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                    U.S. SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                   FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
   ACT OF 1934 (FEE REQUIRED)

                   For the fiscal year ended March 31, 1999

                        Commission file number 1-12657

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                             Dynatech Corporation
            (Exact name of registrant as specified in its charter)

            Massachusetts                                04-2258582
   (State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                  Identification Number)

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

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

          Securities registered pursuant to Section 12(b) of the Act:

                     Common Stock, no par value per share
                               (Title of class)

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

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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]

  At May 20, 1999, the aggregate market value of the Common Stock of the
registrant held by non-affiliates was $33,352,688.25.

  At May 20, 1999 there were 120,673,048 shares of Common Stock of the
registrant outstanding.

  Documents Incorporated By Reference:

  Portions of the proxy statement for the 1999 Annual Meeting of Shareholders
are incorporated by reference in Part III.

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Item 1. Business

  Incorporated in Massachusetts in 1959, Dynatech Corporation has its
principal offices at 3 New England Executive Park, Burlington, Massachusetts
01803. As used in this Form 10-K, the "Company" refers to Dynatech
Corporation, or, as the context requires, Dynatech Corporation and its
subsidiaries.

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

  As a result of the Merger, Clayton, Dubilier & Rice Fund V Limited
Partnership, an investment partnership managed by CDR ("CDR Fund V") holds
approximately 91.8% of the Common Stock. John F. Reno, the former Chairman,
President and Chief Executive of the Company together with two family trusts
holds approximately 1.0% of the Common Stock and other stockholders hold
approximately 7.2% of the Common Stock.

  On May 19, 1999, the Company's then Chairman, President and Chief Executive
Officer, John F. Reno, announced his retirement. Ned C. Lautenbach, a
principal of CDR, was named to replace Mr. Reno as Chairman, President and
Chief Executive Officer.

                                  THE COMPANY

  The Company develops, manufactures and sells market-leading test, analysis,
communications and computing equipment in three product categories:

  .  Communications Test. The Company believes that the TTC division ("TTC")
     of Dynatech LLC (formerly known as Telecommunication Techniques Co.,
     LLC), a subsidiary of the Company, is the third largest U.S. provider of
     communications test instruments (by U.S. sales). TTC provides products
     to communications service providers (such as the Regional Bell Operating
     Companies ("RBOCs"), long-distance companies and competitive access
     providers), service users (such as large corporate and government
     network operators), and manufacturers of communications equipment and
     systems. TTC's broad test and analysis product line ranges from portable
     units (used by field service technicians to test telephone and data
     communications lines and services) to centralized test and monitoring
     systems installed in telephone company central offices. TTC's
     communications test business accounted for 46% of the Company's sales
     (or approximately $239.0 million) for the fiscal year ended March 31,
     1999.

  .  Industrial Computing and Communications. The Company addresses two areas
     of the North American ruggedized computer market. Industrial Computer
     Source ("ICS") is the only significant direct marketer of computer
     products and systems designed to withstand excessive temperatures, dust,
     moisture and vibration in harsh operating environments such as
     production facilities. ICS markets to engineers, scientists and
     production managers through its widely recognized Industrial Computer
     Source-Book catalogs. Itronix Corporation ("Itronix") sells ruggedized
     portable communications and computing devices used by field-service
     workers for telephone companies, utilities, insurance companies and
     other organizations with large field-service workforces. The Company's
     industrial computing and communications business accounted for 37% of
     the Company's sales (or approximately $193.3 million) for the fiscal
     year ended March 31, 1999.

  .  Visual Communications. The Company's visual communications business
     consists principally of two market-leading niche-focused subsidiaries:
     (i) Airshow, Inc. ("AIRSHOW") is a leader in passenger cabin video
     information display systems and information services for the general and
     commercial aviation markets; and (ii) da Vinci Systems, Inc. ("da
     Vinci") is a leader in digital color enhancement

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     systems used in the process of transferring film images into electronic
     signals--a process commonly used to transfer film images to video for
     use in the production of television commercials and programming. The
     Company's visual communications business accounted for 17% of the
     Company's sales (or approximately $90.6 million) for the fiscal year
     ended March 31, 1999.

  For the fiscal year ended March 31, 1999, the Company generated sales of
$522.9 million.

Industry Overview

 Communications Test

  Market Overview. Test instruments are used in the design, manufacturing,
installation and maintenance of communications equipment and networks. Test and
monitoring systems automate the process of detecting, isolating and resolving
faults within a communications network. TTC currently addresses the test
instruments market, primarily in North America, and has begun to address
segments within the test and monitoring systems market.

  Given the growth of communications networks, the multiplicity of
communications technologies and the broad range of applications at various
points in a network, there are numerous different tests and analyses necessary
for communications service providers and users to install, maintain and
troubleshoot communications networks. As a result, the communications test
instrument market is highly fragmented with many competitors, most of which
address only selected niches within the overall market. A small number of
larger companies compete in many segments of the overall market, including
Hewlett-Packard Company, which the Company believes is the worldwide overall
market leader and which competes in many of the same segments as the Company.
Other significant participants in the overall market include Tektronix, Inc.
and Wavetek Wandel Goltermann.

 Industrial Computing and Communications

  The Company's industrial computing and communications business addresses two
markets: (i) the market for ruggedized rack-mounted computers, which is
characterized by thousands of smaller customers who typically order fewer than
ten units each, and (ii) the market for ruggedized portable computers, which is
characterized by a more concentrated group of larger customers that typically
order large quantities of units.

  Ruggedized Rack-Mounted Computers. The Company believes that the global
market for ruggedized industrial computer products is split roughly evenly
between North America and the rest of the world. The market consists of sales
of (i) modular component products, which include chassis and CPUs sold
separately and integrated by the customer, and (ii) fully integrated systems,
which consist of a considerably broader product offering that is fully
integrated into complete systems prior to sale. ICS competes primarily in the
fully integrated systems segment of the market and focuses on the direct
marketing of its products to engineers and scientists, purchasing one to ten
units through its catalogs, utilizing a proprietary database developed over
many years. In ICS's target market, ICS's principal competitors include Texas
Microsystems Inc., the I-Bus Division of Maxwell Technologies, Inc., American
Advantech Corp. and Diversified Technology, Inc. Other significant competitors
in the overall market include IBM and Siemens AG.

  Ruggedized Portable Computers. The market for ruggedized portable computers
consists of customers with large mobile workforces in industries such as
telecommunications, utilities, insurance and others that employ service and
maintenance technicians for a variety of products. In this market, because of
the relatively small number of customers with large field-service work forces,
the timing and size of whose orders are irregular, growth rates vary widely.
Ruggedized portable computers provide field workers with the ability to
install, diagnose and maintain company and customer equipment and collect
critical information from remote locations. The critical feature of ruggedized
portable computers is the ability to operate reliably in adverse environments
and work conditions while withstanding mechanical shock, vibration, moisture
and extreme temperatures. Itronix

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is a market leader in sales to U.S. telecommunications service providers,
whose large field service personnel require portable computers to collect data
from various remote locations. Itronix's competitors in the fully-ruggedized
portable notebook computer market include Panasonic Industrial Co. (which the
Company believes is the worldwide market leader) and a number of smaller
competitors, as well as competition from manufacturers of competing mass-
market "semi-rugged" mobile computers, which constrains the pricing of premium
portable ruggedized products like Itronix's. Producers of ruggedized portable
computers also face indirect competition from off-the-shelf portable computers
and single-purpose diagnostic and data collection instruments.

 Visual Communications

  AIRSHOW. AIRSHOW addresses a segment of the overall market for information
and entertainment systems used by passengers of commercial and general
aviation aircraft. The market is driven by growth in aircraft production and
demand by aircraft passengers to receive real-time video or data information
while the aircraft is in the air. AIRSHOW has a leadership position in a
market niche for passenger cabin video information systems for the general
aviation and commercial airline markets. See "--Products and Services."

  da Vinci. da Vinci produces digital color correction systems, which are a
component of telecine systems used by video post production and commercial
production facilities to enhance and color match images as they are
transferred from film to video tape for editing and distribution. The
principal application of da Vinci's color correction system is to conform and
enhance color in the film editing process and to provide color to black and
white films and video images. da Vinci products occupy the leadership position
in this small niche market, growth in which is driven primarily by the
introduction of new video technologies and standards within the film and video
production industry.

Products and Services

 Communications Test

  Overview. TTC provides a wide range of test and analysis products, service
and support that enable customers worldwide to develop, manufacture, install
and maintain communications networks and equipment. TTC's products include a
broad portfolio of test instruments, test systems, software and professional
services that address multiple technologies and applications at various
locations in communications networks.

  TTC's test instrument products address two key categories of applications in
communications networks: (i) transmission testing between service providers'
central offices ("digital transport") and between a service provider's central
office and its customers (the "local loop"), and (ii) data services testing by
both service providers and users of a broad range of technologies and services
delivered principally to business customers. In addition, TTC continues to
expand its product offerings for the communications test and monitoring
systems market.

  Transmission Testing. TTC produces a wide range of products that test and
monitor the physical transmission of voice and data signals across a service
provider's network of transmission circuits, cables, connectors and related
network components in the central office and local loop. Domestic and
international service providers use TTC's transport test products to install
and maintain high-speed transmission circuits. Service providers have employed
such circuits as inter-office links to connect voice and data transmission
between long-distance carriers, local exchange carriers and wireless carriers.
More recently, transmission circuits employing newer technologies, such as
ISDN, SONET, DWDM (Dense Wave Division Multiplexing) and ATM, have been
proliferating as more analog networks are being upgraded as customers demand
improvements to facilitate high-speed data transmission. TTC's products cover
most widely accepted existing and emerging technologies in its markets, with
average selling prices ranging from $2,000 for a handheld unit to $45,000 for
a fully-featured portable instrument to $70,000 for a test system.


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  Service providers use TTC's local loop test products to install and maintain
voice telephone services, ISDN, ADSL, digital data system ("DDS"), T1 lines,
and fiber optic facilities between the service providers' local central
offices and the customers' premises. For example, technicians use products
such as the T-BERD 209OSP, a ruggedized field service test set, to perform
fault location and data quality testing of voice or data circuits in the local
loop. With the increased competition among service providers and the attendant
workforce downsizing of incumbent local service providers such as the RBOCs,
TTC designs its local loop test products to assist such customers in improving
service quality and productivity while reducing costs.

  Data Services Testing. TTC's data services products test communications
technologies and services employed primarily by businesses, including their
physical transmission facilities, voice services, and data services such as
ATM, frame relay, Internet Protocol ("IP") and ISDN. TTC's FIREBERD data
communications analyzers, for example, measure performance of a wide range of
network transmission equipment utilized on a business customer's premises and
have a modular construction to facilitate simple upgrades as new technologies
and services are employed. TTC's FIREBERD 500 Internetwork Analyzer monitors
and tests network traffic between a LAN and WAN and can analyze numerous
communications protocols such as Voice-Over-IP ("VoIP"). In addition, TTC
manufactures portable, hand-held test instruments that enable service
technicians to install or repair networks.

  Communications Test and Monitoring Systems. TTC historically has focused on
the communications test instrument market, which continues to account for the
predominance of TTC's sales. However, TTC has been developing products to
address the communications test and monitoring systems market. For example,
the CENTEST 650 was developed to automate the monitoring and testing of DS0,
DS1 and DS3 signals so that service providers can identify network trouble
spots quickly and direct mobile repair crews more efficiently from a central
location. In addition, TTC is devoting significant resources to develop
additional products for the communications test and monitoring systems market.

  TTC's sales were $211.3 million in fiscal 1997, $240.4 million in fiscal
1998, and $238.9 million in fiscal 1999.

 Industrial Computing and Communications

  Overview. The Company's industrial computing and communications business
consists of two subsidiaries addressing different areas of the ruggedized
computer market: (1) ICS, primarily a direct marketer of rack-mounted computer
products and systems used by engineers, scientists and others in industrial or
otherwise harsh operating environments, and (2) Itronix, acquired by the
Company in December 1996, which produces mobile computing and communications
devices used by companies with field service organizations such as telephone
companies and utilities. ICS generally sells to thousands of small accounts,
which typically order fewer than ten units, whereas Itronix sells to a more
concentrated group of large organizations that typically order large
quantities of units.

  Industrial Computer Source. ICS employs a direct marketing strategy with its
widely recognized Industrial Computer Source-Book catalogs, proprietary target
customer database and highly trained sales force of electrical engineers to
sell a broad range of integrated industrial computers, input/output devices,
and communication and accessory products. ICS primarily sells fully customized
integrated systems that its sales force configures to address a customer's
particular computing needs. ICS is geared to serving a large number of
customers which typically order fewer than ten units per order.

  ICS offers rack-mounted personal computers for use in environments other
than homes and offices, including a wide range of commercial and
communications applications. Products include ruggedized computers and remote
terminals designed for operation in adverse environments (exposure to
vibration, noise, temperature fluctuations and extremes, dust, moisture,
electromagnetic fields and other hazards). ICS designs, configures and
assembles its products but generally sources components from third-party
vendors and contract manufacturers.

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ICS also uses its in-house CPU design capabilities to sell customized modular
products and subsystems to systems integrators.

  Growth at ICS during fiscal 1999 lagged behind historical growth rates, and
as a result, the Company implemented a change in senior management at ICS as
well as modified the way it markets and sells its products. For example, ICS
implemented a web site for on-line ordering designed to better match the
current market demands and to assist ICS in returning to growing at its
historical rates.

  Itronix. Itronix supplies portable, networked notebook computing and
communications devices used by field-service technicians in the U.S.
telecommunications industry. These products are carried by field-service
technicians who use them in a broad range of environments to communicate--
either through wireline or wireless connections--to a central office.
Customers use Itronix's mobile computing products to automate dispatching,
work management and field reporting processes.

  Itronix also targets utilities, insurance companies, and other organizations
seeking to increase the efficiency of their field-service personnel. Service
technicians often make multiple service calls to different locations without
returning to a base office. The use of networked computing devices allows for
more effective dispatching to service sites and provides two-way
communications with technicians. Itronix's flagship product provides
technicians with the ability to access engineering data and customer service
histories, or to collect and transmit key information regarding their service
calls to a central database.

  Itronix currently produces two hardware product lines, the X-C Series of
laptop computers and the T Series of smaller handheld computing devices.
Itronix's flagship product line, the X-C series, is a rugged laptop computer
that features functionality and power that is similar to commodity laptops yet
is designed to withstand harsh environments, including heat, cold, rain and
the shock and vibration found in service vehicles. The X-C is also an
integrated communications device with options for both wired and wireless
communications. Other features include intelligent battery-life management and
touch screen functionality.

  During fiscal 1997 and 1998 Itronix was facing significant manufacturing and
marketing challenges. Management implemented a plan to (i) reduce
manufacturing costs by renegotiating component costs, outsourcing non-core
manufacturing activities and redesigning its products and (ii) reposition its
premium niche against new market competition from "semi-rugged" and mass
market products. During the third quarter of fiscal 1999 Itronix received
orders totaling more than $72 million, primarily from two RBOCs. As a result,
Itronix's performance during the third and fourth quarters of fiscal 1999
significantly improved. However, results of operations for Itronix are
expected to continue to vary widely because of the relatively small number of
potential customers with large field-service work forces and the irregularity
of timing and size of such customers' orders.

  Industrial Computing and Communications businesses sales were $142.2 million
in fiscal 1997 on a pro forma basis, $155.0 million in fiscal 1998 and $193.3
million in fiscal 1999.

 Visual Communications

  Overview. The Company's principal visual communications businesses are
AIRSHOW and da Vinci. The Company's total visual communications sales were
$72.8 million in fiscal 1997, $77.5 million in fiscal 1998, and $90.6 million
in fiscal 1999.

  AIRSHOW. AIRSHOW primarily manufactures passenger cabin video information
display systems for the general and commercial aviation markets, selling its
equipment to airlines, aircraft manufacturers, and aircraft electronic system
(avionics) installation centers. AIRSHOW also provides information services by
collecting data from various information service providers and transmitting
news, weather and financial information as text and graphics to aircraft
equipped with AIRSHOW Network products. AIRSHOW systems are installed on over
3,000 general aviation aircraft and on approximately 100 commercial airlines.

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  The AIRSHOW moving map system and real-time flight information passenger
video displays are offered across general and commercial aviation markets with
variations in equipment interface for different aircraft and video systems
types. The AIRSHOW Network is an extension of the moving map system and
includes a real-time data communications system. AIRSHOW Network is now
offered as an option by leading corporate aircraft manufacturers such as
Bombardier Inc., The Cessna Aircraft Company, Inc., Dassault Falcon Jet Corp.,
and Gulfstream Aerospace Corporation. The AIRSHOW TV service provides for
reception of direct broadcast satellite TV aboard general aviation aircraft
which operate within the continental U.S.

  da Vinci. da Vinci produces digital color correction systems, which are a
component of telecine systems used by video post production and commercial
production facilities to enhance and color match images as they are
transferred from film to video tape for editing and distribution. The
principal application of da Vinci's color correction system is to conform and
enhance color in the film editing process and to provide color to black and
white films and video images. da Vinci products occupy the leadership position
in this small niche market, growth in which is driven primarily by the
introduction of new video technologies and standards within the film and video
production industry.

  Other Subsidiaries. At March 31, 1999, the Company's other visual
communications subsidiary is: DataViews, which provides tools for software
developers. During fiscal year 1999, two other subsidiaries ceased operating:
ComCoTec, which was sold in June 1998; and Parallax Graphics, Inc., which
ceased full operation in December 1997, was closed in December 1998.

Product Development

  For each of the Company's businesses, the development of new and enhanced
products is a key element of its strategy--designed to further penetrate
served markets--address new markets and reduce costs. From the beginning of
fiscal 1997 through fiscal 1999, consolidated product development expense was
approximately $152.3 million, representing an average of 11.2% of sales per
year. Consolidated product development expense was 11.9% of sales ($43.3
million) in fiscal 1997, 11.6% of sales ($55.0 million) in fiscal 1998 and
10.3% of sales ($54.0 million) in fiscal 1999. The Company anticipates product
development expense in future years to continue at an average historical rate
of approximately 11% of consolidated sales per year.

  From the beginning of fiscal 1997 through fiscal 1999, the Company invested
approximately $94.9 million in the development of communications test
products. In fiscal 1999, the Company introduced a significant number of new
products at its communications test business including the TB 109XC (a
subscriber loop analyzer) that enhances the service providers ability to
provide their customers with higher speed internet access and improved service
quality, a series of service analyzers for the international market in the TTC
2230 (a services module for the TTC 2000 Test Pad) and TPI 750E (ATM field
analyzer), the first CAP and DMT based ADSL analyzer in the TPI 350DSL, and
the first hand-held, battery-operated DSO through OC12 SONET Analyzer in the
T-BERD 2310.

  The Company uses its customer relationships to focus its product development
strategy on customer needs and emerging technologies.

Customers and Marketing

  Overview. The Company markets its products to a diverse customer base. The
Company's products are sold to a broad range of communications service
providers, including RBOCs, long-distance carriers, competitive access
providers, wireless service companies, independent telephone companies, cable
television operations, and a wide array of computer and data communication
users, corporate and industrial customers, and scientific organizations.


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  Most of the Company's revenues are generated through direct selling. The
Company also uses distributorships and representative relationships to sell
its products in areas of the United States and the rest of the world with
relatively low sales volume.

  The Company's sales of goods and services to various agencies of the United
States federal government were approximately $17.5 million, $19.3 million, and
$9.8 million in fiscal 1997, 1998, and 1999, respectively. Sales of goods and
services to the agencies of the United States federal government are made
pursuant to standard contracts which generally permit such agencies to cancel
or revise the contracts at will.

  In fiscal 1997 and fiscal 1998, no single customer accounted for more than
10% of sales. In fiscal 1999, however, the Company recognized revenue equal to
approximately 13% of consolidated sales from BellSouth Telecommunications
("BellSouth"). Due to the high level of BellSouth backlog at March 31, 1999
(approximately $40 million), the Company anticipates shipments to BellSouth in
fiscal 2000 could be approximately 10% of consolidated sales. The Company does
not, however, anticipate sales from BellSouth to continue at this rate in
future years.

  Communications Test. In the United States, TTC markets and sells its
communications test and analysis products primarily through a 160-person
direct sales team comprised predominantly of engineers and technical
professionals who undergo intensive initial training on TTC's and its
competitors' products. Internationally, TTC employs a 50+-person direct sales
team for key markets along with distributors and representatives to market and
sell its products. TTC's principal customers are communications service
providers (such as RBOCs, long-distance companies and competitive access
providers), service users such as large corporate and government network
operators, and manufacturers of communications equipment and systems.

  Industrial Computing and Communications. ICS sells its ruggedized industrial
computer products to engineers and scientists primarily through its catalogs
and a telemarketing sales force comprised of highly-trained electrical
engineers. Itronix employs a direct sales force of engineers to market and
sell its ruggedized mobile computer products to organizations with large field
service groups such as telephone and insurance companies and utilities. ICS
typically sells to thousands of customers with no significant customer
concentration while Itronix's sales tend to be more concentrated on fewer
large customers.

  Visual Communications. The Company's niche visual communications businesses
generally sell into niche markets directly through their own sales forces as
well as through distributors and representatives.

Product Assembly

  The Company outsources most of its manufacturing and mechanical parts
fabrication and generally performs its own final assembly and testing of
products.

Competition

  The markets in which the Company competes are highly competitive and are
characterized by rapidly changing technology. Principal competitors include
businesses with significant financial, development, marketing, and
manufacturing resources, as well as numerous small, specialized companies. The
Company believes it holds a relatively favorable position with respect to the
important competitive factors in each of its markets. The Company considers
rapid product development, product functionality and features, and highly
trained technical sales and support staff to be key competitive factors. See
"Risk Factors--Highly Competitive Markets"

International

  The Company maintains sales subsidiaries or branches for its communications
test business in major countries in Western Europe and Asia and has
distribution agreements in other countries where sales volume does not warrant
a direct sales organization. The Company's foreign sales from continuing
operations (including exports from North America directly to foreign
customers) were approximately 20%, 16% and 14% of consolidated net sales in
fiscal 1997, 1998 and 1999, respectively.

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  The Company's international business is subject to risks customarily found
in foreign operations, such as fluctuations in currency exchange rates, import
and export controls, and regulatory policies of foreign governments. A summary
of the Company's sales, earnings and long-lived assets by geographic area is
found in the Company's financial statements.

Discontinued Operations and Divested Businesses

  The Company engaged in a business divestiture program which began in 1994
and ended in fiscal 1997. Through this program, the Company sold 24 non-core
businesses, which resulted in total proceeds to the Company of approximately
$190 million, including $13.5 million in non-cash proceeds. See "Notes to
Condensed Consolidated Financial Statements."

  In addition, on June 30, 1998 the Company sold the assets of ComCoTec, Inc.
("ComCoTec") located in Lombard, Illinois to The Potomac Group, Inc. for $21
million. ComCoTec is a supplier of pharmacy management software and services
and was a subsidiary within the Company's visual communications products
group.

Backlog

  The Company's backlog of orders at March 31, 1998 and 1999 was $79.1 million
and $170.1 million, respectively, reflecting a 115% increase. The largest
increase in backlog is a result of a significant increase in bookings for the
Company's ruggedized laptop computers. In addition, the Company has an
increased backlog for the Company's communications test products and airplane
passenger video displays.

  The backlog at March 31, 1999, related to BellSouth Telecommunications, a
Dynatech customer that contributed approximately 13% of total sales in fiscal
1999, was $40 million. Of the $170.1 million backlog at March 31, 1999,
approximately 87% is expected to ship in fiscal 2000.

Employees

  At March 31, 1999, the Company employed approximately 2,349 people. The
Company's experience has been that employees having requisite skills for the
Company's purposes are generally available in the areas where its facilities
are located, although there are constraints on the Company's ability to fill
certain engineering positions. The Company's employees are not represented by
a labor union, and the Company believes its employee relations are good.

Seasonality

  As a result of purchasing patterns of its telecommunications customers which
tend to place large orders periodically typically at the end of the Company's
first and third fiscal quarters, the Company expects its results of operations
to vary significantly on a quarterly basis, as they have in the past. In
addition, growth rates and results of operations for Itronix also have varied
widely and are expected to continue to do so because of the relatively small
number of potential customers with large field-service work forces, the timing
and size of whose orders are irregular.

