a rate slower than sales growth.

   Selling, general and administrative expense was $131.6 million or 27.6% of
consolidated sales for the nine months ended December 31, 1999 as compared to
$107.5 million or 29.1% of consolidated sales for the nine months ended
December 31, 1998. The percentage decrease is in part a result of the increase
in sales as well as timing on sales commission expense as commissions in
certain of the Company's subsidiaries are expensed when new orders are
received.


                                      16
<PAGE>

   Product development expense was $51.6 million or 10.8% of consolidated
sales for the nine months ended December 31, 1999 as compared to $40.3 million
or 10.9% of consolidated sales for the same period a year ago. In addition the
Company's communications business segment has invested an additional $5.9
million during the nine months of fiscal 2000 as compared to the same period
last year for the development of the next generation of communications test
equipment.

   Recapitalization and other related costs were $13.3 million and $43.4
million at December 31, 1999 and December 31, 1998, respectively. The fiscal
2000 expense relates to the costs associated with terminating certain
employees. Recapitalization costs totaling $43.4 million were incurred during
the first quarter of fiscal 1999 in connection with the Merger.

   Amortization of intangibles was $7.1 million for the nine months ended
December 31, 1999, as compared to $4.7 million for the same period a year ago.
The increase was primarily due to the amortization of the excess purchase
price in connection with the acquisition of ADA.

   Amortization of unearned compensation was $1.5 million and $1.0 million for
the nine months ended December 31, 1999 and 1998, respectively. This charge is
related to the recognition of the unearned compensation recorded within
stockholders' equity related to the stock options that were issued at a grant
price equal to the fair market value as determined by the Company's board of
directors, but at a price lower than the trading price on the open market.

   Operating income. Operating income increased $52.4 million to $66.2 million
or 13.9% of consolidated sales for the nine months ended December 31, 1999 as
compared to $13.8 million or 3.7% of consolidated sales for the same period a
year ago. The increase was primarily a result of the recapitalization and
other related costs during fiscal 1999 as well as the increase in sales.
Excluding these expenses, the Company generated operating income of $79.5
million or 16.7% of consolidated sales and $57.2 million or 15.5% of
consolidated sales for the nine months ended December 31, 1999 and 1998,
respectively. The percentage increase was primarily the result of the increase
in sales offset slightly by the increase in operating expenses, as discussed
above.

   Interest. Interest expense, net of interest income, was $36.6 million for
the nine months ended December 31, 1999 as compared to $30.2 million for the
same period a year ago. The increase in net interest expense was attributable
to a full nine months of interest expense in fiscal 2000 as compared to
approximately 7.5 months of interest expense for the same period last year, as
the debt was incurred in connection with the Merger on May 21, 1998.

   Gain on sale. On June 30, 1998 the Company sold the assets of ComCoTec for
$21 million which resulted in a gain of $15.9 million. ComCoTec was a
subsidiary within the Company's visual communications segment.

   Taxes. The effective tax rate for the nine months ended December 31, 1999
decreased to 43.2% from 58.0% for the same period last year. This decrease was
due to the permanent book/tax differences arising as a result of the
accounting for the Merger in fiscal 1999, which was offset by the permanent
book/tax differences (primarily to non-deductible goodwill) that arose as a
result of the accounting for the acquisition of ADA.

   Net income (loss). Net income increased to $16.9 million or $0.13 per share
on a diluted basis for the nine months ended December 31, 1999 as compared to
a net loss of $1.3 million or a ($0.01) loss per share on a diluted basis for
the same period a year ago. The increase was primarily attributable to the
higher recapitalization and other related expenses offset by the gain on the
sale of ComCoTec during fiscal 1999 offset by higher sales during fiscal 2000.

