<PAGE>   1



                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

                        FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998


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
incorporation or organization)                               Identification No.)


100 ROYALL STREET                                                       
CANTON, MASSACHUSETTS                                           02021
(Address of Principal                                         (Zip Code)
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 [ X ].

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 19 , 1999 was $86,739,613

The number of shares outstanding of each of the issuer's classes of common stock
                      as of March 19, 1999 was 6,956,838.

                       DOCUMENTS INCORPORATED BY REFERENCE

 Certain portions of the definitive proxy statement for the 1999 Annual Meeting
           of Stockholders are incorporated by reference in Part III.

--------------------------------------------------------------------------------
<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 and structural 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), simulation (structures),
hardness and impact testing systems. Instron offers a comprehensive range of
instruments and computer based systems that provide and enhance control of the
testing process, data collection and analysis.

Instron's products are typically 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 14 United States cities and 17
foreign countries. Approximately 55% of the Company's revenues are derived from
sales outside the United States. Principal manufacturing facilities are located
in the United States, the United Kingdom and Germany.

PRINCIPAL MARKETS

The Company's principal markets are industrial and academic institutions and
governments; organizations that seek to understand the characterization and
properties of materials and products.

INDUSTRY - Most major industries use materials testing systems 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 that reduce manufacturing or operating costs and
improve product quality and durability. Industrial activity and structural
testing tends to be concentrated in the automotive, transportation, aerospace
and civil engineering sectors.

Industrial quality control involves testing the properties of finished products
as well as materials used as inputs to the manufacturing process.

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<PAGE>   3


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

GOVERNMENTS - Government and government agency use of Instron products
principally involves testing which supports defense, space, and civil
engineering programs, ascertains compliance with safety and other legal
requirements, and conducts 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 subjects the test material to rapidly
fluctuating loads, then a 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 to, and the resulting deformation of, the test
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
sophisticated 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 62%, 70%, and 69% of
the Company's revenue in 1998, 1997 and 1996, respectively.

                                       3
<PAGE>   4


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 that 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.

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 or simulation systems.
These systems are used to simulate real life conditions while testing 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.

The prices of dynamic systems generally range from $40,000 to $400,000 with very
complex structural testing systems ranging as high as several million dollars.
Dynamic systems and related accessories accounted for approximately 38%, 30% and
31% of the Company's sales in 1998, 1997 and 1996, 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 Instron's advanced
electromechanical position and control technology and also incorporates
Instron's load cell technology.

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,
training and telephone support. The service business accounted for approximately
16%, 17%, and 16% of the Company's total revenue in 1998, 1997, and 1996,

                                       4
<PAGE>   5

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 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.

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

ACQUISITIONS

On August 4, 1998, the Company acquired substantially all the assets of Satec
Systems, Inc. of Grove City, Pennsylvania, for approximately $12.6 million in
cash. Satec is a manufacturer of a range of materials testing equipment sold
primarily in the United States with annual sales of approximately $18.0 million.
This acquisition has been accounted for under the purchase method of accounting
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. The operating results of
Satec have been included in the Company's consolidated results of operations
from the date of acquisition.

IST was a joint venture company that Instron entered into in November 1996 with
Carl Schenck AG in the area of structural testing. On September 27, 1998, the
Company acquired the remaining 49% interest in Instron Schenck Testing Systems
("IST") from Carl Schenck A.G. of Darmstadt, Germany for $2.7 million in cash.
IST has become a world-class structures testing business with sales of more than
$55 million in 1998. This additional investment has been accounted for under the
purchase method of accounting and, accordingly, the acquired assets and
liabilities have been recorded at their estimated fair values at the date of
acquisition. The operations of IST for the fourth quarter of 1998 have been
consolidated into the Company's results of operations from the date of
acquisition. Prior to this acquisition the Company accounted for its 51%
interest in IST under the equity method of accounting.

                                       5

<PAGE>   6



RESEARCH AND DEVELOPMENT

The Company maintains major research and development staffs at its 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. 

In 1998, the Company expensed $8,485,000 on research and development activities,
compared with $6,959,000 in 1997, and $8,616,000 in 1996. The Company has also
capitalized certain software development costs of $1,490,000. $637,000, and
$1,144,000 during 1998, 1997 and 1996, respectively. During these years, certain
Instron engineering resources have been utilized to develop new products for IST
in accordance with the joint venture agreement. The costs associated with the
development efforts were 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 IST
and Satec and the disposition of LMS, research and development expenses of the
ongoing business would have increased by 7.5% in 1998. In recent years, the
Company has focused its research and development expenditures on creating new
product platforms for 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.

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

                                       6
<PAGE>   7

quality and technical capability of the equipment, responsiveness to customer
needs, quality of service, and price performance.

BACKLOG

At December 31, 1998, the Company's backlog of orders was approximately
$74,477,000 compared with $28,748,000 at December 31, 1997. The increase in
backlog is due primarily to the inclusion of the IST and Satec backlogs in
December 31, 1998.

The Company anticipates that substantially all of its backlog as of December 31,
1998 will be shipped during 1999.

RAW MATERIALS

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.

PATENTS AND TRADEMARKS

The Company has several patents in the United States and in foreign countries.
However, the Company relies principally on its engineering and technological
capabilities 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, 1998 the Company employed 1,421 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.


                                       7
<PAGE>   8

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 55% of the Company's total revenue in 1998, 59% in 1997 and 61% in 1996. 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 economies has increased the business risks associated with
operating in this region. The Company's principal foreign assets are located in
the United Kingdom and Germany.

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. 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 Company believes that the remaining 24 acres are sufficient for
current and future business requirements.

The Company's principal foreign facilities include 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 and 50,000 square feet
of office and manufacturing space leased in Darmstadt, Germany.

The Company has 35 sales offices and demonstration centers which are located
throughout the United States and in 17 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, 1998.

                                       8
<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.


<TABLE>
<CAPTION>
        NAME, AGE AND POSITION                                              BUSINESS EXPERIENCE DURING PAST 5 YEARS
        ----------------------                                              ---------------------------------------

<S>                                                          <C>
James M. McConnell, 58                                       Mr. McConnell joined Instron Corporation in 1990 as President
President and Chief Executive Officer                        and Chief 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, 51                                         Mr. Amaral joined Instron Corporation in 1978. Since 1985, Mr.
Vice President, General Manager,                             Amaral has held positions as Corporate Technology Manager,
North America Operations                                     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, 57                                      Mr. Andersen joined Instron Corporation in 1983. Since 1983,
Vice President,                                              Mr. Andersen has held positions as Director of Software
North America Sales                                          Business Group, Director of Structures Business Group, and
                                                             Corporate Marketing Director. In 1993, he was elected Vice
                                                             President of Sales, North America

John R. Barrett, 44                                          Mr. Barrett joined Instron Corporation in 1988 as Assistant
Treasurer                                                    Treasurer. From 1979 to 1988, Mr. Barrett has held various
                                                             financial management positions with Computervision Corporation. In
                                                             1993, he was elected Treasurer of the Corporation.

Jonathan L. Burr, 51                                         Mr. Burr joined Instron Corporation in 1979. He has held
Vice President, Corporate Director                           positions as Personnel Administrator, Director of Personnel, and
 of Human Resources                                          Corporate Director of Human Resources. In 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.
</TABLE>



                                       9
<PAGE>   10





EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)

<TABLE>
<CAPTION>
        NAME, AGE AND POSITION                                              BUSINESS EXPERIENCE DURING PAST 5 YEARS
        ----------------------                                              ---------------------------------------

<S>                                                          <C>
Yahya Gharagozlou, 43                                        Mr. Gharagozlou joined Instron Corporation in 1981. He has held
Vice President, Corporate Technical                          positions as Corporate Product Manager for Software, Marketing 
 Director                                                    Manager, Product Planning Manager, and Director of Engineering. 
                                                             In, 1996, he was elected Vice President, Corporate Technical
                                                             Director.

Arthur D. Hindman, 55                                        Mr. Hindman joined Instron Corporation in 1979. Since 1979, Mr.
Vice President and General Manager,                          Hindman has held positions as Manager, Marketing Administration;
Asia Pacific/Latin America                                   International Sales Manager, and General Manager, Asia/Latin
                                                             America. In 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, 44                                         Mr. Milliken joined Instron Corporation in 1997 as Vice President,
Vice President, Corporate                                    Corporate Director of Manufacturing. From 1988 to 1997, Mr. Milliken
Director of Manufacturing                                    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 Corporation.

Linton A. Moulding, 45                                       Mr. Moulding joined Instron Corporation in 1985. He has held
Chief Financial Officer                                      positions as Corporate Controller, Director of US Operations,
                                                             Corporate Vice President of Manufacturing, and Vice President of
                                                             Finance and Treasurer. In 1993, he was elected Chief Financial Officer 
                                                             of the Corporation.