Intellectual Property

  The Company relies primarily on trade secrets, trademark laws,
confidentiality procedures and contractual restrictions to establish and
protect its proprietary rights.

  The Company generally seeks patent protection for inventions and
improvements to its products which it believes to be patentable. It holds
numerous United States and foreign patents and patent applications covering
many products. The Company does not believe that the expiration of any patent
or group of patents would materially affect its business.

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  FIREBERD, T-BERD, CENTEST, INTERCEPTOR, XC 6250, INDUSTRIAL COMPUTER SOURCE-
BOOK, DA VINCI SYSTEMS and AIRSHOW are among the registered trademarks which
the Company considers valuable assets.

  DYNATECH and design is a registered service mark of the Company in the
United States and a registered trade or service mark (issued or applied for)
of the Company in most other major industrialized countries of the world.

  The Company is subject to customary risks of infringement of its proprietary
rights. While the Company considers its proprietary rights important, it
believes its technical marketing and manufacturing capabilities are of greater
competitive significance.

Suppliers

  Materials and components used in the Company's products are normally
available stock items or can be obtained to Company specifications from more
than one potential supplier, with the exception of certain components which
are being sourced from a single supplier. These include certain commercially
available and customized microprocessors and application specific integrated
circuits, power supplies, display devices and certain operating system
software. The Company has not entered into long term contracts for the supply
of such components. Although alternative sources generally exist for these
materials, a significant amount of time could be required before the Company
would begin to receive adequate supplies from such alternative suppliers. The
Company also purchases certain key components from sole source vendors,
including a semi-conductor manufacturer of a component utilized in the
Company's communications test business and a component manufacturer for the
Itronix series of ruggedized laptop computers. There can be no assurance that
such components will continue to be produced or that the price for such
components may not significantly increase. Some components and assemblies are
purchased in Asia pursuant to volume contracts.

Environmental Matters

  Federal, state and local laws or regulations which have been enacted or
adopted regulating the discharge of materials into the environment have not
had, and under present conditions, the Company does not foresee that they will
have, a material adverse effect on capital expenditures, earnings, or the
competitive position of the Company.

                                 RISK FACTORS

Control by CDR Fund V

  CDR Fund V currently controls approximately 91.8% of the outstanding shares
of Common Stock of the Company. As a result of its stock ownership, CDR Fund V
controls the Company and has the power to elect the directors of the Company,
appoint new management, and approve any action requiring approval by the
stockholders of the Company, including adopting amendments to the Articles of
Organization of the Company and approving any merger or sale of all or
substantially all the assets of the Company. The directors so elected have the
authority to effect decisions affecting the capital structure of the Company,
including the incurring of additional indebtedness, the issuance of preferred
stock and the declaration of dividends. Moreover, concentration of ownership
by CDR Fund V of Common Stock of the Company will have the effect of requiring
a third party to negotiate any acquisition of control of the Company with CDR
Fund V. There can be no assurance that the interests of CDR Fund V will not
conflict with the interests of investors with respect to any such transaction
or otherwise.

Lack of Trading Market

  Shares of Common Stock trade only in the over-the-counter market. Although
prices in respect of trades may be published by the National Association of
Securities Dealers, Inc. on its electronic bulletin board and

                                      10
<PAGE>

"pink sheets," quotes for such shares may not be readily available;
accordingly, the Common Stock has traded and is anticipated to continue to
trade much less frequently than the Old Common Stock traded prior to the
Merger, which may have a material adverse effect on the market value of Common
Stock.

Termination of Exchange Act Reporting

  In connection with the Merger, the Company has agreed to continue to file
periodic reports (including annual and quarterly reports) under the Securities
Exchange Act of 1934, as amended, until May 21, 2003 (the "Exchange Act")
unless fewer than 100 record holders of shares of Common Stock are non-
affiliates of the Company or except as otherwise provided in the Agreement and
Plan of Merger (the "Merger Agreement"). When the Company ceases to be
obligated to be an Exchange Act reporting company under the Merger Agreement,
the information now available to investors of the Company in the reports
required to be filed by the Company with the Securities and Exchange
Commission would not be available to them as a matter of right, although the
Company may be required to report under other agreements or otherwise.

Substantial Indebtedness; Liquidity

  The Company incurred substantial indebtedness in connection with the Merger
and has thereby become highly leveraged, with indebtedness that is very
substantial in relation to its shareholders' equity. The Company did not have
substantial indebtedness prior to the Merger (approximately $233 thousand at
March 31, 1998). Although the Company repaid $8 million mandatory principal
payments under its term loan facility (the "Term Loan Facility") and repaid
all of the $40 million of indebtedness outstanding under its $110 million
revolving credit facility (the "Revolving Credit Facility") in fiscal year
1999, at March 31, 1999 the Company had a total of $527 million of debt,
outstanding. This outstanding debt consisted primarily of $275 million of the
Company's 9 3/4% Senior Subordinated Notes due 2008 (the "Senior Subordinated
Notes"), $252 million from term loan borrowings under the Company's Term Loan
Facility, and no borrowings under the Company's Revolving Credit Facility
(collectively, the "Senior Secured Credit Facilities"). The Term Loan Facility
and Revolving Credit Facility are governed by a senior secured credit
agreement (the "Senior Secured Credit Agreement"). The Senior Secured Credit
Agreement and the indenture governing the Senior Subordinated Notes permit the
Company to incur or guarantee certain additional indebtedness, subject to
certain limitations. Outstanding term loan borrowings must be repaid (or
prepaid in some cases) over the remaining life of the loans. All outstanding
Revolving Facility Credit borrowings will become due on March 31, 2004.
Because of its working capital needs, the Company expects that it will be
required at that time to enter into new revolving credit facility
arrangements. No assurance can be given that any extension, renewal,
replacement or refinancing of the Company's Revolving Credit Facility can be
successfully accomplished or accomplished on acceptable terms. See "Management
Discussion and Analysis of Financial Condition and Results of Operations."

  The Company's high debt levels may have important consequences for the
Company, including but not limited to the following: (a) the Company's ability
to obtain additional financing for future acquisitions (if any), working
capital, capital expenditures or other purposes may be impaired or any such
financing may not be on terms favorable to the Company; (b) a substantial
amount of the Company's operating cash flow will be dedicated to the payment
of principal and interest on its indebtedness, thereby reducing funds that
would otherwise be available for the Company's operations and other purposes,
including investments in new products, research and development, capital
spending and acquisitions; (c) a substantial decrease in net operating cash
flows or increase in expenses could make it difficult for the Company to meet
its debt service requirements or force it to modify its operations or sell
assets; and (d) the Company's highly leveraged capital structure may place it
at a competitive disadvantage, hinder its ability to adjust rapidly to market
conditions or make it vulnerable to a downturn in its business or the economy
generally or changing market conditions and regulations.

  The Company's ability to repay or to refinance its obligations with respect
to its indebtedness will depend on its future financial and operating
performance. The Company's performance, in turn, will be subject to prevailing
economic and competitive conditions and to financial, business, legislative,
regulatory, industry, economic and other factors, many of which are beyond the
Company's control. These factors could include

                                      11
<PAGE>

general economic conditions, operating difficulties, increased operating
costs, product pricing pressures, potential revenue instability arising from
cost savings initiatives or otherwise, labor relations, the response of
competitors or customers to the Company's business strategy or projects,
delays in implementation of the Company's business strategy, telecommunication
provider consolidation or strategy changes, and the relative success of new
product introductions. The Company's ability to meet its debt service and
other obligations may depend in significant part on the extent to which the
Company can implement successfully its business and growth strategy. There can
be no assurance that the Company will be able to implement its strategy fully
or that the anticipated results of its strategy will be realized.

  If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital or other expenditures, sell assets, seek to obtain additional equity
capital or refinance or restructure its debt. There can be no assurance that
the Company's cash flow and capital resources will be sufficient for payment
of principal of, premium, if any, and interest on, its indebtedness in the
future, or that any such alternative measures would be successful or would
permit the Company to meet its scheduled debt service obligations. In
addition, because the Company's obligations under the Senior Secured Credit
Agreement will bear interest at floating rates, an increase in interest rates
could materially adversely affect, among other things, the Company's ability
to meet its debt service obligations.

Dependence on Communications Industry

  The Company's principal customers are RBOCs, competitive access providers,
wireless service providers, competitive local exchange carriers, other
communications service providers, mobile work forces and industrial engineers
and other users of the Company's communications devices and ruggedized
computers. The industries of the Company's principal customers are
characterized by intense competition and consolidation. Fewer customers as a
result of such consolidation could lead to pressure on the Company to lower
prices. Competitive pressures among the Company's customers or other
communications industry developments could lead to discontinuance or
modifications of products manufactured by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations. Regulation in the communications industry could
materially adversely affect the Company's customers or otherwise materially
limit or restrict the Company's business. Further, these industries are
evolving rapidly and it is difficult to predict their potential size or future
growth rate. There can be no assurance that the deregulation trend in the
telecommunications market that has resulted in increased competition and
escalating demand for technologies and services will continue in a manner
favorable to the Company or its business strategies.

Highly Competitive Markets

  The markets for the Company's products and services are highly competitive.
The Company competes directly or indirectly with Hewlett-Packard Company and
Panasonic Industrial Co., among others. Due to the rapidly evolving markets in
which the Company competes, additional competitors with significant market
presence and financial resources, including large telecommunications equipment
manufacturers and computer hardware and software companies, may enter those
markets, thereby further intensifying competition. Increased competition could
result in price reductions and loss of market share which would materially
adversely affect the Company's business, financial condition and results of
operations. Certain of the Company's current and potential competitors have
greater name recognition and greater financial, selling and marketing,
technical, manufacturing and other resources than the Company. Although the
Company believes it has certain technological and other advantages over its
competitors, realizing and maintaining such advantages will require a
continued high level of investment by the Company in research and product
development, marketing and customer service and support. The highly leveraged
nature of the Company could limit the Company's ability to continue to make
such investments or other necessary or desirable capital expenditures, to
compete effectively and respond to market conditions. There can be no
assurance that the Company will be able to compete effectively with its
existing competitors or with new competitors, or that such competitors will
not succeed in adapting more rapidly and effectively to changes in technology
or in the market or in developing or marketing products that will be more
widely accepted.


                                      12
<PAGE>

Rapid Technological Change; Challenges of New Product Introductions

  The market for the Company's products and services is characterized by
rapidly changing technology, new and evolving industry standards and protocols
and new product and service introductions and enhancements that may render
existing offerings obsolete or unmarketable. Automation in the Company's
addressed markets for communications test instruments or a shift in customer
emphasis from communications test instruments to test and monitoring systems
could likewise render the Company's existing offerings obsolete or
unmarketable or reduce the size of the Company's addressed market. In
particular, incorporation of self-testing functions in the equipment currently
addressed by the Company's communications test instruments could render the
Company's offerings redundant and unmarketable. Failure to anticipate or
respond rapidly to advances in technology and to adapt the Company's products
appropriately could have a material adverse effect on the success of the
Company's products and thus on the Company's business, financial condition and
results of operations.

  The development of new, technologically advanced products is a complex and
uncertain process requiring the accurate anticipation of technological and
market trends and the expenditure of substantial development costs. From the
beginning of fiscal 1997 through fiscal 1999, the Company has expended on
average 11.2% of its sales (or approximately $152.3 million) on product
development and although the Company expects to continue product development
spending at similar levels, there can be no assurance that the Company will
have sufficient free cash flow to do so. There can be no assurance that errors
will not be found in new products or upgrades after commencement of commercial
shipments, resulting in delays in or loss of market acceptance and sales,
diversion of development resources, injury to the Company's reputation,
increased service and warranty costs or payment of compensatory or other
damages, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.

Product Certification and Evolving Industry Standards

  Several of the Company's products must meet significant communications
regulations, certifications, standards and protocols, some of which are
evolving as new technologies are deployed. These regulations, certifications,
and standards and protocols include those promulgated by the Federal
Communications Commission, established by Underwriters Laboratories and
imposed by various foreign countries. Compliance with such regulations,
certifications, standards and protocols may prove costly and time-consuming
for the Company, presenting barriers to entry in particular markets or
reducing the profitability of the Company's product offerings. Such
regulations, certifications, standards and protocols may also adversely affect
the communications industry, limit the number of potential customers for the
Company's products and services or otherwise have a material adverse effect on
the Company's business. The failure of the Company's products to comply, or
delays in compliance, with the various existing and evolving industry
regulations, standards and protocols could delay the introduction of the
Company's products or cause the Company's existing products to become
obsolete.

Dependence on Sole Source Suppliers and Licensors

  The Company purchases certain key components and licenses technology from
sole source vendors, including a semiconductor manufacturer of a component
utilized in the Company's communications test business and a component
manufacturer for the Itronix series of ruggedized laptop computers. There can
be no assurance that such components will continue to be produced or that such
licensed technology will continue to be made available or that the price for
such components and licensed technology may not significantly increase. The
inability to develop alternative sources for these components and licensed
technology or to obtain sufficient quantities of these components could result
in increased costs and delays or reductions in product shipments which could
materially adversely affect the Company's business, financial condition and
results of operations. In the event of a reduction or interruption of supply,
a significant amount of time could be required before the Company would begin
receiving adequate supplies from such alternative suppliers. In such event,
the Company's business, financial condition and results of operations would be
materially adversely affected. In addition, the manufacture of certain of
these sole source components is technologically complex, and the Company's
reliance

                                      13
<PAGE>

on the suppliers of these components exposes the Company to potential
production difficulties and quality variations, which could negatively impact
cost and timely delivery of the Company's products. If supply of certain
components, including but not limited to application-specific integrated
circuits, power supplies, display devices and operating system software,
should cease, the Company may be required to redesign certain of its products.
No assurance can be given that supply problems will not occur or, if such
problems do occur, that satisfactory solutions would be available.

Risks Relating to Business and Growth Strategy, Including Acquisitions

  The Company's future performance depends in part on the Company's success in
implementing its business and growth strategy. The components of the Company's
strategy are subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the control of the
Company. There can be no assurance that the Company will be able to fully
implement its strategy or that the anticipated results of its strategy will be
realized.

  The Company's strategy contemplates, among other things, growth through
acquisitions of complementary businesses and entry into new markets.
Management cannot predict the availability of appropriate acquisition
candidates or the likelihood of an acquisition being completed should any
negotiations commence. The Company could have difficulty obtaining financing
to pursue acquisitions due to its substantial debt and to the restrictive
covenants in its debt instruments, among other things. If the Company does
complete any acquisitions, the Company could have difficulties integrating
acquired technology and operations, or retaining and integrating key employees
of acquired companies. Integrating any acquired business could also divert
management attention from ongoing business concerns. In addition, the
Company's future growth, whether by acquisition or otherwise, depends in part
upon its ability to enter markets in which the Company may have limited
experience, including international markets. In conducting business in foreign
jurisdictions, the Company may encounter difficulties with, among other
things, tariffs and other trade or regulatory barriers, currency controls,
hyperinflation, intellectual property protection, potential adverse tax
consequences, longer payment cycles, greater difficulty or delay in accounts
receivable collection, cultural differences and increased political and
economic instability.

  The Company's planned growth, if achieved, may place significant demands on
its management, administrative and operational resources. The Company's
ability to manage growth effectively will require the Company to continue to
develop and improve its operational, financial and other internal systems, as
well as its sales capabilities, and attract, manage and retain its employees.
There can be no assurance that the Company will effectively manage any
strategic growth it may achieve.

Reliance on Key Personnel

  The Company's success depends in large part upon its senior management, as
well as its ability to attract and retain its highly-skilled technical,
managerial, sales and marketing personnel, particularly engineers skilled and
experienced with communications equipment. Competition for such personnel is
intense and there can be no assurance that the Company will be successful in
retaining its existing key personnel and in attracting and retaining the
personnel it requires. Failure to attract and retain key personnel will have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, continued labor market shortages of
technical personnel may require wage increases well in excess of the growth in
the Company's sales and margins, thereby reducing the overall profitability of
the Company.

Restrictive Financing Covenants

  The Senior Secured Credit Agreement and the indenture governing the Senior
Subordinated Notes contain a number of covenants that significantly restrict
the operations of the Company, limiting the discretion of the Company's
management with respect to certain business matters. These covenants, among
other things, restrict the ability of the Company to incur additional
indebtedness or guarantee obligations, pay dividends and other distributions,
prepay or modify the terms of other indebtedness, create liens, make capital
expenditures, make

                                      14
<PAGE>

certain investments or acquisitions, enter into mergers or consolidations,
make sales of assets, engage in certain transactions with affiliates and
otherwise restrict corporate activities. Certain term loans under the Senior
Secured Credit Agreement are subject to negative covenants similar to those
contained in the indenture. In addition, under the Senior Secured Credit
Agreement, the Company is required to satisfy a minimum interest expense
coverage ratio and a maximum leverage ratio. These financial tests become more
restrictive in future years.

  The Company's ability to comply with the covenants and restrictions
contained in the Senior Secured Credit Agreement and the indenture governing
the Senior Subordinated Notes may be affected by events beyond its control,
including prevailing economic, financial and industry conditions, and there
can be no assurance that the Company will be able to comply with such
covenants or restrictions in the future. A breach of the covenants and
restrictions contained in the Senior Secured Credit Agreement or the indenture
governing the Senior Subordinated Notes or in any agreements with respect to
any additional financing would result in an event of default under such
agreements, which would permit acceleration of the related debt and
acceleration of debt under other debt agreements that may contain cross-
acceleration or cross-default provisions, as well as termination of the
commitments of the lenders to make further extensions of credit under the
Senior Secured Credit Agreement. In addition, if the Company were unable to
repay its indebtedness to the lenders under the Senior Secured Credit
Agreement, such lenders could proceed against the collateral securing such
indebtedness, including substantially all of the Company's assets.

Year 2000 Risks

  Generally, certain computer programs may not be read to reach the year 2000,
because these programs use only two digits to refer a year. While the Company
expects to make the necessary modifications of changes to both its internal
information technology ("IT") and non-IT systems and existing product base in
a timely fashion, there can be no assurance that the Company's internal
systems and existing or installed base of products will not be materially
adversely affected by the advent of Year 2000. Certain of the Company's
products are used, in conjunction with products of other companies, in
applications that may be critical to the operations of its customers. Any
product non-readiness, whether standing alone or used in conjunction with the
products of other companies, may expose the Company to claims from its
customers or others, and could impair market acceptance of the Company's
products and services, increase service and warranty costs, or result in
payment of damages, which in turn could materially adversely affect the
Company.

  In the event of a failure as a result of Year 2000 issues, the Company could
lose or have trouble accessing accurate internal data, resulting in incomplete
or inaccurate accounting of Company financial results, the Company's
manufacturing operating systems could be impaired, and the Company could be
required to expend significant resources to address such failures. Similarly,
in the event of a failure as a result of Year 2000 issues in any systems of
third parties with whom the Company interacts, the Company could lose or have
trouble accessing or receive inaccurate third party data, experience internal
and external communications difficulties or have difficulty obtaining
components that are Year 2000 compliant from its vendors. The Company could
also experience a slowdown or reduction of sales if customers such as
telecommunications companies or commercial airlines are adversely affected by
Year 2000 issues. See "Management Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000."

                                      15
<PAGE>

Item 2. Properties.

  The Company's policy is generally to lease real property for its
manufacturing and sales operations. Principal operating facilities are as
follows:

<TABLE>
<CAPTION>
                                                             Square     Lease
       Location                                               Feet   Termination
       --------                                              ------- -----------
   <S>                                                       <C>     <C>
   Burlington, Massachusetts................................  14,600    2002
   Ft. Lauderdale, Florida..................................  16,300    2001
   Germantown, Maryland.....................................  30,000    2006
   Germantown, Maryland.....................................  68,400    2001
   Germantown, Maryland.....................................  30,000    2003
   Germantown, Maryland.....................................  68,600    2003
   Kirkland, Washington.....................................  50,500    2004
   Northampton, Massachusetts...............................  22,500    1999
   Tustin, California.......................................  52,000    2004
   Salem, Virginia..........................................  35,900    2004
   San Diego, California.................................... 130,000    2005
   Spokane, Washington......................................  66,400    2001
</TABLE>

  The Company has other leases for manufacturing space and sales offices, but
in each case the total leased space is under 15,000 square feet.

  At March 31, 1999 the Company has leases totaling approximately 275,000
square feet of space in various facilities as a result of divested or
discontinued companies, as well as facilities vacated in the normal course of
business. The last of these leases expires in August 2000.

Item 3. Legal Proceedings.

 Litigation

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

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

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

  None

Item 5. Market for Registrant's Common Stock and Related Security Holder
Matters.

  Prior to January 28, 1997, the Old Common Stock was quoted on the Nasdaq
National Market. From January 28, 1997 to May 21, 1998, the Old Common Stock
was traded on the New York Stock Exchange. As a

                                      16
<PAGE>

result of the Merger on May 21, 1998, trading in the Old Common Stock was
halted and the Common Stock is traded only in the over-the-counter market. On
May 20, 1999, the last reported price of the Common Stock was $3.375.

  The following table shows, for the fiscal periods indicated, the high and
low close prices of a share of Old Common Stock or Common Stock as reported by
the New York Stock Exchange and in the over-the-counter market, as applicable.

<TABLE>
<CAPTION>
   Quarter Ended                                                   High    Low
   -------------                                                  ------ -------
   <S>                                                            <C>    <C>
   March 31, 1999(b)............................................. $3.500 $2.7180
   December 31, 1998(b)..........................................  3.000  2.3750
   September 30, 1998(b).........................................  3.438  2.6870
   June 30, 1998(b)..............................................  4.312  3.1250
   June 30, 1998(a).............................................. 50.125 48.1875
   March 31, 1998(a)............................................. 48.500 46.1900
   December 31, 1997(a).......................................... 47.310 34.0000
   September 30, 1997(a)......................................... 41.940 34.3800
   June 30, 1997(a).............................................. 41.880 29.0000
</TABLE>
--------
(a) Old Common Stock reported by the New York Stock Exchange
(b) Common Stock reported by the over-the-counter market

  There were approximately 945 stockholders of record as of May 20, 1999.

  Since April 1, 1995, the Company has not declared or paid cash dividends on
its Old Common Stock or Common Stock. The Company intends to retain earnings
for use in the operation and expansion of its business. The terms of the
Company's current term loan prohibits, and the Senior Secured Credit Agreement
and the indenture governing the Senior Subordinated Notes restrict the payment
of cash dividends on its Common Stock.

Item 6. Selected Financial Data.

  The information requested by this Item is attached as Appendix A.

Item 7. Management Discussion and Analysis of Financial Condition and Results
of Operations.

  The information requested by this Item is attached as Appendix B.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

  The information requested by this Item is included in Appendix B.

Item 8. Financial Statements and Supplementary Data.

  The information requested by this Item is attached as Appendix C.

Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.

  None

Item 10. Directors and Executive Officers of the Registrant.

  Reference is made to the information responsive to items 401 and 405 of
Regulation S-K contained in the Company's definitive Proxy Statement relating
to its 1999 Annual Meeting of Shareholders which will be filed with the U.S.
Securities and Exchange Commission within 120 days after the close of the
Company's fiscal year ended March 31, 1999, pursuant to Rule 14a-6(b) under
the Securities and Exchange Act of 1934, as amended; said information is
incorporated herein by reference.

                                      17
<PAGE>

Item 11. Executive Compensation.

  Reference is made to the information responsive to Item 402 of Regulation S-
K contained in the Company's definitive Proxy Statement relating to its 1999
Annual Meeting of Shareholders which will be filed with the U.S. Securities
and Exchange Commission within 120 days after the close of the Company's
fiscal year ended March 31, 1999, pursuant to Rule 14a-6(b) under the
Securities Exchange Act of 1934, as amended; said information is incorporated
herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

  Reference is made to the information responsive to Item 403 of Regulation S-
K contained in the Company's definitive Proxy Statement relating to its 1999
Annual Meeting of Shareholders which will be filed with the U.S. Securities
and Exchange Commission within 120 days after the close of the Company's
fiscal year ended March 31, 1999, pursuant to Rule 14a-6(b) under the
Securities Exchange Act of 1934, as amended; said information is incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions.

