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

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


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


                       For the Quarter Ended July 4, 1998


                           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.

28,904,237 shares of the Common Stock, $1 par value, were outstanding on
August 14, 1998.

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<PAGE>
                          GENRAD, INC. AND SUBSIDIARIES
                                Table of Contents


<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                      <C>
Part I.  Financial Information:

         Consolidated Statement of Operations .......................          1

         Consolidated Balance Sheet .................................      2 - 3

         Consolidated Statement of Cash Flows .......................          4

         Notes to Consolidated Financial Statements .................      5 - 9

         Management's Discussion and Analysis of
            Financial Condition and Results of Operations ...........    10 - 15

Part II. Other Information:

         Items 1, 4 and 6 ...........................................    16 - 17

         Signatures .................................................         18
</TABLE>
<PAGE>
                          PART I. FINANCIAL INFORMATION
                          GENRAD, INC. AND SUBSIDIARIES
                      Consolidated Statement of Operations
               (In thousands, except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       Three Months Ended              Six Months Ended
                                                 ----------------------------    ----------------------------
                                                   July 4,         June 28,         July 4,        June 28,
                                                    1998             1997            1998            1997
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>         
Sales:
      Sales of products                          $     41,163    $     47,894    $     76,752    $     85,700
      Sales of services                                17,777          13,156          31,260          27,850
                                                 ------------    ------------    ------------    ------------
               Total sales                             58,940          61,050         108,012         113,550
                                                 ------------    ------------    ------------    ------------

Cost of sales:
      Cost of products sold                            20,198          23,578          35,297          39,836
      Cost of services sold                            10,066           7,935          18,767          15,162
                                                 ------------    ------------    ------------    ------------
               Total cost of sales                     30,264          31,513          54,064          54,998
                                                 ------------    ------------    ------------    ------------

Gross profit                                           28,676          29,537          53,948          58,552

Selling, general and administrative                    17,200          16,037          35,634          33,514
Research and development                                5,444           4,565          10,363           9,245
Unusual Charges                                        31,546            --            31,546            --
                                                 ------------    ------------    ------------    ------------
               Total operating expenses                54,190          20,602          77,543          42,759
                                                 ------------    ------------    ------------    ------------

Operating (loss) income                               (25,514)          8,935         (23,595)         15,793

Other income (expense):
      Interest, net                                      (173)           (134)           (282)             (8)
      Other, net                                          211             (74)           (101)            (56)
                                                 ------------    ------------    ------------    ------------
               Total other income (expense)                38            (208)           (383)            (64)
                                                 ------------    ------------    ------------    ------------

Income before income taxes                            (25,476)          8,727         (23,978)         15,729
Income tax (benefit) provision                           (672)            806          (8,082)         (3,909)
                                                 ------------    ------------    ------------    ------------
Net (loss) income                                $    (24,804)   $      7,921    $    (15,896)   $     19,638
                                                 ============    ============    ============    ============

Net (loss) income per common and common
      equivalent shares:
           Basic                                 $      (0.88)   $       0.30    $      (0.57)   $       0.74
                                                 ============    ============    ============    ============
           Diluted                               $      (0.88)   $       0.28    $      (0.57)   $       0.70
                                                 ============    ============    ============    ============


Weighted average common and common 
      equivalent shares used in computing per 
      share amounts:
           Basic                                   28,286,000      26,697,000      27,887,000      26,414,000
                                                 ============    ============    ============    ============
           Diluted                                 28,286,000      28,177,000      27,887,000      28,096,000
                                                 ============    ============    ============    ============
</TABLE>




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

                                       1
<PAGE>





                          GENRAD, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                  July 4,   January 3,
                                                     1998         1998
                                                ---------    ---------
                                              (Unaudited)
<S>                                             <C>          <C>      
Assets
Current Assets:
    Cash and equivalents                        $  16,143    $  21,883
    Accounts receivable, net                       66,365       73,006
    Inventories:
        Raw materials                              18,327       18,378
        Work in process                             9,467        8,355
        Finished goods                              9,280        3,163
                                                ---------    ---------
           Total inventories                       37,074       29,896
                                                ---------    ---------

    Other current assets                            4,666        4,194
                                                ---------    ---------
           Total current assets                   124,248      128,979
                                                ---------    ---------

Property, plant and equipment:
    Buildings and leasehold improvements           15,769       14,612
    Machinery and equipment                        55,113       56,259
    Service parts                                  14,511       12,757
                                                ---------    ---------
                                                   85,393       83,628
    Accumulated depreciation                      (48,770)     (50,149)
                                                ---------    ---------
           Property, plant and equipment, net      36,623       33,479
                                                ---------    ---------

Deferred tax asset                                 15,368        7,868
Intangible assets                                  21,826        7,107
Other assets                                        1,083        1,524
                                                ---------    ---------
                                                $ 199,148    $ 178,957
                                                =========    =========
</TABLE>



