<PAGE>   1



================================================================================

                     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, 1997
                          Commission file number 0-7438

                              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: (617) 272-6100

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

                                      None

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

                     Common Stock, par value $.20 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 June 6, 1997, the aggregate market value of the Common Stock of the
registrant held by non-affiliates was $610,475,323.

At June 6, 1997 there were 16,675,563 shares of Common Stock of the registrant
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 1997 Annual Report to Shareholders are incorporated by reference
in Parts I and II.

Portions of the proxy statement for the 1997 Annual Meeting of Shareholders are
incorporated by reference in Part III.

================================================================================


<PAGE>   2


                                     PART I

ITEM 1.  BUSINESS.

PRODUCTS AND SERVICES

         Incorporated in Massachusetts in 1959, Dynatech Corporation (the
"Company") has its principal offices at 3 New England Executive Park,
Burlington, Massachusetts 01803. Production facilities are located in eight
states.

         The Company is a global communications equipment firm engaged in the
business of developing, manufacturing, marketing, and selling network technology
solutions. These solutions can be categorized into three product types:
Communications Test, Industrial Computing and Communications Systems, and Visual
Communications. In fiscal 1997, these accounted for 58%, 22%, and 20%,
respectively, of consolidated revenues.

                               COMMUNICATIONS TEST

         The Company provides a broad range of test and analysis products,
service, and support which enable customers worldwide to develop, manufacture,
install, and maintain communications networks and equipment. These products are
designed, manufactured, and marketed by Telecommunications Techniques
Corporation (TTC), Tele-Path Instruments, Inc. (TPI), and Synergistic Solutions
Inc. (SSI), wholly owned subsidiaries of the Company based in Maryland,
Virginia, and Georgia, respectively.

         The market for these products comprise: i) service providers including
the Bell operating companies, long-distance companies, competitive access
providers, cable television operators, utility companies and communications
service providers in Europe, Latin America, and Asia; ii) service users
including large corporate and government network operators; and iii)
manufacturers of communications equipment and systems.

         Since the divestiture of AT&T in 1984, the amount of digital traffic
transmitted through the worldwide telecommunications system has increased
dramatically, in part due to the proliferation of computer networks and the
increased desire to communicate electronically. Growth of LAN backbones and
interconnections, high-speed interconnects, Internet access, and
cellular/wireless communications systems are leading to the deployment of new
high-speed transmission technologies such as Synchronous Optical Network
(SONET), Asynchronous Transfer Mode (ATM), frame relay, and Integrated Services
Digital Network (ISDN). The market for the Company's products is driven in part
by the rapid deployment of these technologies and other new communications
standards, as well as efforts on the part of communication service providers and
users to improve service quality and to reduce costs. Deregulatory activity
around the world, such as the Telecommunications Act of 1996 in the United
States, has and will continue to increase competition among service providers
and will further drive demands for more integrated and intelligent test
solutions.

         The Company's communications test products are used in two key
categories of applications: Transmission Testing and Network Services Testing.
Transmission Testing products are geared primarily to long-distance and local
service providers for testing the digital transport, digital loop, and the
terrestrial portion of wireless communications networks. Network Services
Testing products are used by service providers as well as service users to test
Datacom Services (the data services provided to businesses) and Internetworking
(maintaining the interconnections between LANs and WANs).

         The Company sells its communications test products under the following
brand names: T-BERD(R), FIREBERD(R), CENTEST(R), INTERCEPTOR(R), FIBERSCAN(R),
TPI(R), and SSI(R).

Transmission Testing

         Digital transport test products analyze high-speed ATM, SONET/SDH, DS3,
DS1, and DS0 transmission circuits while measuring multiple performance
parameters. The products are used by service 


                                       2

<PAGE>   3


providers to determine the quality of newly installed high-speed circuits by
performing various measurements over a timed test period.

         The Company's digital transport products also serve the international
telecommunications industry by providing portable digital testing capability for
transmission systems that operate in accordance with the Consultative Committee
on International Telephone and Telegraph (CCITT) standards. These products,
marketed under the INTERCEPTOR name, comply with International
Telecommunications Union (ITU) standards, which are used nearly everywhere that
North American standards are not.

         Digital loop test products test the link between a service provider's
central office and the customer premises. Technicians use these products to
perform fault location and data quality testing of voice or data circuits,
whether carried on copper wire pairs or fiber optic cable.

         The Company's rack-mounted centralized test systems are used in the
service provider central-office environment to test high-speed communication
circuits remotely. The CENTEST model 650 allows monitoring and testing of DSO,
DS1, and DS3 signals, respectively, for ongoing maintenance, so that network
trouble spots can be quickly identified and mobile repair crews can be
efficiently directed from a central location.

         The Company markets, develops, and sells products designed to test the
terrestrial portion of wireless networks. In fiscal 1997, the Company introduced
the T-BERD 2207 analyzer, which is a modular, battery-powered, hand-held test
instrument designed for the installation and maintenance of PCS-1900 (GSM)
digital wireless networks. In addition to performing physical layer testing and
in-service monitoring of T1 circuit connections, these instruments are used to
verify proper operation and voice quality of signals transmitted between
wireless base stations and mobile switch centers.

         The Company also sells modular, portable fiber optic test instruments
that allow both central office and field technicians to isolate fiber optic
cable breaks and measure degradation caused by aging connectors and related
components. The instruments include an optical time domain reflectometer used to
locate cable breaks and damage, an optical power meter used to determine the
signal levels on optical fibers, and a stable optical source.

Network Services Testing

         The Company's data communications analyzers perform up to 60
simultaneous performance and error measurements on a wide range of network
transmission equipment. For its family of FIREBERD 4000 and 6000 products, the
Company offers a wide range of test interfaces, including Euro-ISDN (a leading
European communications service), which enable users to tailor the instrument to
specific test requirements. The Company also supplies hand-held, single-function
test sets for installing and maintaining ISDN and frame relay circuits. In
addition, the Company introduced in fiscal 1997 the T-BERD 950 communications
analyzer that combines multiple voice and data services test capabilities into a
single, portable test instrument. This instrument is designed for field service
technicians seeking a single test set, rather than multiple instruments, for
turning up and troubleshooting a number of different types of circuits,
equipment, and services.

         The Company markets internetwork protocol analyzers to test and verify
interconnections between LANs and WANs. The FIREBERD 500, a Windows-based
modular test platform introduced in fiscal 1995, is capable of analyzing ATM,
frame relay, FDDI, ISDN, CDPD (a cellular protocol), TR-303, and SS7
communications networks. The FIREBERD 500 enables network managers to monitor
network behavior and to pinpoint problems within the internetwork.

                     INDUSTRIAL COMPUTING AND COMMUNICATIONS

         The Company's Industrial Computing and Communications business
addresses two areas of the worldwide ruggedized computer market: 1) computer
products and systems used by engineers, scientists, and others in industrial or
otherwise harsh environments; and 2) lightweight computing and 


                                       3
<PAGE>   4


communications devices used by mobile, field-service organizations such as
telephone companies and utilities.

         Sold through direct marketing channels under the name of Industrial
Computer Source, the Company provides a broad range of industrial computer,
input/output and accessory products, and communications devices which are
designed to operate continuously and reliably under adverse conditions. These
products are built to withstand disruptive electrical interference, vibration,
extremes of heat and cold, airborne dust, moisture and other hazards.

         Industrial Computer Source products can be classified into the
following categories: ruggedized computer system chassis, graphical user
interfaces, communicating devices, storage and retreival systems, and
environmental sensing devices.

         Ruggedized computer system chassis are computer enclosures or housings
that protect either industry-standard motherboards or passive backplane
technology for industrial or telecommunications applications. Passive backplanes
contain no electronically active components, but act as a place to plug in
components or cards such as central processing unit cards. Generally, backplane
architectures offer greater flexibility than standard PCs and up to three times
the feature card capacity.

         Graphical industrial user interface products include industrial color
and monochrome monitors and accessory products. In a production plant
environment, these products can display production process information on a
computer screen to simplify man-to-machine interaction with plant machinery and
processes.

         The Company sells a complete selection of communicating devices and
networking products such as LAN adapters, transceivers and repeaters, bridges,
hubs, trunk access units, data compressors, as well as other application
specific network products and accessories. These products are compatible with
most popular network protocols and meet the increasing demands of network
managers in a variety of application environments from computer-integrated
manufacturing to telecommunications. In these environments, data are being
linked for the purpose of analyzing, controlling, or reporting on a variety of
parameters such as a factory production process.

         The Company provides storage and retrieval systems such as its Model
6533-RMDB Series of rack-mount drive bays which, when loaded with up to eight
half-height disk drives of various types, can provide up to 14 gigabytes of
storage capacity. These are suited to applications such as telecommunications
which require large amounts of memory storage for voice, video, and data
communications processing. The Company's line of storage and retrieval products
include floppy and hard drives in all popular formats, CD-ROM drives, SIMM
memory modules, RAID and tape backup systems.