Norman Smith, 52                                             Mr. Smith joined Instron Limited in 1982 as Marketing Director
Vice President and Managing Director,                        Designate and assumed the position of Marketing Director in 1983.
of Instron Limited                                           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.
</TABLE>

                                       10
<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.


<TABLE>
<CAPTION>
                                 1998                            1997
                     ---------------------------    ------------------------------
                       Market Price      Cash          Market Price        Cash
                     ----------------  Dividends    -----------------    Dividends
                      High       Low   Declared       High      Low      Declared

<S>                 <C>       <C>       <C>        <C>       <C>          <C>
First quarter       $19.188    $15.500   $.04       $13.500   $12.000       $.04
Second quarter       20.625     18.375    .04        14.250    10.750        .04
Third quarter        19.125     11.500    .04        18.875    14.000        .04
Fourth quarter       17.250     11.875    .04        19.188    15.125        .04
                                         ----                               ----

Year                $20.625    $11.50    $.16       $19.188   $10.75        $.16
                                         ====                               ====

</TABLE>




The number of holders of record of the Company's Common Stock at December 31,
1998 was 435. This number does not include shareholders for whom shares are held
in a "nominee" or "street" name.

                                       11
<PAGE>   12




ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
In thousands, except per share data          1998        1997        1996        1995        1994
--------------------------------------   --------    --------    --------    --------    --------
<S>                                      <C>         <C>         <C>         <C>         <C>
OPERATING RESULTS
-----------------
Bookings of new orders                   $166,515    $150,020    $161,692    $155,092    $138,947
Total revenue                             183,029     155,660     153,113     150,571     136,192
Income from operations                      9,646      12,571       9,145       8,921       8,082
Income before taxes                        20,333      11,555       7,385       7,684       6,979
Net Income                                 11,459       7,164       4,582       4,995       4,537
Backlog                                    74,477      28,748      34,361      36,136      32,687
Research & development                      8,485       6,959       8,616       8,782       8,062
Earnings before interest, taxes,
depreciation and amortization (EBITDA)     27,671      18,880      15,329      15,891      13,855

FINANCIAL POSITION
------------------
Working capital                          $ 55,241    $ 41,942    $ 44,094    $ 38,259    $ 33,849
Total assets                              158,254     118,985     121,833     113,334     102,294
Total debt                                 19,632      13,659      23,919      19,875      17,818
Stockholders' equity                       79,584      66,254      62,401      56,102      51,926
Capital expenditures                        5,841       4,176       4,473       4,510       4,286

PER SHARE OF COMMON STOCK
-------------------------
Net income per basic share               $   1.72    $   1.11    $    .72    $    .79    $    .72
Net income per diluted share                 1.62        1.05         .70         .78         .72
Dividends declared                            .16         .16         .16         .15         .12
Book value                                  11.46        9.82        9.68        8.85        8.26

PERFORMANCE MEASUREMENT
-----------------------
Revenue growth                               17.6%        1.7%        1.7%       10.6%       10.9%

Pre-tax income as a % of total revenue       11.1         7.4         4.8         5.1         5.1

Effective income tax rate                    43.6        38.0        38.0        35.0        35.0

Net income as a % of total revenue            6.3         4.6         3.0         3.3         3.3

Return on average stockholders' equity       15.7        11.1         7.7         9.2         9.2

Total debt as a % of debt, plus equity       19.8        17.1        27.7        26.2        25.5

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



                                       12
<PAGE>   13



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

RESULTS OF OPERATIONS

     The consolidated results for 1998 reflect, from the dates of
acquisition, the inclusion of Satec which was acquired in August 1998 and the
buyout of the remaining 49% of the IST joint venture in September 1998.

     During August 1998, the Company acquired Satec Systems, a materials testing
company supplying electromechanical and servohydraulic products primarily to the
metals industry. The business was acquired for $12.6 million in cash and the
consolidated results of Instron reflect Satec's activity for the last five
months of 1998. Satec's reported sales were $8,757,000 and net income was
$356,000 for the last five months of 1998. For information purposes, Satec's
annual sales for 1998 and 1997 were $18,642,000 and $17,064,000, respectively.

     IST was a joint venture company that Instron entered into in November 1996
with Carl Schenck AG in the area of structural testing. Both companies
contributed their structural testing business and signed contracts to provide
manufacturing, R&D and support services to the joint venture. During 1997 and
the first nine months of 1998, Instron owned 51% of IST and accounted for the
joint venture using the equity method of accounting. Instron's revenue from IST
was $11,395,000, $6,858,000 and $519,000 for the first nine months of 1998, the
total year of 1997, and the last two months of 1996, respectively. This revenue
reflects the shipment of systems from Instron to IST under the terms of a
manufacturing and supply agreement at substantially reduced gross margins
compared to normal customer margins, and commission income earned by Instron for
selling IST products. During the time that Instron owned 51% of the entity, IST
had operating losses, due in part to low margin orders contributed into the
joint venture, and the time and effort necessary to consolidate the operations
and technology of the two contributing partners. For 1998, 1997 and 1996,
Instron recorded net losses related to its 51% share of the joint venture
results of $902,000, $876,000 and $69,000, respectively.

     Instron exercised its option to purchase the remaining 49% of IST for $2.7
million in cash on September 27, 1998. Upon the completion of the acquisition,
the full results of operations from the IST business were included in
consolidated results of Instron, representing three months of activity in 1998.
IST broke even in the fourth quarter and is anticipated to make a contribution
to earnings in 1999. IST's customer revenue of $18,441,000 for the fourth
quarter of 1998 was included in Instron's reported results. For information
purposes, IST's annual revenues were $56,619,000 and $39,777,000 in 1998 and
1997, respectively.

     Financial comparisons of the results of fiscal 1997 and 1996 are impacted
by Instron's sale of its Laboratory MicroSystems division ("LMS") to Axiom
Systems in April 1997. LMS's revenues were $1,237,000 in the first quarter of
1997 and $5,625,000 in 1996. LMS had no significant impact on net income in
either year.

                                       13

<PAGE>   14

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

RESULTS OF OPERATIONS (continued)

     Total revenue of $183,029,000 in fiscal 1998 increased by 17.6% from
revenue of $155,660,000 in fiscal 1997 due primarily to the acquisitions of
Satec and IST. Total revenue in fiscal 1997 increased by 1.7% from revenue of
$153,113,000 in fiscal 1996.

     Bookings of new orders were $166,515,000 in fiscal 1998. Bookings on a pro
forma basis, including the annual bookings of IST and Satec, would have been
$212.7 million in 1998 compared to $220.1 million in 1997, a decrease of 3.4%.
This decrease is due largely to the impact of the economic downturn in the Asian
markets.

     The Company's backlog of orders was $74,477,000 at December 31, 1998, an
increase of 159.1% from 1997 due primarily to the inclusion of the IST and Satec
backlogs. The year end 1997 backlog decreased by 16.3% from 1996.

     The gross profit margins for the three years ended December 31, 1998 were
39.3%, 41.2% and 42.1%, respectively. The trend of decreasing margins is due
principally to the impact of supplying IST with structures systems at lower than
normal profit margins. Gross margins excluding LMS, IST and Satec were 44.3%,
42.7% and 42.8% in 1998, 1997 and 1996, respectively. This improvement in 1998
is due in part to improved service margins and the benefit of actions previously
taken to reduce manufacturing costs.

     The 1998 selling and administrative expenses of $48,869,000 increased by
9.5% from 1997 due principally to the inclusion of expenses relating to Satec
and IST. As a percentage of revenue, selling and administrative expenses
decreased to 26.7% in 1998, compared to 28.7% in 1997 and 29.3% in 1996. 

     Research and development expenses increased by 21.9% in 1998 and decreased
by 19.2% in 1997. The increase in 1998 is due primarily to the inclusion of the
development efforts of Satec and IST. The decrease in 1997 compared to 1996
resulted from certain Instron engineering resources ($2 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, 1998, 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
capitalized software development costs as period expenses, by adjusting
engineering expenses for the effect of Satec and IST and the disposition of LMS
as previously discussed, research and development expenses of the ongoing
business would have increased by 7.5% in 1998. As a percentage of total revenue,
research and development expenditures, on a comparable basis, represented 7.0%,
6.4% and 6.4% in 1998, 1997 and 1996 respectively.