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


                                       2
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                     Consolidated Balance Sheet (continued)
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                           July 4,   January 3,
                                                              1998         1998
                                                         ---------    ---------
                                                       (Unaudited)
<S>                                                      <C>          <C>      
Liabilities and Stockholders' Equity
Current Liabilities:
     Trade accounts payable                              $  10,182    $  12,730
     Accrued liabilities                                    16,067       12,445
     Accrued compensation and employee benefits              5,207        6,884
     Income taxes payable                                      252        1,029
     Current portion of long-term debt                       2,419        2,434
                                                         ---------    ---------
         Total current liabilities                          34,127       35,522
                                                         ---------    ---------

Long-term Liabilities:
     Long-term debt                                          7,227        8,519
     Accrued pensions and benefits                          10,933       11,239
     Future lease costs of unused facilities                 3,821        4,106
     Other long-term liabilities                             6,116        4,558
                                                         ---------    ---------
         Total long-term liabilities                        28,097       28,422
                                                         ---------    ---------


Stockholders' Equity:
     Common stock, $1 par value, 60,000,000 shares
      authorized; 28,901,000 and 27,349,000 issued and
      outstanding in 1998 and 1997, respectively            28,901       27,349
     Treasury stock, 80,000 and 0 shares held
      in 1998 and 1997, respectively                        (1,618)        --
     Additional paid-in capital                            210,524      172,026
     Accumulated deficit                                   (98,387)     (82,492)
     Cumulative translation adjustment                      (2,496)      (1,870)
                                                         ---------    ---------
         Total stockholders' equity                        136,924      115,013
                                                         ---------    ---------
                                                         $ 199,148    $ 178,957
                                                         =========    =========
</TABLE>



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

                                       3
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                      Consolidated Statement of Cash Flows
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       Six Months Ended
                                                                  --------------------------
                                                                   July 4,          June 28,
                                                                      1998              1997
                                                                  --------          --------
<S>                                                               <C>               <C>     
Operating activities:
Net (loss) income                                                 $(15,896)         $ 19,638
Adjustments to reconcile net income to net cash                                     
  provided by (used in) operating activities:                                       
    Depreciation and amortization                                    6,137             3,877
    Loss (gain) on disposition of property, plant and equipment        322               (66)
    Reserve for future lease costs of unused facilities               (745)             (628)
    Unusual charges                                                 26,626              --
Increase (decrease) resulting from changes in                                       
  operating assets and liabilities:                                                 
    Accounts receivable                                              9,221           (13,539)
    Inventories                                                     (7,225)             (959)
    Other current assets                                              (403)             (687)
    Deferred tax asset                                              (7,500)           (5,388)
    Trade accounts payable                                          (3,031)            3,003
    Accrued liabilities                                              2,814            (1,975)
    Accrued compensation and employee benefits                      (1,952)           (2,718)
    Accrued income taxes                                              (968)              972
    Other, net                                                           4              (718)
                                                                  --------          --------
              Net cash provided by operating activities              7,404               812
                                                                  --------          --------
Investing activities:                                                               
Purchases of property, plant and equipment                          (8,070)          (13,269)
Purchase of subsidiary                                              (2,925)             --
Proceeds from sale of property, plant and equipment                   --                 133
Investment in intangible assets                                     (2,418)             (114)
                                                                  --------          --------
              Net cash used in investing activities                (13,413)          (13,250)
                                                                  --------          --------
                                                                                    
Financing activities:                                                               
Net change in long-term debt                                        (1,212)           11,864
Proceeds from employee stock option exercises                        3,454             3,915
Purchase of treasury stock                                          (1,618)             --
                                                                  --------          --------
              Net cash provided by financing activities                624            15,779
                                                                  --------          --------
Effects of exchange rates on cash                                     (355)              642
                                                                  --------          --------
(Decrease) increase in cash equivalents                             (5,740)            3,983
Cash and equivalents at beginning of period                         21,883            10,557
                                                                  --------          --------
Cash and equivalents at end of period                             $ 16,143          $ 14,540
                                                                  ========          ========
</TABLE>


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

                                       4
<PAGE>





                          GENRAD, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1: Accounting Comments

Reference is made to the Company's 1997 Annual Report and Form 10-K which
contains, at pages 13 through 38, financial statements and the notes thereto,
including a summary of significant accounting policies.

With respect to the financial information for the interim periods included in
this report, which is unaudited, the management of the Company believes that all
adjustments necessary for a fair presentation of the results for such interim
periods have been included. All adjustments are of a normal and recurring
nature.

The results of any interim period are not necessarily indicative of the results
for the entire year.

Note 2: Reclassifications

Certain reclassifications were made to the 1997 consolidated financial
statements to conform to the 1998 presentation.

