<PAGE>   1


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                  UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                               Washington, D.C. 20549

                                      FORM 10-K

(Mark One)

   [X]          ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

                   SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                         OR

   [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

                  SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

              FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                          COMMISSION FILE NUMBER     1-5641

                                 INSTRON CORPORATION
               (Exact name of registrant as specified in its Charter)


            MASSACHUSETTS                               04-2057203
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)

             100 ROYALL STREET                                   02021
          CANTON, MASSACHUSETTS                               (Zip Code)
    (Address of Principal executive offices)

                                 (781) 828-2500
                (Registrant's telephone number, including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

COMMON STOCK, $1 PAR VALUE                     AMERICAN STOCK EXCHANGE
   Title Of Each Class              Name Of Each  Exchange  On Which Registered

             SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                      NONE
                                (Title of class)

            Indicate by check mark if disclosure of delinquent filers pursuant
      to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
      contained herein, and will not be contained, to the best of registrant's
      knowledge, in definitive proxy or information statements incorporated by
      reference in Part III of this Form 10-K or any amendment to this Form 10-K
      _____.

            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
      periods 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

            The aggregate market value of the Registrant's common stock held by
      nonaffiliates of the Registrant as of March 20, 1998 was $97,734,780.

      The number of shares outstanding of each of the issuer's classes of
      common stock as of March 20, 1998 was 6,771,996.

                       DOCUMENTS INCORPORATED BY REFERENCE

            Certain portions of the definitive proxy statement for the 1998
      Annual Meeting of Stockholders are incorporated by reference in Part III.

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<PAGE>   2

                                     PART I
                                ITEM 1. BUSINESS

THE COMPANY

      Founded in 1946, Instron Corporation ("Instron" or the "Company") designs,
develops, manufactures, markets, and services materials testing systems,
software, and accessories. These products are used principally in research and
development and quality control applications to test the mechanical properties
of various materials, components, and structures. The materials tested include
metals, plastics, textiles, composites, ceramics and rubber. Instron systems
test virtually all natural and man-made materials from fragile fibers to the
exotic materials needed for space exploration.

      In the worldwide market for these systems, Instron is a leading producer
of static (electromechanical), dynamic (servohydraulic), hardness and impact
testing systems. Instron offers a comprehensive range of instruments and
computer based materials testing systems that provide and enhance control of the
testing process, data collection and analysis.

      Instron's products typically are assembled from a number of
company-designed standard hardware and software modules and accessories,
selected and configured for the customer's specific application. Additional
hardware, software and accessories may be added to the system at a later date.

      The Company has sales and service offices in 11 United States cities and
16 foreign countries. Approximately 60% of the Company's revenues are derived
from sales outside the United States. Principal manufacturing facilities are
located in the United States and the United Kingdom.

PRINCIPAL MARKETS

      The Company's principal markets are industry, educational institutions and
governments; organizations that need to understand the characterization and
properties of materials.

      INDUSTRY - Most major industries use materials testing as a part of their
research and development and quality control activities. Industrial research
focuses upon developing new materials, substitute materials, or new uses for
existing materials; reducing manufacturing or operating costs; and improving
product quality and durability.

      Industrial quality control involves testing the properties of finished
products as well as materials purchased as part of the manufacturing process.

      EDUCATIONAL INSTITUTIONS - Educational institutions use Instron products
for both basic research and instruction in materials science. The Company places
particular emphasis on educational institutions because scientists and engineers
trained on Instron equipment may influence additional sales of the Company's
products later in their careers.


                                       2
<PAGE>   3

      GOVERNMENTS - Government and government agency use principally involves
testing products to support defense, space, and civil engineering programs, to
ascertain compliance with safety and other legal requirements, and to conduct
research on new materials and emerging technologies.

PRINCIPAL PRODUCTS

      Instron offers a comprehensive range of general-purpose materials testing
systems, application software, and accessories within two principal product
lines; static systems and dynamic systems. The major distinction between a
static system and a dynamic system is the means used to apply force to the test
specimen. The former uses a screw-driven moving crosshead and the latter a
servo-controlled hydraulic actuator. Many tests can be carried out equally well
with either a static or dynamic test machine. However, if the test requires
extremely rapid rates of loading, or if it is a test of endurance in which the
material is subjected to rapidly fluctuating loads, then the dynamic test
machine is appropriate. Instron's product offerings vary in the force capacity
of the machines, the complexity of the drive system, and the sophistication of
the control electronics, the computer system, and the software.

      STATIC SYSTEMS - Static (electromechanical) systems consist of a frame, a
moving crosshead, a load cell, grips, and electronic modules to control the test
and analyze the test data. Static systems typically stretch or compress the
material being tested at a user selected, constant speed that ranges from
fractional microns per minute to one meter per minute. These systems
continuously measure the precise force being applied and the resulting
deformation of the material at various time intervals. They also analyze the
results of the test, and either print, graph or electronically display them.

      Instron's static product offerings include the cost effective Series 4400
product line and the high-performance Series 5500 product line. The Series 5500
systems are usually used for research and development and are equipped with
software and many accessories. Quality control applications usually require
fewer accessories and less breadth of application capability.

      The prices of static systems generally range from $15,000 to $150,000.
Static systems and related accessories accounted for approximately 70%, 69%, and
69% of the Company's revenue in 1997, 1996 and 1995 respectively.

      DYNAMIC SYSTEMS - Dynamic (servohydraulic drive) systems allow repeated
deformation of the material being tested to simulate in-use conditions over an
extended period of time. These systems use a servo-controlled hydraulic
actuator, a load cell, grips, and electronic modules to control the test and
analyze the test data.

      Software, computer control, and data analysis are features routinely added
to basic dynamic systems. The computer may be used to command actuator motion to
simulate real-life loading conditions. It is also used to store and analyze data
and display parameters of performance and endurance for test materials or test
components.


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<PAGE>   4

      Utilizing the Company's engineering expertise, dynamic systems are often
customized to fit the need of a customer's particular test application. Machines
can be configured not only to stretch or compress the material being tested, but
also to simultaneously twist it or subject it to other forms of complex loading.

      The dynamic product line includes structural testing systems. These
systems are used to test a wide range of automotive components from suspension
and steering systems to entire vehicles. They typically consist of several
actuators that push and pull the structure at different points, and sensors that
collect and transmit the resulting data to a central processing unit.

      In November of 1996, the Company formed a joint venture with Carl Schenck
A.G. of Darmastadt, Germany, known as Instron Schenck Testing Systems ("IST").
IST competes in the global structural testing markets. Under the terms of the
agreement, the Company contributed its structural testing business, including
order backlog, and $6.9 million in cash for a 51% ownership in the joint
venture. Under a contract manufacturing and supply agreement, Instron
manufactures and sells structural testing systems to IST.

      The prices of dynamic systems generally range from $40,000 to $400,000
with very complex structures systems ranging as high as several million dollars.
Dynamic systems and related accessories accounted for approximately 30%, 31% and
31% of the Company's sales in 1997, 1996 and 1995, respectively.

      HARDNESS SYSTEMS - Instron is in the forefront of development for new
hardness-testing systems. These systems indent the surface of a material under a
controlled force. The size of the resulting indentation gives an indication of
the hardness of the surface of the material.

      The Series 2000 hardness-testing machine takes advantage of the latest
digital control technology by offering closed-loop control.

      The prices of hardness testing machines range from $2,000 to $20,000. The
sales of hardness systems and related accessories are included in the percentage
amounts for static systems set forth above.

      SERVICE - In recent years, the Company has invested in new service
offerings, including calibration, extended warranties, software support, upgrade
contracts and telephone support. The service business accounted for
approximately 17%, 16%, and 15% of the Company's total revenue in 1997, 1996,
and 1995, respectively. The service revenue is included in the percentage
amounts for static and dynamic systems set forth above.

      OTHER PRODUCTS AND ACCESSORIES - Instron manufactures and sells a wide
range of other products and accessories. The products include durometers, impact
testers, and asphalt binder testers. Typical accessories include application
software, grips, fixtures, optical/video extensometers that measure precisely
the deformation of the material being tested without actually contacting it,
robotic devices that automatically feed test


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<PAGE>   5

specimens to the systems, and environmental control accessories. Accessories can
be included with the initial purchase or subsequently purchased in order to
expand the capability of the original machine.

      In May 1997, the Company acquired the assets of the Dynatup business unit
of GRC International Inc., which included a product line of instrumental impact
testing equipment designed primarily for the plastics industry. The Company
believes that the Dynatup product line will complement the Company's existing
electro-mechanical testing systems, hardness testers and impact testers.

      The Company also has license agreements with third parties for the
exclusive sale of certain products, including software, in the material testing
industry.

      These other products and accessories for static and dynamic equipment
purchased separately from the original sale of equipment are included in the
percentage amounts for static and dynamic systems set forth above.

RESEARCH AND DEVELOPMENT

      The Company maintains major research and development staffs at their U.S.
and U.K. manufacturing facilities. These development staffs often work directly
with industrial and government researchers and the materials science departments
of universities to create leading edge solutions to materials testing
applications.

      Instron is a pioneer in the development and application of electronic
measurement and drive systems techniques in materials testing systems. The
Company has continuously designed, developed, and marketed state-of-the-art
testing systems, software, and accessories, including digitally controlled
static and dynamic testing systems. As part of the IST joint venture agreement,
the Company agreed to expand the capability of the new dynamic controller and
software to support the structures business. The costs associated with these
development efforts are reimbursed by IST.