                                       14
<PAGE>   15


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

RESULTS OF OPERATIONS (continued)

     Operating income decreased by 23.3% to $9,646,000 in 1998, compared to
$12,571,000 in 1997 and $9,145,000 in 1996. As a percentage of total revenue,
operating income represented 5.3%, 8.1% and 6.8% in 1998, 1997 and 1996
respectively. Operating income for 1998 includes a special items charge of
$4,975,000 for the cost of consolidating European operations and to write down
the value of non-performing assets. The Company has closed down a manufacturing
plant in Germany, relocated sales and service personnel to another Instron
location in Germany, and moved the manufacturing operation to the United
Kingdom. The majority of these actions were completed in the fourth quarter and
substantially all cash disbursements are expected to be made by the end of the
first quarter of 1999. Before the effect of the special items charge, operating
income in 1998 was $14,621,000 or 8.0% of total revenue and increased by 16.3%
compared to 1997 due primarily to certain improved product and service margins
and the positive contribution of Satec and IST in the fourth quarter.

     A non-operating pre-tax gain of $11,076,000 was recorded in the first
quarter of 1998 on the sale of excess land in Canton, Massachusetts. Net
interest expense decreased by 72% in 1998 and by 22% in 1997. The net decrease
in both 1998 and 1997 was due to reduced interest expense resulting from lower
average borrowings and was further reduced by interest income received on notes
receivable and temporary bank deposits. Foreign exchange losses of $157,000 in
1998 resulted from the strengthening of the British pound against certain
European currencies. Foreign exchange losses of $185,000 in 1997 resulted from
the strengthening of the U.S. dollar against certain Asian currencies.

     Income before taxes was 11.1% of total revenue in 1998, compared to 7.4% in
1997 and 4.8% in 1996. Excluding the special items charge and the non-operating
gain on the sale of the land in 1998, as well as the special items charge in
1996, income before taxes as a percentage of total revenue was 7.8%, 7.4% and
6.0% in 1998, 1997 and 1996, respectively. The consolidated effective tax rate
was 43.6% compared to 38% in 1997 and 1996. This higher tax rate is due to
certain non-deductible expenses relating to the special items charge. A detailed
reconciliation of the Company's effective tax rate and the United States
statutory tax rate appears in Note 6 of Notes to Consolidated Financial
Statements.

     Instron reported net income of $11,459,000, or $1.62 per diluted share of
common stock, for the year ended December 31, 1998, compared with $7,164,000 or
$1.05 per diluted share in 1997. Net income in 1998 included a special items
charge to operations of $4,975,000 ($4,232,000 net of taxes) and a non-operating
gain on the sale of land of $11,076,000 ($6,867,000 net of taxes). If these
special items are excluded, net income in 1998 was $8,824,000, or $1.25 per
diluted share, an increase of 23.2% from 1997, due primarily to improved product
and service margins, the positive contribution of Satec and IST in the fourth
quarter, and a decline in net interest expense.

                                       15
<PAGE>   16



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

RESULTS OF OPERATIONS (continued)

     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 in 1996, net income increased by 25.6% in 1997 due primarily to
increased revenues of the on-going business, a decline in interest expense and
lower foreign exchange losses.

FINANCIAL CONDITION

     The Company's operating activities generated cash of $5.3 million and $17.0
million in 1998 and 1997, respectively. Investing activities used $6.8 million
in 1998 and $6.2 million in 1997, while financing activities provided $6.1
million in 1998 and used $10.6 million in 1997. The Company's primary source of
funds in 1998 and 1997 was net cash generated by operations, supplemented in
1998 by the net proceeds of the sale of excess land in Canton, Massachusetts.
The net cash generated by operations in 1998 consisted primarily of net income,
as adjusted for the non-cash effect of depreciation and amortization expense,
which was partially offset by an increase in accounts receivable.

     At December 31, 1998, accounts receivable were $65.8 million compared to
$48.2 million at year end 1997 which reflects higher fourth quarter revenue in
1998, and the consolidation of Satec and IST balance sheets. Inventories of
$36.1 million increased by $12.1 million due to the consolidation of Satec and
IST. The inventory turnover ratio increased to 2.97 from 2.87 at the end of
1997.

     The Company's principal investment activities during 1998 included the
purchase of Satec for $12.6 million, the buyout of the remaining 49% of IST for
$2.7 million, capital expenditures of $5.8 million, and the development of
software products for $1.5 million. The Company plans to make capital
expenditures of approximately $6.2 million in fiscal 1999, principally for
manufacturing equipment and information systems. 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 1998 was $19.6 million
compared to $13.7 million at the end of 1997. The ratio of total debt to debt
plus equity, at year-end 1998 increased to 19.8% from 17.1% in 1997. The
increase in debt was primarily due to funding acquisitions in 1998.

     The Company maintains a multi-currency revolving credit and term loan
facility that provides for borrowings of up to $35.0 million. At December 31,
1998 the Company had outstanding domestic and international borrowings of $13.2
million and at December 31, 1997 had outstanding domestic borrowings of $7.6
million under this facility which were classified as long-term. The Company has


                                       16
<PAGE>   17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

FINANCIAL CONDITION (continued)

additional overdraft and borrowing facilities for allowing advances of
approximately $32.0 million of which $6.4 million and $6.1 million were
outstanding and classified as short-term borrowings at December 31, 1998 and
1997, 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.

     Approximately 22% of the Company's total orders came from Asian markets in
1997. Bookings from this region declined by 30% in 1998 compared to 1997. At the
same time, however, IST doubled new order bookings in this part of the world.
The current strength in North America and Europe is expected to continue in
1999, though the Company is not expecting any significant recovery in bookings
from the Asian markets in 1999.

     Earnings are anticipated to maintain their upward momentum in 1999,
reflecting benefits from manufacturing cost improvement programs and the full
year benefit of the recent acquisitions.

     EURO CURRENCY ISSUE. On January 1, 1999, eleven of the fifteen member
countries of the European Union established fixed conversion rates between their
existing currencies ("legacy currencies") and one common currency - the euro.
The euro now trades on currency exchanges and may be used in business
transactions. Beginning in January 2002, new euro-denominated bills and coins
will be issued, and legacy currencies will be withdrawn from circulation. The
Company's operating subsidiaries affected by the euro conversion have
established plans to address the systems and business issues raised by the euro
currency conversion.

     These issues include, among others, (i) the need to adapt computer and
other business systems and equipment to accommodate euro-denominated
transactions; and (ii) the competitive impact of cross-border price
transparency, which may make it more difficult for businesses to charge
different prices for the same products on a country-by-country basis,
particularly once the euro currency is issued in 2002. The Company anticipates
that the euro conversion will not have a material adverse impact on its
financial condition or results of operations.


                                       17
<PAGE>   18


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

FINANCIAL CONDITION (continued)

     YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT. Instron supports the
exchange of information relating to the Year 2000 issue and designates the
information following below as the Year 2000 Readiness Disclosure within the
meaning of the Year 2000 Information and Readiness Disclosure Act. Information
set forth herein regarding the Year 2000 compliance of non-Instron products and
services are "republications" under the Year 2000 Information and Readiness
Disclosure Act and are based on information supplied by other companies about
the products and services they offer. Instron has not independently verified the
contents of these republications and takes no responsibility for the accuracy or
completeness of information contained in such republications.

     YEAR 2000 ISSUE READINESS DISCLOSURE. The term "Year 2000 issue" is a 
general term used to describe various business-related problems that may result 
from the improper processing by computer systems of dates after 1999. The Year 
2000 issue affects virtually all companies and all organizations. The Company 
has identified its Year 2000 non-compliance risks in four categories: (i) 
internal business systems, (ii) internal electronic equipment and embedded chip 
technology; (iii) external non-compliance by the Company's suppliers, and (iv) 
software systems products supplied by the Company to its customers.

     INTERNAL BUSINESS SYSTEMS:- The Company has an active, ongoing program to
insure that its business systems will be Year 2000 compliant. Instron began this
program to identify and correct Year 2000 issues in 1996. In accordance with
this program, the Company is following a four step process to address the Year
2000 Issue. The first stage consisted of auditing the major business systems and
telecommunication switches. This stage identified a couple of minor issues but
due to the installation of a new ERP system in 1996 at our two primary
manufacturing sites, the exposure is minimal and is expected to be corrected by
June 1999. The second stage, begun in September 1997, is an audit of all
departmental systems and network operating systems. This audit is nearing
completion and has formed the basis for the third stage which identifies the
corrective actions required, and outlines the necessary plan of action. The
final stage, which has started, will include the implementation and testing of
all required modifications.

     Accordingly, the Company is confident that its internal business systems
will be made Year 2000 compliant in a timely manner and in any event, no later
than July 1999. The Company anticipates making capital expenditures of
approximately $500,000 in 1999 to upgrade computing, networking and
telecommunications systems as part of the plan to address the Year 2000 issue.
Although the costs associated with identifying and implementing the necessary
plan of action are not expected to be material to the Company's financial
position, there can be no assurance to this effect.