         Environmental sensing devices are used to convert real world "analog"
process signals such as temperature and flow into digital data that can be
communicated via the network to other processing units for local or remote
analysis, control, reporting, storage or any other use related to improving
process efficiency.

         Through its subsidiary, Itronix Corporation, which was acquired on
December 31, 1996, the Company is a leading supplier of lightweight, networked
computing and communications devices used by mobile, field-service technicians.
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.

         Itronix targets telephone companies, utilities, and other organizations
seeking to increase the efficiency of their field-service groups. 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 


                                       4
<PAGE>   5

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.

         A critical feature of the Itronix product is its ability to operate
reliably in adverse environments and work conditions. This capability is due to
a proprietary design that allows the product to withstand mechanical shock,
vibration, moisture, and extreme temperature. In addition, the product can be
equipped with a landline telephone modem option and integrated CDPD, RAM,
Cellular, ARDIS wireless radio capability to facilitate simultaneous two-way
voice and data communication from virtually anywhere. Other features include
intelligent battery-life management and touch screen functionality.

                              VISUAL COMMUNICATIONS

         The Company sells a range of hardware and software used in the
manipulation and display of digital video and graphics. These products are sold
under the names Parallax Graphics, DataViews, AIRSHOW, daVinci Systems, and
ComCoTec.

         Parallax Graphics' products combine full-color live video using
real-time digital video compression with computer graphics and text for such
applications as product training, display of financial market information,
geographic display, and information systems. These products include a live video
windowing system for SUN Microsystems, Hewlett-Packard, DEC, and IBM
workstations.

         DataViews software is used in the development of custom graphic user
interfaces for various UNIX-based computer systems. Applications for this
software include the creation of custom graphics for displaying real-time data
such as found in manufacturing process control and communications network
analysis.

         AIRSHOW passenger cabin video information systems display position
defining maps, airport terminal charts, and in-flight information.

         daVinci Systems line of digital color correction systems are used to
enhance and color-match video program and commercial material as it is
transferred from film origination to video tape for editing and distribution.
These systems are sold to teleproduction and commercial production facilities.

         Dynatech also offers software solutions for the pharmacy industry, via
its ComCoTec Rx Claims, an on-line prescription claims adjudication system.

DISCONTINUED OPERATIONS AND DIVESTED BUSINESSES

         During fiscal 1997, the Company completed its formal plan to sell
certain discontinued operations. Ten businesses were sold during fiscal 1997.

CUSTOMERS AND MARKETING

         Dynatech markets its products to a diverse customer base. The Company's
products are sold to a broad range of communications service providers,
including Regional Bell Operating Companies, 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 and educational
organizations.

         Most of the Company's revenues are generated through a direct sales
force. 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.

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 


                                       5
<PAGE>   6

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.

MAJOR CUSTOMERS

         The Company's sales of goods and services to various agencies of the
United States federal government were approximately $17,484,000, $12,785,000,
and $20,040,00 in fiscal years ended March 31, 1997, 1996, and 1995,
respectively. No single customer accounted for more than 10% of sales in any of
these three years.

INTERNATIONAL

         The Company maintains marketing subsidiaries or branches in major
countries in Western Europe and Asia and has distribution agreements in many
other countries where sales volume does not warrant a direct sales organization.
The Company's foreign sales from continuing operations (including exports from
the United States directly to foreign customers) were approximately 20%, 20%,
and 23% of consolidated net sales in fiscal years 1997, 1996, and 1995,
respectively.

         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 identifiable assets by geographic
area is found in the 1997 Annual Report to Shareholders which is incorporated
herein by reference.

PRODUCT DEVELOPMENT

         As the technologies in the Company's markets are continually changing,
the Company's success depends on its ability to develop new products and improve
existing ones. All businesses within the Company maintain product development
capability focused on and experienced in the technologies important to the
specific business. Consolidated product development expense in the years ended
March 31, 1997, 1996, and 1995 were as follows: $43,267,000, $36,456,000, and
$30,585,000, respectively.

BACKLOG

         The Company's backlog of orders at March 31, 1997 and 1996 were
$71,707,000 and $57,317,000, respectively.

EMPLOYEES

         The Company employs approximately 2,050 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.
The Company considers its labor relations to be good.

PATENTS AND TRADEMARKS

         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. While the Company considers its patent position important, it believes
its technical marketing and manufacturing capabilities are of greater
competitive significance.

         Fireberd, T-Berd, Centest, Interceptor, Fiberscan, and Airshow are
among registered trademarks which the Company considers valuable assets.

         Dynatech 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.


                                       6
<PAGE>   7


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.

         Some components and assemblies are purchased in Asia under volume
contracts.

ENVIRONMENTAL FACTORS

         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.

EXECUTIVE OFFICERS OF THE REGISTRANT

         The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                                                                                                        Executive
                                                                                                        Officer
Name                                Current Position                                      Age           Since
----                                ----------------                                      ---           ---------
<S>                                 <C>                                                   <C>           <C> 
John F. Reno                        Chairman,                                             58            1979
                                    President and Chief Executive Officer

Allan M. Kline                      Corporate Vice President,                             52            1996
                                    Chief Financial Officer and Treasurer

John R. Peeler                      Corporate Vice President                              42            1992
                                    Communications Test Business

George A. Merrick                   Corporate Vice President                              49            1994
                                    Display Business

Samuel W. Tishler                   Corporate Vice President                              59            1997
                                    Corporate Development

John A. Mixon                       Corporate Vice President                              51            1989
                                    Human Resources

Robert W. Woodbury, Jr.             Corporate Vice President                              40            1996
                                    Corporate Controller

Mark V. B. Tremallo                 Corporate Vice President                              40            1997
                                    General Counsel
</TABLE>

         Officers are elected annually by the Board of Directors at its meeting
following the Annual Meeting of Shareholders and serve until the next annual
election or until their successors have been duly elected at any other
Director's meeting. There are no arrangements or understandings between any of
the Directors or Officers and any other person regarding election as a Director
or Officer of the Company.

         Each of the Company's Officers has served in various capacities with
the Company for more than five years, except Messrs. Kline, Tishler, Merrick,
Woodbury and Tremallo.

         Mr. Kline joined the Company in June 1996. From 1995 to 1996, he served
as Senior Vice President, Chief Financial Officer of CrossComm Corp., a
manufacturer of networking products. From 1994 to 1995, he was President of TAR
Acquisition Corp., a private investment company. From 1990 to 1994, Mr. Kline
was Senior Vice President, Chief Financial Officer for Cabot Safety Corporation,
a subsidiary of Cabot Corporation. Prior to that, he served at Leggett & Platt,
Incorporated and was a partner with Arthur Young & Company.


                                       7
<PAGE>   8

         Mr. Merrick joined the Company in September 1994. From 1990 to 1994, he
served as Executive Vice President of Worldwide Sales and Marketing at Ampex
Systems Corp., a supplier of professional video, broadcasting, and recording
products.

         Mr. Tishler joined Dynatech in September 1994. From 1988 to 1994, he
was Vice President of Raytheon Ventures, the venture capital portfolio of
Raytheon Co. From 1977 to 1986, he served as Vice President of ADL Enterprises,
a wholly owned subsidiary of Arthur D. Little, Inc. From 1970 to 1977, Mr.
Tishler was President of Harnessed Energies, Inc., a manufacturer of scientific
instrumentation.

         Mr. Woodbury joined the Company in January 1996. From 1992 to January
1996, he served as Vice President and Controller for Kollmorgen Corporation, a
manufacturer of motion control devices. From 1990 to 1992, he was Chief
Financial Officer of Kidde Fenwal, Inc., a manufacturer of fire suppression
equipment.

         Mr. Tremallo joined the Company in May 1997. From 1995 to 1997 he
served as Vice President, General Counsel and Secretary of Aearo Corporation
(formerly Cabot Safety Corporation), a manufacturer of industrial safety
products. From 1990 to 1995 he was General Counsel of Cabot Safety Corporation,
a subsidiary of Cabot Corporation.

ITEM 2. PROPERTIES.

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

Leased Facilities:
<TABLE>
<CAPTION>
Location                                Square Feet          Lease Termination
--------                                -----------          -----------------
<S>                                        <C>                      <C> 
Burlington, Massachusetts                  22,200                   1998
Germantown, Maryland                       30,000                   2006
Germantown, Maryland                       68,000                   2001
Germantown, Maryland                       98,000                   2003
Lombard, Illinois                          23,300                   1998
Northampton, Massachusetts                 22,500                   1999
Tustin, California                         24,300                   1999
Salem, Virginia                            35,900                   2004
San Diego, California                      72,860                   1999
Spokane, Washington                        66,400                   1999
</TABLE>

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

         The Company has approximately 311,000 square feet in various leased
facilities in discontinued operations.

ITEM 3. LEGAL PROCEEDINGS.

         The Company is party to several pending legal proceedings and claims,
none of which, in the opinion of management or counsel primarily responsible for
such matters, is considered to be material.

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

         None


                                       8
<PAGE>   9



                                     PART II

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

         On January 28, 1997, the Company's common stock began trading on the
New York Stock Exchange under the symbol "DYT." Prior to this date, the
Company's common stock was quoted on the Nasdaq National Market.