      In 1997, the Company expensed $6,959,000 on research and development
activities, compared with $8,616,000 in 1996, and $8,782,000 in 1995. The
Company has also capitalized certain software development costs of $637,000,
$1,144,000, and $1,315,000 during 1997, 1996 and 1995, respectively. In
addition, certain Instron engineering resources are utilized to develop new
products for IST in accordance with the joint venture agreement. The costs
associated with the development efforts are reimbursed by IST. If research and
development expenses were restated for comparison purposes by including software
development costs as period expenses, and by adjusting engineering expenses for
the effect of the IST joint venture and the disposition of LMS, research and
development expenses of the ongoing business would have increased by 4.0% in
1997. The Company, in recent years, has focused its research and development
expenditures on revitalizing the static and dynamic product lines, developing
new hardness testing machines, developing new software and enhancements, and
redesigning products to reduce manufacturing costs. These new products and
enhancements do not, in the Company's opinion, present a significant risk that
on-hand inventory, which supports existing models, will be made obsolete because
of the interchangeability of parts and the lead time available before the
introduction of new products.




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COMPETITIVE CONDITIONS

      The Company competes with a number of other manufacturers, some of whom
have greater financial, technical and marketing resources than the Company. The
intensity of the competition varies by product line and by geographic area.
Competition in the United States is greatest in the dynamic line where the
Company has one major domestic competitor, MTS Systems Corporation. Competition
in foreign markets is greatest in Germany and Japan, where there are major local
manufacturers. The principal competitive factors are engineering excellence, the
quality and technical capability of the equipment, responsiveness to customer
needs, quality of service, and price performance.

BACKLOG

      At December 31, 1997, the Company's backlog of orders was approximately
$28,748,000 compared with $34,361,000 at December 31, 1996. The Company
anticipates that essentially the entire backlog at December 31, 1997 will be
shipped during 1998.

RAW MATERIALS

      The Company orders most of its purchased component parts from vendors who
either manufacture them or supply them as off-the-shelf items. While the Company
is dependent upon a limited number of suppliers for certain components, it has
not experienced significant problems in procurement or delivery of any essential
materials, parts or components. Substantially all purchasing is accomplished on
a competitive basis while maintaining a level of inventory sufficient to provide
support of customer servicing requirements and meet scheduled delivery dates.


                                       6
<PAGE>   7

PATENTS AND TRADEMARKS

      The Company has several patents in the United States and in foreign
countries. The Company relies basically on engineering and technological
capability rather than on these patents to maintain its position in the
industry. The trademarks "Dynatup", "Shore", "Rockwell" and "Instron" and the
device mark are registered trademarks of the Company. Under current law, these
trademarks may be renewed indefinitely as long as they are maintained in use.

ENVIRONMENTAL CONSIDERATIONS

      Compliance with federal, state and local provisions relating to protection
of the environment has not had, and is not expected to have, any material
adverse effects upon the production, capital expenditures, earnings, and
competitive position of the Company and its subsidiaries.

NUMBER OF EMPLOYEES

      At December 31, 1997 the Company employed 1,087 people worldwide.

SEASONALITY

      Historically, the Company's sales are highest in the fourth quarter of
each year due to the ordering pattern of its customers, which favors fourth
quarter deliveries before budget authorizations expire. Sales in the first
quarter are usually low as it takes time to rebuild in-process inventory levels
after the heavy fourth quarter delivery requirements have been satisfied. Also,
third quarter sales are generally low due to vacation patterns of both Company
production workers and customer technical personnel needed for acceptance
testing. The seasonal factors affecting sales are usually reflected in quarterly
net income.

FOREIGN OPERATIONS

      Foreign operations represent a significant portion of the Company's
business. The Company's branches and subsidiaries outside of the United States
accounted for 59% of the Company's total revenue in 1997, 61% in 1996 and 60% in
1995. The Company believes that the business and political risk of operating in
most of its current foreign markets is not, in the aggregate, materially greater
than the risk undertaken by the Company in the United States. The recent
economic turmoil in the Asian economics has increased the business risks
associated with operating in this region. The Company's principal foreign assets
are located in the United Kingdom.

      Foreign exchange fluctuations can have a significant impact on the
Company's consolidated net assets and results of operations as reported in U.S.
dollars. However, the Company believes that these fluctuations generally have
not had, and it does not expect them to have, a significant economic effect on
the Company's business since foreign operations are generally financed, and
revenues and expenses are, for the most part, paid in local currencies, except
for intercompany purchases which are closely monitored.


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<PAGE>   8

Financial information concerning domestic and foreign operations appears in
Notes 1 and 2 in the "Notes to Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", included as part of this report.

ITEM 2.   PROPERTIES

      The Company's corporate headquarters and principal United States
manufacturing facility is located at the junction of Routes 128 and 138 in
Canton, Massachusetts, approximately 15 miles from Boston. On March 27, 1998,
the Company sold 42 acres of excess land in Canton, Massachusetts, for
$13.5 million in cash. The remaining 24 acres is believed to be sufficient for
current and future business requirements.

      The Company's principal foreign facility provides 120,000 square feet of
office and manufacturing space located on seven acres of Company-owned land in
High Wycombe, England, approximately 30 miles west of London.

      The Company has 31 sales offices and demonstration centers which are
located throughout the United States and in 16 foreign countries. The Company
believes that all properties are adequate and suitable for its present needs.

ITEM 3.   LEGAL PROCEEDINGS

      The registrant and its subsidiaries are not involved in any material
pending legal proceedings.

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

      There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1997.


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<PAGE>   9

EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages and positions of the executive officers of the Company are
listed below along with their business experience during the past five years.

   NAME, AGE AND POSITION              BUSINESS EXPERIENCE DURING PAST 5 YEARS
   ----------------------              ---------------------------------------

James M. McConnell, 57                 Mr. McConnell joined Instron Corporation
President and                          in April 1990 as President and Chief
Chief Executive Officer                Executive Officer. From 1987 to 1990,
                                       Mr. McConnell was President and Chief
                                       Executive Officer of Automatic Switch
                                       Company, and from 1986 to 1987, he was
                                       President of Rosemont, Inc. (both are
                                       wholly-owned subsidiaries of Emerson
                                       Electric Co.)

Joseph E. Amaral, 50                   Mr. Amaral joined Instron Corporation in
Vice President, General Manager        1978. Since 1985, Mr. Amaral has held
of North America Operations            positions as Corporate Technical Staff
                                       Engineer, Corporate Technology Manager,
                                       Corporate Product Planning Manager, and
                                       Vice President, Corporate Technical
                                       Director. In March 1995, he was elected
                                       Vice President, General Manager of North
                                       America Operations.

Kenneth L. Andersen, 56                Mr. Andersen joined Instron Corporation
Vice President of Sales,               in June 1983. Since 1983, Mr. Andersen
North America                          has held positions as Director of
                                       Software Business Group, Director of
                                       Structures Business Group, and Corporate
                                       Marketing Director. In February 1993, he
                                       was elected Vice President of Sales,
                                       North America

John R. Barrett, 43                    Mr. Barrett joined Instron Corporation
Treasurer                              in 1988 as Assistant Treasurer. From
                                       1979 to 1988, Mr. Barrett has held
                                       various financial management positions
                                       with Computervision Corporation. In
                                       February 1993, he was elected Treasurer
                                       of the Corporation.

Jonathan L. Burr, 50                   Mr. Burr joined Instron Corporation in
Vice President, Corporate Director     1979. He has held positions as Personnel
 of Human Resources                    Administrator, Director of Personnel,
                                       and Corporate Director of Human
                                       Resources. In February of 1993, he was
                                       elected Vice President, Corporate
                                       Director of Human Resources. Mr. Burr is
                                       the son of George S. Burr, Vice Chairman
                                       of the Board of Directors.


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EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

     NAME, AGE AND POSITION             BUSINESS EXPERIENCE DURING PAST 5 YEARS
     ----------------------             ---------------------------------------

Yahya Gharagozlou, 42                   Mr. Gharagozlou joined Instron
Vice President, Corporate Technical     Corporation in 1981. He has held
 Director                               positions as Application Engineer,
                                        Assistant Product Manager, Corporate
                                        Product Manager for Software, Marketing
                                        Manager, Product Planning Manager, and
                                        Director of Engineering. In February
                                        1996, he was elected Vice President,
                                        Corporate Technical Director.

Arthur D. Hindman, 54                   Mr. Hindman joined Instron Corporation
Vice President and General Manager,     in 1979. Since 1979, Mr. Hindman has
Asia Pacific/Latin America              held positions as Manager, Marketing
                                        Administration; International Sales
                                        Manager, and General Manager, Asia/Latin
                                        America. In February of 1993, he was
                                        elected Vice President and General
                                        Manager, Asia Pacific/Latin America. Mr.
                                        Hindman is the son of Harold Hindman,
                                        Chairman of the Board of Directors.

William Milliken, 43                    Mr. Milliken joined Instron Corporation
Vice President, Corporate               in October of 1997 as Vice President,
Director of Manufacturing               Corporate Director of Manufacturing.
                                        From 1988 to 1997, Mr. Milliken was
                                        Director of Manufacturing for Otis
                                        Elevator's Asia division. From 1978 to
                                        1988 he held various financial and
                                        manufacturing management positions with
                                        General Motors Vice President,
                                        Corporation.

Linton A. Moulding, 44                  Mr. Moulding joined Instron Corporation
Chief Financial Officer                 in 1985. He has held positions as
                                        Corporate Controller, Director of US
                                        Operations, Corporate Vice President of
                                        Manufacturing, and Vice President of
                                        Finance and Treasurer. In February of
                                        1993, he was elected Chief Financial
                                        Officer of the Corporation.

Norman Smith, 51                        Mr. Smith joined Instron Limited in 1982
Vice President and Managing Director,   as Marketing Director Designate and
of Instron Limited                      assumed the position of Marketing
                                        Director in 1983. In January 1996, he
                                        was promoted to Deputy Managing Director
                                        and was elected Vice President of
                                        Instron and Managing Director of Instron
                                        Limited in November 1996.


