<PAGE>

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

                      UNITED STATES SECURITIES AND EXCHANGE
                                   COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

                |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                       For the Quarter Ended July 3, 1999

                                       OR
            | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES AND EXCHANGE ACT OF 1934

                           Commission File No. 1-8045

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

                                  GenRad, Inc.
             (Exact name of registrant as specified in its charter)

                 Massachusetts                               04-1360950
         (State or other jurisdiction of                  (I.R.S. Employer
          incorporation or organization)                Identification Number)

 7 Technology Park Drive, Westford, Massachusetts            01886-0033
    (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (978) 589-7000

      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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

29,714,764 shares of the Common Stock, $1 par value, were outstanding on
August 13, 1999.

================================================================================
<PAGE>

                          GenRad, Inc. and Subsidiaries
                          Quarterly Report on Form 10-Q
                         Three Months Ended July 3, 1999
                                Table of Contents

                                                                            Page
                                                                            ----
Part I. Financial Information:
        Item 1: Condensed Consolidated Statements
                  Condensed Consolidated Statements of Operations ........   1
                  Condensed Consolidated Balance Sheets ..................   2
                  Condensed Consolidated Statements of Cash Flows ........   3
                  Notes to Condensed Consolidated Financial Statements ...   5

        Item 2: Management's Discussion and Analysis of
                  Financial Condition and Results of Operations ..........  11
Part II. Other Information:
        Item 4: Submissions of Matters to a Vote of Security Holders......  24

        Item 6. Exhibits and Reports on Form 8-K .........................  24

                Signatures ...............................................  26
<PAGE>

                                     PART I
               Item 1. Condensed Consolidated Financial Statements

                          GenRad, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Operations
                    (In thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ended        Six Months Ended
                                                     ----------------------    ----------------------
                                                       July 3,      July 4,     July 3,      July 4,
                                                        1999         1998         1999         1998
                                                     ---------    ---------    ---------    ---------
<S>                                                  <C>          <C>          <C>          <C>
Revenue:
      Product                                        $  46,069    $  41,163    $  82,752    $  76,752
      Service                                           17,549       17,777       33,976       31,260
                                                     ---------    ---------    ---------    ---------
          Total revenue                                 63,618       58,940      116,728      108,012

Cost of revenue:
      Product                                           22,806       20,358       37,188       35,457
      Service                                           10,048       10,066       20,224       18,767
                                                     ---------    ---------    ---------    ---------
          Total cost of revenue                         32,854       30,424       57,412       54,224
                                                     ---------    ---------    ---------    ---------

Gross margin                                            30,764       28,516       59,316       53,788

Operating expenses:
      Selling, general and administrative               16,990       17,456       34,121       35,890
      Research and development                           4,788        5,444        9,472       10,363
      Acquired in-process research and development          --       10,097           --       10,097
      Restructuring charges                                 --        3,263           --        3,263
      Loss from impairment of intangible assets             --        4,906           --        4,906
                                                     ---------    ---------    ---------    ---------
          Total operating expenses                      21,778       41,166       43,593       64,519
                                                     ---------    ---------    ---------    ---------

Operating income (loss)                                  8,986      (12,650)      15,723      (10,731)

Other income (expense):
      Interest income                                       30           97          157          314
      Interest expense                                    (262)        (270)        (486)        (596)
      Other, net                                           100          211         (106)        (101)
                                                     ---------    ---------    ---------    ---------
          Total other income (expense)                    (132)          38         (435)        (383)
                                                     ---------    ---------    ---------    ---------

Net income (loss) before income taxes                    8,854      (12,612)      15,288      (11,114)
Income tax benefit (expense)                              (894)         672        2,994        8,082
                                                     ---------    ---------    ---------    ---------
Net income (loss)                                    $   7,960    $ (11,940)   $  18,282    $  (3,032)
                                                     =========    =========    =========    =========

Net income (loss) per share:
      Basic                                          $    0.28    $   (0.42)   $    0.64    $   (0.11)
                                                     =========    =========    =========    =========
      Diluted                                        $    0.27    $   (0.42)   $    0.62    $   (0.11)
                                                     =========    =========    =========    =========

Weighted average shares outstanding:
      Basic                                             28,518       28,286       28,392       27,887
                                                     =========    =========    =========    =========
      Diluted                                           29,480       28,286       29,412       27,877
                                                     =========    =========    =========    =========
</TABLE>

              The accompanying notes are an integral part of these
                  Condensed Consolidated Financial Statements.


                                        1
<PAGE>

                         GenRad, Inc. and Subsidiaries
                     Condensed Consolidated Balance Sheets
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                    July 3,     January 2,
                                                                      1999         1999
                                                                   ---------    ---------
                                                                  (Unaudited)
<S>                                                                <C>          <C>
Assets
  Current Assets:
      Cash and cash equivalents                                    $   8,799    $  12,998
      Accounts receivable, less allowance for doubtful
        accounts of $1,996 and $1,538                                 75,973       65,490
      Inventory                                                       50,274       32,989
      Other current assets                                             7,754        7,119
                                                                   ---------    ---------
          Total current assets                                       142,800      118,596

Property and equipment, net of accumulated depreciation
      of $38,281 and $37,769                                          42,162       37,269
Deferred tax assets                                                   19,921       15,368
Intangible assets, net of accumulated amortization of
      $7,904 and $5,636                                               36,441       35,744
Other assets                                                           1,104        1,248
                                                                   ---------    ---------
                                                                   $ 242,428    $ 208,225
                                                                   =========    =========

Liabilities and Stockholders' Equity
  Current liabilities:
      Line of Credit                                               $  15,585    $      --
      Accounts payable                                                17,551       10,299
      Accrued liabilities                                              6,919       19,786
      Deferred revenue                                                10,081        6,789
      Accrued compensation and employee benefits                       5,257        6,844
      Accrued income taxes                                             2,174          620
      Current portion of long-term debt                                2,301        2,425
                                                                   ---------    ---------
          Total current liabilities                                   59,868       46,763

Long-term debt                                                         4,602        6,062
Accrued pension benefits                                              10,947       11,488
Lease costs of excess facilities                                       3,922        3,854
Deferred revenue                                                         898          962
Other long-term liabilities                                            3,839        5,065

Commitments and Contingencies

  Stockholders' equity:
      Common stock, $1.00 par value, 60,000 shares authorized;
        29,713 and 29,176 issued and outstanding at July 3, 1999
        and January 2, 1999, respectively                             29,713       29,176
      Additional paid-in capital, common stock                       219,244      214,227
      Treasury stock, net                                            (15,307)     (14,958)
      Accumulated deficit                                            (73,278)     (91,560)
      Accumulated other comprehensive loss                            (2,020)      (2,854)
                                                                   ---------    ---------
          Total stockholders' equity                                 158,352      134,031
                                                                   ---------    ---------
                                                                   $ 242,428    $ 208,225
                                                                   =========    =========
</TABLE>

              The accompanying notes are an integral part of these
                  Condensed Consolidated Financial Statements.


                                       2
<PAGE>

                          GenRad, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                          --------------------
                                                           July 3,     July 4,
                                                            1999        1998
                                                          --------    --------
<S>                                                       <C>         <C>
Operating activities:
    Net income                                            $ 18,282    $ (3,032)
    Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
        Depreciation and amortization                        6,401       6,553
        Loss on disposal of property and equipment             392         322
        Deferred income tax benefit                         (4,500)     (7,500)
        Lease costs of excess facilities, net                  (34)       (745)
        Acquired in-process research and development            --       8,420
        Loss from impairment of intangible assets               --       4,906
    Increase (decrease) resulting from changes in
      operating assets and liabilities:
        Accounts receivable, net                           (12,113)      9,221
        Inventory                                          (18,413)     (7,225)
        Other current assets                                  (717)       (403)
        Accounts payable                                     7,523      (3,031)
        Accrued liabilities                                (12,416)      1,045
        Deferred revenue                                     3,274       1,789
        Accrued compensation and employee benefits          (1,460)     (1,952)
        Accrued income taxes                                 1,520        (968)
        Other, net                                          (1,096)          4
                                                          --------    --------
    Net cash (used in) provided by operating activities    (13,357)      7,404

Investing activities:
    Purchases of property and equipment                     (9,978)     (8,070)
    Purchase of subsidiary                                      --      (2,925)
    Purchase of intangible assets                           (2,965)     (2,418)
                                                          --------    --------
    Net cash (used in) investing activities                (12,943)    (13,413)

Financing activities:
    Principal payments on long-term debt                    (1,163)     (1,212)
    Borrowings on credit facility                           31,475          --
    Principal payments on credit facility                  (15,890)         --
    Proceeds from employee stock plans                       8,901       3,454
    Purchase of treasury stock                              (3,696)     (1,618)
                                                          --------    --------
    Net cash provided by financing activities               19,627         624

Effect of exchange rates on cash and cash equivalents        2,474        (355)
                                                          --------    --------
Decrease in cash and cash equivalents                       (4,199)     (5,740)
Cash and cash equivalents at beginning of period            12,998      21,883
                                                          --------    --------
Cash and cash equivalents at end of period                $  8,799    $ 16,143
                                                          ========    ========
</TABLE>


                                       3
<PAGE>

                          GenRad, Inc. and Subsidiaries
           Condensed Consolidated Statements of Cash Flows (Continued)
                                 (In thousands)
                                   (Unaudited)

Supplemental Disclosure of Non-Cash Financing and Investing Activities:

      Stock issued in association with the Company's acquisition of Industrial
Computer Corporation in April 1998 totaled approximately $36.6 million.