Note 3: Unusual Charges

In the second quarter ended July 4, 1998, the Company recorded unusual charges
of $31.5 million comprised of the following items (in millions):

<TABLE>
<S>                                                               <C>     
         Purchased in-process technology related to the
           acquisition of Industrial Computer Corporation         $ 21.7  (1)
         Impairment of goodwill and purchased software               4.9  (2)
         Purchase of in-process diagnostic software                  1.7  (3)
         Severance costs & abandoned equipment and
           facility termination fees                                 3.2  (4)
                                                                  ------
                                                                  $ 31.5
                                                                  ======
</TABLE>

(1) On April 7, 1998, the Company acquired Industrial Computer Corporation, as
    is more fully disclosed in Note 4. An independent third-party appraisal
    company conducted a valuation of the intangible assets acquired and
    determined that $21.7 million of the purchase price represented purchased
    in-process technology that had not yet reached technological feasibility and
    had no alternative future use. Accordingly, a non-cash charge of $21.7
    million was recorded in the second quarter of 1998, for which there will be
    no tax benefit.

(2) 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 III(R), 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.



                                       5
<PAGE>

                          GENRAD, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 3: Unusual Charges (continued)

    The historical financial performance of these entities has continued to be
    less than anticipated and the businesses have 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 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 SFAS No. 121, "Accounting for the Impairment of Long-Lived
    Assets", and as a result, a $4.9 million non-cash charge was recorded in the
    second quarter of 1998.

(3) On July 2, 1998, the Company acquired the rights to certain diagnostic
    software for which technological feasibility had not been established. The
    software technology will be used in the diagnosis of increasingly complex
    mechatronic systems, in particular, in vehicle systems. The purchase price
    of $1.7 million was included as an unusual charge in the second quarter of
    1998. Cash payments will be $1.0 million in the third quarter of 1998 and
    $0.7 million in September 1999.

(4) During the second quarter of 1998, the Company restructured current
    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 will incur approximately $3.2
    million for severance costs, post-employment benefits and for the
    termination fees of certain equipment and real-estate leases. The impact on
    the Company's cash flow will be as follows: $0.6 million was paid in the
    second quarter of 1998, $2.1 million will be paid in the third and fourth
    quarters of fiscal 1998, and $0.5 million will be paid in fiscal 1999.

The Company continues to examine its operating efficiencies and it is likely
that it will incur an additional restructuring charge in the third quarter of
1998.

Note 4: Acquisitions

Industrial Computer Corporation
On April 7, 1998, GenRad acquired all of the then outstanding common shares of
Industrial Computer Corporation ("ICC"). ICC is a software company providing
real-time manufacturing execution systems to electronics manufacturers. ICC was
established in 1980 and is located in Atlanta, Georgia. The acquisition was
accounted for by the purchase method of accounting. The results of ICC are
included in the 1998 financial statements beginning from the date of purchase.

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 $36.6
million. Merger costs were $1.5 million and consisted primarily of legal fees,
accounting fees and broker fees.

An independent third-party appraisal company conducted a valuation of the
intangible assets acquired. Approximately $21.7 million of the purchase price
represented purchased in-process technology that had

                                       6
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 4: Acquisitions (continued)

not yet reached technological feasibility and had no alternative future use.
This amount was expensed as a non-recurring, non-tax deductible charge for the
second quarter of 1998. The value was determined by estimating the future costs
to develop the purchased in-process technology into commercially viable
products; estimating the resulting net cash flow from such projects; and
discounting the net cash flows back to their present value. The efforts required
to develop the purchased in-process technology into a commercially viable
product principally relate to the completion of all planning, designing,
prototyping and testing activities in order to establish that the product can be
produced to meet its design specifications, including functions, features and
technical performance requirements. If this project is not successfully
developed, the consolidated sales and profitability of the Company may be
adversely affected in future periods. Additionally, the value of other
intangible assets acquired could become impaired. GenRad expects to begin to
benefit from the purchased in-process technology commencing in the year 2000.

The remaining excess purchase price over the net assets acquired was comprised
of the following intangibles: $5.0 million of purchased software (5 year useful
life); acquired workforce of $1.3 million (3 year useful life); trade name of
$0.4 million (3 year useful life); and goodwill of $10.1 million (15 year useful
life). Intangibles will be amortized straight line over the estimated useful
lives, previously noted.

The following unaudited pro forma combined financial statements give effect to
the business combination of GenRad and ICC using the purchase method of
accounting. The pro forma combined financial statements assume that the
acquisition took place as of the beginning of the periods presented. These
statements are presented for illustrative purposes only and are not necessarily
indicative of the financial position or the results of operations that actually
would have been realized had the Company and ICC been a combined company during
the specified periods. Additionally, they are not indicative of the results of
future combined operations.