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<PAGE>   11

                                         PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

      The Company's Common Stock is listed on the American Stock Exchange under
the symbol ISN. The table below sets forth the high and low sales prices of the
Common Stock and the dividends declared during the two most recent fiscal years.

                               1997                            1996
                   ----------------------------   ------------------------------
                      MARKET PRICE       CASH         MARKET PRICE       CASH
                      ------------     DIVIDENDS      ------------     DIVIDENDS
                     HIGH       LOW    DECLARED     HIGH        LOW    DECLARED
--------------------------------------------------------------------------------

First quarter      $13.500   $12.000   $  .04     $14.500    $12.625  $  .04
Second quarter      14.250    10.750      .04      14.375     13.000     .04
Third quarter       18.875    14.000      .04      14.375     11.000     .04
Fourth quarter      19.188    15.125      .04      14.250     11.375     .04
                                       ------                         ------

       Year        $19.188   $10.750   $  .16     $14.500    $11.000  $  .16
                   =======   =======   ======     =======   ========  ======


      The number of holders of record of the Company's Common Stock at December
31, 1997 was 461. This number does not include shareholders for whom shares are
held in a "nominee" or "street" name.


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<PAGE>   12

ITEM 6.   SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA   1997          1996        1995        1994       1993
------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>         <C>         <C>         <C>
OPERATING RESULTS
Bookings of new orders               $150,020    $161,692    $155,092    $138,947    $124,998
Total revenue                         155,660     153,113     150,571     136,192     122,827
Income from operations                 12,571       9,145       8,921       8,082       5,034
Income before taxes                    11,555       7,385       7,684       6,979       3,883
Net Income                              7,164       4,582       4,995       4,537       2,485
Backlog                                28,748      34,361      36,136      32,687      29,063
Research & development                  6,959       8,616       8,782       8,062       7,248
Earnings before interest, taxes,
 depreciation and amortization
 (EBITDA)                              18,880      15,329      15,891      13,855       9,083

FINANCIAL POSITION
Working capital                      $ 41,942    $ 44,094    $ 38,259    $ 33,849    $ 31,070
Total assets                          118,985     121,833     113,334     102,294      99,153
Total debt                             13,659      23,919      19,875      17,818      21,718
Stockholders' equity                   66,254      62,401      56,102      51,926      46,897
Capital expenditures                    4,176       4,473       4,510       4,286       4,323

PER SHARE OF COMMON STOCK
Net income per basic share*          $   1.11    $    .72    $    .79    $    .72    $    .40
Net income per diluted share*            1.05         .70         .78         .72         .39
Dividends declared                        .16         .16         .15         .12         .12
Book value                               9.82        9.68        8.85        8.26        7.46

PERFORMANCE MEASUREMENT
Revenue growth                            1.7%        1.7%       10.6%       10.9%        5.6%

Pre-tax income as a % of
total revenue                             7.4         4.8         5.1         5.1         3.2

Effective income tax rate                38.0        38.0        35.0        35.0        36.0

Net income as a % of total revenue        4.6         3.0         3.3         3.3         2.0

Return on average stockholders'
equity                                   11.1         7.7         9.2         9.2         5.4

Total debt as a % of debt,
plus equity                              17.1        27.7        26.2        25.5        31.7

Working capital ratio                   2.0:1       2.2:1       1.9:1       1.9:1       1.8:1
</TABLE>


* Earnings per share for fiscal years 1996, 1995, 1994 and 1993 have been
  restated to conform to the requirements of SFAS 128.


                                       12
<PAGE>   13

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

      Instron contributed its structures business as part of an agreement to
form a joint venture, Instron Schenck Testing Systems ("IST"), with Carl Schenck
AG in November of 1996, as previously announced. The investment in IST has been
accounted for under the equity method of accounting. Pursuant to a manufacturing
and supply agreement, Instron has supplied structures systems and components to
IST at substantially reduced gross margins compared to gross margins achieved
prior to the formation. The revenue on shipments to IST and related
manufacturing costs are included in the Company's consolidated revenue and cost
of revenue. Orders received from IST are not reflected in the Company's total
bookings and backlog figures as the expected profit margin on this business is
substantially lower than the Company's normal operations. Pursuant to a research
and development agreement, as well as a support services agreement, Instron is
reimbursed by IST for certain development projects and support services that
Instron provided to IST. Financial comparisons of the results of fiscal 1997 are
also impacted by Instron's disposition of the LMS business in April 1997.
Historically this operation did not contribute significantly to operating
income, however, the exclusion of its operating results from the last three
quarters of 1997 has an effect on the comparison of bookings, backlog, revenues
and operating expenses.

      Total revenue of $155,660,000 in fiscal 1997 increased by 1.7% from total
revenue of $153,113,000 in fiscal 1996. For comparison purposes, when structures
shipments ($5.6 million in 1997) and revenues of LMS ($1.2 million in 1997) are
adjusted for 1997 and 1996, as described above, revenues of the ongoing business
increased by 5.6% in 1997. Total revenue in fiscal 1996 increased by 2% over
fiscal 1995 due primarily to an improvement in the Company's service business.
Total foreign revenue accounted for approximately 59% of total 1997 revenue,
compared with 61% in 1996 and 60% in 1995.

      Bookings of new orders were $150,020,000 in fiscal 1997. If bookings were
restated by adjusting structures and LMS orders, as previously described,
bookings of the ongoing business increased by 5.4% in 1997. This increase is
largely due to improved bookings in North America, partially offset by lower
demand in overseas markets. In 1996, total bookings increased by 4% due to
increased bookings in North America.


                                       13
<PAGE>   14

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

      The Company's backlog of orders was $28,748,000 at December 31, 1997, a
decrease of 16.3% from 1996. On a comparative basis, when LMS orders are
excluded from last year's backlog, the backlog for 1997 decreased by 7.0%. The
year-end 1996 backlog increased by 4% over 1995, assuming that structures orders
are eliminated from the year-end 1995 backlog.

      The gross profit margins for the three years ended December 31, 1997, were
41.2%, 42.1% and 41.5%, respectively. The decrease in 1997 is due principally to
the impact of supplying IST with structures systems at lower than normal profit
margins which is expected to continue through fiscal year 1998. The increase in
gross margin for 1996 was primarily due to improved service margins.

      The 1997 selling and administrative expenses of $44,641,000 decreased
slightly from 1996. This decrease is due to certain selling and administrative
expenses being reimbursed by IST and the exclusion of LMS expenses subsequent to
the sale of the business in April 1997. As a percentage of revenue, selling and
administrative expenses decreased to 28.7% in 1997 compared to 29.3% in 1996 and
29.7% in 1995. In 1996, selling and administrative expenses increased slightly
from 1995.

      Research and development expenses decreased by 19.2% in 1997 and 2.0% in
1996. The decrease in 1997 resulted from certain Instron engineering resources
($2.0 million in 1997) being utilized to develop new products for IST in
accordance with the joint venture agreement which were reimbursed by IST. During
the three years ended December 31, 1997, the Company has capitalized certain
software development costs (see Note 1 of Notes to Consolidated Financial
Statements). If research and development expenses were restated for comparison
purposes by including software developments costs as period expenses, and by
adjusting engineering expenses for the effect of the IST joint venture and the
disposition of LMS as previously discussed, research and development expenses of
the ongoing business would have increased by 4.0% in 1997. As a percentage of
total revenue, research and development expenditures, on a comparable basis,
represented 6.3%, 6.4% and 6.9% in 1997, 1996 and 1995, respectively.


                                       14
<PAGE>   15

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

      Operating income increased by 37.5% to $12,571,000 in 1997, compared to
$9,145,000 in 1996 and $8,921,000 in 1995. As a percentage of total revenue,
operating income represented 8.1%, 6.0% and 5.9% in 1997, 1996 and 1995,
respectively. The 1996 operating income was effected by a special items charge,
of $1,812,000. Before the effect of the special items charge, operating income
in 1996 was $10,957,000 or 7.2% of total revenue. Excluding the effect of the
special items charge, operating income increased by 14.7% in 1997, due primarily
to the positive impact of IST, including the reimbursement of certain
engineering expenses, and increased revenues of the ongoing business.

      Net interest expense decreased by 22% in 1997 and by 25% in 1996. The net
decrease in 1997 was due to reduced interest expense resulting from lower
average borrowings and further reduced by interest income received on notes
receivable and temporary bank deposits. The decrease in 1996 resulted from
interest income charged on certain debts owed the Company, partially offset by
higher interest expense. Foreign exchange losses of $185,000 in 1997 resulted
from the strengthening of the US dollar against certain Asian currencies.
Foreign exchange losses of $689,000 in 1996 resulted from the strengthening of
the British pound against certain European currencies and the U.S. dollar.

      Income before taxes was 7.4% of total revenue in 1997, compared to 4.8% in
1996 and 5.1% in 1995. The consolidated effective tax rate was 38% in 1997 and
1996 and 35% in 1995. A detailed reconciliation of the Company's effective tax
rate and the United States statutory tax rate appears in Note 7 of Notes to the
Consolidated Financial Statements.

      Instron reported net income of $7.2 million, or $1.05 per diluted share of
common stock , for the year ended December 31, 1997, compared with $4.6 million
or 70 cents per diluted share in 1996. Net income in 1996 included a special
items charge to operations of $1.8 million ($1.1 million net of taxes).
Excluding the effect of the special items charge, net income increased by 25.6%
in 1997, due to the positive impact of IST, increased revenues of the ongoing
business, a decline in interest expense and lower foreign exchange losses. Net
income in 1996 increased by 14%, before the effects of the special items charge,
over net income of $5.0 million in 1995.


                                       15
<PAGE>   16

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

      In February 1997, the Financial Accounting Standards Board issued SFAS
128, Earnings Per Share, which is effective for periods ending after December
15, 1997. The statement changes computational guidelines and disclosure
requirements for earnings per share. The Company has adopted SFAS 128 in the
accompanying financial statements and has restated all prior period earnings per
share data.