      Assets acquired and liabilities assumed upon acquisition of Industrial
Computer Corporation:

         Accounts Receivable                            $  2,893
         Other current assets                                 71
         Property and equipment                              341
         Other assets, net                                    83
         Accounts payable                                    498
         Accrued liabilities                               1,272
         Accrued compensation and benefits                    59
         Accrued income taxes                                139
         Other long-term liabilities                       2,370

              The accompanying notes are an integral part of these
                  Condensed Consolidated Financial Statements.


                                       4
<PAGE>

                          GenRad, Inc. and Subsidiaries
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

Note 1: Basis of Presentation

      The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K, filed with the Securities and Exchange Commission. In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring adjustments,
considered necessary to present fairly the consolidated financial position at
July 3, 1999 and January 2, 1999, and the results of operations and cash flows
for the three and six months ended July 3, 1999 and July 4, 1998, respectively.
Interim results are not necessarily indicative of the results for the full
fiscal year.

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

      Certain prior period balances have been reclassified to conform to the
current presentation.

Net Income per Share

      A reconciliation of the weighted average shares used in computing net
income per share in accordance with Statement of Financial Accounting Standards
No. 128 "Earnings per Share" for the three and six months ended July 3, 1999 and
July 4, 1998, respectively, is as follows (in thousands):

<TABLE>
<CAPTION>
                                              Three Months Ended        Six Months Ended
                                              ------------------        ----------------
                                               July 3,    July 4,      July 3,    July 4,
                                                1999       1998         1999       1998
                                               ------     ------       ------     ------
<S>                                            <C>        <C>          <C>        <C>
Basic: Weighted average shares outstanding     28,518     28,286       28,392     27,887
         Assumed exercise of stock options        962         --        1,020         --
                                               ------     ------       ------     ------
Diluted: Weighted average shares outstanding   29,480     28,286       29,412     27,887
                                               ======     ======       ======     ======
</TABLE>

Comprehensive Income (Loss)

      For the three and six months ended July 3, 1999, comprehensive income
(loss) included changes in cumulative foreign currency translation adjustments
of $0.1 and $0.8 million, compared to $(0.3) and $(0.6) million for the three
and six months ended July 4, 1998. Total comprehensive income (loss) for the
three and six months ended July 3, 1999 totaled $8.1 and $19.1 million, compared
to $(12.2) and $(3.6) million for the three and six months ended July 4, 1998.
At July 3, 1999, accumulated other comprehensive loss totaled $2.0 million.

Note 2: Acquisitions

Industrial Computer Corporation

      On April 7, 1998, GenRad acquired all of the then outstanding common
shares of Industrial Computer Corporation ("ICC"), a software company providing
real-time manufacturing execution systems to electronics manufacturers. ICC was
established in 1980 and is located in Atlanta, Georgia. The transaction was
accounted for as a purchase, and accordingly, the purchase price was allocated



                                       5
<PAGE>

                          GenRad, Inc. and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)
                                   (Unaudited)

to the assets acquired and liabilities assumed based on their respective fair
values. In connection with the acquisition of ICC, 1,237,917 shares of
GenRad's common stock were issued for all of the then outstanding shares of
ICC in a tax-free reorganization. The total consideration for the acquisition
of ICC was approximately $36.6 million. Direct costs of the acquisition
totaled approximately $1.6 million and consisted primarily of legal fees,
accounting fees and broker fees. The results of ICC are included in the 1998
financial statements beginning from the date of purchase.

      The purchase price was allocated to the tangible and intangible assets of
ICC as follows:

      Acquired in-process research and development                     $  8,420
      Goodwill                                                           16,982
      Developed technology                                               11,370
      Assembled workforce                                                 1,280
      Tradename                                                             408
      Assets, primarily accounts receivable and property and equipment    3,954
      Liabilities assumed                                                (4,215)
                                                                       --------
                                                                       $ 38,199
                                                                       ========

      The Securities and Exchange Commission ("SEC"), in September 1998, issued
guidance related to the valuation of acquired in-process research and
development as set forth in its letter dated September 9, 1998 from the Chief
Accountant of the SEC to the American Institute of Certified Public Accountants.
In April 1999, the Company corresponded with the staff of the SEC ("the Staff")
concerning the application of the methodology to the valuation of the incomplete
technology and other intangible assets and implemented the methodology. As a
result of the application of the valuation methodology the purchase price was
allocated to acquired in-process research and development, developed technology,
assembled workforce and tradename. In April 1999 the Company restated its
originally filed Form 10-Q filings for its second and third quarters of fiscal
1998 using this methodology.

      The valuation of acquired in-process research and development was based on
management's projections of the after tax net cash flows attributable to the
acquired in-process research and development. Specifically, the valuation
considers the following: (i) a fair market value premise; (ii) comprehensive due
diligence concerning all potential intangible assets including trademarks and
tradenames, patents, copyrights, non-compete agreements, assembled workforce and
customer relationships and sales channel relationships; (iii) the value
contribution of core technology to the acquired in-process technology, with a
view toward ensuring the relative allocations to core technology and acquired
in-process research and development were consistent with the relative
contributions of each to the final product; and (iv) the calculation used to
determine the value allocated to acquired in-process research and development
considered only the efforts completed as of the transaction date and only the
cash flow associated with said completed efforts for one generation of the
product development efforts in-process at the acquisition date. The charge for
acquired in-process research and development relates to one development project
in process at the date of the acquisition that had not reached technological
feasibility, had no alternative future use, and for which ultimate successful
development was uncertain. The conclusion that the development efforts
in-process, or any material sub-component, had no alternative future use was
reached in consultation with engineering personnel from ICC as well as the
Company's valuation advisors.


                                       6
<PAGE>

                          GenRad, Inc. and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)
                                   (Unaudited)

      The in-process project consists of the development of ICC's existing UNIX
based product using an object oriented design and standard programming language
which will provide users of the product the ability to use ICC's Shop Floor Data
Manager (TM) ("SFDM") product on varied operating platforms. The primary project
tasks open at the time of acquisition included completion of the design of
certain modules, or objects, which will house the program code, completion of
program code written in the new language and preliminary quality assurance and
testing of the product. At the time of acquisition, additional development
remained on all tasks (management estimated that the project was approximately
69% complete) and costs to complete were estimated to total approximately
$928,000. At the time of the acquisition, management believed that the product
being developed would become available for sale late in fiscal 1999. GenRad will
begin to benefit from the acquired in-process research and development once
completed product is sold. Failure to reach successful completion of this
project may result in impairment of the associated capitalized intangible
assets, i.e. goodwill and developed technology, and/or may require the Company
to accelerate the time period over which the intangibles are being amortized,
which may have a material adverse effect on the Company's results of operations
and financial condition.

      Significant assumptions used to determine the value of the acquired
in-process research and development included several factors. The first was a
forecast of net cash flows that were expected to result from the in-process
development effort using projections prepared by ICC management, portions of
which (1998 and 1999) were provided to GenRad's Board of Directors. Net cash
flow projections included projected revenue growth and trends in profit margins
and selling, general and administrative expenses that were consistent with
recent historical trends prior to the acquisition. Second, a percentage complete
of 69% for the project estimated by considering the costs invested to date
relative to the expected total cost of the development effort, supported by the
amount of technological progress completed as of the transaction date relative
to the overall technological achievements required to achieve the intended
functionality of the eventual product. The technological issues were addressed
primarily by engineering representatives from ICC along with the Company's
independent valuation advisors. Third, a 24% discount rate, which represents a
rate equivalent to that which would be employed in a fair value analysis, i.e.,
one that considers all cash flows associated with the product. Lastly, a core
technology charge reflected as one-third of after tax net income related to the
in-process project was utilized. This rate represents an amount that the Company
would be required to pay in royalties assuming it had licensed the products
expected to be derived from the acquired in-process development efforts.

      As of July 3, 1999, the technological feasibility of the project has been
reached and no significant departures from the assumptions included in the
valuation analysis have occurred.