     The Company has initiated an audit of the business systems of the two
recent acquisitions, Satec and IST. So far, there has been no indication of any
major Year 2000 issue that cannot be resolved in a timely manner.



                                       18
<PAGE>   19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

FINANCIAL CONDITION (continued)

     INTERNAL ELECTRONIC EQUIPMENT AND EMBEDDED CHIP TECHNOLOGY:- The audit
process has identified certain telecommunication equipment that needs to be
upgraded to address the Year 2000 issue. The Company plans to replace this
equipment by June 1999, and is currently reviewing such office and facilities
equipment as machine tools, photocopiers, security systems and other systems
which may be impacted by the Year 2000 issue. The Company estimates that the
total cost of completing any modifications, upgrades or replacements of this
equipment will not have a material adverse effect on the Company's business or
results of operations. This estimate is being monitored and will be revised as
additional information becomes available. 

     SUPPLIERS:- The Company has started a communication program with key
suppliers of computers, equipment, parts and material used, operated and
maintained by the Company. This program is intended to identify and, to the
extent possible, resolve issues with suppliers involving the Year 2000 problem.
However, the Company has limited or no control over the actions of these third
party suppliers. Any failure of these suppliers to resolve Year 2000 issues with
their systems in a timely manner could have a material adverse effect upon the
Company's business, financial condition and results of operation.

     COMPANY SUPPLIED SYSTEMS AND SOFTWARE TO CUSTOMERS:- The Company believes
that it has substantially identified and resolved all potential Year 2000 Issues
with all of the software products that it is currently developing and marketing.
Existing software on installed machines may not be Year 2000 compliant and
communication programs have been initiated to advise customers on how to upgrade
or replace their existing systems. Management believes that it is not possible
to determine with complete certainty that all Year 2000 issues affecting the
Company's products have been identified due to the complexity of these systems
and the fact that these products interact with other third party vendor products
and operate on computer systems which are not under the Company's control. Any
such failures to identify or remediate Year 2000 problems affecting the
Company's systems and software products could have a material adverse effect
upon the Company's business, financial conditions and results of operations.



                                       19
<PAGE>   20


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

FINANCIAL CONDITION (continued)

     The information presented above sets forth the key steps taken by the
Company to address the Year 2000 Issue. There can be no absolute assurance that
the Company has identified all the issues, can resolve them in a timely manner,
and that there will be no failures or disruptions to operations which could
result in a material adverse effect upon the company's business, financial
condition, results of operations, and business prospects.

     CONTINGENCY PLANS:- The Company intends to develop contingency plans for
significant business risks identified by the Company that might result from
Year-2000 related events. Because the Company has not yet identified any
specific business function that will be materially at risk of significant
Year-2000 related disruptions, and because a full assessment of the Company's
risk from potential Year 2000 failures is still in process, the Company has not
yet developed detailed contingency plans specific to Year 2000 problems. In the
event that the Company concludes that one or more contingency plans are
required, development of such contingency plans is currently scheduled to occur
no later than September, 1999 or as otherwise appropriate.

QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK.

     The Company is exposed to market risk related to changes in foreign
currency exchange rates. The Company enters into foreign exchange contracts to 
manage and reduce the impact of changes in foreign currency exchange rates. The 
Company does not enter into derivatives or other financial instruments for 
trading or speculative purposes. The exposures are associated with certain 
accounts receivable denominated in local currencies and certain foreign 
revenue transactions.

     At December 31, 1998, the face amount of outstanding forward currency
contracts to buy and sell U.S. dollars, Japanese yen and certain European
currencies was $6.3 million. A 10% fluctuation in exchange rates for these
currencies would change the fair value by approximately $0.3 million. However,
any change in the fair value of the contracts would be offset by changes in the
underlying value of the transactions being hedged.

     The hypothetical movement disclosed above was estimated by calculating the
fair value of the forward currency contracts at December 31, 1998, and comparing
that with those calculated using hypothetical forward currency exchange rates.

NEW ACCOUNTING PRONOUNCEMENTS.
      
     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for fiscal years beginning after June 15, 1999. Management is
currently evaluating the effects of this change on its recording of derivatives
and hedging activities. The Company will adopt SFAS No. 133 for its fiscal year
ending December 31, 2000.

     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Internal Use Software," which provides
guidance on the accounting for the costs of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. Management does not expect the statement to have a material impact on
its financial position or results of operations.

FORWARD LOOKING STATEMENTS.

     Certain statements contained in this Annual Report are "forward-looking"
statements within the meaning of the federal securities laws and are made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. 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, Satec and IST,
particularly in Asia; the success of the automobile industry which is the major
purchaser of IST products; the operating results of Satec and IST; the impact of
fluctuations in exchange rates and 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 Satec; the impact of Year 2000 issues; and the
Company's ability to identify and successfully consummate strategic
acquisitions.

                                       20
<PAGE>   21

                               INSTRON CORPORATION
                           ANNUAL REPORT ON FORM 10-K
                          YEAR ENDED DECEMBER 31, 1998
                                     ITEM 8
          FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION





                                       21
<PAGE>   22





                               INSTRON CORPORATION
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
Consolidated Financial Statements included in Item 8:                                         PAGE
                                                                                              ----

<S>                                                                                             <C>
Report of Independent Accountants..............................................                 23
Consolidated Statements of Income for the years ended
 December 31, 1998, 1997 and 1996..............................................                 24
Consolidated Balance Sheets as of December 31, 1998 and 1997...................                 25
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996............................................................                 26
Consolidated Statements of Stockholders' Equity for the years ended
 December 31, 1998, 1997 and 1996..............................................                 27
Notes to Consolidated Financial Statements.....................................              28-37
Supplementary Financial Information
 (Quarterly Financial Information/1998 and 1997 - (Unaudited)..................                 38
</TABLE>



                                       22
<PAGE>   23


                       REPORT OF INDEPENDENT ACCOUNTANTS


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INSTRON CORPORATION:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Instron Corporation
and its subsidiaries (the "Company") at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.




                                                 /s/ PricewaterhouseCoopers LLP
                                                 ------------------------------
Boston, Massachusetts                                PricewaterhouseCoopers LLP
February 18, 1999





                                       23
<PAGE>   24




                               INSTRON CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
In thousands, except share and per share data (Years Ended December 31)           1998           1997           1996
-----------------------------------------------------------------------    -----------    -----------    -----------

<S>                                                                        <C>            <C>            <C>
Revenue:
  Sales                                                                    $   152,879    $   129,679    $   128,804
  Service                                                                       30,150         25,981         24,309
                                                                           -----------    -----------    -----------

     Total revenue                                                             183,029        155,660        153,113
                                                                           -----------    -----------    -----------

Cost of revenue:
  Sales                                                                         91,410         74,126         72,556
  Service                                                                       19,644         17,363         16,086
                                                                           -----------    -----------    -----------

     Total cost of revenue                                                     111,054         91,489         88,642
                                                                           -----------    -----------    -----------

     Gross profit                                                               71,975         64,171         64,471
                                                                           -----------    -----------    -----------

Operating expenses:

  Selling and administrative                                                    48,869         44,641         44,898
  Research and development                                                       8,485          6,959          8,616
  Special items charge                                                           4,975              0          1,812
                                                                           -----------    -----------    -----------
     Total operating expenses                                                   62,329         51,600         55,326

     Income from operations                                                      9,646         12,571          9,145
                                                                           -----------    -----------    -----------

Other (income) expense:
  Gain on sale of land                                                         (11,076)             0              0
  Interest expense                                                               1,175          1,465          1,548
  Interest income                                                                 (943)          (634)          (477)
  Foreign exchange losses                                                          157            185            689
                                                                           -----------    -----------    -----------

     Total other expenses                                                      (10,687)         1,016          1,760
                                                                           -----------    -----------    -----------

Income before income taxes                                                      20,333         11,555          7,385
Provision for income taxes                                                       8,874          4,391          2,803
                                                                           -----------    -----------    -----------

Net income                                                                 $    11,459    $     7,164    $     4,582
                                                                           ===========    ===========    ===========



Weighted average number of                                                   6,667,914      6,455,527      6,396,202
     basic common shares

Earnings per share - basic                                                 $      1.72    $      1.11    $       .72
                                                                           ===========    ===========    ===========


Weighted average number of                                                   7,066,257      6,791,801      6,524,467
     diluted common shares

Earnings per share - diluted                                               $      1.62    $      1.05    $       .70
                                                                           ===========    ===========    ===========
</TABLE>