FINANCIAL CONDITION

      The Company's operating activities generated cash of $17.0 million and
$9.8 million in 1997 and 1996, respectively. Investing activities used $6.2
million in 1997 and $12.2 million in 1996, while financing activities used $10.6
million in 1997 and provided $3.1 million in 1996.

      The Company's primary source of funds in 1997 and 1996 was net cash
generated by operations. The net cash generated by operations in 1997 consisted
primarily of net income, as adjusted for the non-cash effect of depreciation and
amortization expense, a reduction in inventories and the timing of payments of
certain accounts payable and accrued expenses. The operating cash flows of $17.0
million were used to pay down debt, fund capital expenditures and purchase the
assets of Dynatup.

      At December 31, 1997, accounts receivable were $48.2 million compared to
$46.9 million at year-end 1996, which reflects higher fourth quarter revenue in
1997. Inventories of $24.0 million decreased by $2.3 million from year-end 1996.
The inventory turnover ratio increased to 2.87 from 2.68 at the end of 1996.

      The Company's principal investment activities during 1997 included capital
expenditures of $4.2 million, the purchase of Dynatup's net assets for $2.0
million and the development of software products of $0.6 million. The Company
plans to make capital expenditures of approximately $7.0 million in fiscal 1998,
principally for manufacturing equipment and building improvements. In addition,
the Company plans to continue to develop and enhance its software products and
pursue its strategy of acquisitions.

      The Company's total debt outstanding at year-end 1997 was $13.7 million
compared to $23.9 million at the end of 1996. The ratio of total debt to debt
plus equity, at year-end 1997 decreased to 17.1% from 27.7% in 1996. The
reduction in debt was primarily due to increased earnings in 1997.


                                       16
<PAGE>   17

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

FINANCIAL CONDITION (CONTINUED)

      The Company maintains a multicurrency revolving credit and term loan
facility that provides for borrowings of up to $35.0 million. At December 31,
1997 and 1996, respectively, the Company had outstanding domestic borrowings of
$7.6 million and outstanding domestic and international borrowings of $17.4
million under this facility which were classified as long-term. The Company has
additional overdraft and borrowing facilities for allowing advances of
approximately $26.0 million of which $6.1 million and $6.5 million were
outstanding and classified as short-term borrowings at December 31, 1997 and
1996, respectively.

      The Company believes its present capital resources and anticipated
operating cash flows are sufficient to meet its current and future cash
requirements to finance operations, capital expenditures and acquisitions.

      On March 27, 1998, the Company sold 42 acres of excess land in Canton,
Massachusetts, for $13.5 million in cash. The proceeds will initially be
utilized to reduce outstanding debt, pay closing costs, related transaction
fees and associated expenses, as well as pay taxes on the gain of this sale.

      Approximately 22% of the Company's total orders came from Asian markets in
1997. The Company expects that the current economic situation in Asia will have
a negative impact in 1998. Bookings from this region are expected to decline to
19% of our total volume. At the same time, however, IST anticipates new order
bookings to increase in this part of the world. The current strength in North
America and Europe is expected to continue and potentially offset the slowdown
in Asia. This potential increase in sales, together with IST's contribution,
should enable earnings to maintain their upward momentum in 1998.

      The Company is currently undertaking a worldwide review of its internal
business and operating systems to assess the year 2000 issue. As the Company
has recently updated its major business information systems in the U.S. and
U.K., it believes it will be able to address the year 2000 issue without any
material adverse effect on its business operations and financial condition. With
regard to Instron's software offerings to customers, we have initiated a
communication program to our installed base advising our customers on the
potential need to upgrade the older systems and software that may still be in
operation.


                                       17
<PAGE>   18

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

FINANCIAL CONDITION (CONTINUED)

      The Company has undertaken a consolidation of its European operations in
order to lower costs and improve efficiencies and has also written down the
value of certain non-performing assets. A special items charge of approximately
$5.0 million, before taxes, will be taken in the first quarter of 1998 to cover
these actions.

      Certain statements contained in this Annual Report are "forward-looking"
statements within the meaning of the federal securities laws that are based on
current expectations, estimates and management's beliefs and assumptions. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks," and
"estimates" or variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are made in reliance
upon the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions which are difficult to predict.
Accordingly, no assurances can be given that actual results will not differ
materially from those projected in the forward-looking statements contained in
this Annual Report. Certain factors that might cause such a difference include:
the level of bookings worldwide for Instron and IST, particularly in Asia; the
success of the automobile industry which is the major purchaser of IST
products; the operating results of the IST joint venture; the impact of
fluctuation in exchange rates; the uncertainties of operating in a global
economy, including fluctuations in the economic conditions of the foreign and
domestic markets served by the Company which can affect the demand for its
products and services; the Company's ability to successfully integrate the
products and operations of businesses acquired; the Company's ability to
identify and successfully consummate strategic acquisitions; increased
competition in the Company's businesses and the impact of competitive products
and pricing; and the risks inherent in new product development and
introductions, including uncertainty of customer acceptance and
price-performance relative to competitors.



                                       18
<PAGE>   19

                               INSTRON CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                          YEAR ENDED DECEMBER 31, 1997

                                     ITEM 8

          FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION


                                       19
<PAGE>   20

                               INSTRON CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements included in Item 8:                      PAGE
                                                                           ----
Report of Independent Accountants.....................................       21
Consolidated Statements of Income for the years ended
 December 31, 1997, 1996 and 1995.....................................       22
Consolidated Balance Sheets as of December 31, 1997 and 1996..........       23
Consolidated Statements of Cash Flows for the years ended December 31,
 1997, 1996 and 1995..................................................       24
Consolidated Statements of Stockholders' Equity for the years ended
 December 31, 1997, 1996 and 1995.....................................       25
Notes to Consolidated Financial Statements............................    26-35
Supplementary Financial Information
 (Quarterly Financial Information/1997 and 1996 - (Unaudited).........       36


                                       20
<PAGE>   21

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INSTRON CORPORATION:

We have audited the accompanying consolidated balance sheets of Instron
Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Instron
Corporation as of December 31, 1997 and 1996, and the consolidated results of
its operations and cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.


                                                    /S/COOPERS & LYBRAND L.L.P.
                                                    ---------------------------
Boston, Massachusetts                               COOPERS & LYBRAND L.L.P.
February 24, 1998



                                       21
<PAGE>   22

                              INSTRON CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT SHARE DATA
    (YEARS ENDED DECEMBER 31)                         1997            1996           1995
--------------------------------------------------------------------------------------------
<S>                                               <C>             <C>             <C>
Revenue:
   Sales                                         $   129,679      $  128,804      $  128,018
    Service                                           25,981          24,309          22,553
                                                  ----------      ----------      ----------

       Total revenue                                 155,660         153,113         150,571
                                                  ----------      ----------      ----------

Cost of revenue:
    Sales                                             74,126          72,556          72,155
    Service                                           17,363          16,086          15,971
                                                  ----------      ----------      ----------

       Total cost of revenue                          91,489          88,642          88,126
                                                  ----------      ----------      ----------

       Gross profit                                   64,171          64,471          62,445
                                                  ----------      ----------      ----------

Operating expenses:

    Selling and administrative                        44,641          44,898          44,742
    Research and development                           6,959           8,616           8,782
    Special items charge                                   0           1,812               0
                                                  ----------      ----------      ----------
       Total operating expenses                       51,600          55,326          53,524

       Income from operations                         12,571           9,145           8,921
                                                  ----------      ----------      ----------

Other (income) expense:

    Interest expense                                   1,465           1,548           1,490
    Interest income                                     (634)           (477)            (67)
    Foreign exchange (gains) losses                      185             689            (186)
                                                  ----------      ----------      ----------

       Total other expenses                            1,016           1,760           1,237
                                                  ----------      ----------      ----------

Income before income taxes                            11,555           7,385           7,684
Provision for income taxes                             4,391           2,803           2,689
                                                  ----------      ----------      ----------

Net income                                        $    7,164      $    4,582      $    4,995
                                                  ==========      ==========      ==========

Weighted average number of basic common shares     6,455,527       6,396,202       6,324,540

Earnings per share - basic                        $     1.11      $      .72      $      .79
                                                  ==========      ==========      ==========

Weighted average number of diluted common shares   6,791,801       6,524,467       6,431,882

Earnings per share - diluted                      $     1.05      $      .70      $      .78
                                                  ==========      ==========      ==========
</TABLE>

           See accompanying notes to consolidated financial statements


                                       22
<PAGE>   23

                              INSTRON CORPORATION
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA (DECEMBER 31)                     1997            1996
-------------------------------------------------------           --------        --------

Assets

<S>                                                               <C>             <C>
Current assets:
    Cash and cash equivalents                                     $  2,566        $  2,541
    Accounts receivable, net of allowance for doubtful
     accounts of $1,071 in 1997 and $1,107 in 1996                  48,226          46,938
    Inventories                                                     24,024          26,320
    Deferred income taxes                                            3,314           3,602
    Prepaid expenses and other current assets                        3,767           1,857
                                                                  --------        --------

       Total current assets                                         81,897          81,258

    Property, plant and equipment:

    Land and Buildings                                              21,796          20,855
    Machinery and equipment                                         39,627          41,004
    Accumulated depreciation                                       (40,216)        (39,393)
                                                                  --------        --------
    Property, plant and equipment, net                              21,207          22,466

    Deferred income taxes                                              806           1,203
    Other assets                                                    15,075          16,906
                                                                  --------        --------

       Total assets                                               $118,985        $121,833
                                                                  ========        ========

Liabilities and Stockholders' Equity
Current liabilities:
    Short-term borrowings                                         $  6,059        $  6,510
    Accounts payable                                                11,095           7,153
    Accrued liabilities                                             14,083          12,805
    Accrued employee compensation and benefits                       6,220           6,205
    Accrued income taxes                                               957           1,602
    Advance payments received on contracts                           1,541           2,889
                                                                  --------        --------

       Total current liabilities                                    39,955          37,164

Long-term debt                                                       7,600          17,409
Pension and other long-term liabilities                              5,176           4,859
                                                                  --------        --------

       Total liabilities                                            52,731          59,432
                                                                  --------        --------

Commitments and Contingencies (Note 5)

Stockholders' equity:

    Preferred stock, $1 par value; 1,000,000 shares authorized;
     none issued

    Common stock, $1 par value; 10,000,000 shares authorized;

     6,823,698 and 6,519,687 shares issued, respectively             6,824           6,520
    Additional paid in capital                                       6,972           3,514
    Deferred compensation                                           (3,235)              0
    Retained earnings                                               62,097          55,997
    Cumulative translation adjustment                               (5,690)         (2,916)
                                                                  --------        --------
                                                                    66,968          63,115
    Less:  Treasury stock of 74,952 shares, at cost                    714             714
                                                                  --------        --------

       Total stockholders' equity                                   66,254          62,401
                                                                  --------        --------

       Total liabilities and stockholders' equity                 $118,985        $121,833
                                                                  ========        ========
</TABLE>

                   See accompanying notes to consolidated financial statements.