         The following tables set forth the quarterly high and low sale prices
per share of the Company's Common Stock for the past two years as reported by
the New York Stock Exchange, the Nasdaq National Market and as published in the
WALL STREET JOURNAL.

<TABLE>
<CAPTION>
         Fiscal Year Ended   
          March 31, 1997                  High               Low
         -----------------               ------            ------
         <S>                             <C>               <C>   
         First Quarter                   $35.00            $23.00
         Second Quarter                  $46.88            $30.75
         Third Quarter                   $58.00            $40.50
         Fourth Quarter                  $54.50            $28.00

<CAPTION>
         Fiscal Year Ended   
          March 31, 1996                  High               Low
         -----------------               ------            ------
         <S>                             <C>               <C>   
         First Quarter                   $20.50            $14.75
         Second Quarter                  $22.25            $15.13
         Third Quarter                   $17.50            $14.00
         Fourth Quarter                  $25.50            $16.00
</TABLE>


         There were approximately 959 common stockholders of record as of June
6, 1997.

         The Company has never paid a cash dividend on its Common Stock and does
not intend to make such a payment in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA.

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

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

         The information requested by this Item is attached as 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


                                       9
<PAGE>   10



                                    PART III

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 1997 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, 1997 pursuant to Rule 14a-6(b) under the
Securities and Exchange Act of 1934, as amended; said information is
incorporated herein by reference.

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 1997 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, 1997 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 1997 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, 1997 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 1997 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, 1997 pursuant to Rule 14a-6(b) under the
Securities Exchange Act of 1934, as amended; said information is incorporated
herein by reference.


                                       10
<PAGE>   11


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.

(a) Documents filed as part of this report

         (1)      Financial statements

                           I.       Consolidated Balance Sheets - March 31, 1997
                                    and 1996.

                           II.      Consolidated Statement of Operations -
                                    Fiscal Years ended March 31, 1997, 1996 and
                                    1995.

                           III.     Consolidated Statements of Shareholders'
                                    Equity - Fiscal Years Ended March 31, 1997,
                                    1996 and 1995.

                           IV.      Consolidated Statements of Cash Flows -
                                    Fiscal Years ended March 31, 1997, 1996 and
                                    1995.

                           V.       Notes to Consolidated Financial Statements.

         (2)      Financial statement schedules

                           I.       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

         (1)  A Form 8-K dated March 21, 1997 was filed by the Company
              concerning the sale of the assets of Computerized Medical Systems,
              Inc.

         (2)  A Form 8-K dated December 31, 1996, as amended on Form 8K/A, was
              filed by the Company concerning the acquisition of the assets of
              Itronix Corporation, previously a wholly owned subsidiary of
              Telxon Corporation.

         (3)  A Form 8-K dated October 21, 1996 was filed by the Company
              concerning the sale of the assets of Unex Corporation.

(c) Exhibits

         The exhibits that are filed with this report or that are incorporated
herein by reference are set forth in the Exhibit Index on page E-1.


                                       11
<PAGE>   12



                        REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and Shareholders of Dynatech Corporation:

         Our report on the consolidated financial statements of Dynatech
Corporation has been incorporated by reference in this Form 10-K from the 1997
Annual Report to Shareholders of Dynatech Corporation. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on page 11 of this Form 10-K.

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


/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 1, 1997




                                       12
<PAGE>   13
                                   APPENDIX A

FIVE-YEAR SUMMARY
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>

                                                     YEARS ENDED MARCH 31
                                      1997        1996        1995        1994        1993
--------------------------------------------------------------------------------------------
<S>                                 <C>         <C>         <C>         <C>         <C>
RESULTS OF OPERATIONS
Sales                               $362,412    $293,042    $243,078    $199,612    $190,000
Cost of sales                        137,254     111,436      91,412      72,103      65,738
                                    --------    --------    --------    --------    --------
Gross profit                         225,158     181,606     151,666     127,509     124,262
Selling, general &
   administrative expense            114,479      98,487      86,329      70,719      73,704
Product development expense           43,267      36,456      30,585      26,863      23,691
Nonrecurring charges                  27,776      16,852          --          --          --
Amortization of intangibles            6,793       5,136       5,106       5,728       5,087
                                    --------    --------    --------    --------    --------
Operating income                      32,843      24,675      29,646      24,199      21,780
Interest expense                        (828)     (1,723)     (3,919)     (3,794)     (2,229)
Interest income                        2,785       2,181       1,518       1,244       1,592
Other income, net                        634         975         850       2,198          77
                                    --------    --------    --------    --------    --------
Income from continuing operations
   before income taxes                35,434      26,108      28,095      23,847      21,220
Provision for income taxes            17,585      10,394      11,671       9,897       9,231
                                    --------    --------    --------    --------    --------
Income from continuing
   operations                         17,849      15,714      16,424      13,950      11,989
Discontinued operations, net of
   income taxes                       12,000      (1,471)      3,763     (43,933)      4,446
Extraordinary charge, net of
   income taxes                           --          --      (1,019)         --          --
                                    --------    --------    --------    --------    --------
Net income (loss)                   $ 29,849    $ 14,243    $ 19,168    $(29,983)   $ 16,435
                                    ========    ========    ========    ========    ========
Income (loss) per common share
   Continuing operations            $   0.99    $   0.86    $   0.92    $   0.75    $   0.65
   Discontinued operations              0.67       (0.08)       0.21       (2.36)       0.25
   Extraordinary charge                   --          --       (0.06)         --          --
                                    --------    --------    --------    --------    --------
                                    $   1.66    $   0.78    $   1.07    $  (1.61)   $   0.90
                                    ========    ========    ========    ========    ========

BALANCE SHEET DATA
Net working capital                 $ 80,394    $105,861    $ 91,513    $ 91,010    $118,509
Total assets                        $250,035    $205,189    $256,392    $280,553    $303,023
Long-term debt                      $  5,226    $  1,800    $  7,915    $ 33,006    $ 50,873
Shareholders' equity                $160,686    $160,719    $154,320    $142,643    $171,904
Shares of stock outstanding           16,793      17,585      17,573      18,594      18,506
Shareholders' equity per share      $   9.57    $   9.14    $   8.78    $   7.67    $   9.29

</TABLE>

                                       13

<PAGE>   14

                                   APPENDIX B

Management's Discussion and Analysis of Financial Condition and Results of
Operations

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

BUSINESS: Dynatech is a global communications equipment company focused on
network technology solutions. Its products address communications test,
industrial computing and communications, and visual communications applications.

<TABLE>

The following table and commentary should be read in conjunction with the
Consolidated Financial Statements and related Notes to Consolidated Financial
Statements.
<CAPTION>

                                                  PERCENT OF SALES        PERCENT OF CHANGE
                                                                         1997    1996     1995
                                                                          VS.     VS.      VS.
YEARS ENDED MARCH 31,                          1997     1996    1995     1996    1995     1994
-----------------------------------------------------------------------------------------------
<S>                                           <C>      <C>      <C>      <C>      <C>      <C>
Sales                                         100.0%   100.0%   100.0%   23.7%    20.5%    21.8%
Gross profit                                   62.1     62.0     62.4    24.0     19.7     18.9
Selling, general & administrative expense      31.6     33.6     35.5    16.2     14.1     22.1
Product development expense                    11.9     12.4     12.6    18.7     19.2     13.9
Nonrecurring charges                            7.7      5.8       --    64.8    100.0       --
Amortization of intangibles                     1.9      1.8      2.1    32.3      0.6    (10.9)
Operating income                                9.1      8.4     12.2    33.1    (16.8)    22.5

Income from continuing operations               4.9      5.4      6.7    13.6     (4.3)    17.7
</TABLE>

On December 31, 1996 the Company acquired 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. This incomplete technology had not reached technological
feasibility and had no alternative use. Itronix is a manufacturer of mobile
computing and communications devices, including ruggedized industrial laptop
computers, which increase the efficiency of large, mission-critical service
groups.


                                       14
<PAGE>   15

In March 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.

During fiscal 1997 the Company essentially completed the disposition of its
noncore businesses, a strategy approved by the Board of Directors in February
1996. The Company received proceeds of $110.2 million and $48.9 million in 1997
and 1996, respectively, related to these dispositions, which resulted in an
aftertax gain of $12.0 million or $0.67 per share.

FISCAL 1997 COMPARED TO FISCAL 1996

SALES: For the year ended March 31, 1997, consolidated sales from continuing
operations increased 23.7%, to $362.4 million from $293.0 million in fiscal
1996. Sales of communications test products increased 22.8%, or $39.3 million
due to increased demand for existing products and a full year of operating
results for two acquisitions made in fiscal 1996. Sales of industrial computing
and communications products increased 35.3%, or $20.4 million primarily driven
by revenue at Itronix. Sales of visual communications products increased 15.3%,
or $9.7 million principally due to continued strength in aircraft passenger
video information systems and color correction products.