  Reference is made to the information responsive to Item 404 of Regulation S-
K contained in the Company's definitive Proxy Statement relating to its 1999
Annual Meeting of Shareholders which will be filed with the U.S. Securities
and Exchange Commission within 120 days after the close of the Company's
fiscal year ended March 31, 1999, pursuant to Rule 14a-6(b) under the
Securities Exchange Act of 1934, as amended; said information is incorporated
herein by reference.

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

  (a) (1) Financial statements

  The following financial statement and schedules of the Company are included
as Appendix C to this Report.

  I. Consolidated Balance Sheets--March 31, 1999 and 1998.

  II. Consolidated Statements of Income--Fiscal Years ended March 31, 1999,
  1998, and 1997.

  III. Consolidated Statements of Shareholders' Equity (Deficit)--Fiscal
  Years ended March 31, 1999, 1998, and 1997.

  IV. Consolidated Statements of Cash Flows--Fiscal Years ended March 31,
  1999, 1998, and 1997.

  V. Notes to Consolidated Financial Statements.

  (2) Financial statement schedule

  II. Valuation and Qualifying Accounts.

  Schedules other than those listed above have been omitted because they are
either not required or not applicable or because the required information has
been included elsewhere in the financial statements or notes thereto.

  (b) Reports on Form 8-K

  None

  (c) Exhibits

  The exhibits that are filed with this report or that are incorporated herein
by reference are set forth in Appendix D.

                                      18
<PAGE>

                                  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.

                                          Dynatech Corporation

                                                   /s/ Ned C. Lautenbach
                                          By: _________________________________
                                                  Chairman, President and
                                                  Chief Executive Officer

June 14, 1999

  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.

<TABLE>
<S>  <C>
</TABLE>
              Signature                        Title                 Date

        /s/ Ned C. Lautenbach          Chairman of the          June 10, 1999
-------------------------------------   Board, President
          Ned C. Lautenbach             and Chief Executive
                                        Officer, Director

         /s/ Allan M. Kline            Corporate Vice           June 14, 1999
-------------------------------------   President,
           Allan M. Kline               Director, Chief
                                        Financial Officer,
                                        and Treasurer
                                        (Principal
                                        Financial Officer)

     /s/ Robert W. Woodbury, Jr.       Corporate Vice           June 14, 1999
-------------------------------------   President,
       Robert W. Woodbury, Jr.          Controller
                                        (Principal
                                        Accounting Officer)

       /s/ Joseph L. Rice, III         Director                 June 14, 1999
-------------------------------------
         Joseph L. Rice, III

          /s/ Brian D. Finn            Director                 June 14, 1999
-------------------------------------
            Brian D. Finn

        /s/ Charles P. Pieper          Director                 June 14, 1999
-------------------------------------
          Charles P. Pieper

         /s/ John R. Peeler            Director                 June 14, 1999
-------------------------------------
           John R. Peeler

         /s/ Marvin L. Mann            Director                 June 14, 1999
-------------------------------------
           Marvin L. Mann

          /s/ Brian H. Rowe            Director                 June 14, 1999
-------------------------------------
            Brian H. Rowe

<TABLE>
<S>  <C>
</TABLE>


                                      19
<PAGE>

                                                                     APPENDIX A

                Selected Historical Consolidated Financial Data

  The following tables set forth selected consolidated historical, financial
and other data of the Company for the five fiscal years ended March 31, 1999
which have been derived from, and should be read in conjunction with, the
audited historical Consolidated Financial Statements, and related notes
thereto, of the Company contained herein.
<TABLE>
<CAPTION>
                                        Years Ended March 31,
                            -------------------------------------------------
                              1999       1998      1997      1996      1995
                            ---------  --------  --------  --------  --------
                            (Amounts in thousands except per share data)
<S>                         <C>        <C>       <C>       <C>       <C>
Results of operations
Sales...................... $ 522,854  $472,948  $362,412  $293,042  $243,078
Cost of sales..............   228,572   205,522   137,254   111,436    91,412
                            ---------  --------  --------  --------  --------
Gross profit...............   294,282   267,426   225,158   181,606   151,666
Selling, general &
 administrative expense....   149,006   138,310   114,479    98,487    86,329
Product development
 expense...................    54,023    54,995    43,267    36,456    30,585
Recapitalization-related
 costs.....................    43,386       --        --        --        --
Nonrecurring charges.......       --        --     27,776    16,852       --
Amortization of
 intangibles...............     6,228     5,835     6,793     5,136     5,106
Amortization of unearned
 compensation..............     1,519       --        --        --        --
                            ---------  --------  --------  --------  --------
Operating income...........    40,120    68,286    32,843    24,675    29,646
Interest expense...........   (46,198)   (1,221)     (828)   (1,723)   (3,919)
Interest income............     3,398     3,012     2,785     2,181     1,518
Other income, net..........    15,959       730       634       975       850
                            ---------  --------  --------  --------  --------
Income from continuing
 operations before income
 taxes.....................    13,279    70,807    35,434    26,108    28,095
Provision for income
 taxes.....................     6,834    29,031    17,585    10,394    11,671
                            ---------  --------  --------  --------  --------
Income from continuing
 operations................     6,445    41,776    17,849    15,714    16,424
Discontinued operations,
 net of income taxes.......       --        --     12,000    (1,471)    3,763
Extraordinary charge, net
 of taxes..................       --        --        --        --     (1,019)
                            ---------  --------  --------  --------  --------
Net income................. $   6,445  $ 41,776  $ 29,849  $ 14,243  $ 19,168
                            =========  ========  ========  ========  ========
Income (loss) per common
 share--basic:
  Continuing operations.... $    0.06  $   2.49  $   1.04  $   0.87  $   0.92
  Discontinued operations..       --        --       0.70     (0.08)     0.21
  Extraordinary charge.....       --        --        --        --      (0.06)
                            ---------  --------  --------  --------  --------
                            $    0.06  $   2.49  $   1.74  $   0.79  $   1.07
                            =========  ========  ========  ========  ========
Income (loss) per common
 share--diluted:
  Continuing operations.... $    0.06  $   2.40  $   0.99  $   0.86  $   0.92
  Discontinued operations..       --        --       0.67     (0.08)     0.21
  Extraordinary charge.....       --        --        --        --      (0.06)
                            ---------  --------  --------  --------  --------
                            $    0.06  $   2.40  $   1.66  $   0.78  $   1.07
                            =========  ========  ========  ========  ========
Weighted average number of
 shares:
  Basic....................   106,212    16,795    17,200    17,969    17,846
  Diluted..................   111,464    17,434    18,028    18,315    17,971
                            =========  ========  ========  ========  ========
Balance sheet data
Net working capital........ $  55,498  $117,791  $ 80,394  $105,861  $ 91,513
Total assets............... $ 348,104  $288,130  $249,010  $205,189  $256,392
Long-term debt............. $ 504,151  $     83  $  5,226  $  1,800  $  7,915
Shareholders' equity
 (deficit)................. $(316,440) $202,119  $160,686  $160,719  $154,320
Shares of stock
 outstanding...............   120,665    16,864    16,793    17,585    17,573
Shareholders' equity
 (deficit) per share....... $   (2.62) $  11.99  $   9.57  $   9.14  $   8.78
</TABLE>

                                      A-1
<PAGE>

                                                                     APPENDIX B

Management Discussion and Analysis of Financial Condition and Results of
Operations

  The following discussion of the results of operations, financial condition
and liquidity of the Company should be read in conjunction with the
information contained in the consolidated financial statements and notes
thereto included elsewhere in this Form 10-K. These statements have been
prepared in conformity with generally accepted accounting principles and
require management to make estimates and assumptions that affect amounts
reported and disclosed in the financial statements and related notes. Actual
results could differ from these estimates. The market share and competitive
position data contained in this Form 10-K are approximations derived from
Company estimates, which the Company believes to be reasonable but which have
not been independently verified and, to a lesser extent, from industry
sources, which the Company has not independently verified. The Company
believes that such data are inherently imprecise, but are generally indicative
of its relative market share and competitive position.

  The statements contained in this report (other than Company's consolidated
financial statements and other statements of historical fact) are forward-
looking statements, as described below in greater detail in "Forward-Looking
Statements."

Overview

  The Merger. On May 21, 1998 the Company was merged with CDRD Merger
Corporation ("MergerCo"), a nonsubstantive transitory merger vehicle organized
at the direction of Clayton, Dubilier & Rice, Inc. ("CDR"), a private
investment firm, with the Company continuing as the surviving corporation (the
"Merger"). The Merger and related transactions were treated as a
recapitalization (the "Recapitalization") for financial reporting purposes.
Accordingly, the historical basis of the Company's assets and liabilities was
not affected by these transactions.

  In the Merger, (i) each then outstanding share of common stock, par value
$0.20 per share, of the Company (the "Old Common Stock") was converted into
the right to receive $47.75 in cash and 0.5 shares of common stock, no par
value, of the Company (the "Common Stock") and (ii) each then outstanding
share of common stock of MergerCo was converted into one share of Common
Stock.

  As a result of the Merger, Clayton, Dubilier & Rice Fund V Limited
Partnership, an investment partnership managed by CDR ("CDR Fund V"), holds
approximately 91.8% of the Common Stock. John F. Reno, the former Chairman,
President and Chief Executive Officer of the Company (who retired from the
Company on May 19, 1999), together with two family trusts, holds approximately
1.0% of the Common Stock and other stockholders hold approximately 7.2% of the
Common Stock.

  In connection with the Merger and related transactions, Dynatech LLC
(formerly known as Telecommunications Techniques Co., LLC), Dynatech
Corporation's wholly owned subsidiary ("Dynatech LLC"), became the primary
obligor (and Dynatech Corporation, a guarantor) with respect to indebtedness
of Dynatech Corporation, including the 9 3/4% Senior Subordinated Notes due
2008 (the "Senior Subordinated Notes") and the Senior Secured Credit
Facilities referred to elsewhere in this report.

  Dynatech Corporation has fully and unconditionally guaranteed the Senior
Subordinated Notes. Dynatech Corporation, however, is a holding company with
no independent operations and no significant assets other than its membership
interest in Dynatech LLC. See "Capital Resources and Liquidity." Accordingly,
the condensed consolidated financial statements of Dynatech Corporation,
presented in this report, are not materially different from those of Dynatech
LLC. Management has not included separate financial statements of Dynatech LLC
because management has determined that they would not be material to holders
of the Senior Subordinated Notes or to the holders of Dynatech Corporation's
Common Stock. Dynatech LLC is subject, under the agreements governing its
indebtedness, to prohibitions on its ability to make distributions to Dynatech
Corporation (with limited exceptions) and other significant restrictions on
its operations. See "Capital Resources and Liquidity."

                                      B-1
<PAGE>

  On May 19, 1999, the Company's then Chairman, President and Chief Executive
Officer, John F. Reno, announced his retirement. Ned C. Lautenbach, a
principal of CDR, was named to replace Mr. Reno as Chairman, President and
Chief Executive Officer.

General

  The Company develops, manufactures and sells test, analysis, communications
and computing equipment in three product categories: (i) communications test
instruments, (ii) industrial computing and communications, and (iii) visual
communications. In its communications test business the Company provides
products that test and analyze communications networks and equipment. In its
industrial computing and communications business, the Company addresses two
areas of the worldwide ruggedized computer market through two of its
subsidiaries: (i) ICS, which provides computer products for use in harsh
environments and (ii) Itronix (purchased in December 1996), which provides
ruggedized portable computing and communications devices to field-service
organizations such as telephone companies. In its visual communications
business, the Company sells visual communications products principally through
two of its subsidiaries: (i) AIRSHOW, which provides passenger cabin video
information display systems for the general and commercial aviation markets
and (ii) daVinci Systems, which provides digital color enhancement systems
used in transferring film images into electronic signals. Since 1993, the
Company sold 25 non-core businesses for gross proceeds of approximately $212
million pursuant to a plan to focus on businesses that enjoy leading positions
in their respective markets, strong profitability and good growth prospects.
During the same period the Company, in turn, has purchased six complementary
businesses for a total purchase price of $120 million.

Current and Historical Trends

  Growth rates of enterprises engaged in the manufacture and provision of
telecommunications equipment and services will likely be affected by the
current trend of consolidation among such enterprises. In addition,
particularly in the near term, recent capital market volatility and reduced
financing availability may have affected and continue to affect growth rates
for certain customers, particularly those that may be highly leveraged with
significant capital requirements and those that are located in emerging
markets, as well as growth of the economy in general. Any resulting slowdown
in such growth could result in delays or reductions of orders for the
Company's products, and accordingly affect the Company's own growth.

  In the shorter term, the Company believes that such consolidation is being
reflected in delays in orders for certain of the Company's test products as
consolidating companies integrate or coordinate their purchasing practices.
Conversely, the Company has experienced a recent influx of large orders from
certain of the Regional Bell Operating Companies ("RBOCs") for the Company's
ruggedized laptop computers as the RBOCs initiated a program to replace their
field-based workforce computing systems with more up-to-date ruggedized
computing solutions.

  In the Company's largest business, communications test, sales have been
relatively flat during fiscal 1999 (a decrease of 0.6%) compared to the same
period a year ago. The flattening of sales can be attributed to (1) global
economic events, especially within Asia, (2) service providers diverting
capital spending from the communications test products to product upgrades
that are Year 2000 compliant, and (3) merger activity in the service providers
industry. The Company cannot predict whether growth will continue at
historical rates in either its own business or in the markets in which it
participates, due in part to recent global economic events.

  During fiscal 1998 and the first quarter of fiscal 1999, Itronix had been
facing significant manufacturing and marketing challenges. The Company took
several steps designed to improve the operating performance of Itronix,
including programs designed to reduce costs and streamline manufacturing, as
well as a change in Itronix senior management. During the third quarter of
fiscal 1999 Itronix received orders totaling more than $72 million, primarily
from two RBOCs. As a result, Itronix's performance during the third and fourth
quarters of fiscal 1999 significantly improved. However, results of operations
for Itronix are expected to continue to vary widely because of the relatively
small number of potential customers with large field-service work forces and
the irregularity of timing and size of such customers' orders.

                                      B-2
<PAGE>

  Growth at ICS during fiscal 1999 lagged behind historical growth rates, and
as a result, the Company implemented a change in senior management at ICS as
well as modified the way it markets and sells its products. For example, ICS
implemented a web site for on-line ordering designed to better match the
current market demands and to assist ICS in returning to growing at its
historical rates.

  Operating Income. From fiscal 1997 to 1999 the Company increased operating
income (defined as earnings before interest, taxes, and other income/
expense), by a compound annual growth of 10.5% driven primarily by sales
growth and the Company's acquisitions during this period. Excluding non-
recurring charges, expenses related to the Merger, and amortization of
unearned compensation, the compound annual growth rate was 18.4%. The non-
recurring charges in fiscal 1997 included a charge of $27.8 million for
purchased incomplete technology and impaired intangible asset writeoffs.
Operating income at the communications test business, the Company's largest
segment, decreased by 16.0% from fiscal 1998 to fiscal 1999 as a result of a
flattening of the order volume as well as an increase in selling, general and
administrative expense. This decrease was offset by an increase in operating
income in the industrial computing and communications segment and visual
communications segment, respectively.

Seasonality

  As a result of purchasing patterns of its telecommunications customers which
tend to place large orders periodically typically at the end of the Company's
first and third fiscal quarters, the Company expects its results of operations
to vary significantly on a quarterly basis, as they have in the past. In
addition, growth rates and results of operations for Itronix also have varied
widely and are expected to continue to do so because of the relatively small
number of potential customers with large field-service work forces, the timing
and size of whose orders are irregular.

Product Development

  The market for the Company's products is characterized by changing
technology, evolving industry standards and protocols, and frequent
introductions of new products. Automation in the Company's addressed markets
for communications test instruments or a shift in customer emphasis from
communications test instruments to test and monitoring systems could render
the Company's existing product offerings obsolete or unmarketable or reduce
the size of the Company's addressed market. In particular, incorporation of
self-testing functions in the equipment currently addressed by the Company's
communications test instruments could render the Company's offerings redundant
and unmarketable. The Company thus faces the challenges of anticipating and
responding rapidly to advances in technology and adapting its existing
products or developing new products. The development of new, technologically
advanced products is a complex and uncertain process requiring the accurate
anticipation of technological and market trends and the expenditure of
substantial development costs. From the beginning of fiscal 1997 through March
31, 1999, the Company has spent an aggregate of $152.3 million on product
development or approximately 11.2% of sales, and the Company expects to
continue product development spending at similar levels as a percentage of
consolidated sales per year. See "Item 1 The Business--Risk Factors--Rapid
Technological Change; Challenges of New Product Introductions" and
"Substantial Leverage: Liquidity."

Recent Acquisitions And Dispositions And Discontinued Operations.

 Fiscal 1999 Activity:

  Acquisitions. On June 19, 1998, the Company, through one of its indirect
wholly owned subsidiaries, acquired all of the outstanding capital stock of
Pacific Systems Corporation of Kirkland, Washington ("Pacific") for a total
purchase price of $20 million, including an incentive earnout. This
acquisition resulted in approximately $18 million of goodwill which is being
amortized over 30 years. The acquisition was accounted for using the purchase
method of accounting. Pacific designs and manufactures customer-specified
avionics and integrated cabin management.

                                      B-3
<PAGE>

  In February 1999, the Company, through one of its wholly-owned subsidiaries,
acquired Flight TECH, a Hillsboro, Oregon based inflight entertainment
manufacturer specializing in equipment for small and medium jets, and
turboprop aircraft. The acquisition was accounted for using the purchase
method of accounting at a purchase price of $2 million. This acquisition
resulted in approximately $1.9 million of goodwill which is being amortized
over 30 years.

  Divestiture. On June 30, 1998, the Company sold the assets of ComCoTec,
Inc.("ComCoTec") located in Lombard, Illinois to The Potomac Group, Inc. for
$21 million. ComCoTec is a supplier of pharmacy management software and
services and was a subsidiary within the Company's visual communications
products group. The Company recognized a gain of $15.9 million from the sale
of ComCoTec and recorded it in other income.

  The Company has not presented separate pro forma financial statements for
the recent acquisitions or divestiture due to the immateriality of such pro
forma effects on the consolidated financial statements of the Company.

 Fiscal 1997 Acquisitions:

  In March of 1997, the Company acquired the net assets of Advent Design, Inc.
("Advent") for $3.5 million in cash. Advent designs and manufactures high-
performance microprocessor-based systems for the computer, medical and
communications markets. This acquisition generated $3.4 million of goodwill
which is being amortized over 15 years. During fiscal 1999 and 1998, the
Company incurred a $3.5 million and $1.6 million, respectively, increase in
goodwill, related to a targeted and renegotiated three-year earnout based on,
among other things, a targeted sales growth.

  On December 31, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Itronix Corporation ("Itronix") located in
Spokane, Washington, for $65.4 million in cash.

  Incident to this acquisition was the purchase of incomplete technology
activities which resulted in a one-time pretax charge of $20.6 million or
($0.74) per share on a diluted basis. This purchased incomplete technology
that had not reached technological feasibility and which had no alternative
future use was valued using a risk adjusted cash flow model, both in 1997 and
1996, under which future cash flows associated with in-process research and
development were discounted considering risks and uncertainties related to the
viability of potential changes in future target markets and to the completion
of the products that will ultimately be marketed by the Company. Acquired
complete technology of $8.4 million is being amortized over two to seven
years, and goodwill of $17.9 million is being amortized over 15 years.

Results of Operations

 Fiscal 1999 Compared to Fiscal 1998 on a Consolidated Basis

  Sales. For the fiscal year ended March 31, 1999 consolidated sales increased
$49.9 million or 10.6% to $522.9 million as compared to $472.9 million for the
fiscal year ended March 31, 1998. The increase was primarily attributable to
increased demand for the Company's ruggedized laptop computers and aircraft
cabin video information services offset by slightly lower sales of the
Company's communications test products.

  International sales (defined as sales outside of North America) were $75.5
million or 14.4% of consolidated sales for the fiscal year ended March 31,
1999, as compared to $76.1 million or 16% of consolidated sales for the fiscal
year ended March 31, 1998. The slight decrease in international sales is
primarily a result of decreased demand for the Company's communication test
products due in part to the economic slowdown in Asia.

  Gross Profit. Consolidated gross profit increased $26.9 million to $294.3
million or 56.3% of consolidated sales for the fiscal year ended March 31,
1999 as compared to $267.4 million or 56.5% of consolidated sales for the
fiscal year ended March 31, 1998. The percentage decrease was attributable to
a change in the sales mix within the consolidated group along with lower gross
margins for the Company's rack-mounted computers.

                                      B-4
<PAGE>

  Operating Expenses. Operating expenses consist of selling, general and
administrative expense; product development expense; recapitalization-related
costs; amortization of intangibles; and amortization of unearned compensation.
Total operating expenses were $254.2 million or 48.6% for the fiscal year
ended March 31, 1999, as compared to $199.1 million or 42.1% of consolidated
sales for the fiscal year ended March 31, 1998. Excluding the impact of the
recapitalization-related costs and the amortization of unearned compensation,
total operating expenses were $209.3 million or 40% of consolidated sales in
fiscal 1999. The percentage decrease in total operating expenses excluding
Merger related expenses is due primarily due to lower level operating expenses
as a percentage of sales at the Company's industrial computing and
communications segment which has overall lower operating expenses than the
communications test or visual communications segments.

  Selling, general and administrative expense was $149.0 million or 28.5% of
consolidated sales for the fiscal year ended March 31, 1999, as compared to
$138.3 million or 29.2% of consolidated sales for the fiscal year ended March
31, 1998. The percentage decrease is a result of lower operating expenses
within the industrial computing and communications segment as well as the
Company's focus on ensuring that selling, general and administrative expenses
increase at a rate slower than sales growth.

  Product development expense was $54.0 million or 10.3% of consolidated sales
for the fiscal year ended March 31, 1999 as compared to $55.0 million or 11.6%
of consolidated sales for the same period a year ago. The Company continues to
invest in product development and enhancement within all three segments.
However, the decrease is primarily due to the timing of expenses related to
ongoing research and development programs. The Company anticipates product
development expense in fiscal 2000 to return to its average historical rate of
approximately 11% of consolidated sales per year.

  Recapitalization-related costs totaling $43.4 million were incurred in
connection with the Merger, consisting of $39.9 million (including a $14.6
million non-cash charge) for the cancellation payments of employee stock
options and compensation expense due to the acceleration of unvested stock
options, and $3.5 million for certain other expenses resulting from the
Merger, including employee termination expense. The Company incurred an
additional $41.3 million in expenses, of which $27.3 million was capitalized
and will be amortized over the life of the Senior Secured Credit Facilities
and Senior Subordinated Notes, and $14.0 million was charged directly to
shareholders' equity.

  Amortization of intangibles was $6.2 million for the fiscal year ended March
31, 1999 as compared to $5.8 million for the same period a year ago. The
increase was primarily attributable to increased goodwill amortization related
to the acquisition of Pacific in June, 1998.

  Amortization of unearned compensation of $1.5 million relates to the
amortization of the $9.7 million recorded within shareholders' equity related
to the 14.3 million options that were issued in July, 1998 at a grant price
lower than fair market value.

  Operating income. Operating income decreased 41.2% to $40.1 million or 7.6%
of consolidated sales for the fiscal year ended March 31, 1999 as compared to
$68.3 million or 14.4% of consolidated sales for the same period a year ago.
The decrease was primarily a result of the Recapitalization-related costs in
connection with the Merger. Excluding these expenses, the Company generated
operating income of $85.0 million or 16.3% of consolidated sales. The
percentage increase was primarily the result of lower operating expenses
described above.

  Interest. Interest expense, net of interest income, was $42.8 million for
the fiscal year ended March 31, 1999 as compared to interest income, net of
interest expense of $1.8 million for the same period a year ago. The increase
in net interest expense was attributable to the debt incurred in connection
with the Merger on May 21, 1998. Also included in interest expense is $2.7
million of amortization expense related to deferred debt issuance costs.