                                       23
<PAGE>   24
                              INSTRON CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
IN THOUSANDS (YEARS ENDED DECEMBER 31)                     1997        1996        1995
----------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                     <C>         <C>         <C>
Net income                                              $  7,164    $  4,582    $  4,995
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                            6,494       6,873       6,784
  Provision for losses on accounts receivable                 27         358         163
  Deferred income taxes                                      306         299      (1,635)
  Changes in assets and liabilities, excluding
   the effects from purchase of businesses:
   (Increase) decrease in accounts receivable             (1,335)      1,297      (6,282)
   (Increase) decrease in inventories                      2,563        (521)     (2,210)
   (Increase) decrease in prepaid expenses and
    other current assets                                  (2,028)        151        (976)
   Increase (decrease) in accounts payable and
    accrued expenses                                       3,477      (3,894)      3,920
   Other                                                     321         679       1,602
                                                        --------    --------    --------
   Net cash provided by operating activities              16,989       9,824       6,361
                                                        --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures                                      (4,176)     (4,473)     (4,510)
Joint Venture investment                                       0      (6,926)          0
Purchase of businesses                                    (2,010)          0      (2,660)
Capitalized software costs                                  (637)     (1,144)     (1,315)
Other                                                        596         380         160
                                                        --------    --------    --------
   Net cash used by investing activities                  (6,227)    (12,163)     (8,325)
                                                        --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings under revolving credit and term
 loan facility                                            (9,730)      6,068         208
Net short-term borrowings                                   (173)     (2,785)      1,989
Cash dividends paid                                       (1,064)     (1,024)       (884)
Other                                                        348         861         477
                                                        --------    --------    --------

   Net cash provided (used) by financing activities      (10,619)      3,120       1,790
                                                        --------    --------    --------
Effect of exchange rate changes on cash                     (118)        116         (59)
Net increase (decrease) in cash and cash equivalents          25         897        (233)
Cash and cash equivalents at beginning of year             2,541       1,644       1,877
                                                        --------    --------    --------
Cash and cash equivalents at end of year                $  2,566    $  2,541    $  1,644
                                                        ========    ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for:
  Interest                                              $  1,671    $  1,730    $  1,614
  Income taxes                                             3,041       2,286       2,063

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

Fair value of assets acquired                           $  2,649    $      0    $  3,005
Cash paid                                                  2,010           0       2,660
                                                        --------    --------    --------
Liabilities incurred or assumed in
 business acquisitions                                  $    639    $      0    $    345
                                                        ========    ========    ========
Note receivable on sale of business                     $  3,000    $      0    $      0
                                                        ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       24
<PAGE>   25

<TABLE>
<CAPTION>
                              INSTRON CORPORATION
                      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                     ADDI-                                                      TOTAL
                                                     TIONAL                            CUMULATIVE               STOCK-
                                         COMMON     PAID IN     DEFERRED    RETAINED   TRANSLATION   TREASURY   HOLDERS'
IN THOUSANDS, EXCEPT SHARE DATA           STOCK     CAPITAL   COMPENSATION  EARNINGS   ADJUSTMENT      STOCK    EQUITY
------------------------------------------------------------------------------------------------------------------------
<S>                 <C> <C>             <C>        <C>        <C>            <C>       <C>          <C>        <C>
Balance at December 31, 1994            $ 6,363    $ 2,113    $     0        $48,393   $(4,229)     $  (714)   $51,926
  Net income                                                                   4,995                             4,995
  Translation adjustments
    arising during the year                                                               (347)                   (347)
  Cash dividends declared
    ($.15 per share)                                                            (949)                             (949)
  52,262 shares issued, net, under
    employee stock option plans              52        425                                                         477

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

Balance at December 31, 1995              6,415      2,538          0         52,439    (4,576)        (714)    56,102
  Net income                                                                   4,582                             4,582
  Translation adjustments
    arising during the year                                                              1,660                   1,660
  Cash dividends declared
    ($.16 per share)                                                          (1,024)                           (1,024)
  104,366 shares issued under
    employee stock option plans             105        976                                                       1,081
------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1996              6,520      3,514          0         55,997    (2,916)        (714)    62,401
  Net income                                                                   7,164                             7,164
  Translation adjustments
    arising during the year                                                             (2,774)                 (2,774)
  Cash dividends declared
    ($.16 per share)                                                                    (1,064)                 (1,064)
  33,511 shares issued under
    employee stock option plans              34        314                                                         348
  Restricted stock grants issued during
    the year                                270      3,144     (3,414)                                               0
  Compensation expense recognized under
   the 1992 Stock Incentive Plan                                  179                                              179

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

Balance at December 31, 1997            $ 6,824    $ 6,972    $(3,235)       $62,097   $(5,690)     $  (714)   $66,254
                                        =======    =======    =======        =======   =======      =======    =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       25
<PAGE>   26

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of all domestic and foreign subsidiaries. Significant intercompany
transactions and balances are eliminated. Certain reclassifications were made to
prior years' amounts to conform with the 1997 presentation.

USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that effect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported periods. Actual results could differ
from those estimates.

FOREIGN CURRENCY TRANSLATION Assets and liabilities of the Company's principal
foreign operations are translated at exchange rates prevailing at the end of the
period. Income statement items are translated using average quarterly exchange
rates. Translation adjustments are recorded directly in stockholders' equity and
are included in income only if the underlying foreign investment is sold or
liquidated.

CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.

CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the
Company to a concentration of credit risk principally consist of cash, cash
equivalents and trade receivables. The Company places its temporary cash
investments with major banks throughout the world, in high quality, liquid
instruments. The Company sells to a broad range of customers throughout the
world and performs ongoing credit evaluations to minimize the risk of loss. The
Company makes use of various devices such as letters of credit to protect its
interests, principally on sales to foreign customers. In addition, the Company
has certain receivables, payables, borrowings and other assets and liabilities
denominated in foreign currencies, which are not hedged and therefore are
subject to exchange rate fluctuations.


                                       26
<PAGE>   27

INVENTORIES Inventories are valued at the lower of cost or market (net
realizable value). The last-in, first-out (LIFO) method of determining cost is
used for inventories in the United States and certain Asian branches. The
Company uses the first-in, first-out (FIFO) method for all other locations.

INTANGIBLE ASSETS. Intangible assets are stated at cost and amortized using the
straight-line method over the assets estimated useful lives which range from 8
to 10 years. The Company evaluates the possible impairment of long-lived assets,
including intangible assets, whenever events or circumstances indicate the
carrying value of the assets may not be recoverable.

PROPERTY, PLANT AND EQUIPMENT Depreciation is computed principally using the
straight-line method over the estimated useful lives of 10 to 25 years for land
improvements, 10 to 40 years for buildings and improvements and 3 to 15 years
for machinery and equipment. Maintenance and repairs are expensed as incurred.
Depreciation expense was $4,341,000, $4,619,000 and $4,719,000 for the years
ended December 31, 1997, 1996 and 1995, respectively. Upon retirement or
disposition, the cost and related accumulated depreciation of the assets
disposed of are removed from the accounts, with any resulting gain or loss
included in operations. On March 27, 1998, the Company sold 42 acres of excess
land in Canton, Massachusetts for $13.5 million.

SOFTWARE DEVELOPMENT COSTS Certain software development costs are capitalized
and then amortized over future periods. Amortization of capitalized software
costs is computed on a product-by-product basis over the estimated economic life
of the product, generally three years. Unamortized software costs included in
other assets were $1,574,000, $2,473,000 and $2,679,000 at December 31, 1997,
1996 and 1995, respectively. Software development costs of $637,000, $1,144,000,
and $1,315,000 were capitalized during 1997, 1996 and 1995, respectively. The
amounts amortized and charged to expense in 1997, 1996 and 1995 were $725,000,
$1,350,000, and $1,216,000, respectively.

REVENUE RECOGNITION Revenue from product sales are recognized at time of
shipment. Revenue from services are recognized as services are performed and
ratably over the contract period for service maintenance contracts.

INCOME TAXES Deferred income taxes are provided using the liability method,
which estimates future tax effects of differences between financial statement
carrying amounts and the tax basis of existing assets and liabilities. Tax
credits are recorded as a reduction in income taxes. Provisions are made for the
U.S. income tax liability on earnings of foreign subsidiaries, except for
locations where the Company has designated earnings to be permanently invested.
Such earnings amounted to approximately $23,685,000 at year-end 1997.