Manufacturing Execution Systems Business

      On April 9, 1998, GenRad acquired certain assets of the Manufacturing
Execution Systems ("MES") business of Valstar Systems Limited ("Valstar")
located in Aberdeen, Scotland. Valstar's MES component provides integration
services and support and distribution in Europe for ICC's Software.

      Total consideration paid for Valstar's MES business was $3.2 million in
cash, including acquisition costs, funded through internally generated funds. As
part of the acquisition, the Company entered into a two-year consulting and
services agreement with Valstar that includes securing certain Valstar personnel
and other resources to transition the business to GenRad. Of the $3.0 million
purchase price, $2.0 million was paid on April 9, 1998 and $1.0 million was
released from escrow on October 7, 1998 as certain contingencies were achieved.
Direct costs of the acquisition totaled approximately $0.2 million and consisted
primarily of legal and accounting fees.


                                       7
<PAGE>

                          GenRad, Inc. and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)
                                   (Unaudited)

      The transaction was accounted for as a purchase, and accordingly, the
purchase price was allocated to the intangible assets acquired based on their
respective fair values. The purchase price was allocated to the intangible
assets of Valstar's MES business as follows (in thousands):

              Goodwill                                       $2,100
              Customer lists                                    900
              Employment contracts                              200
                                                             ------
                                                             $3,200
                                                             ======

Note 3: Restructuring, Impairment and Other Charges

      During the three months ended July 4, 1998, the Company recorded certain
restructuring and other charges totaling approximately $9.8 million, summarized
as follows (in thousands):

              Impairment loss                              $  4,900
              Acquired in-process diagnostic software         1,700
              Restructuring and other charges                 3,200
                                                           --------
                                                           $  9,800
                                                           ========

Impairment loss

      In fiscal 1996, the Company purchased Test Technology Associates, Inc.
and Testware, Inc. These companies provide custom test programming, test
fixture integration and other value-added services to manufacturers and users
of electronic products. Additionally, GenRad acquired certain assets of Field
Oriented Engineering, AG in fiscal 1996, consisting primarily of the software
program known as TRACS (R) III, which is sold to electronic manufacturing
systems customers. The excess purchase price over the net assets acquired for
these acquisitions was recorded as long-term intangibles, primarily goodwill.

      Through July 4, 1998 the historical financial performance of these
entities continued to be less than anticipated and the businesses had been
negatively impacted by a decline in the in-circuit test market. Due to these
factors as well as certain management changes during the three months ended July
4, 1998, the Company prepared revised projections of future operating cash flows
relating to these businesses, which indicated that the businesses would not
generate sufficient operating cash flows to realize the carrying value of the
intangible assets. This analysis was performed in accordance with the provisions
of Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of." As a result, a $4.9 million
impairment loss, representing the net book value of goodwill, was recorded
during the three months ended July 4, 1998 and is included in the accompanying
condensed consolidated statements of operations for three and six months ended
July 4, 1998.

Acquired in-process diagnostic software

      On July 2, 1998, the Company acquired the rights to certain diagnostic
software for which technological feasibility had not been established. The
Company plans to use the acquired technology in the diagnosis of increasingly
complex mechatronic systems, particularly in vehicle systems. At the time of
acquisition, the acquired technology had not yet reached technological
feasibility, had no alternative future uses and, accordingly, the entire
purchase price was expensed. The total of $1.7 million is included in acquired
in-process research and development in the accompanying condensed consolidated
statements of operations for the three and six months ended July 4, 1998.


                                       8
<PAGE>

                          GenRad, Inc. and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)
                                   (Unaudited)

Restructuring and other charges

      During the three months ended July 4, 1998, the Company restructured its
operations, which resulted in a workforce reduction of approximately 130
employees or 9% of the Company's workforce. In accordance with EITF 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity", the Company recorded a charge for restructuring totaling
approximately $3.2 million for severance costs and post employment benefits,
write offs of certain fixed assets which will no longer be utilized and for the
termination fees of certain equipment and real estate leases.

Note 4: Inventory

      Inventory consists of the following at July 3, 1999 and January 2, 1999,
respectively (in thousands):

                                           July 3,      January 2,
                                             1999         1999
                                           -------       -------
Raw materials                              $11,826       $ 8,992
Work in process                             19,936        15,204
Finished goods                              18,512         8,793
                                           -------       -------
                                           $50,274       $32,989
                                           =======       =======
Note 5:  Contingencies

      The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to any such claims will not materially affect
the results of operations or the financial position of the Company.

Note 6: Operating Segments

      The following table illustrates, (in thousands), each of the Company's
operating segments' revenues and operating income (loss) for the three and six
months ended July 3, 1999 and July 4, 1998, respectively. The amounts provided
herein are those utilized by the respective segment's President, in conjunction
with the Company's President and Chief Executive Officer, in allocating
resources and evaluating performance.

                                     EMS       ADS       GRS       Total
                                   -------   -------   -------    -------
Three months ended July 3, 1999:
  Revenues:
    Product                        $35,500   $ 9,055   $ 1,514    $46,069
    Service                          8,241     5,876     3,432     17,549
                                   -------   -------   -------    -------
      Total revenues               $43,741   $14,931   $ 4,946    $63,618
                                   =======   =======   =======    =======

  Operating income (loss)          $13,170   $ 2,596   $  (904)   $14,862
                                   =======   =======   =======    =======

Three months ended July 4, 1998:
  Revenues:
    Product                        $37,414   $ 2,049   $ 1,700    $41,163
    Service                          9,309     5,981     2,487     17,777
                                   -------   -------   -------    -------
      Total revenues               $46,723   $ 8,030   $ 4,187    $58,940
                                   =======   =======   =======    =======

  Operating income (loss)          $10,215   $   360   $(1,413)   $ 9,162
                                   =======   =======   =======    =======


                                       9
<PAGE>

                          GenRad, Inc. and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)
                                   (Unaudited)

Note 6: Operating Segments (continued)

                                     EMS        ADS        GRS        Total
                                   --------   --------   --------    --------
Six months ended July 3, 1999:
  Revenues:
     Product                       $ 65,198   $ 11,099   $  6,455    $ 82,752
     Service                         15,650     12,326      6,000      33,976
                                   --------   --------   --------    --------
         Total revenues            $ 80,848   $ 23,425   $ 12,455    $116,728
                                   ========   ========   ========    ========

    Operating income               $ 22,516   $  3,816   $    353    $ 26,685
                                   ========   ========   ========    ========

Six months ended July 4, 1998:
  Revenues:
    Product                        $ 68,791   $  5,386   $  2,575    $ 76,752
    Service                          17,088     10,938   $  3,234      31,260
                                   --------   --------   --------    --------
         Total revenues            $ 85,879   $ 16,324   $  5,809    $108,012
                                   ========   ========   ========    ========

    Operating income (loss)        $ 16,490   $    801   $ (2,936)   $ 14,355
                                   ========   ========   ========    ========

      A reconciliation of the totals reported for the operating segments to net
income (loss) before income taxes in the condensed consolidated financial
statements is as follows:

<TABLE>
<CAPTION>
                                            Three Months Ended       Six Months Ended
                                           --------------------    --------------------
                                            July 3,     July 4,     July 3,     July 4,
                                             1999        1998        1999        1998
                                           --------    --------    --------    --------
<S>                                        <C>         <C>         <C>         <C>
Operating income:
   Total for reportable segments           $ 14,862    $  9,162    $ 26,685    $ 14,355
   Corporate expenses (a)                    (5,876)    (21,812)    (10,962)    (25,086)
                                           --------    --------    --------    --------
   Operating income (loss) per condensed
     consolidated financial statements        8,986     (12,650)     15,723     (10,731)
   Other income (expenses), net                (132)         38        (435)       (383)
                                           --------    --------    --------    --------
Net income (loss) before income taxes      $  8,854    $(12,612)   $ 15,288    $(11,114)
                                           ========    ========    ========    ========
</TABLE>

(a) Includes amortization of capitalized software, corporate research and
    development and other charges.

Note 7: Treasury Stock

      On June 11, 1998, the Company's Board of Directors authorized the Company
to repurchase up to 2,500,000 shares of its common stock, which represented
approximately 8.0% of the then issued and outstanding shares of common stock. At
July 3, 1999, the Company had repurchased 1,225,600 shares of common stock at a
cost of approximately $18.7 million. The Company accounts for its treasury stock
utilizing the cost method.


                                       10
<PAGE>

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

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

      The matters discussed herein contain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in Item 1
"Business" of the Company's Annual Report on Form 10-K for the year ended
January 2, 1999 as well as those discussed in this section and elsewhere in this
Quarterly Report on Form 10-Q.