           See accompanying notes to consolidated financial statements


                                       24
<PAGE>   25


                               INSTRON CORPORATION
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
In thousands, except share data (December 31)                        1998        1997
---------------------------------------------                      --------     -------
<S>                                                                <C>          <C>      
Assets
Current assets:
     Cash and cash equivalents                                     $  7,209    $  2,566
     Accounts receivable, net of allowance for doubtful                         
      accounts of $800 in 1998 and $1,071 in 1997                    65,766      48,226
     Inventories                                                     36,121      24,024
     Deferred income taxes                                            3,060       3,314
     Prepaid expenses and other current assets                        2,223       3,767
                                                                   --------    --------
          Total current assets                                      114,379      81,897
                                                                                
     Property, plant and equipment:                                             
     Land and buildings                                              21,254      21,796
     Machinery and equipment                                         45,217      39,627
     Accumulated depreciation                                       (42,470)    (40,216)
                                                                   --------    --------
     Property, plant and equipment, net                              24,001      21,207
                                                                                
     Goodwill                                                        12,384       6,423
     Deferred income taxes                                              904         806
     Other assets                                                     6,586       8,652
                                                                   --------    --------
          Total assets                                             $158,254    $118,985
                                                                   ========    ========
                                                                                
Liabilities and Stockholders' Equity                                            
                                                                                
Current liabilities:                                                            
     Short-term borrowings                                         $  6,416    $  6,059
     Accounts payable                                                15,807      11,095
     Accrued liabilities                                             22,958      14,083
     Accrued employee compensation and benefits                       6,798       6,220
     Accrued income taxes                                                93         957
     Advance payments received on contracts                           7,066       1,541
                                                                   --------    --------
          Total current liabilities                                  59,138      39,955
                                                                                
Long-term debt                                                       13,216       7,600
Pension and other long-term liabilities                               6,316       5,176
                                                                   --------    --------
          Total liabilities                                          78,670      52,731
                                                                   --------    --------

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;                  
     7,051,968 and 6,823,698 shares issued, respectively              7,052       6,824
     Additional paid in capital                                       8,727       6,972
     Deferred compensation                                           (2,662)     (3,235)
     Retained earnings                                               72,496      62,097
     Accumulated other comprehensive income (loss)                   (4,699)     (5,690)
                                                                   --------    --------
                                                                     80,914      66,968
     Less:  Treasury stock at cost; 108,262 and 74,952 shares,                  
                   respectively                                       1,330         714
                                                                   --------    --------
          Total stockholders' equity                                 79,584      66,254
                                                                   --------    --------
          Total liabilities and stockholders' equity               $158,254    $118,985
                                                                   ========    ========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                       25
<PAGE>   26




                              INSTRON CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
In thousands (Years Ended December 31)                                     1998         1997          1996
----------------------------------------------------------------------------------------------------------

Cash Flows From Operating Activities
------------------------------------
<S>                                                                      <C>         <C>           <C>
Net income                                                               $ 11,459    $  7,164      $  4,582
Adjustments to reconcile net income to net cash
 provided by operating activities:
    Gain on the sale of property, plant and equipment, net                (11,076)        (88)           (5)
    Depreciation and amortization                                           7,106       6,494         6,873
    Provision for losses on accounts receivable                                73          27           358
    Deferred income taxes                                                    (580)        306           299
    Changes in assets and liabilities, excluding
     the effects from purchase of businesses:
     (Increase) decrease in accounts receivable                            (6,312)     (1,335)        1,297
     (Increase) decrease in inventories                                       165       2,563          (521)
     (Increase) decrease in prepaid expenses and
      other current assets                                                  2,055      (2,028)          151
     Increase (decrease) in accounts payable and
      accrued expenses                                                      3,097       3,477        (3,894)
     Other                                                                   (711)        409           684
                                                                         --------    --------      --------
     Net cash provided by operating activities                              5,276      16,989         9,824
                                                                         --------    --------      --------

Cash Flows From Investing Activities
------------------------------------

Capital expenditures                                                       (5,841)     (4,176)       (4,473)
Joint venture investment                                                        0           0        (6,926)
Purchase of businesses, net of cash acquired                              (13,086)     (2,010)            0
Proceeds from the sale of property, plant and equipment                    13,684         376           224
Capitalized software costs                                                 (1,490)       (637)       (1,144)
Other                                                                         (31)        220           156
                                                                         --------    --------      --------
     Net cash used by investing activities                                 (6,764)     (6,227)      (12,163) 
                                                                         --------    --------      --------

Cash Flows From Financing Activities
------------------------------------

Net borrowings under revolving credit and term
 loan facility                                                              5,609      (9,730)        6,068
Net short-term borrowings                                                     199        (173)       (2,785)
Cash dividends paid                                                        (1,060)     (1,064)       (1,024)
Proceeds from stock option exercises                                        1,983         348           861
Treasury stock purchases                                                     (616)          0             0
                                                                         --------    --------      --------
     Net cash provided (used) by financing activities                       6,115     (10,619)        3,120
                                                                         --------    --------      --------
Effect of exchange rate changes on cash                                        16        (118)          116
                                                                         --------    --------      --------
Net increase in cash and cash equivalents                                   4,643          25           897
Cash and cash equivalents at beginning of year                              2,566       2,541         1,644
                                                                         --------    --------      --------
Cash and cash equivalents at end of year                                 $  7,209    $  2,566      $  2,541
                                                                         ========    ========      ========

Supplemental Disclosures of Cash Flow Information
-------------------------------------------------

Cash paid during the year for:
    Interest                                                             $  1,430    $  1,671      $  1,730
    Income taxes                                                            9,145       3,041         2,286

Supplemental Disclosures of Noncash Investing and Financing Activities
----------------------------------------------------------------------

Fair value of assets acquired                                            $ 28,229    $  2,649      $      0
Cash paid                                                                  15,312       2,010             0
                                                                         --------    --------      --------
Liabilities incurred or assumed in                                                                         
 business acquisitions                                                   $ 12,917    $    639      $      0
                                                                         ========    ========      ========
Note receivable on sale of business                                      $      0    $  3,000      $      0
                                                                         ========    ========      ========
</TABLE>







          See accompanying notes to consolidated financial statements.


                                       26
<PAGE>   27



                               INSTRON CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY




<TABLE>
<CAPTION>
                                                                                       Accumulated                Total
                                                Additional                                other                   stock-
                                        Common    paid in     Deferred      Retained  comprehensive  Treasury    holders'
In thousands, except share data          stock    capital   Compensation    earnings  income (loss)    stock      equity
------------------------------------    ------  ----------  ------------    --------   ------------  --------    --------

<S>                                     <C>       <C>          <C>          <C>          <C>           <C>       <C>
Balance at December 31, 1995            $6,415    $2,538       $    0       $52,439      $(4,576)    $ (714)     $56,102
 Net income                                                                   4,582                                4,582
 Other comprehensive income (loss)                                                         1,660                   1,660
                                                                                                                  ------
Comprehensive income                                                                                               6,242  
Cash dividends declared
      ($.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
 Other comprehensive income (loss)                                                        (2,774)                 (2,774)
                                                                                                                  ------
Comprehensive income                                                                                               4,390
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
 Net income                                                                  11,459                               11,459
 Other comprehensive income (loss)                                                           991                     991
                                                                                                                  ------
Comprehensive income                                                                                              12,450      
Cash dividends declared
 ($.16 per share)                                                            (1,060)                              (1,060)
228,270 shares issued, net, under
 employee stock option plans               228     1,755                                                           1,983
Purchase of 33,310 treasury shares                                                                     (616)        (616)
Compensation expense recognized
 under the 1992 Stock Incentive Plan                              573                                                573

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

Balance at December 31, 1998            $7,052    $8,727      $(2,662)      $72,496      $(4,699)   $(1,330)     $79,584
                                        ======    ======      =======       =======      =======    =======      =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       27
<PAGE>   28





                   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 1998 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 gains or losses are included in accumulated other
comprehensive income (loss) and are reported in income only if the underlying
foreign investment is sold or liquidated.

FOREIGN EXCHANGE RISK MANAGEMENT The Company regularly enters into forward
contracts primarily denominated in Japanese yen and certain European currencies
to hedge firm sales and purchase commitments. Forward currency contracts have
maturities of less than one year. These contracts are used to reduce the
Company's risk associated with exchange rate movements, as gains and losses on
these contracts are intended to offset exchange losses and gains on underlying
exposures. The Company does not engage in currency speculation. The Company's 
policy is to defer gains and losses on these contracts until the corresponding 
losses and gains are recognized on the items being hedged. Both the contract 
gains and losses and the gains and losses on the items being hedged are 
included in selling and administrative expenses. The unrealized losses were not 
material in 1998 and 1997 as the fair value of these contracts were 
approximately equal to the fair value of the underlying exposures.