Backlog from ongoing operations was $71.7 million at March 31, 1997, as compared
to $57.3 million at March 31, 1996.

International sales were 20% of consolidated sales in fiscal 1997, an increase
of 18% over consolidated sales in fiscal 1996.

GROSS PROFIT: As a percentage of consolidated sales, gross profit from
continuing operations for fiscal 1997 was 62.1%, essentially at the same level
as the prior year.

EXPENSES: Selling, general and administrative costs increased 16.2% in fiscal
1997 as compared to fiscal 1996. As a percentage of consolidated sales, selling,
general and administrative expenses decreased to 31.6% as compared to 33.6% in
the previous year. Administrative and selling expenses increased at a rate
slower than revenue growth in the communications test products as a result of
the fiscal 1996 acquisitions.

Product development expense increased $6.8 million to 11.9% of consolidated
sales, compared to 12.4% of sales in fiscal 1996. The increase was a result of
additional investment in developing core communications test products as well as
the full year effect of product development at Tele-Path Industries, Inc.
("TPI"), a subsidiary which was purchased in September 1995. Additional expense
was incurred due to the acquisition of Itronix.

Amortization of intangibles increased $1.7 million as a result of the
acquisitions in fiscal 1997 and fiscal 1996.


                                       15
<PAGE>   16

During fiscal 1997 nonrecurring charges were $27.8 million as compared to $16.9
million in 1996. The 1997 charges included $20.6 million for incomplete
technology which had not reached technological feasibility and had no
alternative use, purchased as part of the acquisition of Itronix at the end of
the third quarter. In addition, the Company recorded a noncash charge of $7.1
million related to the impairment of intangible assets, principally related to
the effects of product and distribution transitions. The charge consisted of a
$4.5 million writeoff of goodwill and a $2.6 million writeoff in product
technology.

Interest expense declined in fiscal 1997 compared to the prior year as a result
of lower average borrowings. Interest income increased in fiscal 1997 primarily
from higher average cash balances during the year.

TAXES: The effective tax rate, before one-time charges, increased in fiscal 1997
to 40.5% as compared to 39.8% in fiscal 1996, primarily due to losses generated
in foreign locations without tax benefit. The effective tax rate after one-time
charges increased to 49.6% due to limited tax benefits of these charges. These
charges included $20.6 million of incomplete technology from the Itronix
acquisition which resulted only in a federal tax savings. In addition, the
majority of the $7.1 million of intangibles written off represented goodwill
which was not deductible for tax purposes.

NET INCOME: Net income from continuing operations in fiscal 1997 was $17.8
million, or $0.99 per share, as compared to $0.86 per share in fiscal 1996. Net
income in the current year included a pretax charge of $27.8 million for
purchased incomplete technology and impaired intangible asset writeoffs with an
aftertax effect on earnings per share of ($1.10). Net income for the prior year
included a charge for of incomplete purchased technology that accounted for
$16.9 million with an aftertax effect on earnings per share of ($0.56).

FISCAL 1996 COMPARED TO FISCAL 1995

SALES: Consolidated sales from continuing operations increased 20.5% to $293.0
million from $243.1 million in fiscal 1995 as a result of increased revenue of
24.6% in domestic and 7.1% in international sales including export sales.

Sales of communications test products rose 20% due to increased demand for
existing products and increased volume generated by two acquisitions during the
year. The new acquisitions generated $16.6 million in additional revenue during
fiscal 1996. Sales of industrial computing and communications products rose 29%
driven by strong demand for these products in a broad range of markets. 

Backlog from ongoing operations was $57.3 million at March 31, 1996 as compared
to $40.3 million at March 31, 1995.


                                       16



<PAGE>   17

GROSS PROFIT: Consolidated gross profit from continuing operations for fiscal
1996 was 62.0% compared to 62.4% for the prior year. The slight reduction was
primarily driven by increased sales of industrial computing and communications
products which have a lower gross margin than the consolidated average.

EXPENSES: As a percentage of consolidated sales, selling, general and
administrative expenses decreased to 33.6% as compared to 35.5% in the previous
year. General and administrative costs increased at a rate slower than revenue
growth, primarily due to the increased revenues generated from new acquisitions.
Product development expense was 12.4% of sales in fiscal 1996, down slightly
from 12.6% in fiscal 1995 primarily due to relatively low development expenses
within newly acquired businesses. Amortization of intangibles remained
relatively unchanged. Decreases of amortization on existing businesses were
offset with the amortization costs associated with current year acquisitions.

During fiscal 1996 the Company purchased incomplete technology  activities of
TPI, resulting in a pretax charge to operations of $16.9 million. This
incomplete technology had not reached technological feasibility and had no
alternative use.

Interest expense declined compared to the prior year as a result of     
repayment of debt. Interest income increased primarily from higher average cash
balances during the course of the year.

TAXES: The effective tax rate declined in fiscal 1996 to 39.8% compared to 41.5%
as a result of the resolution of certain prior year tax rebates and utilization
of certain foreign loss carry forwards.

EXTRAORDINARY CHARGE: In February 1995 the Company recorded an extraordinary
charge of $1.7 million ($1.0 million, net of taxes), reflecting a payment
penalty for early debt redemption of its $30 million 10.15% term notes.

NET INCOME: Net income from continuing operations for fiscal 1996 was $15.7
million or $0.86 per share, as compared to $0.92 per share in fiscal 1995. Net
income in fiscal 1996 included a charge for incomplete purchased technology of
$16.9 million with an aftertax effect on earnings per share of ($0.56).

CAPITAL RESOURCES AND LIQUIDITY

The Company's consolidated cash and cash equivalents decreased by $6.3 million
during fiscal 1997. Cash provided from operations was $7.5 million, while $17.1
million was provided by investing activities and $28.5 million was used for
financing activities. The effect of exchange rates was a use of cash of $2.5
million.

The Company's investing activities in fiscal 1997 included expenditures of $10.2
million for property and equipment, primarily for the replacement of existing
equipment. In addition, the Company purchased Itronix for $65.4 million in cash
on December 31, 1996 and Advent for $3.5 million in cash in March 1997. Proceeds
from sale of businesses held for sale were $96.7 million 

                                       17

<PAGE>   18

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.

The Company's financing activities used $28.5 million of cash during the year.
The Company repurchased 1 million shares of stock during fiscal 1997 for an
aggregate of $32.7 million use of cash. The Company has 1.2 million shares left
available for repurchase, as authorized by its Board of Directors. Net
borrowings under existing lines of credit increased $2.5 million over fiscal
1996.

In April 1997 the Company entered into a new agreement with several commercial
banks which increased its borrowing capacity from $70 million to $150 million.
This agreement allows for borrowings using various instruments with interest
payable at Eurodollar rate plus an applicable margin based on the Company's
leverage ratio or base rate. Under the terms of this agreement, the outstanding
principal borrowings may convert to a term loan beginning June 30, 2000.

Inflation rates were moderate during fiscal 1997 and did not have a major impact
on operations.

Capital spending for fiscal 1998 is expected to be at approximately the same
level as 1997. The Company believes that with the cash generated from operations
and with its current and future borrowing capacity it will be able to finance
its 1998 capital expenditures, working capital requirements, and potential
acquisitions.

NEW PRONOUNCEMENTS

The Financial Accounting Standards Board issued Statement No. 128 ("FAS128"),
"Earnings per Share," which modifies the way in which earnings per share (EPS)
is calculated and disclosed. Currently, the Company discloses primary and fully
diluted EPS. Upon adoption of this standard for the interim period ending
December 31, 1997, the Company will disclose basic and diluted EPS and will
restate all prior period EPS data presented. The Company does not anticipate
this change will have a material impact on the calculation of EPS.

                                       18
<PAGE>   19
                                  APPENDIX C


CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

Assets
(Amounts in thousands except share data)
                                                                  MARCH 31
                                                              1997        1996
--------------------------------------------------------------------------------
<S>                                                         <C>         <C>     
Current assets:
   Cash and cash equivalents                                $ 39,782    $ 46,094
   Accounts receivable
      (net of allowance of $1,872 and $957, respectively)     70,930      45,367
   Inventories:
      Raw materials                                           19,423      10,210
      Work in process                                         11,376       9,381
      Finished goods                                           9,326       7,325
                                                            --------    --------
         Total inventory                                      40,125      26,916

   Other current assets                                       11,074       5,981
   Net assets of discontinued operations held for sale            --      22,824
                                                            --------    --------

         Total current assets                                161,911     147,182

Property and equipment:
   Land, building and leasehold improvements                   4,141       2,468
   Machinery and equipment                                    47,020      39,441
   Furniture and fixtures                                      9,940       6,680
                                                            --------    --------
                                                              61,101      48,589
   Less accumulated depreciation and amortization            (37,268)    (30,038)
                                                            --------    --------
                                                              23,833      18,551
Other assets:
   Intangible assets, net                                     43,813      28,406
   Other                                                      20,478      11,050
                                                            --------    --------

                                                            $250,035    $205,189
                                                            ========    ========



</TABLE>


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

                                       19

<PAGE>   20



CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

Liabilities and Shareholders' Equity
(Amounts in thousands except share data)