  Other income. Other income was $16.0 million for the fiscal year ended March
31, 1999 as compared to $0.7 million for the same period last year. The
increase is a result of the sale of assets of ComCoTec for $21 million in
gross proceeds which resulted in a gain of $15.9 million.

                                      B-5
<PAGE>

  Taxes. The effective tax rate increased for the fiscal year ended March 31,
1999 to 51.5% as compared to 41.0% for the fiscal year ended March 31, 1998
due to permanent differences arising in connection with the accounting for the
Merger, and a smaller amount of income before income taxes, which magnified
the effect of such permanent differences.

  Net income. Net income from continuing operations was $6.4 million or $0.06
per share on a diluted basis for the fiscal year ended March 31, 1999 as
compared to $41.8 million or $2.40 per share on a diluted basis for the same
period a year ago. The decrease was primarily attributable to the
Recapitalization-related expenses and the higher interest expense in
connection with the Merger. In addition, the weighted average number of shares
outstanding significantly increased in connection with the Merger, resulting
in a lower earnings per share.

  Backlog. Backlog at March 31, 1999 was $170.1 million, an increase of 115%
from $79.1 million at March 31, 1998. The increase is a result of additional
bookings within all three business segments.

 Adoption of Statement of Financial Accounting Standards No. 131, "Disclosures
 about Segments of an Enterprise and Related Information" ("FAS 131")

  During the fourth quarter of fiscal 1999 the Company adopted FAS 131 which
establishes standards for the reporting of operating segments in the financial
statements. The Company measures the performance of its subsidiaries by the
their respective earnings before interest and taxes ("EBIT"). See "Appendix
C--Notes to Consolidated Financial Statements--Note T. Segment Information and
Geographic Areas." The discussion below includes sales and EBIT (excluding
non-recurring items and gain on sale of subsidiary) for the three segments in
which the Company participates in: communications test, industrial computing
and communications, and visual communications. Segment information "on a pro
forma basis" relates to the twelve month fiscal year ended March 31, 1997,
which presents a summary of bookings and results of operations of the
industrial computing and communications segment as if the acquisition of
Itronix had occurred at the beginning of fiscal 1997.

<TABLE>
<CAPTION>
                                                       Years Ended March 31,
                                                     --------------------------
Segment                                                1999     1998     1997
-------                                              -------- -------- --------
<S>                                                  <C>      <C>      <C>
Communications test:
  Bookings.......................................... $260,722 $233,934 $214,227
  Sales.............................................  238,942  240,432  211,310
  EBIT..............................................   40,656   48,395   42,811
Industrial computing & communications:
  Bookings.......................................... $253,818 $162,784 $ 82,449
  Bookings on a pro forma basis.....................                    146,271
  Sales.............................................  193,322  154,993   78,342
  Sales on a pro forma basis........................      --       --   142,164
  EBIT..............................................   18,793    3,479    3,856
  EBIT on a pro forma basis.........................      --       --     6,795
Visual communications:
  Bookings.......................................... $ 95,785 $ 82,385 $ 77,790
  Sales.............................................   90,590   77,523   72,760
  EBIT..............................................   29,259   20,171   17,820
</TABLE>

 Fiscal 1999 Compared to Fiscal 1998--Communications Test Products

  Bookings for communications test products increased 11.5% to $260.7 million
for the fiscal year ended March 31, 1999 as compared to $233.9 million for the
same period a year ago.


                                      B-6
<PAGE>

  Sales of communications test products decreased $1.5 million or 0.6% to
$238.9 million for the fiscal year ended March 31, 1999 as compared to $240.4
million for the fiscal year ended March 31, 1998. The Company has been
experiencing a decrease in demand for its core instruments in part due to the
RBOC's consolidating their purchasing practices as well as the economic
slowdown in Asia. This decrease had been partially offset by an increase in
demand for the Company's systems and services.

  EBIT for the communications test products decreased $7.7 million to $40.7
million for the fiscal year ended March 31, 1999 as compared to $48.4 million
for the same period a year ago. The reduction in EBIT is in part due to the
sales volume decrease as well as reorganizing and investing in the Company's
sales force.

  The backlog for the Company's communications test products was $60.6 million
and $38.9 million for the fiscal years ended March 31, 1999 and 1998,
respectively.

 Fiscal 1999 Compared to Fiscal 1998--Industrial Computing and Communications
Products

  Bookings for the industrial computing and communications products increased
55.9% to $253.8 million for the fiscal year ended March 31, 1999 as compared
to $162.8 million for the same period a year ago. The increase is primarily
attributable to a few very large contracts received during the third and
fourth quarters of fiscal 1999 from certain of the RBOCs for ruggedized
laptops as the RBOCs initiated a program to replace their field-based
workforce computing systems with more up-to-date ruggedized computing
solutions.

  Sales of industrial computing and communications products increased $38.3
million or 24.7% to $193.3 million for the fiscal year ended March 31, 1999 as
compared to $155.0 million for the fiscal year ended March 31, 1998. The
increase was primarily due to increased shipments of the Company's ruggedized
laptop computers to the RBOCs.

  EBIT for the industrial computing and communications products increased
440.2% to $18.8 million for the fiscal year ended March 31, 1999 as compared
to $3.5 million for the same period a year ago. The increase was primarily
attributable to the additional shipments of the ruggedized laptop computers.

  The backlog for the Company's industrial computing and communications
products was $79.2 million and $18.8 million for the fiscal years ended March
31, 1999 and 1998, respectively.

 Fiscal 1999 Compared to Fiscal 1998--Visual Communications Products

  Bookings for the visual communications products increased $13.4 million or
16.3% to $95.8 million for the fiscal year ended March 31, 1999 as compared to
$82.4 million for the same period a year ago. The increase was primarily a
result of a continued increased demand for the Company's real-time flight
information passenger video displays, as well as an increase in sales from the
acquisition of Pacific.

  Sales for the Company's visual communications products increased $13.1
million or 16.9% to $90.6 million for the year ended March 31, 1999 as
compared to $77.5 million for the same period a year ago. The increase in
shipments is a result of the order volume as described above.

  EBIT for the visual communications products increased $9.1 million or 45.1%
to $29.3 million for the fiscal year ended March 31, 1999 as compared to $20.2
million for the same period a year ago. The increase in EBIT is a result of
the increased shipments as well as reducing redundant functions at Pacific.

  The backlog for the Company's visual communications products was $30.2 and
$21.5 million for the fiscal years ended March 31, 1999 and 1998,
respectively. The increase was primarily attributable to increase in bookings
as described above.


                                      B-7
<PAGE>

Pro Forma Financial Statements

  On December 31, 1996 the Company acquired substantially all of the assets
and assumed certain liabilities of Itronix Corporation ("Itronix"). The
following discussion, as it relates to the twelve month fiscal year ended
March 31, 1997, refers to the financial information presented in "Pro Forma
Income Statement" of the Notes to Consolidated Financial Statements, which
presents a summary of consolidated results of operations of the Company as if
the acquisition had occurred at the beginning of fiscal 1997.

Fiscal 1998 Compared to Fiscal 1997 on a Consolidated Pro Forma Basis

  Sales. For the fiscal year ended March 31, 1998 consolidated sales increased
$46.7 million or 11.0% to $472.9 million as compared to $426.2 million for the
fiscal year ended March 31, 1997 on a pro forma basis. The increase was
primarily attributable to increased demand for communications test products,
catalog sales of industrial computing and communications products, and
aircraft cabin video information services.

  International sales (defined as sales outside of North America) were $76.1
million or 16% of consolidated sales for the fiscal year ended March 31, 1998,
as compared to $70.8 or 16.6% for the fiscal year ended March 31, 1997 on a
pro forma basis.

  Gross profit. Consolidated gross profit increased $24.2 million to $267.4
million or 56.5% of consolidated sales for the fiscal year ended March 31,
1998 as compared to $243.2 million or 57.1% of consolidated sales for the
fiscal year ended March 31, 1997 on a pro forma basis. The slight decrease in
percentage was attributable to a change in the sales mix within the
consolidated group along with lower gross margins on the Company's ruggedized
laptop computers.

  Operating expenses. Operating expenses consist of selling, general and
administrative expenses; product development expense; amortization of
intangibles; and non-recurring expenses. Total operating expenses were $199.1
million or 42.1% of consolidated sales for the fiscal year ended March 31,
1998 as compared to $186.7 million or 43.8% of consolidated sales for the
fiscal year ended March 31, 1997 on a pro forma basis. Excluding the impact of
the non-recurring charge of $7.1 million related to the impairment of
intangible assets during fiscal 1997, operating expenses were $179.6 million
or 42.1% of consolidated sales in fiscal 1997, at the same level as fiscal
1998.

  Selling, general and administrative expense was $138.3 million or 29.2% of
consolidated sales for the fiscal year ended March 31, 1998 as compared to
$122.2 million or 28.7% of consolidated sales for the fiscal year ended March
31, 1997 on a pro forma basis. The percentage increase was primarily
attributable to additional expenses related to information systems upgrades
and increased selling expenses due to the increased sales volume within the
communications test business.

  Product development expense was $55.0 million or 11.6% of consolidated sales
for the fiscal year ended March 31, 1998 as compared to $48.5 million or 11.4%
of consolidated sales for the fiscal year ended March 31, 1997 on a pro forma
basis.

  Amortization of intangibles was $5.8 million for the fiscal year ended March
31, 1998 as compared to $8.9 million for the fiscal year ended March 31, 1997
on a pro forma basis. Amortization decreased during fiscal 1998 due to the
write-off of goodwill and certain intangibles related to product and
distribution transitions at the end of fiscal 1997.

  Interest. Interest income, net of interest expense, was $1.8 million for the
fiscal year ended March 31, 1998 as compared to interest expense, net of
interest income, of $0.5 million for the fiscal year ended March 31, 1997 on a
pro forma basis. Net interest income increased year to year based on higher
average investment balances and lower overall borrowings.


                                      B-8
<PAGE>

  Other income. Other income was $0.7 million for the fiscal year ended March
31, 1998, essentially at the same level of $0.6 million for the fiscal year
ended March 31, 1997 on a pro forma basis.

  Taxes. The effective tax rate, before one time charges, increased for the
fiscal year ended March 31, 1998 to 41% as compared to 40.0% for the fiscal
year ended March 31, 1997 on a pro forma basis, primarily due to increased
income in states with higher income tax rates. The effective tax rate after
one time charges decreased to 41% for fiscal 1998 from 44.2% for fiscal 1997
on a pro forma basis due to the limited tax benefits in 1997 of the charges
relating to the $20.6 million writeoff of incomplete technology from the
Itronix acquisition.

  Net income. Net income from continuing operations was $41.8 million or $2.40
per share on a diluted basis for the fiscal year ended March 31, 1998 as
compared to $31.6 million or $1.74 per share on a diluted basis and a pro
forma basis for the fiscal year ended March 31, 1997. The increase was
primarily attributable to the increase in sales.

  Backlog. Backlog at March 31, 1998 was $79.1 million, an increase of 10.3%
from $71.7 million at March 31, 1997.

 Fiscal 1998 Compared to Fiscal 1997--Industrial Computing and Communications
 Products on a Pro Forma Basis

  Bookings for the Company's industrial computing and communications products
increased $16.5 million or 11.3% to $162.8 million for the year ended March
31, 1998 as compared to $146.3 million for the same period in 1997. The
increase was primarily attributable to increased order-volume for the
Company's rack-mounted computers received primarily from customers within the
Original Equipment Manufacturer (OEM) Market.

  Sales of industrial computing and communications products increased $12.8
million or 9% to $155.0 million for the fiscal year ended March 31, 1998 as
compared to $142.2 million for the fiscal year ended March 31, 1997 on a pro
forma basis. The increase was primarily attributable to the increase in orders
as described above. The overall increase in sales of industrial computing and
communication products was partially offset by slightly lower sales of the
Company's ruggedized laptop computers.

  EBIT for the industrial computing and communications products decreased $3.3
million or 48.8% to $3.5 million for the fiscal year ended March 31, 1998 as
compared to $6.8 million for the fiscal year ended March 31, 1997 on a pro
forma basis. The decrease was in part due to (i) additional sales to the OEM
market which contributes a lower gross margin as well as (ii) an operating
loss at the Company's Itronix subsidiary. Itronix had been facing significant
manufacturing and marketing challenges during fiscal 1998.

  The backlog for the Company's industrial computing and communications
products was $18.8 million and $9.8 million for the fiscal years ended March
31, 1998 and 1997, respectively.

Historical Financial Statements

  The following discussion relates to the actual results of operations of the
Company, in which fiscal 1998 includes a full-year of operations of Itronix
Corporation ("Itronix") as compared to fiscal 1997 in which the results of
operations included only three months of operations.

Fiscal 1998 Compared to Fiscal 1997 on a Consolidated Historical Basis

  Sales. For the fiscal year ended March 31, 1998 consolidated sales increased
$110.5 million or 30.5% to $472.9 million as compared to $362.4 million for
the fiscal year ended March 31, 1997. The increase was primarily attributable
to a full year of operations of Itronix and increased demand for
communications test products, catalog sales of industrial computing and
communications products, and aircraft cabin video information services.


                                      B-9
<PAGE>

  Gross profit. Consolidated gross profit increased $42.3 million to $267.4
million or 56.5% of consolidated sales for the fiscal year ended March 31,
1998 as compared to $225.2 million or 62.1% for the fiscal year ended March
31, 1997. The decrease in gross margin was attributable to a lower gross
margin at Itronix compared with other parts of the Company as well as a change
in the sales mix within the consolidated group.

  Operating expenses. Operating expenses consist of selling, general and
administrative expense; product development expense; amortization of
intangibles; and non-recurring expenses. Total operating expenses were $199.1
million or 42.1% of consolidated sales for the fiscal year ended March 31,
1998 as compared to $192.3 million or 53.1% of consolidated sales for the
fiscal year ended March 31, 1997. Excluding the impact of the non-recurring
charge of $27.8 million related to the impairment of intangible assets and the
write-off of purchased incomplete technology during fiscal 1997, operating
expenses were $164.5 million or 45.4% of consolidated sales in fiscal 1997.

  Selling, general and administrative expense was $138.3 million or 29.2% of
consolidated sales for the fiscal year ended March 31, 1998 as compared to
$114.5 million or 31.6% of consolidated sales for the fiscal year ended March
31, 1997. The percentage decrease was primarily attributable to a full-year of
results of Itronix in which the percentage of selling, general and
administrative expense to sales for Itronix is less than the consolidated
average.

  Product development expense was $55.0 million or 11.6% of consolidated sales
for the fiscal year ended March 31, 1998 as compared to $43.3 million or 11.9%
of consolidated sales for the fiscal year ended March 31, 1997. Amortization
of intangibles was $5.8 million for the fiscal year ended March 31, 1998 as
compared to $6.8 million for the fiscal year ended March 31, 1997.
Amortization decreased during fiscal 1998 due to the write-off of goodwill and
certain intangibles related to product and distribution transitions at the end
of fiscal 1997 and was offset by an increase in goodwill amortization related
to the acquisition of Itronix.

  Interest. Interest income, net of interest expense, was $1.8 million for the
fiscal year ended March 31, 1998 as compared to $2.0 million for the fiscal
year ended March 31, 1997. Interest expense will increase in future years due
to the increase in borrowings.

  Other income. Other income was $0.7 million for the fiscal year ended March
31, 1998, essentially at the same level of $0.6 million for the fiscal year
ended March 31, 1997.

  Taxes. The effective tax rate, before one time charges, increased for the
fiscal year ended March 31, 1998 to 41% as compared to 40.5% for the fiscal
year ended March 31, 1997, primarily due to increased income in states with
higher income tax rates. The effective tax rate after one time charges
decreased to 41% for fiscal 1998 from 49.6% for fiscal 1997 due to the limited
tax benefits in 1997 of the charges relating to the $20.6 million write-off of
incomplete technology from the Itronix acquisition.

  Net income. Net income from continuing operations was $41.8 million or $2.40
per share on a diluted basis for the fiscal year ended March 31, 1998 as
compared to $17.8 million or $0.99 per share on a diluted basis for the fiscal
year ended March 31, 1997. The fiscal 1997 net income included a pretax charge
of $27.8 million (with an aftertax effect on earnings per share on a diluted
basis of $1.10) related to the write-off of intangible assets and the write-
off of purchased incomplete technology. Net income in future years will be
negatively impacted by the expected rise in interest expense due to the
increase in borrowings.

 Fiscal 1998 Compared to Fiscal 1997--Communications Test Products

  Bookings for the Company's communications test products increased $19.7
million or 9.2% to $233.9 million for the fiscal year ended March 31, 1998 as
compared to $214.2 million for the fiscal year ended March 31, 1997. The
increase was attributable to growth in the U.S. market for communications test
solutions as a result of network expansions of the local telco service
providers. The growth was driven by the needs of communications service
providers to provide higher quality networks and to reduce costs through
efficiency, which may be gained by using test and monitoring systems.

                                     B-10
<PAGE>

  Sales of communications test products increased $29.1 million or 13.8% to
$240.4 million for the fiscal year ended March 31, 1998 as compared to $211.3
million for the fiscal year ended March 31, 1997. The increase is primarily a
result of the increased order volume.

  EBIT for the communications test products increased $5.6 million or 13.0% to
$48.4 million for the fiscal year ended March 31, 1998 as compared to $42.8
million for the fiscal year ended March 31, 1997. The increase in EBIT was due
to the increase in sales.

  The backlog for the Company's communications test products was $38.9 million
and $45.4 million for the fiscal years ended March 31, 1998 and 1997,
respectively.

 Fiscal 1998 Compared to Fiscal 1997--Industrial Computing and Communications
 Products on a Historical Basis

  Bookings for the Company's industrial computing and communications products
increased $80.3 million or 97.4% to $162.8 million for the year ended March
31, 1998 as compared to $82.4 million for the same period in 1997. The
increase was primarily attributable to a full-year of operations of Itronix in
fiscal 1998 as compared to only three months in fiscal 1997.

  Sales of industrial computing and communications products increased $76.7
million or 97.8% to $155.0 million for the fiscal year ended March 31, 1998 as
compared to $78.3 million for the fiscal year ended March 31, 1997. The
increase was primarily attributable to a full-year of operations of Itronix in
fiscal 1998 as compared to three months of operations in fiscal 1997. In
addition, the Company had an increase in sales for its rack-mounted computers.

  EBIT for the industrial computing and communications products decreased $0.4
million or 9.8% to $3.5 million for the fiscal year ended March 31, 1998 as
compared to $3.9 million for the fiscal year ended March 31, 1997. The
decrease was primarily a result of an operating loss including an increase in
amortization of goodwill at Itronix during fiscal 1998 as well as sales to the
OEM market which contributes a lower gross margin. Itronix had been facing
significant manufacturing and marketing challenges during fiscal 1998.

  The backlog for the Company's industrial computing and communications
products was $18.8 million and $9.8 million for the fiscal years ended March
31, 1998 and 1997, respectively.

 Fiscal 1998 Compared to Fiscal 1997--Visual Communications Products

  Bookings for the Company's visual communications products increased $4.6
million or 5.9% to $82.4 million for the fiscal year ended March 31, 1998 as
compared to $77.8 million for the fiscal year ended March 31, 1997. Orders for
the Company's real-time flight information passenger video displays increased
as more airlines integrated this product into their in-flight entertainment
systems.

  Sales of visual communications products increased $4.7 million or 6.5% to
$77.5 million for the fiscal year ended March 31, 1998 as compared to $72.8
million for the fiscal year ended March 31, 1997. The increase in sales was a
result of additional sales of its entertainment systems to airlines as well as
improved market penetration with additional sales to commercial airline
companies. Partially offsetting this increase was a lower sales volume in the
video compression and graphical user-interface (GUI) product lines.

  EBIT for the company's visual communications products increased $2.4 million
or 13.2% to $20.2 million for the fiscal year ended March 31, 1998 as compared
to $17.8 million for the fiscal year ended March 31, 1997. The increase in
EBIT was directly a result of the increase in sales.

  The backlog for the Company's visual communications products was $21.5
million and $16.6 million for the fiscal years ended March 31, 1998 and 1997,
respectively.


                                     B-11
<PAGE>

Capital Resources and Liquidity

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

  The Company's liquidity needs arise primarily from debt service on the
substantial indebtedness incurred in connection with the Merger and from the
funding of working capital and capital expenditures. As of March 31, 1999, the
Company had $527.3 million of indebtedness, primarily consisting of $275.0
million principal amount of the Senior Subordinated Notes, $252.0 million in
borrowings under the Term Loan Facility and no borrowings under the new
Revolving Credit Facility.

  Cash Flows. The Company's cash and cash equivalents increased $5.5 million
during the fiscal year ended March 31, 1999.

  Working Capital. For the fiscal year ended March 31, 1999, the Company's
working capital increased as its operating assets and liabilities provided a
$53.3 million source of cash, excluding the acquisition of Pacific. Accounts
receivable increased, creating a use of cash of $1.1 million. Inventory levels
decreased, creating a source of cash of $2.5 million, due primarily to better
inventory management throughout the organization. Other current assets
decreased, creating a source of cash of $2.1 million, mainly due to the
recognition of expenses capitalized in fiscal 1998 in connection with the
Merger. Accounts payable increased, creating a source of cash of $11.0 million
as the Company continues to manage its working capital. Other current
liabilities increased, creating a source of cash of $38.8 million. This is due
to an increase in deferred service contract revenue, the accrual of interest
on the debt incurred in connection with the Merger, and an increase in accrued
taxes.

  Investing activities. The Company's investing activities totaled $20.1
million for the fiscal year ended March 31, 1999 in part for the purchase and
replacement of property and equipment and the payment of an earnout incentive
related to the fiscal 1998 and 1999 operating results of Advent Design, Inc.,
a subsidiary purchased in March 1997. Also included are the proceeds received
from the sale of ComCoTec, offset by the cash purchase price for Pacific and
Flight TECH.

  The Company's capital expenditures in fiscal 1999 were $11.3 million as
compared to $15.9 in fiscal 1998. The reduction was primarily due to the
timing of certain capital expenditure commitments at the Company's
communications test and industrial computing and communications businesses.
The Company anticipates that fiscal 2000 capital expenditures will increase
from fiscal 1999 levels and return to or exceed fiscal 1998 levels as the
Company anticipates replacing certain of its Enterprise Resource Planning
(ERP) systems at the communications test and industrial computing and
communications businesses. The Company is, per the terms of the Senior Secured
Credit Agreement, subject to maximum capital expenditures of up to $25 million
per year.

  Debt and Equity. The Company's financing activities used $41.7 million in
cash during fiscal 1999, due mainly to the Merger.

Debt

  Principal and interest payments under the new Senior Secured Credit
Agreement and interest payments on the Senior Subordinated Notes represent
significant liquidity requirements for the Company. With respect to the $260
million initially borrowed under the Term Loan Facility (which is divided into
four tranches, each of which has a different term and repayment schedule), the
Company is required to make scheduled principal payments of the $50 million of
tranche A term loan thereunder during its six-year term, with substantial
amortization of the $70 million tranche B term loan, $70 million tranche C
term loan and $70 million tranche D term loan thereunder occurring after six,
seven and eight years, respectively. During fiscal 1999 the Company repaid $8
million of

                                     B-12
<PAGE>

mandatory principal payments and repaid $40 million of indebtedness under its
$110 million Revolving Credit Facility. The $275 million of Senior
Subordinated Notes will mature in 2008, and bear interest at 9 3/4% per annum.
Total interest expense including the amortization of deferred debt issuance
costs was $46.2 million in fiscal 1999.

  The Senior Secured Credit Facilities are also subject to mandatory
prepayment and reduction in an amount equal to, subject to certain exceptions,
(a) 100% of the net proceeds of (i) certain debt offerings by the Company and
any of its subsidiaries, (ii) certain asset sales or other dispositions by the
Company or any of its subsidiaries, and (iii) property insurance or
condemnation awards received by the Company or any of its subsidiaries, and
(b) 50% of the Company's excess cash flow (the "Recapture") (as defined in the
Senior Secured Credit Agreement) for each fiscal year in which the Company
exceeds a certain leverage ratio. The Senior Subordinated Notes are subject to
certain mandatory prepayments under certain circumstances.