At December 31, 1998, the face amount of outstanding forward currency contracts
to sell U.S. dollars for non U.S. currencies was $3.2 million, Japanese yen for
German deutschemarks was $1.9 million and French francs for British pounds was
$0.7 million. At December 31, 1998, the face amount of outstanding forward
currency contracts to buy German deutschemarks for U.S. dollars was $2.4
million, German deutschemarks for Japanese yen $1.9 million, British pounds for
U.S. dollars was $0.9 million, British pounds for French francs was $0.7 million
and British pounds for German deutschemarks was $0.4 million.





                                       28
<PAGE>   29

CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments
purchased with an original 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.

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 certain inventories in the United States and Asian branches. The
Company uses the first-in, first-out (FIFO) method for all other locations.

GOODWILL AND INTANGIBLE ASSETS. Intangible assets are stated at cost
and amortized using the straight-line method over the assets estimated useful
lives which range from 4 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. Impairment of purchased technology amounts and goodwill is
measured on the basis of whether anticipated future undiscounted operating cash
flows expected from the acquired business will recover the recorded respective
intangible asset balances over the remaining amortization period. At December
31, 1998, no amounts have been determined impaired.  Amortization of goodwill
and other intangibles was $2,295,000, $1,974,000 and $2,254,000 in 1998, 1997
and 1996, respectively.

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 $4,239,000, $4,341,000 and $4,619,000 for the years
ended December 31, 1998, 1997 and 1996, 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 $2,272,000, $1,574,000 and $2,473,000 at December 31, 1998,
1997 and 1996, respectively.


                                       29
<PAGE>   30

Software development costs of $1,490,000, $637,000 and $1,144,000 were
capitalized during 1998, 1997 and 1996, respectively. The amounts amortized and
charged to expense in 1998, 1997 and 1996 were $792,000, $725,000, and
$1,350,000, 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 $22,803,000 at
year-end 1998.

EARNINGS PER SHARE. Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing net income by the weighted
average number of common shares plus the dilutive effect of common share
equivalents outstanding using the "treasury stock method." 

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

<TABLE>
<CAPTION>
In thousands, except per share data               1998      1997      1996
-----------------------------------            --------  -------   -------

<S>                                            <C>       <C>       <C>
Net Income                                     $11,459   $ 7,164   $ 4,582
                                               =======   =======   =======
     Weighted average number of common
      shares outstanding - basic                 6,668     6,456     6,396
     Dilutive effect of stock options
      outstanding                                  398       336       128
                                               -------   -------   -------
     Weighted average of common and dilutive
      shares - diluted                           7,066     6,792     6,524
                                               =======   =======   =======

     BASIC EARNINGS PER SHARE                  $  1.72   $  1.11   $  0.72
                                               =======   =======   =======

     DILUTED EARNINGS PER SHARE                $  1.62   $  1.05      0.70
                                               =======   =======   =======
</TABLE>

At December 1998, 4,500 Options were not included in the calculation of diluted
earnings per share as they were antidilutive.

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.

COMPREHENSIVE INCOME (LOSS). In June 1997, the Financial Accounting Standards
Board issued SFAS 130, "Reporting Comprehensive Income," which is effective for
periods beginning after December 15, 1997. The statement establishes standards
for reporting and displaying comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. The statement requires that all components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. The Company has adopted SFAS 130 in the
accompanying financial statements.

PENSION PLAN.  In February 1998, the Financial Accounting Standards Board issued
SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" which is effective for periods beginning after December 15, 1997. The
statement standardizes employer disclosure requirements about pension and other
postretirement benefit plans by requiring additional information on changes in
the benefit obligations and fair values of plan assets and eliminating certain
disclosures that are no longer useful. It does not change the measurement of
recognition of those plans. The Company has adopted SFAS 132 in the accompanying
financial statements.

                                       30
<PAGE>   31

2. INDUSTRY SEGMENT AND FOREIGN OPERATIONS

SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements of public business enterprises. It also
establishes standards for related disclosures about products and service,
geographic areas, and major customers. The Company evaluated its business
activities that are regularly reviewed by the Chief Executive Officer for which
discrete financial information is available. As a result of this evaluation, the
Company determined that is has two operating segments: Materials Testing and
Structural Testing.

Instron's Materials Testing business manufactures and markets material testing
instruments (electromechanical, sevohydraulic, hardness and impact), software
and accessories. The structural testing business manufactures and markets
systems for simulating real-life testing of components and products. The
economic characteristics, production processes, core technology, types and
classes of customers, method of distribution and regulatory environments are
similar for both of these operating segments which operate within the material
testing industry. As a result of these similarities, both segments have been
aggregated into one reporting segment for financial statement purposes. 

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

<TABLE>
<CAPTION>
In thousands                                       1998         1997         1996
----------------------------------            ---------    ---------    ---------

<S>                                           <C>          <C>          <C>
REVENUE, INCLUDING INTERAREA SALES
              United States                   $ 102,860    $  76,314    $  70,924
              Germany                            26,293       14,484       15,619
              Other Europe                       54,395       52,393       49,294
              Asia/Latin America                 31,335       40,004       39,077
              Other international                 3,552        3,868        3,404
              Eliminations                      (35,406)     (31,403)     (25,205)
                                              ---------    ---------    ---------
                Total revenue                 $ 183,029    $ 155,660    $ 153,113
                                              =========    =========    =========

IDENTIFIABLE ASSETS AT YEAR-END
              United States                   $  64,903    $  38,384    $  38,654
              Germany                            22,983        6,771        8,180
              Other Europe                       38,546       35,903       37,091
              Asia/Latin America                 18,232       18,645       19,149
              Other international                 1,965        2,072        2,499
              Corporate                          13,335       18,066       16,938
              Eliminations                       (1,710)        (856)        (678)
                                              ---------    ---------    ---------
                Total assets                  $ 158,254    $ 118,985    $ 121,833
                                              =========    =========    =========
</TABLE>

Total assets in the United Kingdom in 1998, 1997 and 1996 were $24,227,000,
$24,883,000 and $24,475,000, respectively.

Sales between geographic areas in 1998, 1997 and 1996, respectively, consisted
primarily of $20,023,000, $13,091,000 and $11,337,000 from the United States and
$15,204,000, $18,168,000 and $13,706,000 from European operations. Transfers
between geographic areas are at manufacturing cost plus a markup factor.

                                       31
<PAGE>   32

3.   INVENTORIES

Inventories at December 31 were as follows:

<TABLE>
<CAPTION>
In thousands                               1998      1997
-----------------                       -------   -------
<S>                                     <C>       <C>
Raw materials                           $13,257   $12,742
Work in process                          16,560     5,156
Finished goods                            6,304     6,126
                                        -------   -------
  Total inventory                       $36,121   $24,024
                                        =======   =======
</TABLE>


Inventories valued at LIFO amounted to $9,056,000 and $9,395,000 at December 31,
1998 and 1997, respectively. The excess of current cost over stated LIFO value
was $5,205,000 at December 31, 1998 and $5,247,000 at December 31, 1997.

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, 1998 and 1997,
respectively, outstanding domestic borrowings of $8,375,000 and $7,600,000 with
a weighted average interest rate of 6.10% and 6.61%, and outstanding European
borrowings of $4,841,000 in 1998 with a weighted average interest rate of 4.75%,
were classified as long-term debt. Long-term debt maturing under the credit
agreement in each of the five years subsequent to December 31, 1998, assuming
outstanding borrowings at December 31, 1998 are unchanged at April 2000, is
$2,478,000 in 2000, $3,304,000 in 2001, 2002 and 2003.

The Company's subsidiaries have other overdraft and borrowing facilities
allowing advances up to approximately $32,000,000. At December 31, 1998, the
outstanding portion of these facilities was $6,416,000, due currently. Bank
guarantees outstanding at December 31, 1998, for which the Company is
contingently liable, amounted to $10,976,000 and relate principally to
performance contracts.

5.   OPERATING LEASE COMMITMENTS

Rental expense amounted to $3,998,000, $3,697,000 and $3,348,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. As of December 31, 1998,
minimum annual commitments under noncancellable operating leases with terms of
more than one year are:

<TABLE>
<CAPTION>
                                                                                     Later
 In thousands               1999       2000       2001       2002        2003        Years
----------------------------------------------------------------------------------------------
<S>                       <C>        <C>        <C>        <C>           <C>         <C>

                          $3,842     $3,094     $2,483     $1,245        $601        $1,033

</TABLE>




                                       32
<PAGE>   33
6.   INCOME TAXES

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

<TABLE>
<CAPTION>
In thousands                              1998          1997
-------------------------------------------------------------
<S>                                    <C>           <C>
Employee benefits                      $ 4,634       $ 3,986
Inventories                              3,280         2,734
Accrued expenses                         1,305           632
                                       -------       -------
   Total deferred assets                 9,219         7,352
                                       -------       -------
Accrued expenses                          (246)         (360)
Fixed assets                            (1,517)       (1,400)
Capitalized software costs 
  and intangibles                       (3,002)         (982)
                                       -------       -------
   Total deferred liabilities           (4,765)       (2,742)
                                       -------       -------
Valuation reserve                         (490)         (490)
                                       -------       -------
   Total net deferred assets           $ 3,964       $ 4,120
                                       =======       =======
</TABLE>

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 relates primarily to foreign tax benefits.