Overview

      GenRad, Inc. ("GenRad" or "the Company"), which commenced operations in
1915, is a leading global manufacturing solutions company. GenRad designs,
manufactures and markets integrated hardware and software solutions that enable
the successful manufacture, test and service of microprocessors and other
electronic devices and components. The Company operates primarily in North
America, Europe and Southeast Asia through its three business segments,
Electronic Manufacturing Solutions ("EMS"), Advanced Diagnostic Solutions
("ADS") and GR Software ("GRS").

      EMS focuses on the integration of hardware and software for process
control in the manufacture of printed circuit boards, emphasizing inspection
technologies. EMS provides its customers with leading-edge, cost effective
solutions used to collect data about its manufacturing process and provide
reliable, timely and useful information which can be used to optimize
manufacturing processes.

      ADS is a global leader in developing and marketing diagnostic solutions
comprised of hardware, software and services which optimize the manufacturing
and service capabilities of leading transportation and equipment companies. ADS
solutions are used by its customers to maximize manufacturing efficiencies at
time of product build as well as to maintain efficient and effective service
operations throughout the product's life.

      GRS develops and markets product solutions and services to companies
wishing to achieve and maintain control over manufacturing processes. GRS'
products manage a business's process information necessary to manufacture
products according to plan. They also enable the shop floor to communicate with
a company's ERP systems to have a real time direct impact on a business's
manufacturing operations.


                                       11
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Results of Operations

      The following table sets forth, for the periods indicated, the percentage
of total revenue represented by certain items in the Company's Condensed
Consolidated Statements of Operations.

                                     Three Months Ended   Six Months Ended
                                     ------------------   ----------------
                                      July 3,   July 4,   July 3,   July 4,
                                       1999      1998      1999      1998
                                      -----     -----     -----     -----

Total revenue                         100.0%    100.0%    100.0%    100.0%
Cost of revenue                        51.7%     51.6%     49.2%     50.2%
                                      -----     -----     -----     -----

Gross margin                           48.3%     48.4%     50.8%     49.8%

Selling, general and administrative    26.7%     29.6%     29.2%     33.2%
Research and development                7.5%      9.2%      8.1%      9.6%
Acquired in-process research
  and development                        --      17.2%       --       9.4%
Restructuring charges                    --       5.6%       --       3.0%
Loss from impairment of
  intangible assets                      --       8.3%       --       4.5%
                                      -----     -----     -----     -----
      Total operating expenses         34.2%     69.9%     37.3%     59.7%
                                      -----     -----     -----     -----
Operating income                       14.1%    (21.5)%    13.5%     (9.9)%
Other income (expense)                 (0.2)%     0.1%     (0.4)%    (0.4)%
Income tax benefit (expense)           (1.4)%     1.1%      2.6%      7.5%
                                      -----     -----     -----     -----
Net income (loss)                      12.5%    (20.3)%    15.7%     (2.8)%
                                      =====     =====     =====     =====

1999 vs. 1998

      Orders for the Company's products and services increased to $96.0 and
$155.3 million for the three and six months ended July 3, 1999 from $52.9 and
$106.8 million for the three and six months ended July 4, 1998. Orders for the
three and six months ended July 3, 1999 totaled $46.4 and $90.8 million for EMS,
$45.6 and $53.1 million for ADS and $4.0 and $11.4 million for GRS. Orders
during the three and six months ended July 4, 1998 totaled $39.6 and $84.6
million for EMS, $8.0 and $15.5 million for ADS and $5.3 and $6.7 million for
GRS.

      The increase in EMS orders for the three and six months ended July 3, 1999
compared to the comparable periods ended July 4, 1998 reflects increasing
activity driven by the global expansion of the Company's contract manufacturing
customers. The increase in ADS orders for the three and six months ended July 3,
1999 compared to the comparable periods ended July 4, 1998 is attributable to
both the European and North American launches of the Company's WDS product for
The Ford Motor Company ("Ford"). The decrease in GRS orders for the three months
ended July 3, 1999 compared to the three months ended July 4, 1998 reflects the
timing of significant customer orders. The increase in GRS orders for the six
months ended July 3, 1999 compared to the six months ended July 4, 1998 is
attributable to the acquisition of Industrial Computer Corporation ("ICC") in
April 1998.

      During the three and six months ended July 3, 1999 orders in North America
totaled $58.8 and $90.6 million, orders in Europe totaled $31.7 and $55.3
million and orders in Asia totaled $5.5 and $9.4 million. During the three and
six months ended July 4, 1998, orders in North America totaled $30.8 and $58.7
million, orders in Europe totaled $18.5 and $40.5 million and orders in Asia



                                       12
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

totaled $3.6 and $7.6 million. For the three and six months ended July 3,
1999 as compared to the comparable periods ended July 4, 1998, the increase
in North American orders reflects the North American launch of the Company's
WDS product for Ford while the increase in European orders reflects the
European launch of the WDS product, the global expansion of the Company's
contract manufacturing customers and improving economies of many European
countries during 1999.

      Backlog totaled $60.3 million at July 3, 1999 compared to $27.9 and $21.6
million at April 3, 1999 and January 2, 1999. The Company believes that a
substantial portion of backlog at July 3, 1999 will be shipped during the three
months ended October 2, 1999.

      Product revenue increased to $46.1 and $82.8 million for the three and six
months ended July 3, 1999 from $41.2 and $76.8 million for the three and six
months ended July 4, 1998. Product revenue for the three and six months ended
July 3, 1999 totaled $35.5 and $65.2 million for EMS, $9.1 and $11.1 million for
ADS and $1.5 and $6.5 million for GRS. Product revenue for the three and six
months ended July 4, 1998 totaled $37.4 and $68.8 million for EMS, $2.1 and $5.4
million for ADS and $1.7 and $2.6 million for GRS. The declines of approximately
$1.9 and $3.6 million for the three and six months ended July 3, 1999 for EMS
are attributable to lower overall demand for the segment's products. The
increases in ADS product revenue of approximately $7.0 and $5.7 million for the
three and six months ended July 3, 1999 are attributable to $6.5 million in
product revenue during the three months ended July 3, 1999 related to the
European launch of the Company's WDS product for Ford and incremental product
revenue totaling approximately $0.5 million during the three months ended July
3, 1999 as compared to the comparable year ago period related to the timing of
product shipments to ADS' customers. For the six months ended July 3, 1999 these
increases were offset by an approximate decrease of $1.3 million during the
three months ended April 3, 1999 as compared to the comparable year ago period
related to lower overall product demand. The increase of approximately $3.9
million in GRS product revenue for the six months ended July 3, 1999 is
primarily attributable to the acquisition of ICC in April 1998, which
contributed incremental product revenue of $3.7 million during the six months
ended July 3, 1999.

      Service revenue increased to $17.5 and $34.0 million for the three and six
months ended July 3, 1999 from $17.8 and $31.3 million for the three and six
months ended July 4, 1998. Service revenue for the three and six months ended
July 3, 1999 totaled $8.2 and $15.7 million for EMS, $5.9 and $12.3 million for
ADS and $3.4 and $6.0 million for GRS. Service revenue for the three and six
months ended July 4, 1998 totaled $9.3 and $17.1 million for EMS, $6.0 and $11.0
million for ADS and $2.5 and $3.2 million for GRS. The decrease in EMS service
revenue of approximately $1.1 and $1.4 million for the three and six months
ended July 3, 1999 reflects the overall demand for the segment's services during
the three and six months ended July 3, 1999 as compared to the comparable year
ago period. The increase of approximately $1.3 million in ADS service revenue
for the six months ended July 3, 1999 is attributable to the increased volume of
service contracts during the six months ended July 3, 1999 as compared to the
comparable year ago period. The increases in GRS service revenue of
approximately $0.9 and $2.8 million for the three and six months ended July 3,
1999 are attributable to the increased volume of service contracts, driven by
increased product sales in the GRS business during the three and six months
ended July 3, 1999 compared to the comparable year ago periods.

      Revenue from international markets increased to $33.2 and $58.6 million,
or 52.2% and 50.2% of revenue, for the three and six months ended July 3, 1999
from $31.6 and $57.7 million, or 53.7% and 53.4% of revenue, for the three and
six months ended July 4, 1998. The percentage decrease was driven by increased
volume of business in North America attributable to the acquisition of ICC in
April 1998. Revenues from international markets are subject to the risks of
currency fluctuations.


                                       13
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

      Product margins were $23.3 and $45.6 million, or 50.5% and 55.1%, for the
three and six months ended July 3, 1999 compared to $20.8 and $41.3 million, or
50.5% and 53.8%, for the three and six months ended July 4, 1998. The increase
in product margins of $2.5 million for the three months ended July 3, 1999 as
compared to the comparable year ago period is attributable primarily to
incremental margins in the ADS business of $2.4 million driven by the European
launch of the Company's WDS product for Ford and $0.4 million in incremental
margins in the EMS business attributable to improved manufacturing efficiencies.
These favorable increases were offset by increased capitalized software
amortization costs of $0.3 million during the three months ended July 3, 1999 as
compared to the comparable year ago period.