Results of Operations -- Business Segments

   The Company measures the performance of its subsidiaries by the their
respective new orders received ("bookings"), sales and earnings before
interest and taxes ("EBIT"), as well as backlog (defined as orders for

                                      17
<PAGE>

goods to be shipped and services to be performed). The discussion below
includes bookings, sales and EBIT (excluding recapitalization and other
related costs and the gain on sale of subsidiary) for the three segments in
which the Company participates: communications test, industrial computing and
communications, and visual communications (in thousands).
<TABLE>
<CAPTION>
                                               Three Months
                                                  Ended       Nine Months Ended
                                               December 31,     December 31,
                                             ---------------- -----------------
                                               1999    1998     1999     1998
                                             -------- ------- -------- --------
   <S>                                       <C>      <C>     <C>      <C>
   SEGMENT:
   Communications Test:
     Bookings............................... $112,256 $69,700 $268,656 $180,087
     Sales..................................   96,923  66,349  241,442  182,201
     EBIT...................................   17,999  15,009   42,034   33,383
   Industrial Computing & Communications:
     Bookings...............................   47,148  96,274  132,814  176,096
     Sales..................................   37,980  46,563  160,317  119,686
     EBIT...................................      571   3,117   18,902    4,607
   Visual Communications:
     Bookings...............................   26,134  23,854   77,724   73,187
     Sales..................................   25,303  23,869   75,367   67,638
     EBIT...................................    5,404   7,883   21,148   21,331
</TABLE>

Three and Nine Months Ended December 31, 1999 Compared to Three and Nine
Months Ended December 31, 1998 -- Communications Test Products

   Bookings for communications test products increased $42.6 million or 61.1%
to $112.3 million for the three months ended December 31, 1999 as compared to
$69.7 million for the same period a year ago. For the nine months ended
December 31, 1999 bookings for communications test products increased $88.6
million or 49.2% to $268.7 million as compared to $180.1 million for the same
period a year ago. Orders for the Company's communications test instruments
products continue to recover from last year's slowdown which was a result of
the communications industry consolidation and the Asia economic crisis. In
addition approximately $6.1 million related to orders received by ADA during
November and December 1999.

   Sales of communications test products increased $30.6 million or 46.1% to
$96.9 million for the three months ended December 31, 1999 as compared to
$66.4 million for the same period a year ago. For the nine months ended
December 31, 1999 sales of communications test products increased $59.2
million or 32.5% to $241.4 million as compared to $182.2 million for the nine
months ended December 31, 1998. Demand for the Company's test products has
rebounded during the first nine months of fiscal 2000 from the fiscal 1999
decrease in demand due to the consolidation of the RBOC's purchasing practices
and the economic slowdown in Asia. In addition approximately $9.2 million
related to shipments by ADA during November and December 1999.

   EBIT for the communications test products increased $3.0 million or 19.9%
to $18.0 million for the three months ended December 31, 1999 as compared to
$15.0 million for the same period a year ago. For the nine months ended
December 31, 1999 EBIT increased $8.7 million or 25.9% to $42.0 million as
compared to $33.4 million for the same period a year ago. The increase in EBIT
is directly related to the increase in sales and was offset by approximately
$2.2 million of goodwill amortization related to the acquisition of ADA.

   The backlog for the Company's communications test products was $95.7
million at December 31, 1999, an increase of 57.8% from the fiscal year ended
March 31, 1999.

Three and Nine Months Ended December 31, 1999 Compared to Three and Nine
Months Ended December 31, 1998--Industrial Computing and Communications
Products

   Bookings for the industrial computing and communications products decreased
to $47.1 million for the three months ended December 31, 1999 as compared to
$96.3 million for the same period a year ago. For the nine

                                      18
<PAGE>

months ended December 31, 1999 bookings for this segment decreased to $132.8
million from $176.1 million for the same period a year ago. The Company has
been experiencing a reduction in orders for its ruggedized computers due in
part to increased competition from manufacturers of "semi-rugged" products
that constrain the pricing of premium, ruggedized products like those
manufactured by Itronix. However, Itronix's results of operations have varied
significantly in the past and may vary significantly in the future, on both a
quarterly and annual basis due to the timing and volume of the orders.