                                       27
<PAGE>   28

1.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS PER SHARE. In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share," which is effective for fiscal
year 1997. Under the new requirements, primary and fully diluted earnings per
share are replaced by basic and diluted earnings per share. Basic earnings
per share is computed based only on the weighted average number of common shares
outstanding during the period and the diluted effect of stock options is
excluded. Diluted earnings per share is based on the weighted average number of
common shares and common share equivalents outstanding.

The following is a reconciliation of the basic and diluted EPS calculations:

IN THOUSANDS, EXCEPT PER SHARE DATA               1997      1996     1995
-----------------------------------            -------   -------  -------
Net Income                                     $ 7,164   $ 4,582  $ 4,995
                                               =======   =======  =======
    Weighted average number of common
     shares outstanding - basic                  6,456     6,396    6,325
    Dilutive effect of stock options
     outstanding                                   336       128      107
                                               -------   -------  -------
    Weighted average of common and dilutive
     shares - diluted                            6,792     6,524    6,432
                                               =======   =======  =======

    BASIC EARNINGS PER SHARE                   $  1.11   $  0.72  $  0.79
                                               =======   =======  =======

    DILUTED EARNINGS PER SHARE                 $  1.05   $  0.70     0.78
                                               =======   =======  =======

FAIR VALUE. The Company's financial instruments consist primarily of cash and
cash equivalents, trade receivables, trade payables and debt. The carrying
amounts of these instruments approximates fair value.

2.  INDUSTRY SEGMENT AND FOREIGN OPERATIONS

The Company operates in one industry segment, that being the design, production,
marketing and servicing of precision systems, software and accessories, for
evaluating the mechanical properties and performance of various materials,
components and structures.


                                       28
<PAGE>   29


The following table summarizes the Company's operations by significant
geographic location for the years ended December 31:

IN THOUSANDS                                    1997         1996        1995
-----------------------------------------------------------------------------
REVENUE, INCLUDING INTERAREA SALES
          United States                     $ 76,314     $ 70,924    $ 70,181
          European operations                 66,877       64,913      61,899
          Asia/Latin America                  40,004       39,077      38,034
          Other international                  3,868        3,404       3,345
          Eliminations                       (31,403)     (25,205)    (22,888)
                                            --------     --------    --------
            Total revenue                   $155,660     $153,113    $150,571
                                            ========     ========    ========

OPERATING PROFIT
          United States                     $  9,507     $  6,599    $  7,052
          European operations                  5,794        6,218       3,612
          Asia/Latin America                   3,470        3,081       2,800
          Other international                    146          326         394
          Eliminations                            94         (237)        162
                                            --------     --------    --------
            Total operating profit            19,011       15,987      14,020
          Corporate expenses                  (6,440)      (5,030)     (5,099)
          Special items charge                     0       (1,812)          0
          Other expenses                      (1,016)      (1,760)     (1,237)
                                            --------     --------    --------
            Income before income taxes      $ 11,555     $  7,385    $  7,684
                                            ========     ========    ========

IDENTIFIABLE ASSETS AT YEAR-END

          United States                     $ 38,384     $ 38,654    $ 40,496
          European operations                 42,674       45,271      44,759
          Asia/Latin America                  18,645       19,149      18,057
          Other international                  2,072        2,499       2,188
          Corporate                           18,066       16,938       8,692
          Eliminations                          (856)        (678)       (858)
                                            --------     --------    --------
            Total assets                    $118,985     $121,833    $113,334
                                            ========     ========    ========

Sales between geographic areas in 1997, 1996 and 1995, respectively, consisted
primarily of $13,091,000, $11,337,000 and $10,534,000 from the United States and
$18,168,000, $13,706,000 and $11,998,000 from European operations. Transfers
between geographic areas are at manufacturing cost plus a markup factor.

3.  INVENTORIES

Inventories at December 31 were as follows:

IN THOUSANDS                                         1997            1996
-------------------------------------------------------------------------
Raw materials                                     $12,742         $13,416
Work in process                                     5,156           5,550
Finished goods                                      6,126           7,354
                                                  -------         -------
  Total inventory                                 $24,024         $26,320
                                                  =======         =======

Inventories valued at LIFO amounted to $9,395,000 and $10,808,000 at December
31, 1997 and 1996, respectively. The excess of current cost over stated LIFO
value was $5,247,000 at December 31, 1997 and $4,990,000 at December 31, 1996.


                                       29
<PAGE>   30

4.  BORROWING ARRANGEMENTS

The Company maintains a multicurrency revolving credit and term loan facility
that provides for borrowings of up to $35,000,000 through April 2000. Borrowings
outstanding as of April 2000 convert to a term loan payable in sixteen equal
quarterly installments. Interest on borrowings under the agreement is based upon
either base rates, money market rates, or other short-term borrowing rates.

Facility fees under this agreement are 1/4 of 1% per annum. The Company has met
the various covenants in the agreement, the most restrictive of which requires a
minimum level of tangible net worth. At December 31, 1997 and 1996,
respectively, outstanding domestic borrowings of $7,600,000 and $15,000,000 with
a weighted average interest rate of 6.61% and 6.17%, and outstanding European
borrowings of $2,409,000 in 1996 with a weighted average interest rate of 8.20%,
were classified as long-term debt. Long-term debt maturing under the credit
agreement in each of the five years subsequent to December 31, 1997, assuming
outstanding borrowings at December 31, 1997 are unchanged at April 2000, is
$1,425,000 in 2000, $1,900,000 in 2001 and 1,900,000 in 2002.

The Company's subsidiaries have other overdraft and borrowing facilities
allowing advances up to approximately $26,000,000. At December 31, 1997, the
outstanding portion of these facilities was $6,059,000, due currently. Bank
guarantees outstanding at December 31, 1997, for which the Company is
contingently liable, amounted to $2,953,000 and relate principally to
performance contracts.

5.  OPERATING LEASE COMMITMENTS

Rental expense amounted to $3,697,000, $3,348,000 and $3,745,000 for the years
ended December 31, 1997, 1996 and 1995, respectively. As of December 31, 1997,
minimum annual commitments under noncancellable operating leases with terms of
more than one year are:

                                                                         LATER
 IN THOUSANDS            1998        1999    2000     2001       2002    YEARS
------------------------------------------------------------------------------
                        $2,196     $1,658   $ 877    $ 551     $ 480    $1,196

6.  EMPLOYEE PENSION AND RETIREMENT PLANS

The Company maintains qualified noncontributory defined benefit pension plans
covering United States employees and employees of Instron's United Kingdom
subsidiary. The benefits are based on years of service and final average
compensation at the date of retirement. The Company's general policy is to fund
the pension plans to the extent such contributions are deductible under
standards established by the Internal Revenue Service in the U.S. and the Inland
Revenue in the U.K. Plan assets in the U.S. consist of mutual funds which invest
primarily in common stocks, corporate bonds, U.S. government notes and temporary
cash investments. In the U.K., plan assets are invested in funds whose assets
consist primarily of common stocks, bonds and other securities. Employees of the
Japan subsidiary receive lump sum payments as a multiple of annual salary at
retirement or termination, based on years of service. These Japanese benefits
are unfunded.


                                       30
<PAGE>   31

Net periodic pension costs include the following components:

<TABLE>
<CAPTION>
                                             1997                           1996                             1995
                               ------------------------------    ---------------------------     ----------------------------
IN THOUSANDS                       U.S.      U.K.      JAPAN      U.S.       U.K.      JAPAN      U.S.       U.K.      JAPAN
-----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>        <C>           <C>    <C>        <C>       <C>        <C>        <C>
Service cost                    $   961    $ 1,357    $   231       936    $ 1,158    $   257   $   900    $ 1,167    $   267
Interest cost                     1,799      1,990        201     1,648      1,690        206     1,496      1,678        210
Actual return on plan assets     (2,547)    (4,812)         0    (2,655)    (2,576)         0    (5,284)    (3,754)         0
Net amortization and deferral       669      1,847         19     1,009        (33)        21     3,802      1,769         25
                                -------    -------    -------   -------    -------    -------   -------    -------    -------
Net periodic pension cost       $   882    $   382    $   451   $   938    $   239    $   484   $   914    $   860    $   502
                                =======    =======    =======   =======    =======    =======   =======    =======    =======
</TABLE>
The funded status of the Company's U.S., U.K. and Japan plans and amounts
recognized in the Consolidated Balance Sheet at December 31 were:

<TABLE>
<CAPTION>
                                            1997                              1996                             1995
                                ------------------------------    ------------------------------    ------------------------------
IN THOUSANDS                     U.S.      U.K.       JAPAN        U.S.       U.K.      JAPAN        U.S.       U.K.       JAPAN
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>        <C>         <C>        <C>        <C>         <C>        <C>        <C>
Actuarial present value of
 benefit obligations:
Vested benefits                 $ 19,164   $ 25,743   $  2,113    $ 16,513   $ 19,546   $  1,996    $ 15,021   $ 15,973   $  1,873
Non-vested benefits                  452          0          0         212          0          0         185          0          0
                                --------   --------   --------    --------   --------   --------    --------   --------   --------
Accumulated benefit obligation  $ 19,616   $ 25,743   $  2,113    $ 16,725   $ 19,546   $  1,996    $ 15,206   $ 15,973   $  1,873
                                ========   ========   ========    ========   ========   ========    ========   ========   ========

Projected benefit obligation    $ 26,209   $ 33,222   $  3,221    $ 23,246   $ 24,681   $  3,404     $21,134    $20,167   $  3,327
Plan assets at fair value         26,650     33,522          0      24,865     29,748          0      21,556     24,466          0
                                --------   --------   --------    --------   --------   --------    --------   --------   --------