                                                                MARCH 31
                                                            1997        1996
-----------------------------------------------------------------------------
<S>                                                      <C>         <C>
Current liabilities:
   Notes payable and current portion of long-term debt   $    201    $    655
    Accounts payable                                       16,900       9,849
    Accrued expenses:
      Compensation and benefits                            23,912      16,120
      Taxes, other than income taxes                        1,850         834
      Deferred revenue                                      8,876       3,424
      Other                                                19,948       9,500
    Accrued income taxes                                      657         939
    Net liabilities of discontinued operations              9,173          --
                                                         --------    --------

        Total current liabilities                          81,517      41,321

Long-term debt                                              5,226       1,800
Deferred income taxes                                       1,025         531
Deferred compensation                                       1,581         818

Commitments and contingencies
Shareholders' equity:
   Serial preference stock, par value $1 per share;
      authorized 100,000 shares; none issued
   Common stock, par value $0.20 per share;
      authorized 50,000,000 shares; issued 18,605,689       3,721       3,721
    Additional paid-in-capital                              9,887      12,102
    Retained earnings                                     195,506     165,657
    Cumulative translation adjustments                     (1,247)        342
    Treasury stock, at cost; 1,812,287 and 1,020,605
      shares, respectively                                (47,181)    (21,103)
                                                         --------    --------

        Total shareholders' equity                        160,686     160,719
                                                         --------    --------

                                                         $250,035    $205,189
                                                         ========    ========

</TABLE>


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

                                       20
<PAGE>   21


CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

(Amounts in thousands except per share data)                    YEARS ENDED MARCH 31
                                                            1997        1996        1995

------------------------------------------------------------------------------------------
<S>                                                       <C>         <C>         <C>     
Sales                                                     $362,412    $293,042    $243,078
Cost of sales                                              137,254     111,436      91,412
                                                          --------    --------    --------
Gross profit                                               225,158     181,606     151,666

Selling, general and administrative expense                114,479      98,487      86,329
Product development expense                                 43,267      36,456      30,585
Nonrecurring charges                                        27,776      16,852          --
Amortization of intangibles                                  6,793       5,136       5,106
                                                          --------    --------    --------
   Operating income                                         32,843      24,675      29,646

Interest expense                                              (828)     (1,723)     (3,919)
Interest income                                              2,785       2,181       1,518
Other income, net                                              634         975         850
                                                          --------    --------    --------

Income from continuing operations before income taxes       35,434      26,108      28,095

Provision for income taxes                                  17,585      10,394      11,671
                                                          --------    --------    --------

Income from continuing operations                           17,849      15,714      16,424
Discontinued operations:
   Gain on sale of businesses net of income tax
      provision of $22,692                                  12,000          --          --
   Operating income (loss), net of income tax provision
      (benefit) of $(1,009) in 1996 and $2,948 in 1995          --      (1,471)      3,763
                                                          --------    --------    --------

Income before extraordinary charge                          29,849      14,243      20,187

Extraordinary charge for early retirement of debt, net
     of income tax benefit of $738                              --          --      (1,019)
                                                          --------    --------    --------
Net income                                                $ 29,849    $ 14,243    $ 19,168
                                                          ========    ========    ========

Income (loss) per common share:
Continuing operations                                     $   0.99    $   0.86    $   0.92
     Discontinued operations                                  0.67       (0.08)       0.21
     Extraordinary charge                                       --          --       (0.06)
                                                          --------    --------    --------
                                                          $   1.66    $   0.78    $   1.07
                                                          ========    ========    ========
Weighted average number of common shares                    18,028      18,315      17,846
                                                          ========    ========    ========
</TABLE>


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

                                       21

<PAGE>   22


<TABLE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Amounts in thousands)
<CAPTION>

                                      Number of Shares             Additional           Cumulative               Total
                                    Common     Treasury   Common    Paid-In   Retained  Translation  Treasury  Shareholders'
                                     Stock       Stock     Stock    Capital   Earnings  Adjustments    Stock     Equity
----------------------------------------------------------------------------------------------------------------------------

<S>                                <C>          <C>       <C>       <C>        <C>       <C>         <C>        <C>     
Balance, March 31, 1994            12,387       (3,090)   $2,477    $ 9,414    $185,957  $  (757)    $(54,448)  $142,643

Net income - 1995                                                                19,168                           19,168
Purchases of treasury stock                       (597)                                               (12,576)   (12,576)
Translation adjustments                                                                    3,416                   3,416
Exercise of stock options and
   other issuances                                  90                 (215)                            1,790      1,575
Retirement of treasury stock       (3,085)       3,085      (617)               (53,711)               54,328         --
Two-for-one stock split             9,303         (521)    1,861     (1,861)                                          --
Tax benefit from exercise
   of stock options                                                      94                                           94
                                   ------       ------    ------    -------    --------  -------     --------   --------
Balance, March 31, 1995            18,605       (1,033)    3,721      7,432     151,414    2,659      (10,906)   154,320

Net income - 1996                                                                14,243                           14,243
Purchases of treasury stock                       (800)                                               (19,367)   (19,367)
Translation adjustments                                                                   (2,317)                 (2,317)
Exercise of stock options and
  other issuances                                  812                3,688                             9,170     12,858
Tax benefit from exercise
   of stock options                                                     982                                          982
                                   ------       ------    ------    -------    --------  -------     --------   --------
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
Purchases of treasury stock                     (1,021)                                               (32,695)   (32,695)
Translation adjustments                                                                   (1,589)                 (1,589)
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  $(1,247)    $(47,181)  $160,686
                                   ======       ======    ======    =======    ========  =======     ========   ========


</TABLE>


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



                                       22
<PAGE>   23


<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

<CAPTION>
                                                                                 YEARS ENDED MARCH 31,
                                                                              1997          1996          1995
------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>         <C>         <C>     
Operating activities:
     Net income from operations                                                $ 29,849    $ 15,714    $ 20,187
     Adjustment for noncash items included in net income:
         Gain on discontinued operations                                        (12,000)         --          --
         Depreciation                                                             9,280       8,279      14,112
         Amortization of intangibles                                              6,793       5,136       8,471
         Purchased incomplete technology                                         20,627      16,852          --
         Intangibles writeoff                                                     7,149          --          --
         Change in net deferred income tax asset                                 (7,617)     (5,173)      7,187
         Other                                                                      797         457         283
     Changes in operating assets and liabilities, net of effects of
         purchase acquisitions and divestitures                                   4,926     (19,556)    (16,013)
                                                                               --------    --------    --------
     Net cash provided by continuing operations                                  59,804      21,709      34,227
     Net cash provided by (used in) discontinued operations                     (52,313)        699      (3,250)
                                                                               --------    --------    --------
     Net cash flows provided by operating activities                              7,491      22,408      30,977
Investing activities:
     Purchases of property and equipment                                        (10,176)     (8,198)    (16,426)
     Disposals of property and equipment                                            214         308         437
     Proceeds from sales of businesses                                           96,682      48,901      27,140
     Businesses acquired in purchase transactions, net of cash acquired         (68,930)    (17,143)     (1,056)
     Other                                                                          290       5,597      (1,095)
                                                                               --------    --------    --------
     Net cash flows provided by continuing operations                            18,080      29,465       9,000
     Net cash flows used in discontinued operations                                (951)     (5,487)         --
                                                                               --------    --------    --------
     Net cash flows provided by investing activities                             17,129      23,978       9,000
Financing activities:
     Net borrowings (repayment) of debt                                           2,522      (9,400)    (24,125)
     Premium paid on early retirement of debt                                        --          --      (1,757)
     Proceeds from exercise of stock options                                      1,693         952       1,461
     Purchases of treasury stock                                                (32,695)    (19,367)    (12,576)
                                                                               --------    --------    --------
     Net cash flows used in financing activities                                (28,480)    (27,815)    (36,997)
Effect of exchange rate on cash                                                  (2,452)       (272)      1,714
                                                                               --------    --------    --------
Increase (decrease) in cash and cash equivalents                                 (6,312)     18,299       4,694
Cash and cash equivalents at beginning of year                                   46,094      27,795      23,101
                                                                               --------    --------    --------
Cash and cash equivalents at end of year                                       $ 39,782    $ 46,094    $ 27,795
                                                                               ========    ========    ========
Change in operating asset and liability components:
     Increase in trade accounts receivable                                     $(15,833)   $(10,287)   $ (1,215)
     Decrease (increase) in inventories                                             450      (2,007)     (2,820)
     Decrease (increase) in other current assets                                 (3,341)       (297)        180
     Increase (decrease) in accounts payable                                      2,059        (402)        129
     Increase (decrease) in accrued expenses and taxes                           21,591      (6,563)    (12,287)
                                                                               --------    --------    --------
     Change in operating assets and liabilities                                $  4,926    $(19,556)   $(16,013)
                                                                               ========    ========    ========
Supplemental disclosures of cash flow information: 
Cash paid during the year for:
         Interest                                                              $    889    $  1,739    $  4,833
         Income taxes                                                            42,340      13,798       7,672
     Tax benefit of disqualifying dispositions of stock options                   1,318         982          94
     Noncash proceeds from sale of businesses:
         Promissory notes                                                         7,200          --       5,200
         Preferred stock                                                          6,300          --          --

</TABLE>


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

                                       23
<PAGE>   24


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS: Dynatech is a global communications equipment company focused on
network technology solutions. Its products address communications test,
industrial computing and communications, and visual communications applications.