   Sales of industrial computing and communications products decreased to
$38.0 million for the three months ended December 31, 1999 as compared to
$46.6 million for the same period a year ago. For the nine months ended
December 31, 1999 sales within this segment increased $40.6 million or 33.9%
to $160.3 million as compared to $119.7 million for the same period a year
ago. The decrease for the quarter was primarily due to shipments of the
Company's ruggedized laptop computers from certain large purchase orders
received during the third quarter of last year. These purchase orders were
received from certain RBOCs for ruggedized laptops as the RBOCs initiated a
program to replace their field-based workforce computing systems with more up-
to-date ruggedized computing solutions. The increase on a fiscal 2000 year-to-
date basis is primarily a result of the high backlog position for products
within this segment at March 31, 1999.

   EBIT for the industrial computing and communications products decreased to
$0.6 million for the three months ended December 31, 1999 as compared to $3.1
million for the same period a year ago. For the nine months ended December 31,
1999 EBIT increased $14.3 million to $18.9 million as compared to $4.6 million
for the same period a year ago. The decrease in EBIT for the quarter is
directly related to the sales shortfall; the increase in EBIT for the first
nine months of fiscal 2000 relate to the shipments of orders during the first
two quarters of fiscal 2000 which were included in backlog at March 31, 1999.

   The backlog for the Company's industrial computing and communications
products was $54.3 million at December 31, 1999, a decrease of 31.5% from the
fiscal year ended March 31, 1999. The decrease is a result of the one-time
orders received from certain RBOCs during the third and fourth quarters of
fiscal 1999 for the Company's ruggedized laptops. These one-time orders were
initiated by certain RBOCs to replace their field workforce computing systems
with more up-to-date ruggedized computing solutions. Included in the backlog
at December 31, 1999 is approximately $40.9 million relating to maintenance
and service contracts associated with the purchase of the ruggedized laptops
by the RBOCs during the last two quarters of fiscal 1999 and the first quarter
of fiscal 2000.

   The results of operations for Itronix are expected to continue to vary
widely because of the relatively small number of potential customers with
large field-service work forces and the irregularity of timing and size of
such customers' orders.

Three and Nine Months Ended December 31, 1999 Compared to Three and Nine
Months Ended December 31, 1998 -- Visual Communications Products

   Bookings for the visual communications products increased $2.3 million or
9.6% to $26.1 million for the three months ended December 31, 1999 as compared
to $23.9 million for the same period a year ago. For the nine months ended
December 31, 1999 bookings within this segment increased $4.5 million or 6.2%
to $77.7 million as compared to $73.2 million for the same period a year ago.
Approximately $0.8 million was related to orders received by Sierra.

   Sales for the Company's visual communications products increased $1.4
million or 6.0% to $25.3 million for the three months ended December 31, 1999
as compared to $23.9 million for the same period a year ago. For the nine
months ended December 31, 1999 sales for products within this segment
increased $7.7 million or 11.4% to $75.4 million as compared to $67.6 million
for the same period a year ago. The increase is primarily a result of
increased demand for the Company's real-time flight information passenger
video displays as more airlines integrate this product into their in-flight
entertainment systems.

                                      19
<PAGE>

   EBIT for the visual communications products decreased to $5.4 million as
compared to $7.9 million for the same period a year ago. For the nine months
ended December 31, 1999 and 1998 EBIT for this segment was $21.1 million and
$21.3 million, respectively. The decrease is due in part to the additional
research and development spending for the development of future products as
well as a change in the mix of products sold creating a lower gross margin.

   The backlog for the Company's visual communications products was $32.8
million, an increase of 8.7% from the fiscal year ended March 31, 1999.

Capital Resources and Liquidity

   The Company broadly defines liquidity as its ability to generate sufficient
cash flow from operating activities to meet its obligations and commitments.
In addition, liquidity includes the ability to obtain appropriate debt and
equity financing and to convert into cash those assets that are no longer
required to meet existing strategic and financial objectives. Therefore,
liquidity cannot be considered separately from capital resources that consist
of current or potentially available funds for use in achieving long-range
business objectives and meeting debt service commitments.