Projected benefit obligation
in excess of (less than)
 plan assets                        (441)      (300)     3,221      (1,619)    (5,067)     3,404        (422)    (4,299)     3,327
Unrecognized net gain(loss)        3,683     (1,177)       259       4,038      4,011         77       3,265      3,794         92
Unrecognized prior service cost     (505)     1,066          0        (549)     1,498          0        (593)     1,543          0
Unrecognized net asset
 (liability) at transition            57        538       (229)         66        637       (278)         75        649       (335)
                                --------   --------   --------    --------   --------   --------    --------   --------   --------
Pension liability included
 in Consolidated Balance Sheet  $  2,794   $    127   $  3,251    $  1,936   $  1,079   $  3,203    $  2,325   $  1,687   $  3,084
                                ========   ========   ========    ========   ========   ========    ========   ========   ========
</TABLE>
Assumptions used in the accounting for the Company's U.S., U.K., and Japan plans
at December 31 were:

<TABLE>
<CAPTION>
                                             1997                         1996                        1995
                              -------------------------------    ------------------------    -------------------------
                                   U.S.      U.K.    JAPAN       U.S.     U.K.    JAPAN       U.S.     U.K.    JAPAN
----------------------------------------------------------------------------------------------------------------------
<S>                                <C>       <C>      <C>        <C>      <C>      <C>        <C>      <C>      <C>
Weighted average discount rate     7.0%      6.5%     5.0%       7.5%     8.0%     6.0%       7.5%     8.0%     6.0%
Rates of increase in
 compensation levels               4.5       4.75     4.0        5.0      5.5      5.0        5.0      5.5      5.0
Expected long-term rate of
 return on assets                  9.0       8.75     0.0        9.0      9.5        0        9.0      9.5        0
</TABLE>

The expense of all pension plans for 1997, 1996 and 1995 was $1,715,000,
$1,661,000, and $2,276,000, respectively. The Company also sponsors a Savings
and Security Plan for all U.S. employees. The plan (in accordance with section
401(k) of the Internal Revenue Code) offers participating employees a program of
regular savings and investment, funded by their own contributions and those of
the Company. The amount charged to operating expense for this plan was $530,000,
$523,000 and $535,000 in 1997, 1996 and 1995, respectively.


                                       31
<PAGE>   32

7.  INCOME TAXES

The significant components of the Company's deferred tax assets and liabilities
at December 31, are as follows:

IN THOUSANDS                                  1997          1996
--------------------------------------------------------------------------------
Employee benefits                            $ 3,986       $ 3,783
Inventories                                    2,734         2,572
Accrued expenses                                 632         1,372
                                             -------       -------
   Total deferred assets                       7,352         7,727
                                             -------       -------
Accrued expenses                                (360)         (124)
Depreciation                                  (1,400)       (1,667)
Capitalized software costs                      (982)         (898)
                                             -------       -------
   Total deferred liabilities                 (2,742)       (2,689)
                                             -------       -------
Valuation reserve                               (490)         (490)
                                             -------       -------
   Total net deferred assets                 $ 4,120       $ 4,548
                                             =======       =======

A valuation reserve has been established where, based upon available evidence,
it is more likely than not that some or all of the deferred tax assets will not
be realized. The valuation allowance as of December 31, 1997 related primarily
to foreign tax benefits.

The components of income before income taxes consisted of the following:

IN THOUSANDS                                   1997            1996        1995
--------------------------------------------------------------------------------
Domestic                                     $ 5,664        $  2,996     $ 3,602
Foreign                                        5,891           4,389       4,082
                                             -------        --------     -------
    Total                                    $11,555        $  7,385     $ 7,684
                                             =======        ========     =======

Income tax provisions (credits) were as follows:

IN THOUSANDS                                   1997            1996        1995
--------------------------------------------------------------------------------
Currently payable:
    Federal                                 $ 1,701         $   609      $2,525
    Foreign                                   2,090           1,486       1,671
    State                                       172             314         238
                                            -------         -------     -------
                                              3,963           2,409       4,434
                                            -------         -------     -------
Deferred, net:
    Federal & State                             518             215      (1,261)
    Foreign                                    ( 90)            179        (484)
                                            -------         -------     -------
                                                428             394      (1,745)
                                            -------         -------     -------
    Total provision for income taxes        $ 4,391         $ 2,803     $ 2,689
                                            =======         =======     =======

The provisions for income taxes varied from the United States statutory rate of
34% for 1997, 1996 and 1995 principally because of the tax effect of the
following:

IN THOUSANDS                                      1997         1996        1995
-------------------------------------------------------------------------------

Tax provision at United States
    statutory rate                             $ 3,929      $ 2,511      $2,612
Effect of earnings of foreign
    operations subject to
    different tax rates                             (2)         199        (200)
State taxes, net of federal
    income tax benefit                             114          208         157
Benefit of Foreign Sales Corporation               (68)        (195)       (115)
Amortization of software costs and goodwill        356           97         114
All other, net                                      62          (17)        121
                                               -------      -------      ------
    Total tax provision                        $ 4,391      $ 2,803      $2,689
                                               =======      =======      ======


                                       32
<PAGE>   33

8.  STOCK OPTION PLANS

The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.

The Company has two stock options plans currently in effect under which future
grants may be issued: the 1992 Stock Incentive Plan and the 1979 Non-Qualified
Plan. A total of 1,391,500 shares has been authorized by the Company for grants
of options or shares. Stock Options granted during 1997, 1996 and 1995 generally
have a maximum term of eight years and vest equally over four years.

A summary of the Company's stock option activity for the years ended December 31
follows:
                                                              WEIGHTED
                                        NUMBER                AVERAGE
                                        OF OPTIONS            EXERCISE  PRICES
   -----------------------------------------------------------------------------

   Outstanding at
   December 31, 1994                    758,724               $10.50
   Granted, 1995                        206,000                11.87
   Exercised, 1995                      (55,962)                9.40
   Terminated, 1995                     (27,312)               12.24
                                       --------

   Outstanding at
   December 31, 1995                    881,450                10.80
   Granted, 1996                        225,750                13.51
   Exercised, 1996                     (112,726)                9.91
   Terminated, 1996                     (15,750)               12.59
                                       --------

   Outstanding at
   December 31, 1996                    978,724                11.49
   Granted, 1997                          5,000                12.25
   Exercised, 1997                      (37,385)               11.02
   Terminated, 1997                     (13,000)               12.43
                                       --------
   Outstanding at
   December 31, 1997                    933,339               $11.51
                                       ========


                                       33
<PAGE>   34

At December 31, 1997, 1996 and 1995, respectively, there were 656,902, 526,045
and 510,781 options exercisable with a weighted average exercise price of
$10.94, $10.58 and $10.25. Exercise prices for options outstanding as of
December 31, 1997, ranged from $9.50 to $13.75. The weighted average remaining
contractual life of those options is 7.7 years.

The weighted average fair value at date of grant for options granted during
1997, 1996 and 1995 was $5.04, $5.79 and $4.90 per option, respectively. The
fair value of these options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions for 1997,
1996 and 1995, respectively: risk-free interest rates of 5.7.%, 6.5% and 6.0%;
dividend yields of 1.31%, 1.19% and 1.35%; volatility factors of the expected
market price of the Company's common stock of .31, .30 and .31; and a weighted
average expected life of the options of 8.0, 7.8 and 7.8 years.

Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant date for awards in 1997, 1996 and 1995, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:

                                      1997               1996              1995
                                    ------             ------            ------
   Net income - proforma            $6,691             $4,105            $4,780
   Earnings per share - basic       $ 1.04             $  .64            $  .76
   Earnings per share - diluted     $  .99             $  .63            $  .74

The pro forma effect on net income for 1997, 1996 and 1995 is not representative
of the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1995.

On May 14, 1997 and October 29, 1997, respectively, the Company issued 250,000
and 20,500 shares of restricted stock to key employees, which resulted in
$3,414,000 of non-cash deferred compensation to be recognized as operating
expense over a seven year period. Vesting is accelerated if certain performance
criteria are met.

9.  JOINT VENTURE

Effective November 17, 1996, the Company formed a joint venture with Carl
Schenck A.G. of Darmstadt, Germany, known as Instron Schenck Testing Systems
("IST"). IST competes in the global structural testing market. Under the terms
of the agreement, Instron contributed its structural testing business and $6.9
million in cash for a 51% ownership in the Joint Venture. The Company has an
option to purchase Schenck's interest at certain future dates, subject to a
buyout formula as set forth in the agreement. The current agreement calls for
shared control over the operations of the Joint Venture. As such, the Company's
interest in IST is accounted for under the equity method of accounting and
accordingly, 51% of the operating results of IST are included in the Company's
consolidated results of operations from the effective date of the Joint Venture,
which were not material. During 1997, the Company shipped $5.6 million to IST at
substantially reduced gross margins and was reimbursed for certain operating
expenses of $2.5 million by IST for services provided to the joint venture.

10. NEW ACCOUNTING PRONOUNCEMENT

The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income." This Statement
requires that changes


                                       34
<PAGE>   35
 in comprehensive income be shown in a financial statement that is displayed
with the same prominence as other financial statements. Comprehensive income for
the Company will include foreign currency adjustments. The Company is in the
process of evaluating the impact of the new standard on the presentation of the
financial statements and the disclosures therein. The Company will adopt the new
standard beginning in the first quarter of the fiscal year ending December 31,
1998.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 specifies new
guidelines for determining a company's operating segments and related
requirements for disclosure. The Company is in the process of evaluating the
impact of the new standard on the presentation of the financial statements and
the disclosures therein. The Company will adopt the new standard for the fiscal
year ending December 31, 1998.

11. SPECIAL ITEMS CHARGE

In March 1996, the Company recognized a $1,812,000 special items charge to
implement a work force reduction and consolidate certain manufacturing
operations.