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.

FOREIGN EXCHANGE CONTRACTS: The Company enters into a limited number of forward
exchange contracts to manage the exposure to foreign currency fluctuations
associated with certain monetary assets and liabilities denominated in a foreign
currency, as well as certain highly anticipated cash flows or firm commitments.
Gains and losses on these contracts will be included in income when the
operating revenue and expenses related to the underlying transactions are
recognized. Amounts as of March 31, 1997 and 1996 were $0 and $1.0 million,
respectively.

CASH EQUIVALENTS: Cash equivalents represent highly liquid debt instruments with
a maturity of three months or less at the time of purchase. Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of short-term deposits in Europe with major banks, with
investment levels and debt ratings set to limit exposure from any one
institution.

INVENTORIES: Inventories are stated at 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 

                                       24
<PAGE>   25


two to ten years. Leasehold improvements are amortized over the lesser of the
lives of the leases or estimated useful lives of the improvements. Buildings are
depreciated on the straight-line method over the estimated useful lives, up to
30 years.

<TABLE>
INTANGIBLE ASSETS: Intangible assets acquired primarily from business
acquisitions are summarized as follows:

<CAPTION>
Amounts in thousands                              1997             1996
-------------------------------------------------------------------------
<S>                                             <C>               <C>    
Product technology                              $17,042           $18,259
Excess of cost over net assets acquired          30,861            17,424
Other intangible assets                          13,307            13,307
                                                -------------------------
                                                 61,210            48,990
Less accumulated amortization                    17,397            20,584
                                                -------------------------
   Total                                        $43,813           $28,406
                                                =========================

</TABLE>

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 three 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, $1.9 million in fiscal 1996, and $1.6 million in
fiscal 1995, and was excluded from cost of sales. Excess of cost over fair
market value of net assets is being amortized on a straight-line basis
primarily over 15 years.

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

TREASURY STOCK: The Company delivers treasury shares upon the exercise of stock
options 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.

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. 

                                       25

<PAGE>   26

RESEARCH, DEVELOPMENT AND WARRANTY COSTS: Costs relating to research,
development and product warranty are expensed as incurred. Warranty costs are
not material to the consolidated financial statements. Internal software
development costs that qualify for capitalization are not material.

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.

INCOME PER SHARE: Income per share is based on income divided by the weighted
average number of common shares and common share equivalents outstanding
including the effect of the deferred stock compensation for directors. Fully
diluted income per share is not materially different from reported primary
earnings per share for all periods.

NEW PRONOUNCEMENTS: The Financial Accounting Standards Board issued Statement
No. 128 ("FAS128"), "Earnings per Share," which modifies the way in which
earnings per share (EPS) is calculated and disclosed. Currently, the Company
discloses primary and fully diluted EPS. Upon adoption of this standard for the
interim period ending December 31, 1997, the Company will disclose basic and
diluted EPS for fiscal 1998 and will restate all prior period EPS data
presented. The Company does not anticipate this change will have a material
impact on the calculation of EPS.

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.

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 is $3 million for a period of seven years from the closing date and is
to be used to fund the purchaser's capital expenditures.

During fiscal 1995 the Corporation sold ten businesses for approximately $27.1
million in cash and long-term promissory notes approximating $5.2 million. The
provision for losses was reflected in fiscal 1994 and did not affect fiscal 1995
earnings.

                                       26


<PAGE>   27
<TABLE>

Summary operating results of noncore businesses prior to the formal plan to
discontinue operations are as follows:

<CAPTION>

Amounts in thousands                                   1996              1995
-------------------------------------------------------------------------------
<S>                                                  <C>               <C>     
Sales                                                $182,040          $256,452
Gross margin                                           79,571           109,563
Income (loss) before taxes                             (3,460)            6,711
Net income (loss)                                    $ (1,471)         $  3,763

</TABLE>

In connection with the disposition of these subsidiaries, the Company has net
liabilities of $9.2 million. Included in this amount are liabilities related to
severance, legal, lease runout, taxes and warranty accruals offset by noncash
investments.

NOTES PAYABLE

Short-term notes payable, primarily in Europe, were $0 and $640 thousand at
March 31, 1997 and 1996, respectively. The maximum amount of short-term
borrowings, domestic and foreign, at any month end during the year was $330
thousand in fiscal 1997, $1.1 million in 1996, and $4.4 million in 1995. The
average amount of short-term borrowings during the year was $186 thousand in
fiscal 1997, $886 thousand in 1996, and $3.4 million in 1995. The approximate
weighted average interest rate was 6.2% in fiscal 1997, 6.6% in 1996, and 6.2%
in 1995 (calculated by dividing interest expense for such borrowings by the
weighted average borrowings outstanding during the year).

At year end, the Company had short-term unused lines of credit aggregating $500
thousand for continuing foreign operations.

LONG-TERM DEBT

<TABLE>

Long-term debt is summarized below:

<CAPTION>

Amounts in thousands                                   1997             1996
-----------------------------------------------------------------------------
<S>                                                  <C>               <C>
Revolving credit and term bank loan                  $5,000            $1,800
Capital lease obligations                               427                15
                                                     ------------------------
   Total debt                                         5,427             1,815
     Less current portion                               201                15
                                                     ------------------------
   Long-term debt                                    $5,226            $1,800
                                                     ========================

</TABLE>

The Company has an unsecured $70 million revolving credit and term bank loan
agreement ("Old Agreement") with several commercial banks which allows for
borrowings in various currencies and provides for interest to be payable at the
Eurocurrency rate, or base or money market rate quoted by the lender, depending
upon the currencies borrowed and the form of 

                                       27

<PAGE>   28


borrowing. Under the terms of the Old Agreement, the principal borrowings may
convert to a term loan payable in eight equal quarterly installments beginning
September 30, 1998.

In April 1997, the Company entered into a new $150 million revolving credit and
term loan agreement ("New Agreement") with several commercial banks. This
agreement allows for borrowings using various instruments with interest payable
at Eurodollar rate plus an applicable margin based on the Company's leverage
ratio or base rate, quoted by the lender. Under the terms of the New Agreement,
the principal borrowings may convert to a term loan payable in eight equal
quarterly installments beginning June 30, 2000.

The approximate weighted average cost of capital was 8.6% in both fiscal 1997 
and in 1996. The composite rate at March 31, 1997 was 6.9% and at
March 31, 1996 was 5.9%.

The terms of the Old Agreement require, among other things, specific levels of 
current ratio, fixed-charge coverage ratio, and minimum tangible net worth. 
The Company was in compliance with all covenants at March 31, 1997.

Aggregate maturities of the above term debt for each of the years in the 
five-year period ending March 31, 2002 are as follows: $201 thousand, $2.0
million, $2.6 million, $625 thousand, and $0, respectively.

INCOME TAXES

<TABLE>

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

<CAPTION>
Amounts in thousands                           1997        1996        1995
----------------------------------------------------------------------------
<S>                                          <C>         <C>         <C>
Domestic                                     $38,486     $26,657     $27,771
Foreign                                       (3,052)       (549)        324
                                             -------     -------     -------
   Total                                     $35,434     $26,108     $28,095
                                             =======     =======     =======
</TABLE>

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

<CAPTION>
Amounts in thousands                    1997           1996          1995
---------------------------------------------------------------------------
<S>                                    <C>           <C>            <C>    
Provision for income taxes:
     United States                     $11,729       $ 9,092        $ 9,552
     Foreign                               234          (428)           127
     State                               5,622         1,730          1,992
                                       ------------------------------------
         Total                         $17,585       $10,394        $11,671
                                       ====================================
</TABLE>

                                       28
<PAGE>   29

<TABLE>

<S>                                    <C>           <C>            <C>    
Components of income tax provision:
     Current:
         Federal                       $19,297       $15,247        $10,609
         Foreign                           234          (423)           112
         State                           5,671         3,072          2,130
                                       ------------------------------------
         Total current                  25,202        17,896         12,851
     Deferred:
         Federal                        (7,568)       (6,155)        (1,057)
         Foreign                            --            (5)            15
         State                             (49)       (1,342)          (138)
                                       ------------------------------------
         Total deferred                 (7,617)       (7,502)        (1,180)
                                       ------------------------------------
         Total                         $17,585       $10,394        $11,671
                                       ====================================