   The Company's liquidity needs arise primarily from debt service on the
substantial indebtedness incurred in connection with the Merger and from the
funding of working capital and capital expenditures. As of December 31, 1999,
the Company had $566.6 million of indebtedness, primarily consisting of $275.0
million principal amount of the Senior Subordinated Notes, $235.5 million in
borrowings under the Term Loan Facility, and $56.0 million in borrowings under
the Revolving Credit Facility.

   Cash Flows. The Company's cash and cash equivalents decreased $31.3 million
during the first nine months of fiscal 2000.

   Working Capital. During the first nine months of fiscal 2000, the Company's
working capital decreased net of the purchase accounting effects related to
ADA and Sierra as its operating assets and liabilities used $19.6 million of
cash. Accounts receivable increased, creating a use of cash of $10.3 million
primarily due to the increased sales volume during the quarter. Inventory
levels decreased, creating a source of cash of $6.1 million, due primarily to
improved inventory management throughout the organization. Other current
assets increased, creating a use of cash of $1.0 million. Accounts payable
decreased, creating a use of cash of $8.7 million. Other current liabilities
decreased, creating a use of cash of $5.7 million. The decrease is due in part
to interest payments on debt as well as payment of the deferred purchase prior
to the previous owners of Pacific Systems offset by an increase in deferred
revenue.

   Investing Activities. The Company's investing activities totaled $90.0
million for the nine months ended December 31, 1999 in part for the purchase
and replacement of property and equipment. In addition, the Company purchased
the stock of ADA for $81 million and Sierra for $6.3 million.

   The Company's capital expenditures during the first nine months of fiscal
2000 were $13.0 million as compared to $7.4 million for the same period last
year. Fiscal 2000 capital expenditures will continue to increase from fiscal
1999 levels and return to or exceed fiscal 1998 levels as the Company replaces
certain of its Enterprise Resource Planning (ERP) systems at the
communications test and industrial computing and communications businesses.
The Company is, in accordance with the terms of the Senior Secured Credit
Agreement, subject to maximum capital expenditure levels.

   Debt and Equity. The Company's financing activities generated $42.9 million
in cash during the first nine months of fiscal 2000, due mainly to the
borrowing of debt to fund the acquisition of ADA.

Debt

   Principal and interest payments under the new Senior Secured Credit
Agreement and interest payments on the Senior Subordinated Notes represent
significant liquidity requirements for the Company. With respect to the

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$260 million initially borrowed under the Term Loan Facility (which is divided
into four tranches, each of which has a different term and repayment
schedule), the Company is required to make scheduled principal payments of the
$50 million of tranche A term loan thereunder during its six-year term, with
substantial amortization of the $70 million tranche B term loan, $70 million
tranche C term loan and $70 million tranche D term loan thereunder occurring
after six, seven and eight years, respectively. The balances of the revolving
credit facility, and tranches A, B, C, and D at December 31, 1999 were $56.0
million, $34.7 million, $66.9 million, $66.9 million, and $66.9 million,
respectively. The $275 million of Senior Subordinated Notes will mature in
2008, and bear interest at 9 3/4% per annum. Total interest expense including
$2.4 million of deferred debt issuance costs amortization was $38.4 million
for the six months of fiscal 2000.

   The Company is required, under the terms of its Senior Secured Credit
Facilities, to make a mandatory prepayment and principal reduction in an
amount equal to 50% of the Company's excess cash flow (the "Recapture")
calculated at the end of the Company's fiscal year. The Company was required
to prepay $14.5 million on June 30, 1999 for its excess cash flow calculated
as of March 31, 1999 in accordance with the terms of the Senior Secured Credit
Facilities. The Company elected to use this Recapture as a prepayment of the
mandatory $8 million amortization due in fiscal 2000 which subsequently
reduced the mandatory principal payments to approximately $2.6 million during
fiscal 2000.