      The increase in product margins of $4.3 million, or 1.3%, for the six
months ended July 3, 1999 as compared to the comparable year ago period is
attributable primarily to incremental margins in the ADS business of $2.9
million during the six months ended July 3, 1999. This increase was driven by
the European launch of the Company's WDS product for Ford and enhanced margins
on non WDS product business during the three months ended July 3, 1999. The
overall product margin increase was also favorably impacted by increased margins
in the GRS business of $3.8 million for the six months ended July 3, 1999. These
increases were offset by a decline in year to date EMS margins of $2.3 million
driven by lower product revenue in the first half of the fiscal year and
increased software amortization costs of $0.1 million during the six months
ended July 3, 1999 as compared to the comparable year ago period.

      Inventory turnover, excluding certain inventory related to the Company's
contract with Ford, for the three and six months ended July 3, 1999, was 3.0 and
2.6. For the three and six months ended July 4, 1998 inventory turnover,
excluding certain Ford inventory, was 2.4 and 2.2, respectively. The increase in
inventory turnover for the three and six months ended July 3, 1999 compared to
the year ago comparable period is attributable to increased operating
efficiencies in manufacturing resulting from the Company's restructuring efforts
in 1998 as well as overall improved inventory management.

      Service margins were $7.5 and $13.8 million, or 42.7% and 40.5%, for the
three and six months ended July 3, 1999 compared to $7.7 and $12.5 million, or
43.4% and 40.0%, for the three and six months ended July 4, 1998. The decrease
in service margins as a percentage of revenues for the three months ended July
3, 1999 as compared to the three months ended July 4, 1998 is attributable to
declining margins in the ADS business which reflects the competitive market
conditions in the segments that ADS competes. For the six months ended July 3,
1999 service margins increased $1.3 million, or 0.5% of revenue. The dollar
value increase reflects higher service revenue in the Company's ADS and GRS
business units. As a percentage, the increase reflects improved utilization in
the EMS and GRS service operations offset by declining margins in the ADS
business primarily during the three months ended July 3, 1999.

      Selling, general and administrative expenses decreased to $17.0 and $34.1
million, or 26.7% and 29.2% of total revenue, for the three and six months ended
July 3, 1999 from $17.5 and $35.9 million, or 29.6% and 33.2% of total revenue,
for the three and six months ended July 4, 1998. The decrease in selling,
general and administrative expenses, both in dollars and as a percentage of
total revenue, is attributable to the restructuring actions management
implemented during the second and third quarters of 1998, accounting for
approximately $3.0 million of reduced selling, general and administrative
expenses for the six months ended July 3, 1999. This decrease was offset by
approximately $1.2 million in incremental selling, general and administrative
expenses resulting from the acquisition of ICC in April 1998. The Company
expects to continue to focus on cost minimization efforts to lower selling,
general and administrative expenses, particularly as a percentage of total
revenue. However, there can be no assurances that such reductions can be
achieved. Failure to achieve such reductions may impact the Company's financial
position, results of operations or cash flow.

      Research and development expenses decreased to $4.8 and $9.5 million, or
7.5% and 8.1% of total revenue, for the three and six months ended July 3, 1999



                                       14
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

from $5.4 and $10.4 million, or 9.2% and 9.6% of total revenue, for the three
and six months ended July 4, 1998. During the three months ended July 3,
1999, on-going research and development projects continue to be for
in-circuit and functional test equipment software, a next generation
in-circuit hardware platform, a low cost functional test system and new
product development and system enhancements for the Company's GRS product
suite. The decrease in research and development expenses is attributable in
part to an increase in capitalized software of $0.5 and $1.3 million for the
three and six months ended July 3, 1999 compared to the comparable year ago
period. The Company expects to continue to invest in new product development
and enhancements to its existing products.

      Interest expense was $0.3 and $0.5 million for the three and six months
ended July 3, 1999 and $0.3 and $0.6 million for the three and six months ended
July 4, 1998. Interest expense primarily relates to the five-year term loan
entered into in June 1997 which provided approximately $12.0 million for the
purchase of furniture and fixtures for the Company's corporate headquarters and
manufacturing facilities in Westford, Massachusetts. Interest is payable
quarterly in arrears at LIBOR plus 1.25%. The decrease in interest expense is
attributable to a decline in the LIBOR interest rate during the three months
ended July 3, 1999 compared to the three months ended July 4, 1998.

      A net income tax benefit (expense) of $(0.9) and $3.0 million was recorded
during the three and six months ended July 3, 1999 compared to a net income tax
benefit of $0.7 and $8.1 million during the three and six months ended July 3,
1998. The recorded income tax benefit of $3.0 million for the six months ended
July 3, 1999 results primarily from a reversal of a portion of the Company's
deferred tax asset valuation allowance totaling $4.5 million which was recorded
due to management's expectations of future income and expected utilization of
the Company's domestic and foreign net operating loss carryforwards. Excluding
the reversal of a portion of the deferred tax asset valuation allowance income
tax expense was $1.5 million for the six months ended July 3, 1999 compared to
an income tax benefit of $0.6 million for the six months ended July 4, 1998.

Impairment loss

      In fiscal 1996, the Company purchased Test Technology Associates, Inc. and
Testware, Inc. These components provide custom test programming, text fixture
integration and other value-added services to manufacturers and users of
electronic products. Additionally, GenRad acquired certain assets of Field
Oriented Engineering, AG in fiscal 1996, consisting primarily of the software
program known as TRACS(R) III, which is sold to electronic manufacturing systems
customers. The excess purchase price over the net assets acquired for these
acquisitions was recorded as long-term intangibles, primarily goodwill.

      Through July 4, 1998 the historical financial performance of these
entities continued to be less than anticipated and the businesses had been
negatively impacted by the recent decline in the in-circuit test market. Due to
these factors as well as certain management changes during the second quarter of
1998, the Company prepared revised projections of future net cash flows relating
to these businesses, which indicated that the businesses would not generate
sufficient net cash flows to realize the carrying value of the intangible
assets. This analysis was performed in accordance with the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Assets to be Disposed Of." As a result,
a $4.9 million impairment loss, representing the net book value of goodwill, was
recorded during the second quarter of 1998 and is included in the accompanying
condensed consolidated statements of operations for the three and six months
ended July 4, 1998.

Acquired in-process diagnostic software

      On July 2, 1998, the Company acquired the rights to certain diagnostic
software for which technological feasibility had not been established. The
Company plans to use the acquired technology in the development and diagnosis of
increasingly complex mechatronic systems, particularly in vehicle systems.


                                       15
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

At the time of the acquisition, the acquired technology had not yet reached
technological feasability and had no alternative future uses and, accordingly,
the entire purchase price was expensed. The total of $1.7 million is included in
acquired in-process research and development in the accompanying condensed
consolidated statements of operations for the three and six months ended July 4,
1998.

Restructuring and other charges

      During the three months ended July 4, 1998, the Company restructured its
operations, which resulted in a workforce reduction of approximately 130
employees or 9% of the Company's workforce. In accordance with EITF 94-3,
"Liability Recognition for Certain Employee Termination Benefits, and Other
Costs to Exit an Activity," the Company recorded a charge for restructuring
totaling approximately $3.2 million for severance costs and post-employment
benefits, write-offs of certain fixed assets which will no longer be utilized
and for the termination fees of certain equipment and real estate leases.

Acquisition of Industrial Computer Corporation

      On April 7, 1998, GenRad acquired all of the then outstanding common
shares of Industrial Computer Corporation ("ICC"), a software company providing
real-time manufacturing execution systems to electronics manufacturers. ICC was
established in 1980 and is located in Atlanta, Georgia. The transaction was
accounted for as a purchase, and accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on their respective fair
values. In connection with the acquisition of ICC, 1,237,917 shares of GenRad's
common stock were issued for all of the then outstanding shares of ICC in a
tax-free reorganization. Consideration for the acquisition of ICC totaled
approximately $36.6 million. Direct costs of the acquisition totaled
approximately $1.6 million and consisted primarily of legal fees, accounting
fees and broker fees. Consideration was allocated to the tangible and intangible
assets of ICC as follows: acquired in-process research and development ($8.4
million), developed technology ($11.4 million), goodwill ($17.0 million), other
intangible assets ($1.7 million) and the net assets and liabilities of ICC (net
liability of $0.3 million). The results of ICC are included in the 1998
financial statements beginning from the date of purchase.

      The Securities and Exchange Commission ("SEC"), in September 1998, issued
guidance related to the valuation of acquired in-process research and
development as set forth in its letter dated September 9, 1998 from the Chief
Accountant of the SEC to the American Institute of Certified Public Accountants.
In April 1999 the Company corresponded with the staff of the SEC ("the Staff")
concerning the application of the methodology to the valuation of the incomplete
technology and other intangible assets and implemented the methodology. As a
result of the application of the valuation methodology, the purchase price was
allocated to acquired in-process research and development, developed technology,
assembled workforce and tradename. In April 1999, the Company restated its
originally filed Forms 10-Q filings for its second and third quarters of fiscal
1998 to reflect this methodology.