</TABLE>

<TABLE>

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

<CAPTION>
                                                                   1997        1996       1995
----------------------------------------------------------------------------------------------
<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                                                  0.6        (0.5)       0.4
     State income taxes, net of federal income tax benefit          3.8         4.3        4.4
     Research and development tax credit                           (0.7)       (0.7)      (0.9)
     Nondeductible amortization                                     1.1         1.9        1.8
     Other                                                          0.7        (0.2)       0.8
                                                                   ---------------------------
         Effective tax rate before certain charges                 40.5%       39.8%      41.5%
     Nondeductible purchased research and development,              8.2          --         --
     Nondeductible writeoff of intangibles                          0.9          --         --
                                                                   ---------------------------
            Total effective tax rate on continuing operations      49.6%       39.8%      41.5%
                                                                   ===========================

</TABLE>


                                       29

<PAGE>   30



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

<CAPTION>
Amounts in thousands                                                           1997       1996
------------------------------------------------------------------------------------------------
<S>                                                                           <C>        <C>    
Deferred tax assets:
     Net operating loss carryforwards                                         $ 3,291    $ 1,993
     Vacation benefits                                                            792        632
     Bad debt allowance                                                           364        196
     Inventory capitalization                                                     363        347
     Depreciation and amortization                                             16,767      9,283
     Other deferred assets                                                      4,434      3,979
                                                                              ------------------
                                                                               26,011     16,430
Valuation allowance                                                            (3,291)    (1,993)
                                                                              ------------------
                                                                               22,720     14,437
Deferred tax liabilities:
     Depreciation and amortization                                              1,025        531
     Other deferred liabilities                                                 1,491      1,319
                                                                              ------------------
                                                                                2,516      1,850
                                                                              ------------------
Net deferred tax assets                                                       $20,204    $12,587
                                                                              ==================

Deferred income taxes are included in the following balance sheet accounts:
     Amounts in thousands                                                        1997       1996
                                                                              ------------------
     Other current assets                                                     $ 3,846    $ 3,495
     Other assets                                                              17,383      9,623
     Deferred income taxes                                                     (1,025)      (531)
                                                                              ------------------
                                                                              $20,204    $12,587
                                                                              ==================

</TABLE>

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.


EMPLOYEE RETIREMENT PLANS

The Company has a trusteed employee retirement profit sharing and 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.

                                       30


<PAGE>   31

Corporate contributions to employee retirement plans were $4.0 million in fiscal
1997, $3.3 million in 1996, and $3.0 million in 1995.

STOCK COMPENSATION AND PURCHASE PLANS

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.

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. The plan commenced October
1, 1996 and each plan period lasts six months beginning on October 1 and April 1
of each year. The purchase price for each share of stock is the lesser of 85% of
the market price on the first or last day of the plan period. A total of 600,000
shares are available for purchase under the plan and 36,536 shares were reserved
for issuance at March 31, 1997.

<TABLE>

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

<CAPTION>
                                                           1997                     1996                  1995
                                                       Weighted                 Weighted              Weighted
                                                        Average                  Average               Average
                                           1997        Exercise      1996       Exercise     1995     Exercise
                                           Shares         Price     Shares         Price    Shares       Price
---------------------------------------------------------------------------------------------------------------

<S>                                      <C>             <C>       <C>            <C>       <C>          <C>   
Shares under option, beginning of year   1,684,580       $15.17    1,296,720      $12.09    705,806      $10.55
Options granted (at an exercise price of
 $32 to $54 in 1997, $15.50 to $20.25 in
 1996, $10.375 to $17.50 in 1995)          607,550        34.51      673,700       20.01    927,000       12.68
Options exercised                         (255,690)       11.99     (126,500)      10.26   (193,920)       9.90
Options canceled                          (265,880)       17.82     (159,340)      14.44   (142,166)       9.67
                                         ---------                 ---------              ---------
Shares under option, end of year         1,770,560        21.87    1,684,580       15.17  1,296,720       12.09
                                         =========                 =========              =========

Shares exercisable                         300,710       $14.77      261,780      $11.52    163,936      $10.01

</TABLE>

Options available for future grants under the plans were 1.0 million, 1.4
million and 0 at March 31, 1997, 1996, and 1995, respectively.

The fair market value of each option granted during 1997 and 1996 is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: expected volatility of 39%, risk-free
interest rate of 6.59% in 1997 and 6.27% in 1996, expected life of 7 years and a
dividend yield of 0%. The Weighted Average Fair Value of 

                                       31
<PAGE>   32

options granted, net of forfeitures, during the years 1997 and 1996 was $18.68
and $10.68, respectively.

<TABLE>
The following table summarizes information about currently outstanding and
exercisable stock options at March 31, 1997:

<CAPTION>

                                                        Weighted
                                      Number of          Average       Weighted
                                        Options        Remaining        Average
                                    Outstanding      Contractual       Exercise
      Range of Exercise Price        at 3/31/97             Life          Price
      -------------------------------------------------------------------------
      <S>                             <C>                   <C>          <C>   
      $9.00 - $15.00                    533,590             5.86         $10.93
      $15.00 - $30.00                   638,120             8.12          19.13
      $30.00 - $54.00                   598,850             9.35          34.53
                                      ---------

         Total                        1,770,560             7.86         $21.87
                                      =========
</TABLE>

<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 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:

<CAPTION>

   Amounts in thousands except per share             1997                      1996
                                           As Reported   Pro Forma   As Reported  Pro Forma
   ----------------------------------------------------------------------------------------
   <S>                                        <C>         <C>          <C>         <C>    
   Net income                                 $29,849     $27,863      $14,243     $13,464
   Net income per share                       $  1.66     $  1.55      $  0.78     $  0.74

</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.

                                       32

<PAGE>   33

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 was amended in March 1990. Each Right, when
exercisable, entitles a qualifying shareholder to buy shares of Dynatech junior
participating cumulative preferred stock. The Rights would only become
exercisable (i) ten days after a person has become the beneficial owner of 15%
or more of Dynatech's common stock, or (ii) ten business days after the
commencement of a tender offer that would result in the ownership of 15% or more
of the common stock, or (iii) upon determination by the Board of Directors that
a person who holds 10% or more of Dynatech's common stock intends to, or is
likely to, act in certain specified manners adverse to the interests of Dynatech
and its shareholders.

In the event Dynatech is acquired and is not the surviving corporation in a
merger, or in the event of the acquisition of 50% or more of the assets or
earning power of Dynatech, each Right would then entitle the qualified holder to
purchase, at the then-current exercise price, shares of common stock of the
acquiring company having a value of twice the exercise price of the Right.
Furthermore, if any party were to acquire 15% or more of Dynatech's common stock
or were determined to be an adverse person as described above, qualified holders
of the Rights would be entitled to acquire shares of Dynatech junior
participating cumulative preferred stock having a value of twice the
then-current exercise price. At the option of the Board of Directors, all of the
Rights could be exchanged into shares of common or preferred stock.

The Rights will expire February 16, 1999, but may be redeemed at the option of
the Board for $0.02 per Right until one of the triggering events described above
has occurred. The Rights do not entitle holders to any voting power or other
shareholder benefits. Issuance of the Rights does not dilute the shareholders'
ownership of Dynatech, nor does it affect reported earnings per share.

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
1998 through 2002 under noncancelable operating leases having an original term
of more than one year are $7.5 million, $7.0 million, $5.7 million, $4.6
million, and $4.1 million, respectively. The aggregate obligation subsequent to
fiscal 2002 is $9.5 million. Rent expense from continuing operations was
approximately $6.2 million, $5.7 million, and $4.4 million in fiscal 1997, 1996,
and 1995, respectively.

                                       33

<PAGE>   34

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.

NONRECURRING CHARGES

<TABLE>
The components of nonrecurring expenses include the following:


<CAPTION>
     Amounts in thousands                           1997              1996
     -----------------------------------------------------------------------
     <S>                                           <C>               <C>    
     Incomplete technology                         $20,627           $16,852
     Intangible writeoffs                            7,149                --
                                                   -------------------------
        Total                                      $27,776           $16,852
                                                   =========================
</TABLE>


ACQUISITIONS

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. In order to ensure that key
personnel would remain with Advent, a targeted three-year earnout incentive of
$1 million per year of the Company's stock, was negotiated but not included in
the purchase price. The earnout is based on, among other things, a positive
operating income.

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. 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. 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.

                                       34
<PAGE>   35

<TABLE>
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.

<CAPTION>
         Amounts in thousands                              1997         1996
         ----------------------------------------------------------------------
<S>                                                      <C>           <C>     
         Revenue                                         $426,234      $355,886
         Net income from continuing operations           $ 31,569      $ 14,609
         Earnings per share                              $   1.74      $   0.80
         Weighted average shares                           18,028        18,315
</TABLE>

1996 Acquisitions On February 20, 1996 Dynatech acquired the stock of
Synergistic Solutions, Inc. ("SSI"), of Atlanta, Georgia, for approximately $5.5
million. Acquired technology and other intangible assets of approximately $4.3
million are being amortized over four to seven years. The investment in excess
of fair market value of assets purchased of $964 thousand is being amortized
over 15 years.