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

<TABLE>
<CAPTION>
In thousands                              1998          1997          1996
--------------------------------------------------------------------------
<S>                                    <C>           <C>            <C>
Domestic                               $17,775       $ 5,664        $2,996
Foreign                                  2,558         5,891         4,389
                                       -------       -------        ------
     Total                             $20,333       $11,555        $7,385
                                       =======       =======        ======

Income tax provisions (credits) were as follows:

<CAPTION>
In thousands                                    1998       1997       1996
--------------------------------------------------------------------------
<S>                                          <C>          <C>        <C>
Currently payable:
     Federal                                  $6,441     $1,701     $  609
     Foreign                                   1,896      2,090      1,486
     State                                       381        172        314
                                              ------     ------     ------
                                               8,718      3,963      2,409
                                              ------     ------     ------
Deferred, net:                                 
     Federal & State                             139       518        215
     Foreign                                      17       (90)       179
                                              ------     ------     ------
                                                 156       428        394
                                              ------     ------     ------
     Total provision for income taxes         $8,874     $4,391     $2,803
                                              ======     ======     ======

The provisions for income taxes varied from the United States statutory rate of
35% for 1998 and 34% for 1997 and 1996 principally because of the tax effect of
the following:

<CAPTION>
In thousands                                     1998       1997       1996    
---------------------------------------------------------------------------
<S>                                            <C>        <C>        <C>
Tax provision at United States
     statutory rate                            $7,117     $3,929     $2,511
Effect of earnings of foreign operations                            
     subject to different tax rates             1,019         (2)       199
State taxes, net of federal                                         
     income tax benefit                           247        114        208
Benefit of Foreign Sales Corporation              (76)       (68)      (195)
Goodwill amortization                              --        356         97
All other, net                                    567         62        (17)
                                               ------     ------     ------
     Total tax provision                       $8,874     $4,391     $2,803
                                               ======     ======     ======
</TABLE>
                                      33

<PAGE>   34
7.   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.

Net periodic pension costs include the following components:

<TABLE>
<CAPTION>
                                               1998                            1997                            1996
                                     ------------------------        ------------------------        ------------------------
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                         $ 1,122  $ 1,749  $  222            961  $ 1,357  $  231        $   936  $ 1,158  $  257
Interest cost                          1,911    2,278     171          1,799    1,990     201          1,648    1,690     206
Expected return on plan assets        (2,077)  (2,971)      0         (1,914)  (2,742)      0         (1,682)  (2,576)      0
Amortization of transition asset
 (liability)                              (9)     (76)     18             (9)     (75)     19             (9)    ( 72)     21
Amortization of prior service cost        44      (73)      0             44      (89)      0             44      (91)      0
Amortization of unrecognized
 (gain) loss                               2        0       0              1      (59)      0              1      130       0
Settlement gain                            0        0    (118)             0        0       0              0        0       0
                                     -------  -------  ------        -------  -------  ------        -------  -------  ------
     Net periodic pension cost       $   993  $   907  $  293        $   882  $   382  $  451        $   938  $   239  $  484
                                     =======  =======  ======        =======  =======  ======        =======  =======  ======

Assumptions used in the accounting for the Company's U.S., U.K., and Japan plans at December 31 were:
<CAPTION>
                                                1998                            1997                             1996
                                       ------------------------         ----------------------          -----------------------
                                       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          6.75%     5.5%    4.0%           7.0%     6.5%    5.0%           7.5%     8.0%    6.0%
Rates of increase in
 compensation levels                    4.25      4.0     3.0            4.5     4.75     4.0            5.0      5.5     5.0
Expected long-term rate of 
 return on assets                        9.0     7.25     0.0            9.0     8.75     0.0            9.0      9.5     0.0

The following is a reconciliation of the Projected Benefit Obligation as of December 31:
<CAPTION>
                                                1998                            1997                            1996
                                ------------------------------     ------------------------------    ---------------------------
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>

Projected benefit obligation
 at prior year end             $ 26,209    $ 33,222    $  3,221    $ 23,246    $ 24,681    $3,404    $ 21,134  $ 20,167   $3,327
Service cost                      1,122       1,749         222         961       1,357       231         936     1,159      257
Interest cost                     1,911       2,278         171       1,799       1,990       201       1,648     1,690      206
Actuarial (gain) loss             1,170       1,160        (102)        989       7,019      (205)        201       287        4
Benefits paid                      (871)     (1,437)          0        (786)     (1,288)      (10)       (673)   (1,246)      (4)
Plan amendments                       0         262           0           0         287         0           0        94        0
Settlement                            0           0        (872)          0           0         0           0       244        0
Foreign currency gain (loss)          0         180         400           0        (824)     (400)          0     2,286     (386)
                               --------    --------    --------    --------    --------    ------    --------  --------   ------
Projected Benefit Obligation
 at year end                   $ 29,541    $ 37,414    $  3,040    $ 26,209    $ 33,222    $3,221    $ 23,246  $ 24,681   $3,404
                               ========    ========    ========    ========    ========    ======    ========  ========   ======

The following is a reconciliation of the beginning and ending balances of the fair value of Plan assets at December 31:
<CAPTION>
                                                1998                            1997                            1996
                                -------------------------------    ----------------------------    ---------------------------
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>
Fair value of plan assets
 at prior year end             $ 26,650    $ 33,522    $      0    $ 24,865    $ 29,748    $  0    $ 21,556    $ 24,466    $ 0
Actual return on plan assets      3,667       5,475           0       2,546       4,812       0       2,655       2,576      0
Employer contributions               24       1,334         551          25       1,288      10       1,327       1,195      4
Benefits paid                      (871)     (1,437)       (551)       (786)     (1,288)    (10)       (673)     (1,246)    (4)
Foreign currency gain (loss)          0         184           0           0      (1,038)      0           0       2,757      0
                               --------    --------    --------    --------    --------    ----    --------    --------    ---
Fair value of plan assets
 at year end                   $ 29,470    $ 39,078    $      0    $ 26,650    $ 33,522    $  0    $ 24,865    $ 29,748    $ 0
                               ========    ========    ========    ========    ========    ====    ========    ========    ===
</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>
                                                1998                          1997                           1996
                                     -------------------------     --------------------------     --------------------------
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>   
Projected benefit obligation
 in excess of (less than)
 plan assets                         $   71   $(1,664)  $3,040     $ (441)  $  (300)  $ 3,221     $(1,619)  $(5,067)  $3,404
Unrecognized asset (liability)                                                                                       
 at transition                           48       465     (243)        57       538      (229)         66       637     (278)
Unrecognized prior service cost        (461)      737                (505)    1,066         0        (549)    1,498        0
Unrecognized gain (loss)              4,104       163      648      3,683    (1,177)      259       4,038     4,011       77
                                     ------   -------   ------     ------   -------   -------     -------   -------   ------

Pension liability included assets                                                                                    
 in Consolidated Balance Sheet       $3,762   $  (299)  $3,445     $2,794   $   127   $ 3,251     $ 1,936   $ 1,079   $3,203
                                     ======   =======   ======     ======   =======   =======     =======   =======   ======
</TABLE>

The expense of all pension plans for 1998, 1997 and 1996 was $2,193,000,
$1,715,000, and $1,661,000, 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 $582,000,
$530,000 and $523,000 in 1998, 1997 and 1996, respectively.


                                       34

<PAGE>   35


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 1998, 1997 and 1996 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:

<TABLE>
<CAPTION>
                                                        Weighted
                                      Number             Average
                                    of Options        Exercise Prices     
---------------------------------------------------------------------
<S>                                 <C>                  <C>
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
                                    --------

</TABLE>

                                       35

<PAGE>   36

     Outstanding at
     December 31, 1997                    933,339              11.51
     Granted, 1998                         77,250              16.71
     Exercised, 1998                     (260,848)              9.92
     Terminated, 1998                     (24,937)             13.90
                                         --------
     Outstanding at
     December 31, 1998                    724,804             $12.55
                                         ========

At December 31, 1998, 1997 and 1996, respectively, there were 502,735, 656,902
and 526,045 options exercisable with a weighted average exercise price of
$11.84, $10.94 and $10.58. Exercise prices for options outstanding as of
December 31, 1998, ranged from $10.00 to $19.625. The weighted average remaining
contractual life of those options is 4.3 years.