   The loans under the Senior Secured Credit Agreement bear interest at
floating rates based upon the interest rate option elected by the Company. The
Company's weighted-average interest rate on the loans under the Senior Credit
Agreement was 8.06% per annum for the period April 1, 1999 through December
31, 1999. However, the Company has entered into interest rate swap contracts
which will be effective for periods ranging from two to three years beginning
September 30, 1998 to fix the interest charged on a portion of the total debt
outstanding under the Term Loan Facility. After giving effect to these
arrangements, approximately $220 million of the debt outstanding will be
subject to an effective average annual fixed rate of 5.66%. This average
annual interest rate does not include a margin payable to the lenders
participating in the Senior Secured Credit Facilities.

   Future Financing Sources and Cash Flows. The amount under the Revolving
Credit Facility that remained undrawn at December 31, 1999, was $54.0 million.
The Company believes that cash generated from operations, together with
amounts available under the Revolving Credit Facility and any other available
sources of liquidity, will be adequate to permit the Company to meet its debt
service obligations, capital expenditure program requirements, ongoing
operating costs and working capital needs, although no assurance can be given
in this regard. The Company's future operating performance and ability to
service or refinance the Senior Subordinated Notes and to repay, extend or
refinance the Senior Secured Credit Facilities (including the Revolving Credit
Facility) will be, among other things, subject to future economic conditions
and to financial, business and other factors, many of which are beyond the
Company's control.

   Covenant Restrictions. The Senior Secured Credit Agreement imposes
restrictions on the ability of the Company to make capital expenditures, and
both the Senior Secured Credit Facilities and the indenture governing the
Senior Subordinated Notes limit the Company's ability to incur additional
indebtedness. Such restrictions, together with the highly leveraged nature of
the Company, could limit the Company's ability to respond to market
conditions, to meet its capital-spending program, to provide for unanticipated
capital investments, or to take advantage of business opportunities.

   The Company was in compliance with all its debt covenants at December 31,
1999.

Year 2000

   The Company developed and implemented a plan to address year 2000 issues
facing the Company. The Company has not experienced any material adverse
effects as a result of the Year 2000 issue. The Company does not believe that
any failure to be Year 2000 compliant, including in respect of leap year
calculations or other dates, would have a material adverse effect on the
Company.

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<PAGE>

   The Company's historical and estimated costs of remediation have not been
and are not anticipated to be material to the Company's financial position or
results of operations, and will be funded through operating cash flows. Total
costs associated with remediation of Year 2000 issues (including systems,
software, and non-IT systems replaced as a result of Year 2000 issues) are
currently estimated at approximately $2 million to $3 million, of which
approximately $1.8 million has already been incurred. Estimated remediation
costs are based on management's best estimates. There can be no guarantee that
these estimates will be achieved, and actual results could differ materially
from those anticipated, particularly if unanticipated Year 2000 issues arise.
The costs do not include estimates for potential litigation. Many commentators
believe that there will be a significant amount of litigation arising out of
Year 2000 readiness issues. Because of the unprecedented nature of this
litigation, it is not possible for the Company to predict the impact of such
litigation.

   Year 2000 Risks and Related Plans. While the Company expects to make the
necessary modifications or changes to both its internal IT and non-IT systems
and existing product base in a timely fashion, there can be no assurance that
the Company's internal systems and existing or installed base of products will
not be materially adversely affected by the advent of Year 2000. Certain of
the Company's products are used, in conjunction with products of other
companies, in applications that may be critical to the operations of its
customers. Any product non-readiness, whether standing alone or used in
conjunction with the products of other companies, may expose the Company to
claims from its customers or others, and could impair market acceptance of the
Company's products and services, increase service and warranty costs, or
result in payment of damages, which in turn could materially adversely affect
the Company.

   In the event of a failure as a result of Year 2000 issues, the Company
could lose or have trouble accessing accurate internal data, resulting in
incomplete or inaccurate accounting of Company financial results, the
Company's manufacturing operating systems could be impaired, and the Company
could be required to expend significant resources to address such failures. In
an effort intended to minimize potential disruption to its internal systems,
the Company intends to perform additional hard-disk back-up of its rudimentary
systems and critical information in advance of the Year 2000.