      The valuation of acquired in-process research and development was based on
management's projections of the after tax net cash flows attributable to the
acquired in-process research and development. Specifically, the valuation
considers the following: (i) a fair market value premise; (ii) comprehensive due
diligence concerning all potential intangible assets including trademarks and
tradenames, patents, copyrights, non-compete agreements, assembled workforce and
customer relationships and sales channel relationships; (iii) the value
contribution of core technology to the acquired in-process technology, with a
view toward ensuring the relative allocations to core technology and acquired
in-process research and development were consistent with the relative
contributions of each to the final product; and (iv) the calculation used to
determine the value allocated to acquired in-process research and development
considered only the efforts completed as of the transaction date and only the
cash flow associated with the product development efforts in-process at the
acquisition date. The charge for acquired in-process research and development
relates to one development project in process at the date of the acquisition



                                       16
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

that had not reached technological feasibility, had no alternative future
use, and for which ultimate successful component, had no alternative future
use was reached in consultation with engineering personnel from ICC as well
as the Company's valuation advisors.

      The in-process project consists of the development of ICC's existing UNIX
based product using an object oriented design and standard programming language
which will provide users of the product the ability to use ICC's Shop Floor Data
Manager (TM) ("SFDM") product on varied operating platforms. The primary project
tasks open at the time of acquisition included completion of the design of
certain modules, or objects, which will house the program code, completion of
program code written in the new language and preliminary quality assurance and
testing of the product. At the time of acquisition, additional development
remained on all tasks (management estimated that the project was approximately
69% complete) and costs to complete were estimated to total approximately
$928,000. At the time of the acquisition, management believed that the product
being developed would become available for sale late in fiscal 1999. GenRad will
begin to benefit from the acquired in-process research and development once
completed product is sold. Failure to reach successful completion of this
project may result in impairment of the associated capitalized intangible
assets, i.e. goodwill and developed technology, and/or may require the Company
to accelerate the time period over which the intangibles are being amortized,
which may have a material adverse effect on the Company's results of operations
and financial condition.

      Significant assumptions used to determine the value of the acquired
in-process research and development included several factors. The first was a
forecast of net cash flows that were expected to result from the in-process
development effort using projections prepared by ICC management, portions of
which (1998 and 1999) were provided to GenRad's Board of Directors. Net cash
flow projections included projected revenue growth and trends in profit margins
and selling, general and administrative expense that were consistent with recent
historical trends prior to the acquisition. Second, a percentage complete of 69%
for the project estimated by considering the costs invested to date relative to
the expected total cost of the development effort, supported by the amount of
technological progress completed as of the transaction date relative to the
overall technological achievements required to achieve the intended
functionality of the eventual product. The technological issues were addressed
primarily by engineering representatives from ICC along with the Company's
independent valuation advisors. Third, a 24% discount rate, which represents a
rate equivalent to that which would be employed in a fair value analysis, i.e.,
one that considers all cash flows associated with the project and resulting
product, and therefore represents a blended rate of all the risks associated
with the product. Lastly, a core technology charge reflected as one third of
after tax net income related to the in-process project was utilized. This rate
represents an amount that the Company would be required to pay in royalties
assuming it had licensed the products expected to be derived from the acquired
in-process development efforts.

      As of July 3, 1999, the technological feasibility of the project has been
reached and no significant departures from the assumptions included in the
valuation analysis have occurred.

Acquisition of Manufacturing Execution Systems Business

      On April 9, 1998, GenRad acquired certain assets of the Manufacturing
Execution Systems ("MES") business of Valstar Systems Limited ("Valstar")
located in Aberdeen, Scotland. Valstar's MES component provides integration
services and support and distribution in Europe for ICC's Shop Floor Data
Manager Software.

      Consideration paid for Valstar's MES business totaled $3.2 million in
cash, including acquisition costs, funded through internally generated funds. As
part of the acquisition, the Company entered into a two-year consulting and
services agreement with Valstar that includes securing certain Valstar personnel
and other resources to transition the business to GenRad. Of the $3.0 million



                                       17
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

purchase price, $2.0 million was paid on April 9, 1998 and $1.0 million was
released from escrow on October 7, 1998 as certain contingencies were
achieved. Direct costs of the acquisition totaled approximately $0.2 million
and consisted primarily of legal and accounting fees.

Liquidity and Sources of Capital

Sources and uses of cash

      Cash and cash equivalents at July 3, 1999 totaled approximately $8.8
million, compared to approximately $13.0 million at January 2, 1999 and
approximately $16.1 million at July 4, 1998. The Company's current ratio at July
3, 1999 and January 2, 1999 was 2.4 and 2.5 and was 3.6 at July 4, 1998. Net
cash used in operating activities was $13.4 million for the six months ended
July 3, 1999, compared to net cash provided by operating activities of $7.4
million for the six months ended July 4, 1998.

      The change in cash (used in) provided by operating activities during the
six months ended July 3, 1999 as compared to the six months ended July 4, 1998
is primarily driven by significant inventory investments related to the
Company's contract with Ford and payment of $7.0 million, net of insurance
proceeds, related to the settlement of arbitration recorded in 1998 offset by
increased net income, improved inventory management, improved payment timing on
long-term contracts, and better cash management related to timing of vendor
payments.

      During the three months ended July 3, 1999, the Company's accounts
receivable turnover was approximately 4.5 (annualized) compared to approximately
4.0 (annualized) for the three months ended July 4, 1998. The improvement
reflects management's continued focus on cash collections, offset by continued
customer demands for more favorable payment terms during the three months ended
July 3, 1999.

      During the six months ended July 3, 1999, net cash used in investing
activities was $12.9 million, compared to $13.4 million for the six months ended
July 4, 1998. Capital expenditures totaled $10.0 million for the six months
ended July 3, 1999 compared to $8.1 million for the six months ended July 4,
1998. Cash used in the acquisition of certain intangible assets totaled $2.9
million for the six months ended July 3, 1999 compared to $2.4 million for the
six months ended July 4, 1998. The purchase of ICC and MES during the three
months ended July 4, 1998 used cash of $2.9 million.

      The increase in capital expenditures during the six months ended July
3, 1999 compared to the six months ended July 4, 1998 is attributable to the
Company's new business system implementation. Beginning in 1998, the Company
began efforts to implement SAP R/3-TM- ("SAP"), an enterprise resource
planning system. During the six months ended July 3, 1999, total capital
expenditures related to the Company's SAP implementation totaled
approximately $4.0 million. At the end of 1998, the Company had completed
Phase I of this project with the successful implementation of certain modules
of the SAP ERP system. During the quarter ended April 3, 1999, the Company
began Phase II of this project, which involves the implementation of certain
other modules of SAP, including sales, manufacturing and distribution related
modules. Total expenditures in 1999 are expected to approximate $7.0 million
to $8.0 million. Thereafter, the Company expects to continue to incur certain
capital expenditures and on-going expenses related to the implementation of
SAP, however such expenditures are expected to be significantly less than
those made in 1998 and expected to be made in 1999.

      Cash used in the acquisition of certain intangible assets of $2.9 million
represents the costs of software capitalized in accordance with Statement of
Financial Accounting Standards No. 86 as well as the direct purchase of certain
intangible assets from third parties.


                                       18
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

      Net cash provided by financing activities was $19.6 million for the six
months ended July 3, 1999 compared to $0.6 million for the six months ended July
4, 1998. The increase in cash provided by financing activities during the six
months ended July 3, 1999 as compared to the six months ended July 4, 1998 is
primarily attributable to the Company's borrowings on its line of credit
facility during the six months ended July 3, 1999. Net borrowings totaled $15.6
million during the six months ended July 3, 1999 (all of which occurred during
the three months ended July 3, 1999) and were for inventory investments related
to the Company's contract with Ford and on-going software development efforts in
the Company's GRS segment. Proceeds from employee stock plans provided
incremental cash from investing activities of $5.4 million as compared to the
six months ended July 4, 1998. Offsetting these increases was an incremental
cash outlay of $2.1 million related to the Company's stock repurchase program
for the six months ended July 3, 1999.

Stock repurchase program

      During the second quarter of 1998, the Company commenced a stock
repurchase program whereby the Company will purchase, in the open market, shares
of its stock. The Company intends to buy back its stock at times when the market
price of the stock presents opportunities to do so. The Company's stock
repurchase plan is intended as a means to partially mitigate the dilutive impact
of stock options and to provide an alternative investment for the Company's
excess cash. The program has been funded entirely through operating cash flow,
however, the Company may if it considers it prudent, utilize its available
credit facilities in connection with its stock repurchase program. Through July
3, 1999, the Company had utilized approximately $18.7 million to repurchase
1,225,600 shares of its common stock.