  The Company is required, under the terms of the Recapture, to repay $15
million in Term Loan borrowing on June 30, 1999. The Company, may, in its sole
discretion, use the $15 million in part to prepay the mandatory $8 million
amortization due in fiscal 2000. The Company will determine, prior to June 30,
1999, whether or not to elect this option.

  The Company's $110 million Revolving Credit Facility matures in 2004, with
all amounts then outstanding becoming due. The Company expects that its
working capital needs will require it to obtain new revolving credit
facilities at the time that the Revolving Credit Facility matures, by
extending, renewing, replacing or otherwise refinancing the Revolving Credit
Facility. No assurance can be given that any such extension, renewal,
replacement or refinancing can be successfully accomplished or accomplished on
acceptable terms.

  The loans under the Senior Secured Credit Agreement bear interest at
floating rates based upon the interest rate option elected by the Company. The
Company's weighted-average interest rate on the loans under the Senior Credit
Agreement was 8.25% per annum for the period commencing May 21, 1998 and
ending March 31, 1999. However, the Company has entered into interest rate
swap contracts which will be effective for periods ranging from two to three
years beginning September 30, 1998 to fix the interest charged on a portion of
the total debt outstanding under the Term Loan Facility. After giving effect
to these arrangements, approximately $220 million of the debt outstanding will
be subject to an effective average annual fixed rate of 5.66%. This average
annual interest rate does not include a margin payable to the lenders
participating in the Senior Secured Credit Facilities. See Note L. Interest
Rate Swaps. As a result of the substantial indebtedness incurred in connection
with the Merger, it is expected that the Company's interest expense will be
higher and will have a greater proportionate impact on net income in
comparison to preceding periods.

  Future Financing Sources and Cash Flows. The amount under the Revolving
Credit Facility that remained undrawn following the May, 1998 closing of the
Recapitalization was $70 million. The undrawn portion of this facility will be
available to meet future working capital and other business needs of the
Company. At March 31, 1999, the Company had no outstanding borrowings under
the Revolving Credit Facility. Therefore, the undrawn portion of this facility
was $110 million. The Company believes that cash generated from operations,
together with amounts available under the Revolving Credit Facility and any
other available sources of liquidity, will be adequate to permit the Company
to meet its debt service obligations, capital expenditure program
requirements, ongoing operating costs and working capital needs, although no
assurance can be given in this regard. The Company's future operating
performance and ability to service or refinance the Senior Subordinated Notes
and to repay, extend or refinance the Senior Secured Credit Facilities
(including the Revolving Credit Facility) will be, among other things, subject
to future economic conditions and to financial, business and other factors,
many of which are beyond the Company's control.

  Covenant Restrictions. The Senior Secured Credit Agreement imposes
restrictions on the ability of the Company to make capital expenditures, and
both the Senior Secured Credit Facilities and the indenture governing the
Senior Subordinated Notes limit the Company's ability to incur additional
indebtedness. Such restrictions, together with the highly leveraged nature of
the Company, could limit the Company's ability to respond to

                                     B-13
<PAGE>

market conditions, to meet its capital-spending program, to provide for
unanticipated capital investments, or to take advantage of business
opportunities. The covenants contained in the Senior Secured Credit Agreement
also, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur guarantee obligations, prepay other
indebtedness, make restricted payments, create liens, make equity or debt
investments, make acquisitions, modify terms of the indenture governing the
Senior Subordinated Notes, engage in mergers or consolidations, change the
business conducted by the Company and its subsidiaries taken as a whole or
engage in certain transactions with affiliates. These restrictions, among
other things, preclude Dynatech LLC from distributing assets to Dynatech
Corporation (which has no independent operations and no significant assets
other than its membership interest in Dynatech LLC), except in limited
circumstances. In addition, under the Senior Secured Credit Agreement, the
Company is required to comply with a minimum interest expense coverage ratio
and a maximum leverage ratio. These financial tests become more restrictive in
future years. The term loans under the Senior Secured Credit Facilities (other
than the $50 million tranche A term loan) are governed by negative covenants
that are substantially similar to the negative covenants contained in the
indenture governing the Senior Subordinated Notes, which also impose
restrictions on the operation of the Company's business.

The Euro Conversion

  On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "participating countries") established fixed conversion rates
between their existing sovereign currencies (the "legacy currencies") and the
euro. The participating countries agreed to adopt the euro as their common
legal currency on that date. The euro now trades on currency exchanges for
non-cash transactions.

  As of January 1, 1999, the participating countries no longer controlled
their own monetary policies by directing independent interest rates for the
legacy currencies. Instead, the authority to direct monetary policy, including
money supply and official interest rates for the euro, is exercised by the new
European Central Bank.

  Following introduction of the euro, the legacy currencies remain legal
tender in the participating countries as denominations of the euro between
January 1, 1999 and January 1, 2002 (the "transition period"). During the
transition period, public and private parties may pay for goods and services
using either the euro or the participating country's legacy currency.

  The impact of the euro is not expected to materially affect the results of
operations of the Company. The Company operates primarily in U.S. dollar-
denominated purchase orders and contracts, and the Company neither has a large
customer nor vendor base within the countries participating in the euro
conversion.

Year 2000

  Broadly speaking, Year 2000 issues may arise when certain computer programs
use only two digits to refer to a year or to recognize a year. As a result,
computers that are not Year 2000 compliant may read the date 2000 as 1900. The
Company is aware that Year 2000 issues could adversely impact its operations,
and as detailed below, previously commenced and continues with a process
intended to address Year 2000 issues that the Company has been able to
identify. The Company's program for addressing Year 2000 issues at each of its
businesses generally comprises the following phases: inventory, assessment,
testing and remediation. The scope of this program includes the review of the
Company's products, information technology ("IT") systems, non-IT and embedded
systems, and vendors/supply chain.

  State of Readiness. Management at each of the Company's businesses is in the
final stages of a review of its computer systems and products to assess
exposure to Year 2000 issues. The review process has been conducted by
employees with expertise in information technology as well as engineers
familiar with non-IT systems, and focuses on both the Company's internal
systems and its existing and installed base of products. The Company
previously formed a Year 2000 committee which is responsible for coordinating
and facilitating activities across the Company. Progress of the Year 2000
committee is reported regularly to the Audit Committee of the Company's Board
of Directors. Although the Company has used the services of consultants in
connection with its assessment of some Year 2000 issues, it has not used
independent verification and validation processes

                                     B-14
<PAGE>

in the testing of its systems and products. As of March 31, 1999, the Company
had conducted an inventory and test of its existing significant internal
systems with regard to Year 2000 issues, and where necessary, identified
proposed solutions to non-conforming systems. The Company anticipates that
additional testing and remediation of these systems will continue through
June, 1999.

  As of March 31, 1999, the Company had conducted an inventory of its existing
and installed base of products. In particular, significant focus and resources
will be required for the continuing assessment, testing and remediation
process for the Industrial Computer Source existing product line and installed
base of products. In determining state of readiness the Company has adopted
the following definition:

  Year 2000 readiness means the intended functionality of a product, when used
in accordance with its associated documentation, will correctly process,
provide and/or receive date-data in and between the years 1999 and 2000,
including leap year calculations, provided that all other products and systems
(for example, hardware, software and firmware) used with the product properly
exchange accurate date-data with it.

  Most of the Company's existing product lines, and the installed base of
products, already meet this definition of Year 2000 readiness (i.e., they are
"Year 2000 Ready"). These products do not have Year 2000 readiness issues
because they do not contain date-sensitive functions. Certain existing
products which are date-sensitive are being made Year 2000 Ready by making
upgrades (i.e., hardware modifications and/or new software versions, as
appropriate) available to customers. A few of the Company's older, installed
base of products, primarily at the Company's communications test business,
cannot reasonably be upgraded; customers using these products are being
offered trade-in packages for newer, Year 2000 Ready products. As part of its
assessment phase, the Company is in the process of communicating with its
significant suppliers and customers to determine the extent to which the
Company is vulnerable to any failure by those third parties to remediate their
own Year 2000 issues. In addition, the Company is evaluating the extent to
which Year 2000 issues may arise as a result of some combinations of certain
of its products with other companies' products. If any such suppliers to
customers or product combinations do not successfully and timely achieve Year
2000 compliance, the Company's business or operations could be materially
adversely affected. There can be no assurances that the Company's assessment
of its suppliers and customers will be accurate.

  The targeted completion date for the review and remediation process for the
communications test business, the Company's largest, is June, 1999. As of
March 31, 1999, the communications test business had completed the inventory,
assessment and testing of its existing products. Management does not consider
data time fields to be critical to the functionality of most of the Company's
communications test products. For the Company's other product categories,
which may employ data time fields in areas that are critical to product
functionality, completion dates are targeted on or prior to June, 1999 for
testing and remediation. In those limited product lines where Year 2000
readiness issues have been recently identified, the remediation process
(generally, the distribution and implementation of software upgrades) will not
be completed until after June, 1999.

  Costs. The Company's historical and estimated costs of remediation have not
been and are not anticipated to be material to the Company's financial
position or results of operations, and will be funded through operating cash
flows. Total costs associated with remediation of Year 2000 issues (including
systems, software, and non-IT systems replaced as a result of Year 2000
issues) are currently estimated at approximately $2 million to $3 million, of
which approximately $700 thousand has already been incurred. Estimated
remediation costs are based on management's best estimates. There can be no
guarantee that these estimates will be achieved, and actual results could
differ materially from those anticipated, particularly if unanticipated Year
2000 issues arise. The costs do not include estimates for potential
litigation. Many commentators believe that there will be a significant amount
of litigation arising out of Year 2000 readiness issues. Because of the
unprecedented nature of this litigation, it is not possible for the Company to
predict the impact of such litigation.

  Year 2000 Risks and Related Plans. While the Company expects to make the
necessary modifications or changes to both its internal IT and non-IT systems
and existing product base in a timely fashion, there can be no assurance that
the Company's internal systems and existing or installed base of products will
not be materially

                                     B-15
<PAGE>

adversely affected by the advent of Year 2000. Certain of the Company's
products are used, in conjunction with products of other companies, in
applications that may be critical to the operations of its customers. Any
product non-readiness, whether standing alone or used in conjunction with the
products of other companies, may expose the Company to claims from its
customers or others, and could impair market acceptance of the Company's
products and services, increase service and warranty costs, or result in
payment of damages, which in turn could materially adversely affect the
Company.

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

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

New Pronouncements

  During the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share," which modifies
the calculation of earnings per share ("EPS"). The Standard replaces the
previous presentation of primary and fully diluted EPS to basic and diluted
EPS. Basic EPS excludes dilution and is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS includes the dilution of common stock
equivalents, and is computed similarly to fully diluted EPS pursuant to APB
Opinion 15. All prior periods presented have been restated to reflect this
adoption.

  In the quarter ended June 30, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive
Income." SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components. SFAS 130 requires, among other
things, foreign currency translation adjustments, which prior to adoption were
reported separately in stockholders' equity to be included in other
comprehensive income.

  In the quarter ended June 30, 1998, the Company adopted Statement of
Position 97-2, "Software Revenue Recognition" ("SOP 97-2"). SOP 97-2 provides
guidance on applying generally accepted accounting principals in recognizing
revenue on software transactions.

  At March 31, 1999, the Company adopted Financial Accounting Standards Board
issued Statement No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for the
reporting of operating segments in the financial statements. The Company has
included in its Management Discussion and Analysis disclosure within its three
operating segments: communications test, industrial computing and
communications, and visual communications.

  On June 15, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 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 Company is assessing the impact of the adoption
of SFAS 133 on its results of operations and its financial position.

                                     B-16
<PAGE>

Quantitative And Qualitative Disclosures About Market Risk

  The Company operates both manufacturing facilities and sales offices within
the United States and primarily sales offices outside the United States. The
Company is subject to business risks inherent in non-U.S. activities,
including political and economic uncertainty, import and export limitations,
and market risk related to changes in interest rates and foreign currency
exchange rates. The Company believes the political and economic risks related
to its foreign operations are mitigated due to the stability of the countries
in which its sales offices are located, as well as the low percentage of
overall sales outside the United States (approximately 14%, 16% and 20% in
fiscal 1999, 1998, and 1997, respectively of consolidated sales relate to
foreign sales including exports from the United States). The Company's
principal currency exposures against the U.S. dollar are in the major European
currencies and in Canadian currency. The Company does not use foreign currency
forward exchange contracts to mitigate fluctuations in currency. The Company's
market risk exposure to currency rate fluctuations is not material. The
Company does not hold derivatives for trading purposes.

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

  At March 31, 1999, the Company had $252 million of variable rate debt
outstanding. At March 31, 1999 the Company had four interest rate swap
contracts with notional amounts totaling $220 million which fixed its variable
rate debt to a fixed interest rate for periods of two to three years in which
the Company pays a fixed interest rate on a portion of its outstanding debt
and receives three-month LIBOR. At March 31, 1999, three of the four interest
rate swap contracts had an interest rate higher than the three-month LIBOR
quoted by its financial institutions, as variable rate three-month LIBOR
interest rates declined after the swap contracts became effective. Therefore,
the additional interest expense (calculated as the difference between the
interest rate in the swap contracts and the three-month LIBOR rate) recognized
by the Company during fiscal 1999 was $0.5 million. The Company has performed
a sensitivity analysis assuming a hypothetical 10% adverse movement in the
floating interest rate on the interest rate sensitive instruments described
above. The Company believes that such a movement is reasonably possible in the
near term. As of March 31, 1999, the analysis demonstrated that such movement
would cause the Company to recognize additional interest expense of
approximately $1.1 million, and accordingly, would cause a hypothetical loss
in cash flows of approximately $1.1 million.

Forward-Looking Statements

  This report (other than the Company's consolidated financial statements of
historical fact) contains forward-looking statements, including, without
limitation:

    1. the statement in "Business-Products and Services--Industrial Computing
       and Communications", "Business-Seasonality", "Management Discussion
       and Analysis of Financial Condition and Results of Operations--Current
       and Historical Trends" and "Management Discussion and Analysis of
       Financial Condition and Results of Operations--Seasonality" concerning
       the Company's belief that the results of operations of Itronix are
       expected to continue to vary widely because of the relatively small
       number of potential customers with large field-service work forces and
       the irregularity of timing and size of such customers' orders;

    2. the statements in

      a. "Management Discussion and Analysis of Financial Condition and
         Results of Operations--Capital Resources and Liquidity" that the
         Company anticipates that fiscal 2000 capital expenditures will
         increase from fiscal 1999 levels and return to or exceed fiscal
         1998 levels as the Company anticipates replacing certain of its
         Enterprise Resource Planning (ERP) systems at the communications
         test and industrial computing and communications businesses, and

      b. "Business--Product Development" and "Management Discussion and
         Analysis of Financial Condition and Results of Operations--Results
         of Operations" that the Company anticipates product development
         expense in future years to continue at an average to its
         historical rate of

                                     B-17
<PAGE>

         approximately 11% of consolidated sales per year, and "Risk
         Factors--Rapid Technological Change: Challenges of New Product
         Introductions" and "Management Discussion and Analysis of Financial
         Condition and Results of Operations--Product Development" that the
         Company expects to continue product development spending at levels
         similar as a percentage of consolidated sales per year to that
         expended from the beginning of fiscal 1997 through fiscal 1999;

    3. The statements in "Business--Customers and Marketing" that the Company
       anticipates shipments to BellSouth in fiscal 2000 could be
       approximately 10% of consolidated sales and does not anticipate sales
       from BellSouth to continue at a rate of approximately 13% of
       consolidated sales in future years;

    4. the statement in "Business--Seasonality" and "Management Discussion
       and Analysis of Financial Condition and Results of Operations--
       Seasonality" concerning the Company's belief that its results of
       operations are expected to vary significantly on a quarterly basis;

    5. the statement in "Business--Intellectual Property" that the Company
       does not believe that the expiration of any patent or group of patents
       would materially effect its business;

    6. the statement in "Business--Environmental Matters" that the Company
       does not foresee that federal, state and local laws or regulations
       which have been enacted or adopted regarding the discharge of
       materials into the environment will have a material adverse effect on
       capital expenditures, earnings or the competitive position of the
       Company;

    7. the statement in "Risk Factors--Lack of Trading Market" concerning the
       Company's belief that the Common Stock is anticipated to continue to
       trade much less frequently than the Old Common Stock traded prior to
       the Merger, which may have a material adverse effect on the market
       value of the Common Stock;

    8. the statements in "Risk Factors--Year 2000 Risks and Related Plans"
       and "Management Discussion and Analysis of Financial Condition and
       Results of Operations--Year 2000" that the Company expects to make the
       necessary modification of changes to both its internal IT and non-IT
       systems and existing product base in a timely fashion;

    9. the statements in "Legal Proceedings--Litigation" and "Financial
       Statements and Supplementary Data-Note Q. Commitments and
       Contingencies":

      a. concerning the Company's belief that the resolution of routine
         legal matters incidental to the Company's business in which the
         Company is involved from time to time will not have a material
         adverse effect on the Company's financial condition or results of
         operations and

      b. that the Company does not believe that the outcome of current
         litigation is likely to have a material adverse effect on the
         Company's financial condition, results of operations or liquidity;

   10. the statement in "Market for Registrant's Common Stock and Related
       Security Holder Matters" that the Company intends to retain earnings
       for use in the operation and expansion of its business;

   11. the statements in "Management Discussion and Analysis of Financial
       Condition and Results of Operations--Capital Resources--and Liquidity"
       and "Financial Statements and Supplementary Data-Note K. Debt" that:

      a. the Company will determine prior to June 30, 1999, whether or not
         to elect the option to prepay the mandatory $8 million amortization
         due in fiscal 2000 under the terms of the Recapture,

      b. the Company expects that its working capital needs will require it
         to obtain new revolving credit facilities at the time that the
         Revolving Credit Facility matures, by extending, renewing,
         replacing or otherwise refinancing the Revolving Credit Facility,

      c. the Company expects that its interest expense will be higher and
         will have a greater proportionate impact on net income in
         comparison to preceding periods and

      d. the Company believes that cash generated from operations, together
         with amounts available under the Revolving Credit Facility and any
         other available sources of liquidity, will be adequate to

                                     B-18
<PAGE>

         permit the Company to meet its debt service obligations, capital
         expenditure program requirements, ongoing operating costs and
         working capital needs;

    12. the statement in "Management Discussion and Analysis of Financial
        Condition and Results of Operations--The Euro Conversion" concerning
        the Company's belief that the impact of the euro is not expected to
        materially effect the results of operations of the Company,

    13. the statements in "Management Discussion and Analysis of Financial
        Condition and Results of Operations--Year 2000":

      a. that the Company anticipates that additional testing and
         remediation of internal systems will continue through June, 1999,

      b. concerning the Company's belief that the targeted completion date
         for the review and remediation process for the communications test
         business is June, 1999,

      c. concerning the Company's belief that completion dates are targeted
         on or prior to June 1999 for testing and remediation for other
         product categories, which may employ data time fields in areas that
         are critical to product functionality,

      d. concerning the Company's belief that those limited product lines
         where Year 2000 readiness issues have been recently identified, the
         remediation process (generally, the distribution and implementation
         of software upgrades) will not be completed until after June, 1999,

      e. concerning the Company's belief that the Company's estimated costs
         of remediation are not anticipated to be material to the Company's
         financial position or results of operations, and will be funded
         through operating cash flows,

      f. concerning the Company's belief that total costs associated with
         remediation of Year 2000 issues (including systems, software, and
         non-IT systems replaced as a result of Year 2000 issues) are
         currently estimated at approximately $2 million to $3 million, and

      g. the Company intends to perform additional hard-disk back-up of its
         rudimentary systems and critical information in advance of the Year
         2000,

    14. the statement in "Quantitative and Qualitative Disclosures about
        Market Risk" concerning the Company's belief that the political and
        economic risks related to its foreign operations are mitigated due to
        the stability of the countries in which its sales offices are located,
        as well as the low percentage of overall sales outside the United States
        and

    15. other statements as to management's or the Company's expectations or
        beliefs presented in "Management Discussion and Analysis of Financial
        Condition and Results of Operations."

  Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future developments
will be in accordance with management's expectations or that the effect of
future developments on the Company will be those anticipated by management.
The Company's actual results may be affected (and in some cases, have been
affected) or could differ materially from estimates or expectations reflected
in such forward-looking statements as a result of the factors described under
"Business--Risk Factors", and as a result of important factors described
elsewhere in this report (including, without limitation, those discussed in
"--Business--Industry Overview," "--Products and Services," "--Customers and
Marketing," "--International," "--Intellectual Property," "--Suppliers," and
"--Environmental Matters," "Properties," "Legal Proceedings," "Management
Discussion and Analysis of Financial Condition and Results of Operations--
Current and Historical Trends," "--Results of Operations," "--Capital
Resources and Liquidity," "--The Euro Conversion," and "--Year 2000"), or as a
result of important factors described in other Securities and Exchange
Commission filings of the Company.

  While the Company periodically reassesses material trends and uncertainties
affecting the operations and financial condition in connection with its
preparation of Management Discussion and Analysis of Financial Condition and
Results of Operations contained in its quarterly and annual reports, the
Company does not intend to review or revise any particular forward-looking
statement referenced in this report in light of future events.