                                       35
<PAGE>   36

                       SUPPLEMENTARY FINANCIAL INFORMATION
                            QUARTERLY FINANCIAL DATA
                           (quarterly data unaudited)

<TABLE>
<CAPTION>
                                       Quarter   Quarter    Quarter    Quarter
 IN THOUSANDS, EXCEPT PER SHARE DATA      1         2          3          4         YEAR
 ------------------------------------------------------------------------------------------

 <S>                                  <C>        <C>       <C>         <C>       <C>
 1997:
 Total revenue                        $ 36,023   $37,124   $35,996     $46,517   $155,660
 Gross profit                           14,706    15,127    15,008      19,330     64,171
 Income before income taxes              1,482     2,376     2,966       4,731     11,555
 Net income                                919     1,470     1,842       2,933      7,164
 Earnings per share - basic               0.14      0.23      0.29        0.45       1.11
 Earnings per share - diluted*            0.14      0.22      0.26        0.42       1.05
 -------------------------------------------------------------------------------------------

 1996:
 Total revenue                         $35,224   $35,337   $38,494     $44,058   $153,113
 Gross profit                           14,656    15,239    15,488      19,088     64,471
 Income before income taxes              (357)     1,472     2,318       3,952      7,385
 Net income                              (221)       912     1,437       2,454      4,582
 Earnings per share - basic*            (0.03)      0.14      0.22        0.38       0.72
 Earnings per share - diluted*          (0.03)      0.14      0.22        0.38       0.70
 -------------------------------------------------------------------------------------------
</TABLE>

*   The sum of the quarterly earnings per share does not equal the amount
    reported for the year, as per share amounts are calculated independently and
    are based on the weighted average common shares outstanding for each period.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

          NONE

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The response to this item is contained in part under the caption, "Executive
Officers of the Registrant", in Part I hereof, and the remainder is contained
under the captions, "Information Regarding the Board of Directors' Nominees and
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934" in the Registrant's definitive proxy statement relating to its 1998 Annual
Meeting of Stockholders and is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information contained under the captions "Summary Compensation Table",
"Severance and Other Agreements", "Pension Plans", "Stock Option Plans" and
"Stock Performance Graph" in the Registrant's definitive proxy statement
relating to its 1998 Annual Meeting of Stockholders is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Registrant's definitive proxy statement
relating to its 1998 Annual Meeting of Stockholders is incorporated herein by
reference.


                                       36
<PAGE>   37

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the caption "Certain Transactions" in the
Registrant's definitive proxy statement relating to its 1998 Annual Meeting of
Stockholders is incorporated herein by reference.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a)1.     FINANCIAL STATEMENTS

          The following consolidated financial statements are included in Item
           8:

          Consolidated statements of income for the
           years ended December 31, 1997, 1996 and 1995
          Consolidated balance sheet at
           December 31, 1997 and 1996
          Consolidated statements of cash flows for the
           years ended December 31, 1997 1996 and 1995
          Consolidated statements of stockholders' equity
           for the years ended December 31, 1997, 1996 and 1995
          Notes to consolidated financial statements

(a)2.     FINANCIAL STATEMENT SCHEDULE

                                                                     SCHEDULE
                                                             PAGE     NUMBER
                                                             ----    --------
          Report of Independent Accountants on
            financial statement schedule                      41

          Consolidated valuation accounts                     42       II

All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the accompanying notes.

(a)3.          EXHIBITS

EXHIBIT NO.    DESCRIPTION OF EXHIBITS

3(a)           Restated Articles of Organization of the Registrant and all
               amendments incorporated by reference to Exhibit 3(a) of the
               Registrant's Form 10-K for the year ended December 31, 1981,
               Exhibit 4 of the Registrant's Form 10-Q for the quarter ended
               March 31, 1984, Exhibit 4 of the Registrant's Form 10-Q for the
               quarter ended June 28, 1986, and Exhibit 4 of the Registrant's
               Form 10-Q for the quarter ended June 27, 1987.

3(b)           By-Laws of the Registrant, as amended, incorporated by reference
               to the Current Report on Form 8-K, filed with the Securities and
               Exchange Commission on October 5, 1990.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
          (CONTINUED)


                                       37
<PAGE>   38

10(a)    1979 Non-Qualified Stock Option and Stock Appreciation Rights Plan, as
         amended, incorporated by reference to Exhibit 10(a) of Form 10-K for
         the year ended December 31, 1991.

10(b)    1982 Incentive Stock Option Plan, as amended, incorporated by reference
         to Exhibit 10(b) of Form 10-K for the year ended December 31, 1987 and
         to Exhibit 19(b) of Form 10-Q for the quarter ended September 29, 1990.

10(c)    1984 United Kingdom Share Option Scheme, as amended, incorporated by
         reference to Exhibit 10(c) of Form 10-K for the year ended December 31,
         1991.

10(d)    1992 Stock  Incentive  Plan,  incorporated  by reference to Exhibit
         10(b) of Form 10-K for the year ended December 31, 1991.

10(e)    Executive Severance Agreement, dated as of December 8, 1993, between
         the Company and James M. McConnell, incorporated by reference to
         Exhibit 10(e) on Form 10-K for the year ended December 31, 1993.

10(f)    Form of Executive Severance Agreement, dated as of December 8, 1993,
         between the Company and each of Joseph E. Amaral, three other executive
         officers and two key employees, incorporated by reference to Exhibit
         10(f) on Form 10-K for the year ended December 31, 1993.

10(g)    Form of Executive Severance Agreement, dated as of December 8, 1993,
         between the Company and Kenneth L. Andersen, incorporated by reference
         to Exhibit 10(g) on Form 10-K for the year ended December 31, 1993.

10(h)    Form of Executive Severance Agreement, dated as of December 8, 1993,
         between Instron Limited, the Company and each of Ian M. MacGregor and
         five key employees, incorporated by reference to Exhibit 10(h) on Form
         10-K for the year ended December 31, 1993.

10(i)    Executive Severance Agreement, dated as of December 8, 1993, the
         Company and an executive officer, incorporated by reference to Exhibit
         10(i) on Form 10-K for the year ended December 31, 1993.

10(j)    Executive Severance Agreement, dated as of August 8, 1995, between the
         Company and a key employee, incorporated by reference to Exhibit 10 on
         Form 10-Q for the quarter ended September 30, 1995.

10(k)    Joint Venture Agreement between Instron Corporation and Carl Schenck
         AG, dated November 17, 1996, incorporated by reference to Exhibit
         10(k) of Form 10-K for the year ended December 31, 1996.

10(l)    Form of Executive Severance Agreement entered into between the Company
         and each of two key employees, dated December 9, 1997 and December 15,
         1997, respectively.


                                       38
<PAGE>   39

10(m)    Form of Executive Severance Agreement entered into among Instron
         Limited, the Company and each of two key employees, dated December 1,
         1997 and December 8, 1997, respectively.

21       Subsidiaries of the Registrant

23       Consent of Independent Accountants

27.1997  Financial Data Schedule

27.1996  Financial Data Schedule

27.1995  Financial Data Schedule

(b)         Report on Form 8-K

            None.


                                     39
<PAGE>   40

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

INSTRON CORPORATION
   (Registrant)


By: /S/ James M. McConnell                       By: /S/Linton A. Moulding
    -------------------------------------            ---------------------------
    James M. McConnell                               Linton A. Moulding
    President and Chief Executive Officer            Chief Financial Officer
    (Principal Executive Officer)                    (Principal Financial and
                                                      Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

/S/ Harold Hindman                 Chairman of the Board          March 30, 1998
------------------------
Harold Hindman


/S/ George S. Burr              Vice Chairman of the Board        March 30, 1998
------------------------
George S. Burr


                            President, Chief Executive Officer
/S/ James M. McConnell              and Director                  March 30, 1998
------------------------
James M. McConnell


/S/ John W. Lacey                        Director                 March 30, 1998
------------------------
John W. Lacey


/S/ Dennis J. Moore                      Director                 March 30, 1998
------------------------
Dennis J. Moore


/S/ Sheldon Rutstein                     Director                 March 30, 1998
------------------------
Sheldon Rutstein


/S/ John F. Smith                        Director                 March 30, 1998
------------------------
John F. Smith


/S/ Richard W. Young                     Director                 March 30, 1998
------------------------
Richard W. Young


                                       40
<PAGE>   41

                        REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF INSTRON CORPORATION

Our report on the consolidated financial statements of Instron Corporation is
included in this Annual Report on Form 10-K. In connection with our audits of
such financial statements, we have also audited the related financial statement
schedule listed in Item 14(a) of this Form 10-K.

In our opinion, this financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

                                                /S/ COOPERS & LYBRAND L.L.P
                                                ---------------------------
                                                COOPERS & LYBRAND L.L.P.


Boston, Massachusetts
February 24, 1998


                                       41
<PAGE>   42

                                                                     SCHEDULE II
                               INSTRON CORPORATION
                         CONSOLIDATED VALUATION ACCOUNTS

<TABLE>
<CAPTION>
                                                            EFFECT OF
                             BALANCE AT     ADDITIONS       FOREIGN
                              BEGINNING     CHARGED TO      CURRENCY          (A)         BALANCE AT
DESCRIPTION                    OF YEAR      OPERATIONS      TRANSLATION    DEDUCTIONS     END OF YEAR
-----------                  ---------      ----------      -----------    ----------     -----------
<S>                          <C>            <C>             <C>            <C>            <C>
Allowance for doubtful
 accounts:
Year ended
 December 31, 1997           $1,107,000     $   27,000      $  (56,000)    $    7,000     $1,071,000
                             ----------     ----------      ----------     ----------     ----------

Year ended
 December 31, 1996           $1,040,000     $  358,000      $   27,000     $  318,000     $1,107,000
                             ----------     ----------      ----------     ----------     ----------

Year ended
 December 31, 1995           $  943,000     $  163,000      $   (4,000)    $   62,000     $1 040,000
                             ----------     ----------      ----------     ----------     ----------
</TABLE>

(A)    Uncollected receivables written off, net of recoveries and deduction due
       to the disposal of LMS in 1997.


                                       42