   Similarly, in the event of a failure as a result of Year 2000 issues in any
systems of third parties with whom the Company interacts, the Company could
lose or have trouble accessing or receive inaccurate third party data,
experience internal and external communications difficulties or have
difficulty obtaining components that are Year 2000 compliant from its vendors.
The Company could also experience a slowdown or reduction of sales if
customers such as telecommunications companies or commercial airlines are
adversely affected by Year 2000 issues.

New Pronouncements

   On June 15, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." FAS 133 was amended by
Statement of Financial Accounting Standards No. 137 which modified the
effective date of FAS 133 to all fiscal quarters of all fiscal years beginning
after June 15, 2000. FAS 133, as amended, requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction. The
Company is assessing the impact of the adoption of FAS 133 on its results of
operations and its financial position.

Item 3. Quantitative And Qualitative Disclosures About Market Risk

   The Company operates both manufacturing facilities and sales offices within
the United States and primarily sales offices outside the United States. The
Company is subject to business risks inherent in non-U.S. activities,
including political and economic uncertainty, import and export limitations,
and market risk related to changes in interest rates and foreign currency
exchange rates. The Company believes the political and economic risks related
to its foreign operations are mitigated due to the stability of the countries
in which its sales offices are

                                      22
<PAGE>

located, as well as the low percentage of overall sales outside the United
States (approximately 14%, 16% and 20% in fiscal 1999, 1998, and 1997,
respectively of consolidated sales relate to foreign sales including exports
from the United States). The Company's principal currency exposures against
the U.S. dollar are in the major European currencies and in Canadian currency.
The Company does not use foreign currency forward exchange contracts to
mitigate fluctuations in currency. The Company's market risk exposure to
currency rate fluctuations is not material. The Company does not hold
derivatives for trading purposes.

   The Company uses derivative financial instruments consisting solely of
interest rate swap contracts. The Company's objective in managing its exposure
to changes in interest rates (on its variable rate debt) is to limit the
impact of such changes on earnings and cash flow and to lower its overall
borrowing costs.

   The Company currently has three interest rate swap contracts with notional
amounts totaling $220 million which fixed its variable rate debt to a fixed
interest rate for periods of two to three years in which the Company pays a
fixed interest rate on a portion of its outstanding debt and receives three-
month LIBOR. At September 30, 1999, two of the three interest rate swap
contracts had an interest rate higher than the three-month LIBOR quoted by its
financial institutions, as variable rate three-month LIBOR interest rates
declined after the swap contracts became effective. Therefore, the additional
interest expense (calculated as the difference between the interest rate in
the swap contracts and the three-month LIBOR rate) recognized by the Company
during the three and nine months ended December 31, 1999 were $48.0 thousand
and $577.3 thousand, respectively.

   At December 31, 1999 all of the swap contracts had fixed interest rates
below the three-month LIBOR quoted by its financial institutions.

   The Company has performed a sensitivity analysis assuming a hypothetical
10% adverse movement in the floating interest rate on the interest rate
sensitive instruments described above. The Company believes that such a
movement is reasonably possible in the near term. As of September 30, 1999,
the analysis demonstrated that such movement would cause the Company to
recognize additional interest expense of approximately $1.4 million on an
annual basis, and accordingly, would cause a hypothetical loss in cash flows
of approximately $1.4 million on an annual basis.

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<PAGE>

                          PART II. Other Information

Item 1. Legal Proceedings

   Litigation. The Company is involved from time to time in routine legal
matters incidental to its business. The Company believes that the resolution
of such matters will not have a material adverse effect on the Company's
financial condition or results of operations.