                                     B-19
<PAGE>

                                                                      APPENDIX C

                              DYNATECH CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                         <C>
REPORT OF INDEPENDENT ACCOUNTANTS.......................................... C-2
FINANCIAL STATEMENTS
  CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 AND 1998................ C-3
  CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 1999,
   1998 AND 1997........................................................... C-4
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE YEARS
   ENDED MARCH 31, 1999, 1998 AND 1997..................................... C-5
  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 1999,
   1998 AND 1997........................................................... C-6
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................... C-7
</TABLE>

                                      C-1
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Dynatech Corporation:

  In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of
Dynatech Corporation and its subsidiaries (the "Company") at March 31, 1999
and 1998, and the results of their operations and their cash flows for each of
the three years in the fiscal period ended March 31, 1999, 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
April 26, 1999

                                      C-2
<PAGE>

                              DYNATECH CORPORATION

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               March 31,
                                                           -------------------
                                                             1999       1998
                                                           ---------  --------
                                                              (Amounts in
                                                            thousands except
                                                              share data)
<S>                                                        <C>        <C>
                          ASSETS
Current assets:
  Cash and cash equivalents............................... $  70,362  $ 64,904
  Accounts receivable (net of allowance of $1,634 and
   $1,764, respectively)..................................    70,996    69,988
  Inventories:
    Raw materials.........................................    16,680    24,263
    Work in process.......................................    13,644    11,769
    Finished goods........................................    16,947    12,850
                                                           ---------  --------
      Total inventory.....................................    47,271    48,882
  Other current assets....................................    22,150    16,823
                                                           ---------  --------
      Total current assets................................   210,779   200,597
Property and equipment:
  Leasehold improvements..................................     6,170     4,904
  Machinery and equipment.................................    51,893    51,220
  Furniture and fixtures..................................    14,748    12,351
                                                           ---------  --------
                                                              72,811    68,475
  Less accumulated depreciation and amortization..........   (47,192)  (42,110)
                                                           ---------  --------
                                                              25,619    26,365
Other assets:
  Intangible assets, net..................................    56,768    39,595
  Other...................................................    54,938    21,573
                                                           ---------  --------
                                                           $ 348,104  $288,130
                                                           =========  ========
      LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable and current portion of long-term debt..... $  23,191  $    150
  Accounts payable........................................    34,317    22,933
  Accrued expenses:
    Compensation and benefits.............................    24,420    21,750
    Taxes, other than income taxes........................     2,626     2,071
    Deferred revenue......................................    27,141    13,868
    Interest..............................................    10,129       --
    Other.................................................    22,685    16,838
  Accrued income taxes....................................    10,772     5,196
                                                           ---------  --------
      Total current liabilities...........................   155,281    82,806
Long-term debt............................................   504,151        83
Deferred compensation.....................................     5,112     3,122
Commitments and contingencies (Note Q)
Shareholders' equity (deficit):
  Serial preference stock, par value $1 per share;
   Authorized 100,000 shares; none issued
  Common stock, 1999 and 1998, respectively:
   par value $0.00 and $0.20
   Authorized 200,000,000 and 50,000,000 shares...........       --        --
   Outstanding 120,665,048 and 18,605,689 shares..........       --      3,721
  Additional paid-in capital..............................   322,746     7,647
  Retained earnings (deficit).............................  (629,941)  237,282
  Unearned compensation...................................    (7,563)      --
  Other comprehensive loss................................    (1,682)   (1,600)
  Treasury stock, at cost; 0 and 1,741,265 shares,
   respectively...........................................       --    (44,931)
                                                           ---------  --------
      Total shareholders' equity (deficit)................  (316,440)  202,119
                                                           ---------  --------
                                                           $ 348,104  $288,130
                                                           =========  ========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      C-3
<PAGE>

                              DYNATECH CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                    Years Ended March 31,
                                                  ----------------------------
                                                    1999      1998      1997
                                                  --------  --------  --------
                                                    (Amounts in thousands
                                                            except
                                                       per share data)
<S>                                               <C>       <C>       <C>
Sales............................................ $522,854  $472,948  $362,412
Cost of sales....................................  228,572   205,522   137,254
                                                  --------  --------  --------
Gross profit.....................................  294,282   267,426   225,158
Selling, general and administrative expense......  149,006   138,310   114,479
Product development expense......................   54,023    54,995    43,267
Recapitalization-related costs...................   43,386       --        --
Nonrecurring charges.............................      --        --     27,776
Amortization of intangibles......................    6,228     5,835     6,793
Amortization of unearned compensation............    1,519       --        --
                                                  --------  --------  --------
Total operating expenses.........................  254,162   199,140   192,315
                                                  --------  --------  --------
  Operating income...............................   40,120    68,286    32,843
Interest expense.................................  (46,198)   (1,221)     (828)
Interest income..................................    3,398     3,012     2,785
Other income, net................................   15,959       730       634
                                                  --------  --------  --------
Income from continuing operations before income
 taxes...........................................   13,279    70,807    35,434
Provision for income taxes.......................    6,834    29,031    17,585
                                                  --------  --------  --------
Income from continuing operations................    6,445    41,776    17,849
Discontinued operations:
  Gain on sale of businesses net of income tax
   provision of $22,692..........................      --        --     12,000
                                                  --------  --------  --------
Net income....................................... $  6,445  $ 41,776  $ 29,849
                                                  ========  ========  ========
Income per common share--basic:
  Continuing operations.......................... $   0.06  $   2.49  $   1.04
  Discontinued operations........................      --        --       0.70
                                                  --------  --------  --------
                                                  $   0.06  $   2.49  $   1.74
                                                  ========  ========  ========
Income per common share--diluted:
  Continuing operations.......................... $   0.06  $   2.40  $   0.99
  Discontinued operations........................      --        --       0.67
                                                  --------  --------  --------
                                                  $   0.06  $   2.40  $   1.66
                                                  ========  ========  ========
Weighted average number of common shares
  Basic..........................................  106,212    16,795    17,200
  Diluted........................................  111,464    17,434    18,028
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      C-4
<PAGE>

                              DYNATECH CORPORATION

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                                          Total
                          Number of Shares                                            Other              Share-
                          -----------------          Additional Retained             Compre-            holders'
                          Common   Treasury Common    Paid-In   Earnings   Unearned  hensive  Treasury   Equity
                           Stock    Stock    Stock    Capital   (Deficit)    Comp     Loss     Stock    (Deficit)
                          -------  -------- -------  ---------- ---------  --------  -------  --------  ---------
                                                       (Amounts in thousands)
<S>                       <C>      <C>      <C>      <C>        <C>        <C>       <C>      <C>       <C>
Balance, March 31,
 1996...................   18,605   (1,021) $ 3,721   $ 12,102  $ 165,657            $   342  $(21,103) $ 160,719
 Net income--1997.......                                           29,849                                  29,849
 Translation
  adjustment............                                                              (1,589)              (1,589)
                                                                                                        ---------
 Total comprehensive
  income................                                                                                   28,260
                                                                                                        ---------
 Purchases of treasury
  stock.................            (1,021)                                                    (32,695)   (32,695)
 Exercise of stock
  options and other
  issuances.............               230              (3,533)                                  6,617      3,084
 Tax benefit from
  exercise of stock
  options...............                                 1,318                                              1,318
                          -------   ------  -------   --------  ---------  -------   -------  --------  ---------
Balance, March 31,
 1997...................   18,605   (1,812)   3,721      9,887    195,506        0    (1,247)  (47,181)   160,686
                          =======   ======  =======   ========  =========  =======   =======  ========  =========
 Net income--1998.......                                           41,776                                  41,776
 Translation
  adjustment............                                                                (353)                (353)
                                                                                                        ---------
 Total comprehensive
  income................                                                                                   41,423
                                                                                                        ---------
 Purchases of treasury
  stock.................              (163)                                                     (5,330)    (5,330)
 Exercise of stock
  options and other
  issuances.............               234              (2,919)                                  7,580      4,661
 Tax benefit from
  exercise of stock
  options...............                                   679                                                679
                          -------   ------  -------   --------  ---------  -------   -------  --------  ---------
Balance, March 31,
 1998...................   18,605   (1,741)   3,721      7,647    237,282        0    (1,600)  (44,931)   202,119
                          =======   ======  =======   ========  =========  =======   =======  ========  =========
 Net income--1999.......                                            6,445                                   6,445
 Translation
  adjustment............                                                                 (82)                 (82)
                                                                                                        ---------
 Total comprehensive
  income................                                                                                    6,363
                                                                                                        ---------
 Exercise of stock
  options and other
  issuances.............      414       59                (111)                                  1,946      1,835
 Tax benefit from
  exercise of stock
  options...............                                   609                                                609
Recapitalization-related
 costs:
 Common stock
  repurchased...........  (18,605)   1,682   (3,721)    (7,269)  (873,668)                      42,985   (841,673)
 Issuance of new stock,
  net of fees...........  120,251                      298,148                                            298,148
 Stock options expense..                                14,640                                             14,640
 Unearned compensation..                                 9,082              (9,082)                           --
 Amortization of
  unearned
  compensation..........                                                     1,519                          1,519
                          -------   ------  -------   --------  ---------  -------   -------  --------  ---------
Balance, March 31,
 1999...................  120,665        0  $     0   $322,746  $(629,941) $(7,563)  $(1,682) $      0  $(316,440)
                          =======   ======  =======   ========  =========  =======   =======  ========  =========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      C-5
<PAGE>

                              DYNATECH CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     Years Ended March 31,
                                                  -----------------------------
                                                    1999       1998      1997
                                                  ---------  --------  --------
                                                    (Amounts in thousands)
<S>                                               <C>        <C>       <C>
Operating activities:
 Net income from operations.....................  $   6,445  $ 41,776  $ 29,849
 Adjustment for noncash items included in net
  income:
 Gain on discontinued operations................        --        --    (12,000)
 Depreciation...................................     11,741    12,066     9,280
 Amortization of intangibles....................      6,228     5,835     6,793
 Purchased incomplete technology................        --        --     20,627
 Intangibles writeoff...........................        --        --      7,149
 Gain on sale of subsidiary.....................    (15,900)      --        --
 Recapitalization-related costs.................     14,640       --        --
 Amortization of unearned compensation..........      1,519       --        --
 Amortization of deferred debt issuance costs...      2,693       --        --
 Change in net deferred income tax asset........    (12,289)   (5,575)   (7,617)
 Other..........................................        612       580       797
 Changes in operating assets and liabilities,
  net of effects of purchase acquisitions and
  divestitures..................................     53,309     4,380     4,926
                                                  ---------  --------  --------
 Net cash provided by continuing operations.....     68,998    59,062    59,804
 Net cash used in discontinued operations.......     (1,328)  (13,717)  (52,313)
                                                  ---------  --------  --------
 Net cash flows provided by operating activi-
  ties..........................................     67,670    45,345     7,491
Investing activities:
 Purchases of property and equipment............    (11,323)  (15,879)  (10,176)
 Disposals of property and equipment............        369       219       214
 Proceeds from sales of businesses..............     21,000       --     96,682
 Businesses acquired in purchase transactions,
  net of cash acquired..........................    (21,365)      --    (68,930)
 Incentive earnout related to the purchase of
  Advent........................................     (3,845)      --        --
 Other..........................................     (4,915)      144       290
                                                  ---------  --------  --------
 Net cash flows provided by (used in) continuing
  operations....................................    (20,079)  (15,516)   18,080
 Net cash flows provided by (used in) discontin-
  ued operations................................        --        507      (951)
                                                  ---------  --------  --------
 Net cash flows provided by (used in) investing
  activities....................................    (20,079)  (15,009)   17,129
Financing activities:
 Borrowings of debt.............................    575,000    (5,000)    3,200
 Repayment of debt..............................    (48,000)      --       (678)
 Repayment of notes payable.....................     (2,192)      --        --
 Repayment of capital lease obligations.........       (159)     (195)      --
 Financing fees.................................    (38,631)      --        --
 Proceeds from issuance of common stock.........    277,035     4,513     1,693
 Proceeds from exercise of stock options........      1,800       --        --
 Purchases of treasury stock and stock outstand-
  ing...........................................   (806,508)   (5,330)  (32,695)
                                                  ---------  --------  --------
 Net cash flows used in financing activities....    (41,655)   (6,012)  (28,480)
Effect of exchange rate on cash.................       (478)      798    (2,452)
                                                  ---------  --------  --------
Increase (decrease) in cash and cash equiva-
 lents..........................................      5,458    25,122    (6,312)
Cash and cash equivalents at beginning of year..     64,904    39,782    46,094
                                                  ---------  --------  --------
Cash and cash equivalents at end of year........  $  70,362  $ 64,904  $ 39,782
                                                  =========  ========  ========
Change in operating asset and liability compo-
 nents:
 Decrease (increase) in trade accounts receiv-
  able..........................................  $  (1,114) $    994  $(15,833)
 Decrease (increase) in inventories.............      2,503    (8,739)      450
 Increase (decrease) in other current assets....      2,089    (2,431)   (3,341)
 Increase in accounts payable...................     11,025     6,009     2,059
 Increase in accrued expenses and taxes.........     38,806     8,547    21,591
                                                  ---------  --------  --------
 Change in operating assets and liabilities.....  $  53,309  $  4,380  $  4,926
                                                  =========  ========  ========
Supplemental disclosures of cash flow informa-
 tion:
 Cash paid during the year for:
 Interest.......................................  $  33,376  $    934  $    889
 Income taxes...................................     16,013    24,307    42,340
 Tax benefit of disqualifying dispositions of
  stock options.................................        609       679     1,318
 Noncash proceeds from sale of businesses:
 Promissory notes...............................        --        --      7,200
 Preferred stock................................        --        --      6,300
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      C-6
<PAGE>

                             DYNATECH CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. FORMATION AND BACKGROUND

    Dynatech Corporation was formed in 1959 and is a global communications
  equipment company focused on network technology solutions. The Company's
  operations are conducted primarily by wholly-owned subsidiaries located
  principally in the United States with other operations, primarily sales
  offices, located in Europe and the Far East. The Company is managed in
  three business segments: communications test, industrial computing and
  communications, and visual communications.

    The communications test segment manufactures products for communications
  service providers (such as Regional Bell Operating Companies ("RBOCs"),
  long distance companies and competitive access providers), service users
  such as large corporate and government network operators), and
  manufacturers of communications equipment systems.

    The industrial computing and communications segment provides computer
  products and systems designed to withstand excessive temperatures, dust,
  moisture and vibration in harsh operating environments. In addition, the
  Company sells ruggedized portable communications and computing devices used
  by field-service workers for telephone companies, utilities, insurance
  companies, and other organizations with large field-service workforces.

    The visual communications segment primarily provides (i) airplane cabin
  video information display systems and information services for the general
  and commercial aviation markets, and (ii) digital color enhancement systems
  used in the process of transferring film images into electronic signals--a
  process commonly used to transfer film images to video for use in the
  production of television commercials and programming.

B. RECAPITALIZATION AND MERGER

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

    As a result of the Merger, Clayton, Dubilier & Rice Fund V Limited
  Partnership, an investment partnership managed by CDR ("CDR Fund V"), holds
  approximately 91.8% of the Common Stock. John F. Reno, the Chairman,
  President and Chief Executive of the Company (who retired from the Company
  on May 19, 1999) together with two family trusts holds approximately 1.0%
  of the Common Stock and other stockholders hold approximately 7.2% of the
  Common Stock. The Merger and related transactions were treated as a
  recapitalization for financial reporting purposes. Accordingly, the
  historical basis of the Company's assets and liabilities were not affected
  by these transactions.

    In connection with the Merger, the Company incurred a charge of $43.4
  million, consisting of $39.9 million (including a $14.6 million non-cash
  charge) for the cancellation payments of employee stock options and
  compensation expense due to the acceleration of unvested stock options, and
  $3.5 million for certain other expenses resulting from the Merger,
  including employee termination expense. The Company incurred an additional
  $41.3 million in expenses, of which $27.3 million was capitalized and will
  be amortized over the life of the Senior Secured Credit Facilities and
  Senior Subordinated Notes, and $14.0 million was charged directly to
  shareholders' equity.


                                      C-7
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

C. RELATED PARTY

    The Company will pay an annual management fee of $0.5 million to CDR. In
  return for the annual management fee, CDR will provide management and
  financial consulting services to the Company and its subsidiaries. During
  fiscal 1999, the Company paid CDR $0.5 million in management fees and
  expenses.

    On May 19, 1999, Ned C. Lautenbach, a principal of CDR, became the
  Company's Chairman, President and Chief Executive Officer. Mr. Lautenbach
  will not receive compensation for these services, which will be provided in
  connection with an agreement between the Company and CDR.

D. FINANCIAL POSITION OF DYNATECH CORPORATION AND DYNATECH LLC

    In connection with the Merger and related transactions, Dynatech LLC
  (formerly known as Telecommunications Techniques Co., LLC), Dynatech
  Corporation's wholly owned subsidiary ("Dynatech LLC"), became the primary
  obligor (and Dynatech Corporation, a guarantor) with respect to
  indebtedness of Dynatech Corporation, including the 9 3/4% Senior
  Subordinated Notes due 2008 (the "Senior Subordinated Notes") and the
  Senior Secured Credit Facilities referred to elsewhere in this report.

    Dynatech Corporation has fully and unconditionally guaranteed the Senior
  Subordinated Notes. Dynatech Corporation, however, is a holding company
  with no independent operations and no significant assets other than its
  membership interest in Dynatech LLC. See Note K. Debt. Accordingly, the
  condensed consolidated financial statements of Dynatech Corporation,
  presented in this report, are not materially different from those of
  Dynatech LLC. Management has not included separate financial statements of
  Dynatech LLC because management has determined that they would not be
  material to holders of the Senior Subordinated Notes or to the holders of
  Dynatech Corporation's common stock. Dynatech LLC is subject, under
  agreements governing its indebtedness, to prohibitions on its ability to
  make distributions to Dynatech Corporation (with limited exceptions) and
  other significant restrictions on its operations. See Note K. Debt.

E. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Principles of Consolidation. The consolidated financial statements
  include the accounts of the parent company and its wholly owned domestic
  and international subsidiaries. Intercompany accounts and transactions have
  been eliminated. Certain prior year amounts have been reclassified to
  conform with the current year.

    Use of Estimates. The preparation of financial statements in conformity
  with generally accepted accounting principles requires management to make
  certain estimates and assumptions that affect the reported amount of assets
  and liabilities and disclosure of contingent assets and liabilities at the
  date of the financial statements and the reported amounts of revenues and
  expenses during the reported period. Significant estimates in these
  financial statements include allowances for accounts receivable, net
  realizable value of inventories, tax valuation reserves, nonrecurring
  charges, and the carrying values of discontinued operations. Actual results
  could differ from those estimates.

    Cash Equivalents. Cash equivalents represent highly liquid debt
  instruments with a maturity of three months or less at the time of
  purchase.

    Concentration of Credit Risk. Financial instruments which potentially
  subject the Company to concentrations of credit risk consist primarily of
  cash investments, accounts receivable and interest rate swap contracts.

    The Company maintains its cash accounts primarily with one institution
  and places its cash investments in prime quality certificates of deposit,
  commercial paper, or mutual funds.

                                      C-8
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    Credit risk related to its accounts receivable are limited due to the
  large number of customers and their dispersion across many business and
  geographic areas. However, a significant amount of trade receivables are
  with customers within the telecommunications industry. The Company extends
  credit to its customers based upon an evaluation of the customer's
  financial condition and credit history and generally does not require
  collateral. The Company has historically incurred minimal credit losses. In
  fiscal 1999 the Company provided approximately $0.5 million for doubtful
  accounts ($0.4 million in fiscal 1998 and $0.6 million if fiscal 1997).

    In fiscal 1999 the Company recognized revenue equal to approximately 13%
  of consolidated sales from one telecommunications customer. At March 31,
  1999 approximately 10% of the accounts receivable balance related to this
  customer.

    The Company's counterparties to the agreements relating to the Company's
  investments and interest rate swap contracts consist of various major
  corporations and financial institutions of high credit standing. The
  Company does not believe there is significant risk of non-performance by
  these counterparties.

    Inventories. Inventories are carried and charged to cost of sales at
  standard costs, which is updated regularly and which approximates the lower
  of cost (first-in, first-out or average) or market.

    Property and Equipment. Property and equipment are carried at cost and
  include expenditures for major improvements which substantially increase
  their useful life. Repairs and maintenance are expensed as incurred. When
  assets are retired or otherwise disposed of, the assets and related
  allowances for depreciation and amortization are eliminated from the
  accounts and any resulting gain or loss is recognized in the Statement of
  Operations.

    Depreciation and Amortization. For financial reporting purposes,
  depreciation of machinery, equipment, and fixtures is computed on the
  straight-line method over estimated useful lives of two to ten years.
  Leasehold improvements are amortized over the lesser of the lives of the
  leases or estimated useful lives of the improvements.

    Intangible Assets. At each balance sheet date, management evaluates
  whether there has been a permanent impairment in the value of goodwill or
  intangible assets by assessing the carrying value of the asset against the
  anticipated future cash flows from related operating activities. Factors
  which management considers in performing this assessment include current
  operating results, trends, product transition, distribution channels and
  prospects, and, in addition, demand, competition, and other economic
  factors. In March 1997, the Company recorded a $7.1 million charge related
  to product and distribution transitions.

    Product technology and other intangible assets are amortized on a
  straight-line basis primarily over two to ten years, but in no event longer
  than their expected useful lives. Amortization expense related to product
  technology was $3.1 million in fiscal 1997, $3.1 million in fiscal 1998 and
  $3.0 million in fiscal 1999, and was excluded from cost of sales. Excess of
  cost over fair market value of net assets (goodwill) is being amortized on
  a straight-line basis over 15 to 30 years.

    Other Assets. In connection with the Merger, the Company incurred
  financing fees which will be amortized over the life of the Senior Secured
  Credit Facilities and Senior Subordinated Notes. See Note K. Debt. In
  addition, the deferred tax asset increased primarily as a result of certain
  compensation charges relating to stock options in connection with the
  Merger.

    Other comprehensive income (loss). The functional currency for the
  majority of the Company's foreign operations is the applicable local
  currency. The translation from the applicable foreign currencies to U.S.
  dollars is performed for balance sheet accounts using the exchange rates in
  effect at the balance sheet

                                      C-9
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  date and for revenue and expense accounts using a weighted average exchange
  rate during the period. The unrealized gains or losses resulting from such
  translation are included in shareholders' equity. The realized gains or
  losses resulting from foreign currency transactions are included in other
  income.

    Unearned compensation. On July 15, 1998, the Company granted non-
  qualified options to certain key employees to purchase 14.3 million shares
  of common stock at an exercise price lower than closing market price. The
  Company has historically granted options at a price equal to the closing
  market price on the date of the grant. During fiscal 1999 the amortization
  of unearned compensation was $1.5 million.

    Unearned compensation related to these options of $9.7 million was
  recorded within shareholders' equity (deficit) and will be charged to
  expense over a five-year vesting period. As of March 31, 1999, the
  unamortized portion of the total compensation expense was $7.6 million.

    Treasury Stock. The Company delivers treasury shares upon the exercise of
  stock options and issuance of shares for the Company's Employee Stock
  Purchase Plan and the difference between the cost of the treasury shares,
  on a last-in, first-out basis, and the exercise price of the option is
  reflected in additional paid-in capital. Repurchase of treasury stock is
  accounted for by using the cost method of accounting. On May 21, 1998, the
  Company retired all of its treasury stock in connection with the Merger.

    Revenue Recognition. Sales of products and services are recorded based on
  product shipment and performance of service, respectively. Proceeds
  received in advance of product shipment or performance of service are
  recorded as deferred revenue in the balance sheet.

    Research and Development. Costs relating to research and development are
  expensed as incurred. Internal software development costs that qualify for
  capitalization are not material.

    Warranty Costs. The Company generally warrants its products for one year
  after delivery. A provision for estimated warranty costs is recorded at the
  time revenue is recognized.

    Year 2000 Costs. Costs of modifying computer software for Year 2000
  compliance are expensed as incurred.

    Interest Rate Swap Contracts. The Company uses interest rate swap
  contracts to effectively fix a portion of its variable rate Term Loan
  Facility to a fixed rate in order to reduce the impact of interest rate
  changes on future income. The Company does not hold or issue financial
  instruments for trading or speculative purposes. The differential to be
  paid or received under these agreements will be recognized as an adjustment
  to interest expense related to the debt. See Note L. Interest Rate Swap
  Contracts.

    Income Taxes. The Company provides for income taxes in accordance with
  Statement of Financial Accounting Standard No. 109, "Accounting for Income
  Taxes." Under this method, deferred tax assets and liabilities are
  determined based on the differences between the financial reporting and tax
  basis of assets and liabilities and are measured using the enacted tax
  rates and laws that will be in effect when the differences are expected to
  reverse.

   New Pronouncements

    During the quarter ended December 31, 1997, the Company adopted Statement
  of Financial Accounting Standards No. 128, "Earnings per Share," which
  modifies the calculation of earnings per share ("EPS"). The Standard
  replaces the previous presentation of primary and fully diluted EPS to
  basic and diluted EPS. Basic EPS excludes dilution and is computed by
  dividing income available to common

                                     C-10
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  stockholders by the weighted average number of common shares outstanding
  for the period. Diluted EPS includes the dilution of common stock
  equivalents, and is computed similarly to fully diluted EPS pursuant to APB
  Opinion 15. All prior periods presented have been restated to reflect this
  adoption.

    In the quarter ended June 30, 1998, the Company adopted Statement of
  Financial Accounting Standards No. 130 ("SFAS 130") "Reporting
  Comprehensive Income." SFAS 130 establishes standards for the reporting and
  display of comprehensive income and its components. SFAS 130 requires,
  among other things, foreign currency translation adjustments, which prior
  to adoption were reported separately in stockholders' equity to be included
  in other comprehensive income.

    In the quarter ended June 30, 1998, the Company adopted Statement of
  Position 97-2, "Software Revenue Recognition" ("SOP 97-2"). SOP 97-2
  provides guidance on applying generally accepted accounting principals in
  recognizing revenue on software transactions.

    At March 31, 1999, the Company adopted Financial Accounting Standards
  Board issued Statement No. 131 ("SFAS 131"), "Disclosures about Segments of
  an Enterprise and Related Information," which establishes standards for the
  reporting of operating segments in the financial statements. The Company
  has included in its Management's Discussion and Analysis disclosure within
  its three operating segments: communications test, industrial computing and
  communications, and visual communications.

    On June 15, 1998, the Financial Accounting Standards Board issued
  Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
  "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 is
  effective for all fiscal quarters of all fiscal years beginning after June
  15, 2000. SFAS 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 Company is assessing the impact of the adoption of SFAS 133 on its
  results of operations and its financial position.

F. ACQUISITIONS AND DIVESTITURES

   Fiscal 1999 Activity:

    Acquisitions. On June 19, 1998, the Company, through one of its indirect
  wholly owned subsidiaries, acquired all of the outstanding capital stock of
  Pacific Systems Corporation of Kirkland, Washington ("Pacific") for a total
  purchase price of $20 million, including an incentive earnout. This
  acquisition resulted in approximately $18 million of goodwill which is
  being amortized over 30 years. The acquisition was accounted for using the
  purchase method of accounting. Pacific designs and manufactures customer-
  specified avionics and integrated cabin management.