The weighted average fair value at date of grant for options granted during
1998, 1997 and 1996 was $7.39, $5.04 and $5.79 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 1998,
1997 and 1996, respectively: risk-free interest rates of 5.07%, 5.70% and 6.50%;
dividend yields of 0.97%, 1.31% and 1.19%; volatility factors of the expected
market price of the Company's common stock of .35, .31 and .30; and a weighted
average expected life of the options of 7.9, 8.0 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 1998, 1997 and 1996, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
                                            1998     1997     1996
                                         -------   ------   ------
     Net income - pro forma              $10,871   $6,691   $4,105

     Earnings per share - basic          $  1.63   $ 1.04   $  .64

     Earnings per share - diluted        $  1.54   $  .99   $  .63

The pro forma effect on net income for 1997 and 1996 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 upon change in control
or if certain performance criteria are met.

9.   ACQUISITIONS

On August 4, 1998, the Company acquired substantially all the assets of Satec
Systems, Inc. of Grove City, Pennsylvania, for approximately $12.6 million in
cash. Satec is a manufacturer of a range of materials testing equipment sold
primarily in the United States with annual sales of approximately $18.0 million.
This acquisition has been accounted for under the purchase method of accounting
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. In conjunction with this
acquisition the Company recorded $7.2 million of goodwill which is being
amortized over ten years. The operating results of Satec have been included in
the Company's consolidated results of operations from the date of acquisition.



                                       36


<PAGE>   37



On September 27, 1998, the Company acquired the remaining 49% interest in IST
from Carl Schenck A.G. of Darmstadt, Germany for $2.7 million in cash. The book
value of net assets acquired were equal to the consideration paid. IST has
become a world-class structures testing business with sales of more than $55
million in 1998. This additional investment has been accounted for under the
purchase method of accounting and, accordingly, the acquired assets and
liabilities have been recorded at their estimated fair values at the date of
acquisition. The operations of IST for the fourth quarter of 1998 have been
consolidated into the Company's results of operations from the date of
acquisition. Prior to this acquisition the Company accounted for its 51%
interest in IST under the equity method of accounting.

10.       NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for fiscal years beginning after June 15, 1999. Management is
currently evaluating the effects of this change on its recording of derivatives
and hedging activities. The Company will adopt SFAS No. 133 for its fiscal year
ending December 31, 2000.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Internal Use Software," which provides
guidance on the accounting for the costs of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. This statement does not have a material impact on the Company's
financial position or results of operations.

11.       SPECIAL ITEMS CHARGES

During the first quarter of 1998, the Company recorded a special items charge to
operations to undertake a consolidation of its European operations and
write-down the value of certain non-performing assets. A pre-tax charge of
$4,975,000 was taken in the quarter ended March 28, 1998 to cover these actions.
The special items charge includes termination benefits, the costs to exit a
manufacturing facility, other asset impairments and other related costs. The
Company has closed down a manufacturing plant in Germany, relocated sales and
service support personnel to another Instron location in Germany and has moved
the manufacturing operation to the United Kingdom. During 1998 the Company paid
$1.4 million for termination benefits and related costs and $1.6 million for the
costs to shutdown and exit a manufacturing facility in Germany. In addition, the
Company wrote-off $1.0 million of non-performing assets in 1998, primarily
relating to its interest in Lightspeed Simulation Systems. The balance of the
Special Items reserve relates primarily to the Company's obligation under a
long-term lease agreement in Germany, partially offset by estimated income under
a sub-lease arrangement.

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


                                       37



<PAGE>   38

                       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>     
  1998:
  Total revenue                            $33,869     $37,761     $43,331     $68,068     $183,029
  Gross profit                              13,742      15,734      16,718      25,781       71,975
  Income before income taxes                 8,159       2,914       3,403       5,857       20,333
  Net income                                 3,911       1,807       2,110       3,631       11,459
  Earnings per share - basic*                 0.60        0.27        0.32        0.54         1.72
  Earnings per share - diluted                0.55        0.25        0.30        0.52         1.62
  -------------------------------------------------------------------------------------------------

  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
  -------------------------------------------------------------------------------------------------
</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.



                                       38
<PAGE>   39



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 1999 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 1999 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 1999 Annual Meeting of Stockholders is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 The information contained under the caption "Information Regarding the Board of
Directors' Nominees and Directors" in the Registrant's definitive proxy
statement relating to its 1999 Annual Meeting of Stockholders is incorporated
herein by reference.



                                       39
<PAGE>   40


                                     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, 1998, 1997 and 1996
         Consolidated balance sheets at
          December 31, 1998 and 1997
         Consolidated statements of cash flows for the
          years ended December 31, 1998 1997 and 1996
         Consolidated statements of stockholders' equity
          for the years ended December 31, 1998, 1997 and 1996
         Notes to consolidated financial statements

(a)2.    FINANCIAL STATEMENT SCHEDULE
                                                                      Schedule
                                                          Page         Number 
                                                          ----        --------
         Report of Independent Accountants on
          financial statement schedule                     44
         Consolidated valuation accounts                   45           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.



                                       40
<PAGE>   41



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

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

                                       41
<PAGE>   42





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

10(g)    Form of Executive Severance Agreement entered into between the Company
         and one key employee, incorporated by reference to exhibit 10(l) on
         Form 10-K for the year ended December 31, 1997.

10(h)    Form of Executive Severance Agreement entered into among Instron
         Limited, the Company and one key employee, incorporated by 
         reference to exhibit 10(m) on Form 10-K for the year ended December 
         31, 1997.

10(i)    Executive Severance Agreement entered into by the Company and James M.
         McConnell, dated May 14, 1998.  

10(j)    Form of Executive Severance Agreement entered into by the Company and 
         each of Linton A Moulding, Joseph E. Amaral, William J. Milliken, Yahya
         Gharagozlou and five other executive officers, in each case dated 
         May 14, 1998.

10(k)    Lease Agreement, dated as of March 31, 1998, by and between Schenck
         Immobilien & Services GmbH and Instron Schenck Testing Systems GmbH.

10(l)    Strategic Alliance Agreement between Instron Corporation, Instron
         Partners, Instron GmbH, Instron Schenck Testing Systems GmbH, Instron
         Schenck Testing Systems, and Carl Schenck AG, Schenck Atis GmbH,
         Schenck Pegasus Testing Inc., Schenck Fertigungs GmbH, executed
         September 24, 1998 and effective as of September 27, 1998.

21       Subsidiaries of the Registrant

23       Consent of Independent Accountants

27       Financial Data Schedule

(b)      Report on Form 8-K

         None.


                                       42
<PAGE>   43



                                   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                           Date: March 30, 1999
   (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, 1999
------------------------
Harold Hindman


/s/ George S. Burr             Vice Chairman of the Board         March 30, 1999
------------------------
George S. Burr


                           
/s/ James M. McConnell     President, Chief Executive Officer     March 30, 1999
------------------------             and Director
James M. McConnell


/s/ John W. Lacey                       Director                  March 30, 1999
------------------------
John W. Lacey


/s/ Dennis J. Moore                     Director                  March 30, 1999
------------------------
Dennis J. Moore


/s/ Sheldon Rutstein                    Director                  March 30, 1999
Sheldon Rutstein


/s/ John F. Smith                       Director                  March 30, 1999
------------------------
John F. Smith


/s/ Richard W. Young                    Director                  March 30, 1999
------------------------
Richard W. Young



                                       43
<PAGE>   44



                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                         FINANCIAL STATEMENTS SCHEDULE


To the Board of Directors and Stockholders
of Instron Corporation:

Our audits of the consolidated financial statements referred to in our report 
dated February 18, 1999 included in this Annual Report on Form 10-K also 
included an audit of the financial statement schedule noted in Item 14(a)(2) of 
this Form 10-K. In our opinion, this financial statement schedule presents 
fairly, in all material respects, the information set forth therein when read 
in conjunction with the related consolidated financial statements.


                                            /s/ PricewaterhouseCoopers  LLP
                                            ------------------------------------
                                            PricewaterhouseCoopers  LLP

Boston, Massachusetts
February 18, 1999

                                       44
<PAGE>   45



                                                                     SCHEDULE II




                               INSTRON CORPORATION
                         CONSOLIDATED VALUATION ACCOUNTS


<TABLE>
<CAPTION>
                                                                     (A)
                                                                  Effect of
                                Balance at        Additions        Foreign
                                 Beginning        Charged to       Currency           (B)           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, 1998    $1,071,000         $146,000        $(43,000)        $374,000        $  800,000
                                ----------         --------        --------         --------        ----------

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
                                ----------         --------        --------         --------        ----------
</TABLE>



(A)      Included in "Additions Charged to Operations" for the year ended
         December 31, 1998, is 73,000 for allowance for doubtful accounts
         recorded in conjunction with the acquisitions of Satec and IST.


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



                                       45