   On June 27, 1996, Cincinnati Microwave, Inc. ("CMI") filed an action in the
United States District Court for the Southern District of Ohio against the
Company and Whistler Corporation of Massachusetts ("Whistler"), alleging
willful infringement of CMI's patent for a mute function in radar detectors.
In 1994, the Company sold its radar detector business to Whistler. The Company
and Whistler have asserted in response that they have not infringed, and that
the patent is invalid and unenforceable. The Company obtained an opinion of
counsel from Bromberg & Sunstein LLP in connection with the manufacture and
sale of the Company's Whistler series radar detectors and will be offering the
opinion, among other things, as evidence that any alleged infringement was not
willful. On March 24, 1998, CMI, together with its co-plaintiff and patent
assignee Escort, Inc., moved for summary judgment. The Company and Whistler
have opposed the motion for summary judgment. Discovery in this matter closed
on June 20, 1998. On May 27, 1999 Whistler filed a Chapter 11 bankruptcy case
in the United States Bankruptcy Court for the District of Massachusetts. The
case is scheduled for trial in April 2000 and the Company intends to defend
the lawsuit vigorously. The Company does not believe that the outcome of the
litigation is likely to have a material adverse effect on the Company's
financial condition, results of operations or liquidity.

   On September 7, 1999, the Company and ADA entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, a
subsidiary of the Company commenced a cash tender offer to purchase all of the
outstanding shares of ADA's common stock at a price of $5.37 per share.
Following the public announcement of the Merger Agreement, four class action
complaints were filed (three in Superior Court of California in San Diego and
one in Delaware Chancery Court) asserting claims that ADA and certain of its
directors breached their fiduciary duties to ADA's stockholders in connection
with the Merger Agreement, and one of which asserted a claim that the Company
aided and abetted in the ADA's directors' breach of fiduciary duties. In
October, the California actions were consolidated and an amended consolidated
complaint was served on the Company. On October 29, 1999 the Superior Court of
California denied the plaintiff's motion for a preliminary injunction to
enjoin the tender offer by the Company for all ADA's shares and the proposed
merger of ADA with the Company. On December 3, 1999, the California plaintiffs
served a second amended consolidated class action complaint in which they
added claims against, among others, the Company and certain of its officers,
alleging that material information was omitted from the Company's Offer to
Purchase ADA shares, and that certain officers of the Company aided and
abetted the ADA directors in a breach of their fiduciary duties to ADA
stockholders. On January 13, 2000, the Company and certain officers filed a
demurrer seeking judgment on the pleadings. In the Company's opinion, those
lawsuits and four similar lawsuits filed against ADA have no merit and the
Company intends to vigorously defend against them.

Item 2. Changes in Securities and Use of Proceeds

   On October 1, 1999, the Company issued 615,384 shares of the Company's
outstanding stock to certain non-employee directors of the Company. As to the
securities sold, the aggregate offering price was approximately $2,000,000 at
$3.25 per share. The securities issued were not registered under the
Securities Act of 1933, as amended (the "Securities Act"). Exemption from
registration was claimed under Section 4(2) of the Securities Act as the
offering was made only to non-employee directors of the Company, all of who
were Accredited Investors pursuant to Rule 501 of Regulation D under the
Securities Act.

Item 4. Submission of Matters to a Vote

   None.

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<PAGE>

Item 6. Exhibits and Reports on Form 8-K

   (a) Exhibits

   The exhibit numbers in the following list correspond to the numbers
assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K:

       10.1   Proof Non-Employee Director Stock Purchase Agreement
       27     Financial Data Schedule

   (b) Reports on Form 8-K

   The Company filed a Current Report on Form 8-K dated November 9, 1999
related to the Company's acquisition of Applied Digital Access, Inc.

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<PAGE>

                                   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.

                                          DYNATECH CORPORATION

February 14, 2000                         /s/ ALLAN M. KLINE
_____________________________________     _____________________________________
Date                                      Allan M. Kline
                                          Vice President, Chief Financial
                                          Officer and Treasurer

February 14, 2000                         /s/ ROBERT W. WOODBURY, JR.
_____________________________________     _____________________________________
Date                                      Robert W. Woodbury, Jr.
                                          Vice President, Corporate
                                          Controller and Principal Accounting
                                          Officer


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