    In February 1999, the Company, through one of its wholly owned
  subsidiaries, acquired Flight TECH, a Hillsboro, Oregon based inflight
  entertainment manufacturer specializing in equipment for small and medium
  jets, and turboprop aircraft. The acquisition was accounted for using the
  purchase method of accounting at a purchase price of $2 million. This
  acquisition resulted in approximately $1.9 million of goodwill which is
  being amortized over 30 years.

    Divestiture. On June 30, 1998, the Company sold the assets of ComCoTec,
  Inc.("ComCoTec") located in Lombard, Illinois to The Potomac Group, Inc.
  for $21 million. ComCoTec is a supplier of pharmacy management software and
  services and was a subsidiary within the Company's visual communications
  products group. The Company recognized a gain of $15.9 million from the
  sale of ComCoTec and recorded it in other income.


                                     C-11
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    The Company has not presented separate pro forma financial statements for
  the recent acquisitions or divestiture due to the immateriality of such pro
  forma effects on the consolidated financial statements of the Company.

   Fiscal 1997 Acquisitions:

    In March of 1997, the Company acquired the net assets of Advent Design,
  Inc. ("Advent") for $3.5 million in cash. Advent designs and manufactures
  high-performance microprocessor-based systems for the computer, medical and
  communications markets. This acquisition generated $3.4 million of goodwill
  which is being amortized over 15 years. During fiscal 1999 and 1998, the
  Company incurred a $3.5 million and $1.6 million, respectively, increase in
  goodwill, related to a targeted and renegotiated three-year earnout based
  on, among other things, a targeted sales growth.

    On December 31, 1996, the Company acquired substantially all of the
  assets and assumed certain liabilities of Itronix Corporation ("Itronix")
  located in Spokane, Washington, for $65.4 million in cash. Approximately
  $40 million of the purchase price was borrowed pursuant to the terms of the
  Company's revolving credit and term loan agreement in effect at that time.
  A significant portion of the borrowed funds was repaid during the fourth
  quarter of 1997. Itronix is a manufacturer of mobile computing and
  communications devices, including ruggedized laptop computers, which
  increase the efficiency of large, mission-critical service groups.

    Incident to this acquisition was the purchase of incomplete technology
  activities which resulted in a one-time pretax charge of $20.6 million or
  ($0.74) per share on a diluted basis. This purchased incomplete technology
  that had not reached technological feasibility and which had no alternative
  future use was valued using a risk adjusted cash flow model, both in 1997
  and 1996, under which future cash flows associated with in-process research
  and development were discounted considering risks and uncertainties related
  to the viability of potential changes in future target markets and to the
  completion of the products that will ultimately be marketed by the Company.
  Acquired complete technology of $8.4 million is being amortized over two to
  seven years, and goodwill of $17.9 million is being amortized over 15
  years.

G. DISCONTINUED OPERATIONS

    A formal plan to discontinue noncore businesses was approved by the Board
  of Directors on February 7, 1996. In fiscal 1997, the Company essentially
  completed its disposition of the noncore businesses. Proceeds from these
  sales in fiscal 1997 and 1996 were $96.7 million in cash, $7.2 million in
  long-term promissory notes, and Class A Preferred Stock of CMSI Holdings
  Corporation with an aggregate liquidation preference of $6.3 million, and
  $48.9 million in cash, respectively, which resulted in an aftertax gain of
  $12 million or $0.67 per share on a diluted basis.

    In connection with the sale of one of its subsidiaries, the Company
  agreed to guarantee the purchaser's payment obligations under a credit
  facility obtained by the purchaser. The guaranteed portion of the principal
  amount of this facility was reduced from $3 million to $1.4 million in
  fiscal 1999. The guarantee will expire in June 1999.

    In connection with the disposition of these subsidiaries, the Company had
  net liabilities of $1.2 million and $756 thousand at March 31, 1999 and
  1998, respectively. Included in these amounts are liabilities related to
  severance, legal, lease runout, taxes and warranty accruals, most of which
  were paid in fiscal 1998, offset by noncash investments.

                                     C-12
<PAGE>

                              DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


H. INTANGIBLE ASSETS

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

<TABLE>
<CAPTION>
                                                             1999       1998
                                                          ---------- ----------
                                                          Amounts in thousands
   <S>                                                    <C>        <C>
   Product technology.................................... $   17,042 $   17,042
   Excess of cost over net assets acquired...............     55,878     32,478
   Other intangible assets...............................     13,307     13,307
                                                          ---------- ----------
                                                              86,227     62,827
   Less accumulated amortization.........................     29,459     23,232
                                                          ---------- ----------
     Total............................................... $   56,768 $   39,595
                                                          ========== ==========
</TABLE>

I. OTHER ASSETS

    The detail of Other Assets is as follows:

<TABLE>
<CAPTION>
                                                             1999       1998
                                                          ---------- ----------
                                                          Amounts in thousands
   <S>                                                    <C>        <C>
   Deferred financing fees............................... $   24,614 $      --
   Deferred tax asset....................................     23,852     17,084
   Other assets..........................................      6,472      4,489
                                                          ---------- ----------
     Total other assets.................................. $   54,938 $   21,573
                                                          ========== ==========
</TABLE>

J. EARNINGS PER SHARE

    The computation for earnings per share is as follows:

<TABLE>
<CAPTION>
                                                     1999     1998     1997
                                                   --------  -------  -------
   <S>                                             <C>       <C>      <C>
   Net income:
     Continuing operations........................ $  6,445  $41,776  $17,849
     Discontinued operations......................      --       --    12,000
                                                   --------  -------  -------
   Consolidated net income........................ $  6,445  $41,776  $29,849
                                                   ========  =======  =======
   BASIC:
   Common stock outstanding, net of treasury
    stock, beginning of period....................   16,871   16,803   17,594
   Weighted average common stock and treasury
    stock issued during the period................  104,324      134      144
   Weighted average common stock and treasury
    stock repurchased.............................  (14,983)    (142)    (538)
                                                   --------  -------  -------
   Weighted average common stock outstanding, net
    of treasury stock, end of period..............  106,212   16,795   17,200
                                                   ========  =======  =======
   Net income per common share:
     Continuing operations........................ $   0.06  $  2.49  $  1.04
     Discontinued operations......................      --       --       .70
                                                   --------  -------  -------
   Consolidated net income........................ $   0.06  $  2.49  $  1.74
                                                   ========  =======  =======
</TABLE>

                                      C-13
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                                                     1999     1998     1997
                                                   --------  -------  -------
   <S>                                             <C>       <C>      <C>
   DILUTED:
   Common stock outstanding, net of treasury
    stock, beginning of period....................   16,871   16,803   17,594
   Weighted average common stock and treasury
    stock issued during the period................  104,324      134      144
   Weighted average common stock equivalents......    5,252      639      828
   Weighted average common stock and treasury
    stock repurchased.............................  (14,983)    (142)    (538)
                                                   --------  -------  -------
   Weighted average common stock outstanding, net
    of treasury stock, end of period..............  111,464   17,434   18,028
                                                   ========  =======  =======
   Net income per common share:
     Continuing operations........................ $   0.06  $  2.40  $  0.99
     Discontinued operations......................      --       --       .67
                                                   --------  -------  -------
   Consolidated net income........................ $   0.06  $  2.40  $  1.66
                                                   ========  =======  =======
</TABLE>

K. DEBT

    Long-term debt is summarized below:

<TABLE>
<CAPTION>
                                                             1999       1998
                                                          ---------- ----------
                                                          Amounts in thousands
   <S>                                                    <C>        <C>
   Senior secured credit facilities...................... $  252,000 $      --
   Senior subordinated notes.............................    275,000        --
   Capital lease obligations.............................        342        233
                                                          ---------- ----------
     Total debt..........................................    527,342        233
   Less current portion..................................     23,191        150
                                                          ---------- ----------
     Long-term debt...................................... $  504,151 $       83
                                                          ========== ==========
</TABLE>

    In fiscal 1998, the Company had two credit facilities totaling $180
  million. At March 31, 1998, the Company had $180 million available under
  these facilities. These facilities were terminated at the time of the
  Merger.

    In connection with the Merger, the Company entered into a senior secured
  credit agreement (the "Senior Secured Credit Agreement") consisting of a
  $260 million term loan facility (the "Term Loan Facility") and a $110
  million revolving credit facility (the "Revolving Credit Facility")
  (collectively, the "Senior Secured Credit Facilities"). In addition, the
  Company incurred $275 million of debt through the sale of its 9 3/4% Senior
  Subordinated Notes (the "Senior Subordinated Notes").

    In connection with the Merger and related transactions, Dynatech LLC
  became the primary obligor with respect to the Senior Secured Credit
  Facility and the Senior Subordinated Notes. See Note D. Financial Position
  of Dynatech Corporation and Dynatech LLC. Dynatech Corporation has
  guaranteed the Senior Secured Credit Facilities and the Senior Subordinated
  Notes.

    Principal and interest payments under the new Senior Secured Credit
  Agreement and interest payments on the Senior Subordinated Notes represent
  significant liquidity requirements for the Company. With respect to the
  $260 million initially borrowed under the Term Loan Facility (which is
  divided into four tranches, each of which has a different term and
  repayment schedule), the Company is required to make scheduled principal
  payments of the $50 million of tranche A term loan thereunder during its
  six-year term, with

                                     C-14
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  substantial amortization of the $70 million tranche B term loan, $70
  million tranche C term loan and $70 million tranche D term loan thereunder
  occurring after six, seven and eight years, respectively. During fiscal
  1999 the Company repaid $8 million of mandatory principal payments and
  repaid $40 million of indebtedness under its $110 million Revolving Credit
  Facility. The $275 million of Senior Subordinated Notes will mature in
  2008, and bear interest at 9 3/4% per annum. Total interest expense
  including the amortization of deferred debt issuance costs was $46.2
  million in fiscal 1999.

    The Senior Secured Credit Facilities are also subject to mandatory
  prepayment and reduction in an amount equal to, subject to certain
  exceptions, (a) 100% of the net proceeds of (i) certain debt offerings by
  the Company and any of its subsidiaries, (ii) certain asset sales or other
  dispositions by the Company or any of its subsidiaries, and (iii) property
  insurance or condemnation awards received by the Company or any of its
  subsidiaries, and (b) 50% of the Company's excess cash flow (the
  "Recapture") (as defined in the Senior Secured Credit Agreement) for each
  fiscal year in which the Company exceeds a certain leverage ratio. The
  Senior Subordinated Notes are subject to certain mandatory prepayments
  under certain circumstances.

    The Company is required, under the terms of the Recapture, to repay $15
  million in Term Loan borrowing on June 30, 1999. The Company, may, in its
  sole discretion, use the $15 million in part to prepay the mandatory $8
  million amortization due in fiscal 2000. The Company will determine, prior
  to June 30, 1999, whether or not to elect this option.

    At March 31, 1999, the Company had no outstanding borrowings under the
  Revolving Credit Facility. The Revolving Credit Facility matures in 2004,
  with all amounts then outstanding becoming due. The Company expects that
  its working capital needs will require it to obtain new revolving credit
  facilities at the time that the Revolving Credit Facility matures, by
  extending, renewing, replacing or otherwise refinancing the Revolving
  Credit Facility. No assurance can be given that any such extension,
  renewal, replacement or refinancing can be successfully accomplished or
  accomplished on acceptable terms.

    The loans under the Senior Secured Credit Agreement bear interest at
  floating rates based upon the interest rate option elected by the Company.
  The Company's weighted-average interest rate on the loans under the Senior
  Credit Agreement was 8.25% per annum for the period commencing May 21, 1998
  and ending March 31, 1999. However, the Company has entered into interest
  rate swaps which will be effective for periods ranging from two to three
  years beginning September 30, 1998 to fix the interest charged on a portion
  of the total debt outstanding under the Term Loan Facility. After giving
  effects to these arrangements, approximately $220 million of the debt
  outstanding will be subject to an effective average annual fixed rate of
  5.66% (plus an applicable margin). The terms of one interest rate swap
  contract provide upon termination for a one-year option to renew 50% of the
  notional amount at the discretion of the lender. See Note L. Interest Rate
  Swaps. As a result of the substantial indebtedness incurred in connection
  with the Merger, it is expected that the Company's interest expense will be
  higher and will have a greater proportionate impact on net income in
  comparison to preceding periods.

    Future Financing Sources and Cash Flows. The amount under the Revolving
  Credit Facility that remained undrawn following the May, 1998 closing of
  the Recapitalization was $70 million. The undrawn portion of this facility
  will be available to meet future working capital and other business needs
  of the Company. At March 31, 1999, the Company had no outstanding
  borrowings under the Revolving Credit Facility. Therefore, the undrawn
  portion of this facility was $110 million. The Company believes that cash
  generated from operations, together with amounts available under the
  Revolving Credit Facility and any other available sources of liquidity,
  will be adequate to permit the Company to meet its debt service
  obligations, capital expenditure program requirements, ongoing operating
  costs and working capital needs, although no assurance can be given in this
  regard. The Company's future operating performance and ability

                                     C-15
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  to service or refinance the Senior Subordinated Notes and to repay, extend
  or refinance the Senior Secured Credit Facilities (including the Revolving
  Credit Facility) will be, among other things, subject to future economic
  conditions and to financial, business and other factors, many of which are
  beyond the Company's control.

    The mandatory repayment schedule of the Term Loan Facility over the next
  five years and thereafter is as follows: $8.0 million in fiscal 2000, $8.0
  million in fiscal 2001, $11.5 million in fiscal 2002, $14.5 million in
  fiscal 2003, $18.0 million in fiscal 2004, and $192.0 million in fiscal
  years subsequent to fiscal 2004.

    The Company is also required, under the Terms of the Senior Secured
  Credit Facility, to pay a commitment fee based on the unused amount of the
  revolving credit facility. The rate is an annual rate, paid quarterly, and
  ranges from 0.30% to 0.50%, and is based on the Company's leverage ratio in
  effect at the beginning of the quarter.

    Covenant Restrictions. The Senior Secured Credit Agreement imposes
  restrictions on the ability of the Company to make capital expenditures,
  and both the Senior Secured Credit Facilities and the indenture governing
  the Senior Subordinated Notes limit the Company's ability to incur
  additional indebtedness. Such restrictions, together with the highly
  leveraged nature of the Company, could limit the Company's ability to
  respond to market conditions, to meet its capital-spending program, to
  provide for unanticipated capital investments, or to take advantage of
  business opportunities. The covenants contained in the Senior Secured
  Credit Agreement also, among other things, restrict the ability of the
  Company and its subsidiaries to dispose of assets, incur guarantee
  obligations, prepay other indebtedness, make restricted payments, create
  liens, make equity or debt investments, make acquisitions, modify terms of
  the indenture governing the Senior Subordinated Notes, engage in mergers or
  consolidations, change the business conducted by the Company and its
  subsidiaries taken as a whole or engage in certain transactions with
  affiliates. These restrictions, among other things, preclude Dynatech LLC
  from distributing assets to Dynatech Corporation (which has no independent
  operations and no significant assets other than its membership interest in
  Dynatech LLC), except in limited circumstances. In addition, under the
  Senior Secured Credit Agreement, the Company is required to comply with a
  minimum interest expense coverage ratio and a maximum leverage ratio. These
  financial tests become more restrictive in future years. The term loans
  under the Senior Secured Credit Facilities (other than the $50 million
  tranche A term loan) are governed by negative covenants that are
  substantially similar to the negative covenants contained in the indenture
  governing the Senior Subordinated Notes, which also impose restrictions on
  the operation of the Company's business.

L. INTEREST RATE SWAP CONTRACTS

    The Company uses interest rate swap contracts to effectively fix a
  portion of its variable rate Term Loan Facility to a fixed rate in order to
  reduce the impact of interest rate changes on future income. The
  differential to be paid or received under these agreements will be
  recognized as an adjustment to interest expense related to the debt. At
  March 31, 1999 the Company had four interest rate swap contracts in which
  the Company pays a fixed interest rate and the Company receives a three-
  month LIBOR interest rate.

<TABLE>
<CAPTION>
   Swap No.   Notional Amount                  Term                  Fixed Interest Rate
   --------   ---------------                  ----                  -------------------
   <S>        <C>             <C>                                    <C>
    1             $25,000     October 16, 1998--October 16, 2000           4.7150%
    2             $65,000     September 30, 1998--September 30, 2001       5.8450%
    3             $65,000     September 30, 1998--September 30, 2001       5.8500%
    4             $65,000     September 30, 1998--September 28, 2001       5.8375%
</TABLE>

                                     C-16
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    On April 6, 1999 the Company renegotiated two of its interest rate swap
  contracts (swap numbers 3 and 4 above). These two agreements, with notional
  amounts totaling $130 million, a weighted-average interest rate of 5.84375%
  and original termination dates of September 28, 2001 and September 30, 2001
  were replaced. The notional amount of the new swap contract is $130 million
  with a fixed interest rate of 5.755%, terminating on September 28, 2001. In
  addition there is a one-year option to renew for 50% of the notional amount
  ($65 million) at the discretion of the lender. All other terms of the swap
  contract remained the same. The Company did not incur any additional
  expense to renegotiate this contract.

M. INCOME TAXES

    The components of income (loss) from continuing operations before taxes
  are as follows:

<TABLE>
<CAPTION>
                                                        1999     1998    1997
                                                       -------  ------- -------
                                                        Amounts in thousands
   <S>                                                 <C>      <C>     <C>
   Domestic........................................... $13,900  $69,772 $38,486
   Foreign............................................    (621)   1,035  (3,052)
                                                       -------  ------- -------
     Total............................................ $13,279  $70,807 $35,434
                                                       =======  ======= =======
</TABLE>

    The components of the provision (benefit) for income taxes from
  continuing operations are as follows:

<TABLE>
<CAPTION>
                                                         1999    1998    1997
                                                        ------  ------- -------
                                                         Amounts in thousands
   <S>                                                  <C>     <C>     <C>
   Provision for income taxes:
   United States....................................... $6,268  $22,810 $11,729
   Foreign.............................................   (125)     327     234
   State...............................................    691    5,894   5,622
                                                        ------  ------- -------
     Total............................................. $6,834  $29,031 $17,585
                                                        ======  ======= =======
</TABLE>

    The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
                                                       1999     1998     1997
                                                     --------  -------  -------
                                                       Amounts in thousands
   <S>                                               <C>       <C>      <C>
   Current:
     Federal........................................ $ 18,901  $21,248  $19,297
     Foreign........................................     (125)    (978)     234
     State..........................................      301    6,123    5,671
                                                     --------  -------  -------
       Total Current................................   19,077   26,393   25,202
                                                     --------  -------  -------
   Deferred:
     Federal........................................  (12,626)   1,562   (7,568)
     Foreign........................................      --     1,305      --
     State..........................................      383     (229)     (49)
                                                     --------  -------  -------
     Total deferred.................................  (12,243)   2,638   (7,617)
                                                     --------  -------  -------
       Total........................................ $  6,834  $29,031  $17,585
                                                     ========  =======  =======
</TABLE>

                                     C-17
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    Reconciliations between U.S. federal statutory rate and the effective tax
  rate of continuing operations follow:

<TABLE>
<CAPTION>
                                                              1999  1998  1997
                                                              ----  ----  ----
   <S>                                                        <C>   <C>   <C>
   Tax at U.S. federal statutory rate.......................  35.0% 35.0% 35.0%
   Increases (reductions) to statutory tax rate resulting
    from:
     Foreign income subject to tax at a rate different than
      U.S. rate.............................................  (0.8)  --    0.6
     State income taxes, net of federal income tax benefit..   5.2   5.1   3.8
     Research and development tax credit....................   --   (1.3) (0.7)
     Nondeductible amortization.............................   3.4   1.2   1.1
     Nondeductible compensation.............................   4.8   --    --
     Other..................................................   3.9   1.0   0.7
                                                              ----  ----  ----
       Effective tax rate before certain charges............  51.5% 41.0% 40.5%
     Nondeductible purchased research and and development...   --    --    8.2
     Nondeductible writeoff of intangibles..................   --    --    0.9
                                                              ----  ----  ----
       Total effective tax rate on continuing operations....  51.5% 41.0% 49.6%
                                                              ====  ====  ====
</TABLE>

    The principal components of the deferred tax assets and liabilities
  follow:

<TABLE>
<CAPTION>
                                                            1999        1998
                                                         ----------  ----------
                                                         Amounts in thousands
   <S>                                                   <C>         <C>
   Deferred tax assets:
     Net operating loss carryforwards................... $    4,758  $    4,608
     Vacation benefits..................................      1,109       1,556
     Depreciation and amortization......................     16,349      16,343
     Reserves, primarily inventory......................      8,174       5,791
     Deferred revenue...................................      6,705       1,747
     Compensation-related to stock options..............      5,126         --
     Other deferred assets..............................      3,326       1,841
                                                         ----------  ----------
                                                             45,547      31,886
   Valuation allowance..................................     (4,758)     (4,608)
                                                         ----------  ----------
                                                             40,789      27,278
   Deferred tax liabilities:
     Depreciation and amortization......................        --          431
     Other deferred liabilities.........................      1,016       1,068
                                                         ----------  ----------
                                                              1,016       1,499
                                                         ----------  ----------
     Net deferred tax assets............................ $   39,773  $   25,779
                                                         ==========  ==========
</TABLE>

    Deferred income taxes are included in the following balance sheet
  accounts:

<TABLE>
<CAPTION>
                                                              1999       1998
                                                           ---------- ----------
                                                           Amounts in thousands
   <S>                                                     <C>        <C>
   Other current assets................................... $   15,921 $    8,695
   Other assets...........................................     23,852     17,084
                                                           ---------- ----------
                                                           $   39,773 $   25,779
                                                           ========== ==========
</TABLE>

                                     C-18
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    The valuation allowance applies to state and foreign net operating loss
  carryforwards that may not be fully utilized by the Company. The increase
  in the valuation reserve relates to the increase in these net loss
  carryforwards.

    On March 31, 1999 the Company has foreign and state net operating loss
  carryforwards of $9.1 million and $31.3 million respectively. The foreign
  loss carryforwards begin to expire in the year ending March 31, 2003, and
  the state net operating losses begin to expire in the year ending March 31,
  2004.

N. EMPLOYEE RETIREMENT PLANS

    The Company has a trusteed employee 401(k) savings plan for eligible U.S.
  employees. The Plan does not provide for stated benefits upon retirement.
  Employees outside the U.S. are covered principally by government-sponsored
  plans that are deferred contribution plans. The cost of Company-provided
  plans is not material.

    The Company has a nonqualified deferred compensation plan which permits
  certain key employees to annually elect to defer a portion of their
  compensation for their retirement. The amount of compensation deferred and
  related investment earnings will be placed in an irrevocable rabbi trust
  and presented as assets in the Company's balance sheet because they will be
  available to the general creditors of the Company in the event of the
  Company's insolvency. An offsetting liability will reflect amounts due
  employees.

    Corporate contributions to employee retirement plans were $4.9 million in
  fiscal 1999, $4.5 million in fiscal 1998 and $4.0 million in fiscal 1997.

O. STOCK COMPENSATION AND PURCHASE PLANS

    On July 30, 1996 the shareholders adopted the 1996 Employee Stock
  Purchase Plan under which eligible employees may contribute up to 10% of
  their salary toward semi-annual purchases of the Company's capital stock.
  There were 38,692 shares issued on April 17, 1998. The plan commenced
  October 1, 1996 and terminated on May 21, 1998.

    The Company maintains two Stock Option plans in which common stock is
  available for grant to key employees at prices not less than fair market
  value (110% of fair market value for employees holding more than 10% of the
  outstanding common stock) at the date of grant determined by the Board of
  Directors. Incentive or nonqualified options may be issued under the plans
  and are exercisable from one to ten years after grant.

    The Company maintains a third Stock Option plan in which common stock is
  available for grant to non-employee directors. Each eligible director is
  automatically granted a stock option to purchase 25,000 shares of stock
  when he or she is first elected to the Board of Directors.