Credit facility

      The Company has a $50.0 million credit facility, which requires the
Company to maintain certain financial and operating covenants and expires in
July 2001. Borrowings on the line are payable on demand and bear interest, which
is payable quarterly in arrears, at the lesser of the bank's prime rate (for
borrowings designated as `prime rate" borrowings) or LIBOR plus a range from
0.75% to 1.50% (for borrowings designated as "LIBOR" borrowings), as determined
from time to time by the bank. Under the terms of the credit facility, the
Company is required to pay a commitment fee on the unused portion of the line
ranging from 0.25% to 0.50% of the total unused portion of the line dependent on
the Company's operating performance. At July 3, 1999, borrowings outstanding
under the line totaled $15.6 million, of which $10.0 million was designated as a
LIBOR borrowing and $5.6 million as a prime rate borrowing.

Summary

      The Company's primary source of liquidity is internally generated funds.
Throughout 1999, the Company anticipates it will fund its working capital and
capital expenditure requirements, make principal and interest payments on its
borrowings and meet its cash obligations from internally generated funds and
from its available credit facility. As the Company continues to invest in new
product developments and enhancements to existing products, it expects research
and development expenditures to continue at approximately the same percentage of
sales as prior fiscal years.

Effects of Inflation and Foreign Exchange

      Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe inflation has had a material
effect on its revenues or its results of operations. The Company attempts to
mitigate inflationary cost increases by continuously improving manufacturing
methods and technologies. Management does not expect inflation to have a
significant impact on operations in the foreseeable future.


                                       19
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Effects of Inflation and Foreign Exchange (continued)

      The Company maintains development, sales and support facilities in several
locations worldwide, including, England, France, Germany, Switzerland,
Singapore, and Mexico, among others. A significant amount of the Company's
business is conducted with companies located in these and other countries and
certain transactions may be denominated in currencies other than the US dollar.
As a result, the Company may experience transaction gains and losses as a result
of currency fluctuations. In order to minimize its exposure to loss from changes
in foreign currency exchange rates, the Company mitigates its risk using foreign
currency forward exchange contracts. The Company's currency risk mitigation
strategies are designed to reduce the Company's vulnerability to certain foreign
currency exchange exposures. In executing its strategies, the Company actively
monitors foreign currency exchange rates and executes foreign currency forward
exchange contracts, primarily with financial institutions. These contracts serve
to offset the impact of actual foreign currency changes, e.g. if currency rates
changed with respect to a certain transaction resulting in a loss to the
Company, the forward contract would be structured to result in a gain, thereby
minimizing the actual loss incurred, if any.

      The Company may be subject to losses resulting from unanticipated changes
in foreign currency exchange rates. The market factors that expose the Company
in this regard include economic conditions in which the Company conducts
business as well as the Company's ability to effectively and efficiently engage
in foreign currency forward exchange contracts at competitive rates with
financial institutions or others. The Company expects to continue these or
similar practices in the future to the extent appropriate. Historically, actual
results of the Company's foreign currency risk management procedures have been
in line with management's expectations and have not resulted in significant
gains or losses, however, there can be no assurance that these results will
continue in the future.

The Introduction of the Euro

      The Company is aware of and has developed systems designed to handle the
introduction of the Euro as an effective currency in Europe. Although the
Company believes the systems that have been implemented are sufficient for the
Company to be able to process Euro denominated transactions, there can be no
assurances that such systems will continue to function as designed. If they do
not so function, GenRad's financial results could be adversely affected. To
date, the Company has not encountered any significant processing issues related
to the introduction of the Euro. The introduction of the Euro has not materially
affected the manner in which the Company conducts its operations, nor has it
required the Company to alter any significant contracts with suppliers and/or
financial institutions.

Factors That May Affect Future Results

      This Quarterly Report may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company's actual results of operations and
future financial condition may differ materially from those expressed in any
such forward-looking statements as a result of many factors that may be beyond
the Company's control. Factors that might cause such differences include, but
are not limited to, those discussed below.

      The Company has experienced and expects to continue to experience
fluctuations in its results of operations, particularly on a quarterly basis.
The Company's expense levels are based, in part, on expectations of future
revenues. If revenue levels in a particular period do not meet expectations, due
to the timing of the receipt of orders from customers, customer cancellations or
delays of shipments, then operating results could be adversely impacted.


                                       20
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

      The market for the Company's products is characterized by rapid
technological change, an increased demand for specific feature requests by
customers, evolving industry standards, and frequent new product introductions.
The introduction of products embodying new technology or the emergence of new
industry standards or practices could render the Company's existing products
obsolete or otherwise unmarketable. Future operating results are dependent upon
the Company's ability to develop, design, manufacture and market technologically
innovative products that meet customer needs.

      Competition in the markets where the Company operates is intense. The
Company continues to invest in manufacturing productivity to try to minimize the
impact of competitive pricing pressures, fluctuations within the Company's
product mix, potential inventory obsolescence exposure and start-up
manufacturing costs for new product introductions.

      The Company is dependent upon a number of suppliers for several key
components of its products. The loss of certain of the Company's suppliers,
supply shortages or increases in the costs of key raw materials could have a
material adverse effect on the Company.

The Year 2000 Issue

      Many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year. Consequently, they may be
unable to process certain dates before, during and after the year 2000. As a
result, entities are at risk for possible miscalculations or system failures
causing disruptions in their operations. GenRad has and continues to evaluate
its operations to assess modifications needed for this issue. A full time
project manager position was established in 1998 to address the Year 2000 issue.

      GenRad has a comprehensive worldwide program that is intended to identify
and correct potential material problems related to the Year 2000 in its
products, information systems, infrastructure and manufacturing facilities. The
work plan established involves the following phases:

<TABLE>
<CAPTION>
                                                                    Anticipated
Phase                                         Status              Completion Date
-----                                         ------              ---------------

<S>                                  <C>                      <C>
Inventory GenRad products, assets,   First pass complete.     Planned for summer of
   facilities and manufacturing and                           1999 as verification of
   business processes.                                        first pass. Final
                                                              review scheduled for
                                                              completion in Fall 1999.

Assess the risk associated with      First pass complete.     Planned for summer of
   that inventory.                                            1999 as verification of
                                                              first pass. Final
                                                              review scheduled for
                                                              completion in Fall 1999.

Correct business systems impacted    On-going                 Fall 1999.
   by Year 2000 issues.

Identify and communicate to          On-going. Customers are  Fall 1999.
   customers those products that     identified as product
   will be Year 2000 compliant,      assessments are
   that have a remediation path to   completed.
   make those products Year 2000
   compliant and that have no
   remediation path and will not
   be Year 2000 compliant.

Test and document all of the above   On going.                Fall 1999.
   that must be or are represented
   to be compliant.
</TABLE>


                                       21
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

      A number of inventory reviews have been completed and will continue to be
updated in the future. Software and hardware, as well as tools to test, age and
evaluate data, have been acquired, are being installed and are being utilized
for the Year 2000 compliance work plan. Test plans for items identified as
critical are either being deployed or currently being developed.

      Prior to addressing the Year 2000 issue, GenRad had decided to replace all
of its business system software. GenRad is replacing its worldwide business
systems with systems that use programs primarily from SAP America, Inc. ("SAP").
SAP has advised GenRad that its programs are Year 2000 compliant. The financial
system replacement was completed in the first quarter of 1999, while the
manufacturing, materials, order entry and service portions are scheduled for
completion in the fourth quarter of 1999. As a contingency, the existing
business systems have been corrected, tested and believed to be Year 2000
compliant. Although the results have been tested, there can be no assurances
that such systems will function as tested, if necessary, in the Year 2000.

      With respect to GenRad products, the Company is in the process of
designing and executing scripted tests that will determine the impact of the
Year 2000 on each currently manufactured GenRad product. GenRad will treat any
Year 2000 issue discovered during this process, if any, as an important product
maintenance issue and will make reasonable efforts to provide available fixes to
all worldwide GenRad customers. The on-going status of GenRad's Year 2000
compliance for each product it manufactures is posted on the Company's home page
at the following web address: http://www.genrad.com.

      GenRad has initiated formal communications with all significant external
interfaces, including customers, banks and municipal agencies, and suppliers to
determine the extent to which GenRad is vulnerable to third party failures to
correct their own potential Year 2000 problems. GenRad's primary significant
external interfaces include its external banking service providers and municipal
agencies. The Company's banking service providers provide necessary service to
the Company in the area of cash management. Certain municipal agencies in the
municipalities in which GenRad operates provide necessary water and sewerage
services to the Company. GenRad's formal communications with suppliers and other
significant external interfaces have resulted in 61% of those contacted
responding. As of the date of this report, the Company has not identified any
suppliers or external interfaces which it believes critical to have a definitive
Year 2000 compliance problem. GenRad's formal communications with its customers
have resulted in a 13% response rate of those contacted responding. A failure of
any of these interfaces or suppliers to adequately address their Year 2000
issues could adversely affect the Company's operations.