On September 1, 1995 Dynatech acquired substantially all of the business and
assets of Tele-Path Industries, Inc. ("TPI"), of Salem, Virginia, for $23.6
million. Approximately $12.6 million was cash, including a $2.6 million
contingent adjustment for the stock price, and 688,096 shares of the Company's
common stock at $19.91 per share. Acquired complete technology and other
intangible assets of approximately $6.7 million are being amortized over five
years.

Incident to this acquisition, the Company purchased the incomplete technology
activities of TPI, resulting in a one-time pretax charge in the second quarter
of approximately $16.9 million, or ($0.56) per share. 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.

Acquisitions, both in fiscal 1997 and 1996, were recorded using the purchase
method of accounting.

SEGMENT INFORMATION AND GEOGRAPHIC AREAS

The Corporation operates predominantly in a single industry as a global
communications equipment manufacturer focused on network technology solutions.
Its products address communications test, industrial computing and
communications, and visual communications applications. Dynatech 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.

Net income in fiscal 1997, 1996, and 1995 included currency gains (losses) of
approximately $99,300, $(90,300), and $292,900, respectively.



                                       35

<PAGE>   36

<TABLE>
Information by geographic areas for the years ended March 31, 1997, 1996, and
1995 is summarized below:

<CAPTION>
                                                                              Outside U.S.
                                                                              (principally
Amounts in thousands                                        United States        Europe)          Combined
-----------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>     
Sales to unaffiliated customers
     1997                                                      $340,603*         $21,809           $362,412
     1996                                                       268,830*          24,212            293,042
     1995                                                       220,907*          22,171            243,078
Income (loss) before taxes from continuing operations
     1997                                                      $ 38,486          $(3,052)           $35,434
     1996                                                        26,657             (549)            26,108
     1995                                                        27,771              324             28,095
Identifiable assets at
     March 31, 1997                                            $216,243          $33,792           $250,035
     March 31, 1996                                             186,186           19,003            205,189
     March 31, 1995                                             177,317           79,075            256,392

</TABLE>

* Includes export sales of $48,959, $35,844 and $33,929 in 1997, 1996 and 1995,
respectively.

                                       36
<PAGE>   37


To the Board of Directors and Shareholders of Dynatech Corporation:

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

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

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



Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 1, 1997

                                       37



<PAGE>   38

<TABLE>

SUMMARY OF OPERATIONS BY QUARTER (Unaudited)

(Amounts in thousands except per share data)
<CAPTION>

                                                              1997
                                      FIRST      SECOND      THIRD         FOURTH         YEAR
------------------------------------------------------------------------------------------------

<S>                                 <C>        <C>          <C>          <C>            <C>     
Sales                               $81,122    $85,725      $92,007      $103,558       $362,412
Gross profit                         50,874     54,463       58,485        61,336        225,158
Income (loss) from
     continuing operations            8,412      9,277       (2,896)(b)     3,056(c)      17,849
Net income (loss)                     8,412      9,277       (2,896)       15,056(d)      29,849
Income (loss) per common share
     Continuing operations          $  0.46    $  0.52      $ (0.16)     $   0.17       $   0.99
     Net income (loss)                 0.46       0.52        (0.16)         0.84           1.66
Market Share Price(a) -- High       $ 35.00    $ 46.88      $ 58.00      $  54.50
                      -- Low          23.00      30.75        40.50         28.00

<CAPTION>

                                                              1996
                                      FIRST      SECOND      THIRD         FOURTH         YEAR
------------------------------------------------------------------------------------------------

Sales                               $66,758    $68,513      $80,540      $77,231        $293,042
Gross profit                         41,509     42,251       49,917       47,929         181,606
Income (loss) from
     continuing operations            5,047     (4,883)(b)    8,141        7,409          15,714
Net income (loss)                     4,625     (4,993)       7,807        6,804          14,243
Income (loss) per common share
     Continuing operations          $  0.28    $ (0.27)     $  0.45      $  0.40        $   0.86
     Net income (loss)                 0.26      (0.28)        0.43         0.37            0.78
Market Share Price(a) -- High       $ 20.50    $ 22.25      $ 17.50      $ 25.50
                      -- Low          14.75      15.13        14.00        16.00

</TABLE>


(a)      Dynatech common shares are traded on the New York Stock Exchange. Prior
         to January 28, 1997, Dynatech common shares were traded on the Nasdaq -
         National Market. No cash dividends were paid on Dynatech common shares.

(b)      Includes charge for purchased incomplete technology of $20.6 million or
         ($0.74) per share in 1997, $16.9 million or ($0.56) per share in 1996.

(c)      Includes a charge of $7.1 million or ($0.36) per share relating to the
         writeoff of certain intangible assets.

(d)      Includes gain on discontinued operations of $12 million or $0.67 per
         share.


                                       38
<PAGE>   39


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


June 18, 1997                             By: /s/ Allan M. Kline
                                          --------------------------------------
                                          Corporate Vice President, 
                                          Chief Financial Officer and Treasurer


         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>                                              <C>
/s/ JOHN F. RENO                        Chairman of the Board, Director, President
--------------------------------------  and Chief Executive Officer                      June 18, 1997
                                       
/s/ ALLAN M. KLINE                      Corporate Vice President,
--------------------------------------  Chief Financial Officer, and Treasurer           June 18, 1997
                                        (Principal Financial Officer)

/s/ ROBERT W. WOODBURY, JR.             Corporate Vice President
--------------------------------------  Controller (Principal Accounting Officer)        June 18, 1997

/s/ RICHARD K. LOCHRIDGE                Director                                         June 18, 1997
--------------------------------------

/s/ RONALD L. BITTNER                   Director                                         June 18, 1997
--------------------------------------

/s/ WILLIAM R. COOK                     Director                                         June 18, 1997
--------------------------------------

/s/ O. GENE GABBARD                     Director                                         June 18, 1997
--------------------------------------

/s/ L. DENNIS KOZLOWSKI                 Director                                         June 18, 1997
--------------------------------------

/s/ ROBERT G. PAUL                      Director                                         June 18, 1997
--------------------------------------

/s/ PETER VAN CUYLENBURG                Director                                         June 18, 1997
--------------------------------------
</TABLE>


                                       40

<PAGE>   40




SCHEDULE II



<TABLE>
                        VALUATION AND QUALIFYING ACCOUNTS
                               FOR THE YEARS ENDED
                         MARCH 31, 1997, 1996, AND 1995

                  RESERVE FOR DOUBTFUL ACCOUNTS (In thousands)
<CAPTION>
                  <S>                                                           <C>
                  BALANCE, March 31, 1994                                         3,905(a)
                           Additions charged to income                            2,685
                           Write-off of uncollectible accounts, net              (1,293)
                           Allowances of divisions sold                            (220)
                                                                                -------

                  BALANCE, March 31, 1995                                         5,077(a)
                           Additions charged to income                              356
                           Write-off of uncollectible accounts, net                (494)
                           Allowances reclassified, related to
                               discontinued operations                           (3,982)
                                                                                -------

                  BALANCE, March 31, 1996                                           957
                           Additions charged to income                              646
                           Allowances reclassified                                  628
                           Write-off of uncollectible accounts, net                (359)
                                                                                -------

                  BALANCE, March 31, 1997                                       $ 1,872
                                                                                =======
</TABLE>


(a) Prior year balances have not been restated to reflect elimination of
    discontinued operations.



                                       

<PAGE>   41


DYNATECH CORPORATION
                                  EXHIBIT INDEX

EXHIBIT
-------
3.1(1)     Restated Articles of Organization, as amended.

3.2(2)     Amended and Restated By-laws.

4.1(1)     Shareholder Rights Agreement dated February 16, 1989, as amended and
           restated as of March 12, 1990.

10.1(1)*   1982 Incentive Stock Option Plan.

10.2(3)*   1992 Stock Option Plan.

10.3(4)*   1994 Stock Option and Incentive Plan, as amended.

10.4(1)*   Form of Special Termination Agreement between the Company and Mr.
           Reno.

10.5(1)*   Form of Special Termination Agreement between the Company and each of
           its Executive Officers other than Mr. Reno.

10.6       Revolving Credit and Term Loan Agreement dated April 29, 1997 between
           the Company and BankBoston, N.A.

10.7       Dynatech Corporation Supplemental 401-K Savings Plan.

10.8       Dynatech Corporation 1996 Employee Stock Purchase Plan. Computation
           of per share earnings.

11         Computation of Per Share Earnings.

21         Subsidiaries of the Company.

23         Consent of Independent Accountants.

27         Financial Data Schedule.

--------------------------------------------------------------------------------
* Management contract or compensatory plan or arrangement as an exhibit to this
Form pursuant to Items 14(a) and 14(c) of Form 10K.

(1)   Incorporated by reference to the Company's Annual Report on Form 10-K for
      the fiscal year ended March 31, 1996.

(2)   Incorporated by reference to the Company's Annual Report on Form 10-K for
      the fiscal year ended March 31, 1992.

(3)   Incorporated by reference to the Company's Quarterly Report on Form 10-Q
      for the fiscal year ended March 31, 1992.

(4)   Incorporated by reference to Exhibit 4.1 to Form S-8 filed on January 30,
      1996 (File No. 333-01639).