    At the time of the Merger, each Company stock option became fully vested
  and exercisable, other than 20,737 Company stock options held by John F.
  Reno. Any Company stock option that was outstanding immediately prior to
  the effective time of the Merger, was cancelled and each holder received an
  option cancellation payment. Stock options held by certain key executives
  were converted into equivalent options to purchase shares of Common Stock
  and were not cancelled.

                                     C-19
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    A summary of activity in the Company's option plans is as follows:

<TABLE>
<CAPTION>
                                           1999                1998                1997
                                         Weighted            Weighted            Weighted
                                         Average             Average             Average
                                1999     Exercise   1998     Exercise   1997     Exercise
                               Shares     Price    Shares     Price    Shares     Price
                             ----------  -------- ---------  -------- ---------  --------
   <S>                       <C>         <C>      <C>        <C>      <C>        <C>
   Shares under option,
    beginning of year......   2,135,719   $26.33  1,770,560   $21.87  1,684,580   $15.17
   Impact of converting
    shares on date
    of Merger..............  18,479,093
   Options granted (at an
    exercise price of $2.50
    to $3.187 in 1999, $35
    to $44 in 1998, and $32
    to $54 in 1997.........  16,439,511     2.54    634,800    36.25    607,550    34.51
   Options exercised.......    (860,120)   15.15   (148,941)   17.20   (255,690)   11.99
   Options canceled........  (2,290,959)    9.68   (120,700)   24.26   (265,880)   17.82
                             ----------           ---------           ---------
   Shares under option, end
    of year................  33,903,244   $ 1.85  2,135,719   $26.33  1,770,560   $21.87
                             ==========           =========           =========
   Shares exercisable......  18,420,794   $ 1.30    512,999   $18.79    300,710   $14.77
</TABLE>

    Options available for future grants under the plans were 4.2 million, 497
  thousand, and 1.0 million at March 31, 1999, 1998, and 1997, respectively.

    The fair market value of each option granted during 1999, 1998, and 1997
  is estimated on the date of grant using the Black-Scholes option-pricing
  model with the following weighted average assumptions: expected volatility
  of 45% in 1999, 40% in 1998 and 39% in 1997, risk-free interest rate of
  5.38% in 1999, 6% in 1998 and 6.59% in 1997, expected life of 5 years in
  1999, 7 years in 1998 and 1997, and a dividend yield of 0%. The Weighted
  Average Fair Value of options granted, net of forfeitures, during the years
  1999, 1998 and 1997 was $1.673, $19.20 and $18.68, respectively.

    The following table summarizes information about currently outstanding
  and exercisable stock options at March 31, 1998:

<TABLE>
<CAPTION>
                                                             Weighted
                                                 Number of    Average   Weighted
                                                  Options    Remaining  Average
                                                Outstanding Contractual Exercise
   Range of Exercise Price                      At 3/31/99     Life      Price
   -----------------------                      ----------- ----------- --------
   <S>                                          <C>         <C>         <C>
   $0.00 - $1.00...............................  6,914,880     4.926     $0.737
   $1.00 - $2.00............................... 11,507,153     7.490      1.597
   $2.00 - $3.25............................... 15,481,211     9.197      2.542
                                                ----------
     Total..................................... 33,903,244     7.746     $1.853
                                                ==========
</TABLE>

    The Company applies ABP Opinion 25 and related interpretations in
  accounting for its plans. In October 1995, the Financial Accounting
  Standards Board issued Statement of Financial Accounting Standards No. 123,
  "Accounting for Stock-Based Compensation" ("FAS123"), which is effective
  for transactions entered into for fiscal years that begin after December
  15, 1995. FAS123 established a fair value-based method of accounting for
  stock-based compensation plans. In adopting FAS123 in 1997, the Company
  elected footnote disclosure only. Accordingly, no compensation cost has
  been recognized for its stock option plans and its stock purchase plan
  under FAS123. Had compensation cost for the Company's

                                     C-20
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  stock-based compensation plans been recorded based on the fair value of
  awards or grant date consistent with the method prescribed by FAS123, the
  Company's net income and earnings per share would have been changed to the
  pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                  1999              1998             1997
                            ----------------  ---------------- ----------------
                               As      Pro       As      Pro      As      Pro
                            Reported  Forma   Reported  Forma  Reported  Forma
                            -------- -------  -------- ------- -------- -------
                                  Amounts in thousands except per share
   <S>                      <C>      <C>      <C>      <C>     <C>      <C>
   Net income..............  $6,445  $(7,510) $41,776  $38,441 $29,849  $27,863
   Net income per share:
     Basic.................  $ 0.06  $ (0.07) $  2.49  $  2.29 $  1.74  $  1.62
     Diluted...............  $ 0.06  $ (0.07) $  2.40  $  2.20 $  1.66  $  1.55
</TABLE>

    The effect of applying FAS123 in this pro forma disclosure is not
  indicative of future amounts. FAS123 does not apply to awards prior to
  1995; and additional awards in future years are anticipated.

P. SHAREHOLDER RIGHTS PLAN

    In February 1989 the Board of Directors adopted a Shareholder Rights Plan
  and declared a dividend distribution of one Right for each outstanding
  share of Dynatech's common stock. The Plan as amended entitled a qualifying
  shareholder to buy shares of Dynatech junior participating cumulative
  preferred stock in the case of an acquisition of, or tender offer for, more
  than a specified percentage of Dynatech's common stock.

    All outstanding Rights issued and outstanding under the Rights Agreement
  and the Rights Agreement terminated immediately prior to the effective time
  of the Merger and no shares of Common Stock issued on or after the
  effective time of the Merger have or will have any Rights associated with
  them under the Rights Agreement.

Q. COMMITMENTS AND CONTINGENCIES

    The Company has operating leases from continuing operations covering
  plant, office facilities, and equipment which expire at various dates
  through 2006. Future minimum annual fixed rentals required during the years
  ending in fiscal 2000 through 2004 under noncancelable operating leases
  having an original term of more than one year are $8.9 million, $7.5
  million, $6.2 million, $5.1 million, and $4.2 million, respectively. The
  aggregate obligation subsequent to fiscal 2004 is $2.7 million. Rent
  expense was approximately $9.2 million, $8.1 million, and $6.2 million in
  fiscal 1999, 1998, and 1997, respectively.

    The Company is a party to several pending legal proceedings and claims.
  Although the outcome of such proceedings and claims cannot be determined
  with certainty, the Company's counsel and management are of the opinion
  that the final outcome should not have a material adverse effect on the
  Company's operations or financial position.

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

                                     C-21
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

R. NONRECURRING CHARGES

    The components of nonrecurring expenses include the following:

<TABLE>
<CAPTION>
                                                                    1997
                                                            --------------------
                                                            Amounts in thousands
   <S>                                                      <C>
   Incomplete technology...................................       $20,627
   Intangible writeoffs....................................         7,149
                                                                  -------
     Total.................................................       $27,776
                                                                  =======
</TABLE>

S. PRO FORMA INCOME STATEMENT

    On December 31, 1996, the Company acquired substantially all of the
  assets and assumed certain liabilities of Itronix Corporation ("Itronix")
  located in Spokane, Washington, for $65.4 million in cash. As a percentage
  of sales, the gross margin and selling, general and administrative expenses
  of Itronix are lower than the consolidated financial results of the Company
  prior to the acquisition. Therefore, the pro forma income statements below
  reflect a lower gross margin and selling, general and administrative
  expenses as a percent of consolidated sales. Hence, in order to demonstrate
  the Company's operating performance versus the previous years, the
  following unaudited pro forma information presents a summary of
  consolidated results of operations of the Company as if the acquisition had
  occurred at the beginning of fiscal 1996, with pro forma adjustments to
  give effect to amortization of goodwill and intangibles, interest expense
  on acquisition debt, and certain other adjustments, together with related
  income tax effects. (In thousands except per share data).

<TABLE>
<CAPTION>
                                     1997
                             --------------------
                             Amounts in thousands
   <S>                       <C>
   Sales...................        $426,234
   Cost of sales...........         183,076
                                   --------
   Gross profit............         243,158
   Selling, general & ad-
    ministrative expense...         122,232
   Product development ex-
    pense..................          48,515
   Nonrecurring charges....           7,149
   Amortization of intangi-
    bles...................           8,853
                                   --------
   Operating income........          56,409
   Interest expense........          (3,284)

   Interest income.........           2,785
   Other income, net.......             633
                                   --------
   Income from continuing
    operations before in-
    come taxes.............          56,543
   Provision for income
    taxes..................          24,974
                                   --------
   Income from continuing
    operations.............        $ 31,569
                                   ========
</TABLE>

                                     C-22
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                                                                    1997
                                                            --------------------
                                                            Amounts in thousands
   <S>                                                      <C>
   Income per share:
     Basic.................................................        $ 1.84
     Diluted...............................................        $ 1.74
   Weighted average shares:
     Basic.................................................        17,200
     Diluted...............................................        18,028
</TABLE>

T. SEGMENT INFORMATION AND GEORGRAHIC AREAS

    Segment Information. The Company operates in three business segments:
  communications test, industrial computing and communications, and visual
  communications applications. The communications test segment, through the
  Company's TTC subsidiary, provides communications test instruments to
  communications service providers, long-distance companies, and competitive
  access providers, among others. TTC's broad test and analysis product line
  ranges from portable units to centralized test and monitoring systems
  installed in telephone company central offices.

    The industrial computing and communications segment provides computer
  products to the ruggedized computer market. The Company's ICS subsidiary
  provides computer products and systems designed to withstand excessive
  temperatures, dust, moisture, and vibration in harsh operating
  environments. The Company's Itronix subsidiary sells ruggedized portable
  communications and computing devices used by field service workers.

    The Company's visual communications segment is comprised primarily by
  Airshow, a subsidiary that manufactures passenger cabin video information
  display systems and information services; and da Vinci, which manufactures
  digital color enhancement systems used in the process of transferring film
  images into electronic signals--a process commonly used to transfer film
  images to video.

    Corporate EBIT is comprised of corporate general and administrative
  expense that has not been allocated to each segment. Corporate expenses
  exclude any non-recurring items such as recapitalization-related costs,
  non-recurring expenses, amortization of unearned compensation, and gain on
  sale of subsidiary. Corporate assets are comprised primarily of cash,
  deferred financing fees, and deferred taxes.

    The Company is a multi-national corporation with continuing operations
  outside the United States consisting of distribution and sales offices in
  Germany, England, France and the Pacific Rim.

    The accounting policies for the segments are the same as those described
  in the summary of significant accounting policies. See "Note E. Summary of
  Significant Accounting Policies."

    In fiscal 1997 and fiscal 1998, no single customer accounted for more
  than 10% of sales. In fiscal 1999, however, the Company recognized revenue
  equal to approximately 13% of consolidated sales from one customer.

                                     C-23
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    Segment Information. During the fourth quarter of fiscal 1999 the Company
  adopted FAS 131 which establishes standards for the reporting of operating
  segments in the financial statements. The Company measures the performance
  of its subsidiaries by the their respective earnings before interest and
  taxes ("EBIT"). The information below includes sales and EBIT (excluding
  non-recurring items) for the three segments the Company participates in:
  communications test, industrial computing and communications, and visual
  communications.

<TABLE>
<CAPTION>
                      SEGMENT                       1999      1998      1997
                      -------                     --------  --------  --------
   <S>                                            <C>       <C>       <C>
   Communications test:
     Bookings.................................... $260,722  $233,934  $214,227
     Sales.......................................  238,942   240,432   211,310
     Earnings before interest & taxes............   40,656    48,395    42,811
     Total assets................................   71,453    78,586    70,857
     Capital expenditures........................    5,147     8,898     6,461
   Industrial computing & communications:
     Bookings.................................... $253,818  $162,784  $ 82,449
     Bookings on a pro forma basis...............                      146,271
     Sales.......................................  193,322   154,993    78,342
     Sales on a pro forma basis..................      --        --    142,164
     Earnings before interest & taxes............   18,793     3,479     3,856
     EBIT on a pro forma basis...................      --        --      6,795
     Total assets................................   93,753    94,724    90,469
     Capital expenditures........................    2,967     4,586     1,653
   Visual communications:
     Bookings.................................... $ 95,785  $ 82,385  $ 77,790
     Sales.......................................   90,590    77,523    72,760
     Earnings before interest & taxes............   29,259    20,171    17,820
     Total assets................................   41,748    16,869    20,405
     Capital expenditures........................    3,029     2,349     1,973
   Corporate:
     Loss before interest & taxes (a)............ $ (3,624) $ (3,029) $ (3,234)
     Total assets................................  141,150    97,951    67,279
     Capital expenditures........................      180        46        89
   Total Company:
     Bookings.................................... $610,325  $479,103  $374,466
     Sales.......................................  522,854   472,948   362,412
     Earnings before interest & taxes (a)........   85,084    69,016    61,253
     Total assets................................  348,104   288,130   249,010
     Capital expenditures........................   11,323    15,879    10,176
</TABLE>
  --------
  (a) Excludes recapitalization-related costs, non-recurring expenses,
      amortization of unearned compensation, and gain on sale of subsidiary;
      includes corporate general and administrative expense not allocated to
      each segment.

                                     C-24
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    Geographic Information. Information by geographic areas for the years
  ended March 31, 1999, 1998, and 1997 is summarized below:

<TABLE>
<CAPTION>
                                                         Outside U.S.
                                                United   (principally
                                                States     Europe)    Combined
                                               --------  ------------ --------
                                                    Amounts in thousands
   <S>                                         <C>       <C>          <C>
   Sales to unaffiliated customers
     1999..................................... $502,611*   $20,243    $522,854
     1998.....................................  451,360*    21,588     472,948
     1997.....................................  340,603*    21,809     362,412
   Income (loss) before taxes from continuing
    operations
     1999..................................... $ 13,900    $  (621)   $ 13,279
     1998.....................................   69,772    $ 1,035    $ 70,807
     1997.....................................   38,486     (3,052)     35,434
   Long-lived assets (a) at
     March 31, 1999........................... $112,662    $   811    $113,473
     March 31, 1998...........................   69,584        865      70,449
     March 31, 1997...........................   70,985        781      71,766
</TABLE>
  --------
  *  Includes export sales of $55,219, $54,552, and $48,959 in 1999, 1998 and
     1997, respectively.
  (a) Excludes deferred taxes.

    Currency Income. Net income in fiscal 1999, 1998, and 1997 included
  currency gains (losses) of approximately $9,800, $12,600, and $99,300,
  respectively.

U. SUMMARY OF OPERATIONS BY QUARTER (UNAUDITED)

<TABLE>
<CAPTION>
                                                      FY 1999
                                    First     Second   Third    Fourth    Year
                                   --------  -------- -------- -------- --------
                                   (Amounts in thousands except per share data)
   <S>                             <C>       <C>      <C>      <C>      <C>
   Sales.........................  $109,143  $123,601 $136,781 $153,329 $522,854
   Gross profit..................    62,989    70,936   76,731   83,626  294,282
   Net income (loss).............   (11,933)    3,661    6,949    7,768    6,445
   Income (loss) per common share
     Basic.......................  $  (0.19) $   0.03 $   0.06 $   0.06 $   0.06
     Diluted.....................     (0.19)     0.03     0.05     0.06     0.06
   Market Share Price(b)--High...  $  4.312  $  3.438 $  3.000 $  3.500
            --Low................     3.125     2.687    2.375    2.718
</TABLE>

                                     C-25
<PAGE>

                             DYNATECH CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                                                     FY 1998
                                    First    Second   Third    Fourth    Year
                                   -------- -------- -------- -------- --------
   <S>                             <C>      <C>      <C>      <C>      <C>
   Sales.......................... $104,320 $115,856 $133,138 $119,634 $472,948
   Gross profit...................   61,683   65,044   74,873   65,826  267,426
   Net income (loss)..............    8,982   10,512   12,735    9,547   41,776
   Income (loss) per common share
     Basic........................ $   0.54 $   0.63 $   0.76 $   0.57 $   2.49
     Diluted......................     0.52     0.60     0.73     0.55     2.40
   Market Share Price(a)--High.... $  41.88 $  41.94 $  47.31 $  48.50
            --Low.................    29.00    34.38    34.00    46.19
</TABLE>
  --------
  (a) From January 28, 1997 to May 21, 1998, shares of Common Stock of the
      Company were traded on the New York Stock Exchange. Prior to January
      28, 1997, shares of Common Stock of the Company were traded on the
      Nasdaq--National Market. No cash dividends were paid on shares of
      Common Stock of the Company.
  (b) As a result of the Merger on May 21, 1998, trading in the Old Common
      Stock was halted and the Common Stock is traded only in the over-the-
      counter market. The market share prices reflect the high and low close
      prices after May 21, 1998.

                                     C-26
<PAGE>

                                                                     SCHEDULE II

                              DYNATECH CORPORATION

                       VALUATION AND QUALIFYING ACCOUNTS

               For the years ended March 31, 1999, 1998, and 1997

Reserve for Doubtful Accounts (in thousands)
<TABLE>
<S>                                                                      <C>
Balance, March 31, 1996................................................. $  957
  Additions charged to income...........................................    646
  Writeoff of uncollectible accounts, net...............................   (359)
  Allowances reclassified...............................................    628
                                                                         ------
Balance, March 31, 1997.................................................  1,872
  Additions charged to income...........................................    425
  Writeoff of uncollectible accounts, net...............................   (533)
                                                                         ------
Balance, March 31, 1998.................................................  1,764
  Additions charged to income...........................................    483
  Writeoff of uncollectible accounts, net...............................   (613)
                                                                         ------
Balance, March 31, 1999................................................. $1,634
                                                                         ======
</TABLE>
<PAGE>

                                                                      APPENDIX D

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit No.
 -----------
 <C>         <S>
  2.1        Agreement and Plan of Merger, dated as of December 20, 1997, by
             and between CDRD Merger Corporation and Dynatech Corporation.(3)

  2.2        Agreement and Plan of Merger, dated May 18, 1998, between TTC
             Reorg Corp. and Telecommunications Techniques Co., LLC.(2)

  2.3        Agreement and Plan of Merger, dated May 21, 1998, between TTC
             Merger Co. LLC and Telecommunications Techniques Co., LLC.(2)

  3.1        Restated Articles of Organization of Dynatech Corporation.

  3.2        Bylaws of Dynatech Corporation.(1)

  4.1        Indenture, dated May 21, 1998, among Dynatech Corporation, TTC
             Merger Co. LLC and State Street Bank and Trust Company, as
             Trustee.(2)

  4.2        Form of 9 3/4% Senior Subordinated Note due 2008 (included in
             Exhibit 4.1).

  4.3        First Supplemental Indenture, dated May 21, 1998, between
             Telecommunications Techniques Co., LLC and State Street Bank and
             Trust Company, as Trustee.(2)

  4.4        Registration Rights Agreement, dated May 21, 1998, by and Among
             Dynatech Corporation, Telecommunications Techniques Co., LLC,
             Credit Suisse First Boston Corporation and J.P. Morgan Securities
             Inc. (2)

 10.1        Agreement and Plan of Merger, dated as of December 20, 1997, by
             and between CDRD Merger Corporation and Dynatech Corporation.(3)

 10.2        Agreement and Plan of Merger, dated May 18, 1998, between TTC
             Reorg Corp. and Telecommunications Techniques Co., LLC.(2)

 10.3        Agreement and Plan of Merger, dated May 21, 1998, between TTC
             Merger Co., LLC and Telecommunications Techniques Co., LLC.(2)

 10.4        Credit Agreement, dated May 21, 1998, among Dynatech Corporation,
             TTC Merger Co. LLC, the lenders named therein, Morgan Guaranty and
             Trust Company of New York, as administrative agent, Credit Suisse
             First Boston, as syndication agent, and The Chase Manhattan Bank,
             as documentation agent.(2)

 10.5        Guarantee and Collateral Agreement, dated as of May 21, 1998,
             among Dynatech Corporation, Telecommunications Techniques Co., LLC
             and certain of its subsidiaries and Morgan Guaranty and Trust
             Company of New York.(2)

 10.6        Indemnification Agreement, dated May 21, 1998, among Dynatech
             Corporation, Telecommunications Techniques Co., LLC, Clayton,
             Dubilier & Rice, Inc. and Clayton, Dubilier & Rice Fund V Limited
             Partnership.(2)

 10.7        Consulting Agreement, dated May 21, 1998, by and among Dynatech
             Corporation, Telecommunications Techniques Co., LLC and Clayton,
             Dubilier & Rice, Inc.(2)

 10.8        Tax Sharing Agreement, dated May 21, 1998, between Dynatech
             Corporation and Telecommunications Techniques Co., LLC.(2)

 10.9        Registration Rights Agreement, dated May 21, 1998, by and among
             Dynatech Corporation, Clayton, Dubilier & Rice Fund V Limited
             Partnership, Mr. Reno, the Suzanne D. Reno Trust and the John F.
             Reno Trust.(2)

 10.10       Assignment and Assumption Agreement, dated May 21, 1998, between
             Dynatech Corporation and Telecommunications Techniques Co., LLC.(2)

</TABLE>


                                      D-1
<PAGE>

<TABLE>
<CAPTION>
 Exhibit No.
 -----------
 <C>         <S>
 10.11       Purchase Agreement, dated May 14, 1998, among Dynatech
             Corporation, TTC Merger Co., LLC, Credit Suisse First Boston
             Corporation and J.P. Morgan Securities, Inc.(2)

 10.12       Purchase Agreement Supplement, dated May 21, 1998, between
             Dynatech Corporation, Telecommunications Techniques Co., LLC.,
             Credit Suisse First Boston Corporation and J.P. Morgan Securities,
             Inc.(2)

 10.13       Assumption Agreement, dated May 21, 1998, among Dynatech
             Corporation, TTC Merger Co., LLC, and Telecommunications
             Techniques Co., LLC and consented to by Morgan Guaranty Trust
             Company of New York, as administrative agent.(1)

 10.14       Amended and Restated Employment Agreement, entered into November
             1, 1998, by and between Dynatech Corporation and John F. Reno.(4)

 10.15       Amended and Restated Employment Agreement, entered into November
             1, 1998, by and between Dynatech Corporation and Allan M.
             Kline.(4)

 10.16       Amended and Restated Employment Agreement, entered into November
             1, 1998, by and between Dynatech Corporation and John R.
             Peeler.(4)

 10.17       Form of Letter Agreement with John A. Mixon and Certain Other
             Officers.(1)

 10.18       Form of Management Equity Agreement with Mr. Reno.(1)

 10.19       Form of Management Equity Agreement with Messrs. Kline and
             Peeler.(1)

 10.20       Form of Management Equity Agreement with Mr. Mixon and Certain
             Other Officers.(1)

 10.21       Form of Nondisclosure, Noncompetition and Nonsolicitation
             Agreement.(1)

 10.22       Amendment No. 1, dated as of December 20, 1997, to the Shareholder
             Rights Agreement, dated as of February 16, 1989, as amended and
             restated as of March 12, 1990, between Dynatech Corporation and
             BankBoston, N.A., as Rights Agent.(7)

 10.23       Dynatech Corporation 1992 Stock Option Plan.(5)

 10.24       Dynatech Corporation Amended and Restated 1994--Stock Option and
             Incentive Plan.(6)

 10.25       Dynatech Corporation Non-Employee Directors Stock--Incentive
             Plan.(6)

 10.26       Retirement Agreement between Dynatech Corporation and John F.
             Reno, dated as of May 19, 1999

 21          Subsidiaries of Dynatech Corporation

 23          Consent of Independent Accountants

 27          Financial Data Schedule

</TABLE>

--------
(1) Incorporated by reference to Dynatech Corporation Form 10-K for the fiscal
    year ended March 31, 1998 (File No. 001-12657).
(2) Incorporated by reference to Dynatech Corporation's Registration Statement
    on Form S-4 (Registration No. 333-60893).
(3) Incorporated by reference to Dynatech Corporation's Registration Statement
    on Form S-4 (File No. 333-44933).
(4) Incorporated by reference to Dynatech Corporation Form 10-Q for the
    quarter ended December 31, 1998 (File No. 1-12657).
(5) Incorporated by reference to Dynatech Corporation Form 10-K for the fiscal
    year ended March 31, 1992.
(6) Incorporated by reference to Dynatech Corporation's Registration Statement
    on Form S-8 (File No. 333-75797).
(7) Previously filed.

                                      D-2