      Upon completion the results will be evaluated in the context of GenRad's
contingency plans. To date, GenRad has not identified any specific external
interfaces which it considers to place the Company at significant risk. However,
no formal discussions have yet to occur or are planned with the municipalities
in which GenRad operates as it pertains to local services such as water supply
and sewerage services. Further, a portion of the Company's direct or indirect
external interfaces are solely based in, or have headquarters in, Southeast
Asia. Many publicly available surveys suggest that, of all major global economic
regions, Southeast Asia is the least ready for the Year 2000, driven by the lack
of solid information from the region concerning the region's Year 2000
readiness.

      Costs incurred to date for the Year 2000 issue, primarily related to
software corrections, are approximately $917,000 with estimated future costs of
$485,000. The costs were and will continue to be funded through internally
generated resources, without cannibalizing the Company's information technology
budget or resources, and expensed as incurred in accordance with EITF 96-14,
"Accounting For the Costs Associated with Modifying Computer Software for the
Year 2000."


                                       22
<PAGE>

                          GenRad, Inc. and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Management believes that its internal Year 2000 issues will be addressed in a
manner that will prevent such issues from having a material adverse effect on
GenRad results of operations, financial position or cash flows. However, there
can be no assurances that management will be successful in addressing all its
internal Year 2000 issues or that all of the Company's external interfaces will
be successful in addressing their Year 2000 issues. If management or any
significant external interfaces is not, the Company's operating results and
financial position could be materially and adversely impacted. In the worst
case, although not anticipated or considered likely by GenRad management, the
Company may not be able to operate manufacturing facilities or other support
functions which would have a material adverse effect on the Company's financial
position and results of operations for periods subsequent to 1999. Management
believes that its contingency plans, which include the use of alternative
manufacturing facilities currently available to the Company, and business
systems, which the Company currently utilizes, are adequate to mitigate the risk
associated with the Company's worst case scenario.

Other factors

      Other factors which could impact future results are past and future
acquisitions, strategic alliances, patent or product liability claims in excess
of available insurance coverage, changes in the Company's effective tax rates,
new regulatory requirements, political and economic changes, tariffs, trade
restrictions, transportation delays, foreign currency fluctuations and
inflation.

      The Company disclaims any intent or obligation to update any
forward-looking statements that may be included in this report. Additionally,
there can be no assurance that other factors, not included above, could impact
future results.

Impact of Recently Issued Accounting Pronouncements

Financial Instruments

      On June 15, 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). This Statement is effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000 (which the Company will adopt in
fiscal year 2001, starting on December 31, 2000) and requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. The Company is currently determining the impact of the adoption of
SFAS 133 to its operating results or financial position.


                                       23
<PAGE>

                           Part II. Other Information

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

(a)   The Annual Meeting of Shareholders of GenRad, Inc. was held on May 13,
      1999 (the "Annual Meeting").

(b)   Not required pursuant to instructions No. 3.

(c)   Votes were cast or withheld in connection with the election of directors
      at the Annual Meeting as follows:

       Name of Director                      For               Withheld
       ----------------                      ---               --------
       Russell A. Gullotti                22,231,624            519,454
       William G. Scheerer                22,239,924            517,154

      Votes were cast or withheld in connection with the following proposals,
      more fully described in the Company's Proxy Statement dated May 13, 1999
      at the Annual Meeting.

<TABLE>
<CAPTION>
                                                    Affirmate          Negative
                                                      Votes              Votes         Abstained
                                                      -----              -----         ---------
       <S>                                         <C>                  <C>             <C>
       1) To amend the Company's 1991 Equity
          Incentive Plan by increasing by
          500,000 the shares of Common Stock
          available for issuance                   15,974,860           5,613,026       1,667,192
</TABLE>

Item 6. Exhibits and Reports on Form 8-K

(a)   The following Exhibits are filed as part of this report:

3.1   Articles of Organization of GenRad, Inc. as amended to May 21, 1980,
      incorporated by reference to Exhibit 3.1 to the Company's report on Form
      10-K for the year ended January 3, 1981.

3.2   Articles of Amendment to the Articles of Organization of GenRad, Inc.,
      incorporated by reference to Exhibit 3.1 to the Company's report on Form
      10-K for the year ended December 31, 1983.

3.3   Articles of Amendment to the Articles of Organization of GenRad, Inc.,
      incorporated by reference to Exhibit 3.1 to the Company's report on Form
      10-K for the year ended January 2, 1988.

3.4   By-laws of GenRad, Inc. (as amended) incorporated by reference to Exhibit
      3.2 of the Company's report on Form 10-K for the year ended December 29,
      1990.

10.   Lease agreement dated July 26, 1996 between GenRad, Inc. and Michelson
      Farm-Westford Technology Park Trust, incorporated by reference to Exhibit
      10 to the Company's report on Form 10-Q for the three months ended June
      29, 1996.

10.1  Facility agreement dated June 26, 1997 between GenRad Limited and
      BankBoston, N.A. London Branch, incorporated by reference to Exhibit 10.1
      to the Company's report on Form 10-Q for the three months ended June 28,
      1997.

10.2  Amended and restated revolving credit agreement dated May 6, 1997 between
      GenRad, Inc. and BankBoston, N.A. incorporated by reference to Exhibit
      10.2 to the Company's report on Form 10-Q for the three months ended June
      28, 1997.

10.3  Severance Agreement between GenRad, Inc. and Kevin R. Cloutier effective
      as of May 9, 1997, incorporated by reference to Exhibit 10.3 to the
      Company's report on Form 10-Q for the three months ended September
      27,1997.


                                       24
<PAGE>

10.4  Severance Agreement between GenRad, Inc. and Paul Geere effective as of
      May 9, 1997, incorporated by reference to Exhibit 10.4 to the Company's
      report on Form 10-Q for the three months ended September 27,1997.

10.5  Severance Agreement between GenRad, Inc. and Lori B. Hannay effective as
      of May 9, 1997, incorporated by reference to Exhibit 10.5 to the Company's
      report on Form 10-Q for the three months ended September 27,1997.

10.6  Severance Agreement between GenRad, Inc. and Sarah H. Lucas effective as
      of May 9, 1997, incorporated by reference to Exhibit 10.6 to the Company's
      report on Form 10-Q for the three months ended September 27,1997.

10.7  Severance Agreement between GenRad, Inc. and James F. Lyons effective as
      of May 8, 1997, incorporated by reference to Exhibit 10.7 to the Company's
      report on Form 10-Q for the three months ended September 27,1997.

10.8  Severance Agreement between GenRad, Inc. and Paul Pronsky, Jr. effective
      as of May 9, 1997, incorporated by reference to Exhibit 10.8 to the
      Company's report on Form 10-Q for the three months ended September
      27,1997.

10.9  Severance Agreement between GenRad, Inc. and Michael W. Schraeder
      effective as of May 9, 1997, incorporated by reference to Exhibit 10.9 to
      the Company's report on Form 10-Q for the three months ended September
      27,1997.

10.10 Severance Agreement between GenRad, Inc. and Walter A. Shephard effective
      as of October 24, 1997, incorporated by reference to Exhibit 10.10 to the
      Company's report on Form 10-K for the year ended January 3, 1998.

10.11 Severance Agreement between GenRad, Inc. and Gary H. Mueller effective as
      of October 24, 1997, incorporated by reference to Exhibit 10.10 to the
      Company's report on Form 10-K for the year ended January 3, 1998.

10.12 Agreement dated February 12, 1997 between GenRad Limited and Ford Motor
      Company, incorporated by reference to Exhibit 10.12 of the Company's
      report on Form 10-K for the year ended January 2, 1999.

10.13 Settlement agreement and Mutual General Release dated April 7, 1999
      between William E. Gaines, William E. Massaker, Frank B. Wingate and
      Heritage Investment Limited Partnership and GenRad, Inc., James F. Lyons
      and Paul Pronsky Jr., incorporated by reference to Exhibit 10.13 of the
      Company's report on Form 10-K for the year ended January 2, 1999.

11.   Statement re: Computation of Net Income Per Share.

27    Financial Data Schedule

(b)   There were no reports on Form 8-K filed during the three months ended
      July 3, 1999.


                                       25
<PAGE>

                                   Signatures

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                GenRad, Inc.


                                By: /s/ WALTER A. SHEPHARD
                                    ----------------------------------------
                                        Walter A. Shephard
                                        Vice President and
                                        Chief Financial Officer and Clerk

Date: August 17, 1999


                                       26