<TABLE>
<CAPTION>
(In thousands)                         Three Months Ended          Six Months Ended
                                     -----------------------    ---------------------
                                      July 4,       June 28,     July 4,     June 28,
                                         1998           1997        1998         1997
                                     --------     ----------    --------     --------
<S>                                  <C>          <C>           <C>          <C>     
Total Sales                          $ 58,940     $   63,615    $110,860     $118,654
                                     ========     ==========    ========     ========

Net (Loss) Income                    $(24,804)    $    7,129    $(16,498)    $ 18,406
                                     ========     ==========    ========     ========

Pro Forma Net (Loss) Income
Per Common and Common
Equivalent Shares:
Basic                                $  (0.88)    $     0.26    $  (0.59)    $   0.67
                                     ========     ==========    ========     ========
Diluted                              $  (0.88)    $     0.24    $  (0.59)    $   0.63
                                     ========     ==========    ========     ========
</TABLE>


                                       7
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 4: Acquisitions (continued)

Approximately $21.7 million of the purchase price represented in-process
technology that had not yet reached technological feasibility and had no
alternative future use. This amount was not included in the pro forma combined
statements of operation due to its non-recurring nature. The pro forma per share
impact is as follows:

<TABLE>
<CAPTION>
(In thousands)                         Three Months Ended          Six Months Ended
                                     -----------------------    ---------------------
                                      July 4,       June 28,     July 4,     June 28,
                                         1998           1997        1998         1997
                                     --------     ----------    --------     --------
<S>                                  <C>          <C>           <C>          <C>     
Basic & Diluted                      $  (0.77)    $    (0.78)   $  (0.78)    $  (0.79)
                                     ========     ==========    ========     ========
</TABLE>

Additional information concerning the acquisition is contained in the company's
current report on Form 8-K, as filed with the Securities and Exchange Commission
on July 10, 1998.

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

Valstar's MES business was acquired for $3.0 million in cash, funded through
internally generated funds. As part of the acquisition, the Company entered into
a two-year consulting and services agreement with Valstar Systems Limited that
includes securing certain Valstar personnel and other resources to transition
the business to GenRad. Of the $3.0 million purchase price, $1.0 million is
being held in escrow and the release is contingent upon the retention of certain
key personnel, as well as certain operating targets being achieved through
October 3, 1998. The acquisition was accounted for by the purchase method of
accounting. The excess purchase price over the net assets acquired was composed
of the following intangibles: $0.2 million of employment contracts (3 year
useful life); customer list of $0.9 million (7 year useful life); and goodwill
of $1.1 million (10 year useful life). Intangibles will be amortized straight
line over the estimated useful lives, previously noted.

Note 5: 1997 Stock Option Award Plan

The Company has a 1997 Stock Option Award Plan for key employees excluding
directors and officers. In the first quarter of 1998, the Board of Directors
approved 1,250,000 additional shares for this plan. At July 4, 1998, there were
1,750,000 shares authorized for issuance under this plan. Options under this
plan generally vest over a four-year period and have a term of ten years.

Note 6: Contingencies

On April 28, 1998, the Company and James F. Lyons, President and Chief Executive
Officer were served with a lawsuit purported to be a class action suit on behalf
of persons who purchased Company stock in the open market over a specified
period of time. The lawsuit is entitled Duck Enterprises, LPV GenRad and James
                                        --------------------------------------
F. Lyons, CA No. 98-10706-PBS, and was filed in the United States District Court
--------
for the District of Massachusetts. The complaint seeks unspecified damages, as
well as costs and attorney's fees. The Company has reviewed the complaint

                                       8
<PAGE>

                          GENRAD, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 6: Contingencies (continued)

and believes that the allegations are without merit. The Company intends to
vigorously defend the suit and has notified its insurance carrier of the claim.
Due to the preliminary nature of the action, it is not possible at this time to
assess the outcome of the suit.

On May 27, 1998, William E. Gaines, William E. Masskaker, Frank B. Wingate and
Heritage Investment Limited Partnership ("the plaintiffs") filed a Demand for
Arbitration with the American Arbitration Association in Boston (No. 11 168
00247 98) against the Company, James F. Lyons and Paul Pronsky, Jr., Vice
President and Chief Financial Officer. The claims arise out of the merger
transaction between GenRad and ICC. The plaintiffs are seeking damages of $13.6
million, plus interest charges and legal fees, based upon the decline in the
market price of GenRad's common stock subsequent to the merger. The Company
denies the allegations made in the Demand for Arbitration. The Company intends
to vigorously defend the claim and has notified its insurance carrier. Due to
the preliminary nature of the action, it is not possible at this time to assess
the outcome of the claim.

Note 7: Line of Credit

The Company has a credit facility under which there were no borrowings
outstanding on July 4, 1998. The Company increased its credit facility to $50
million on July 16, 1998. Borrowings under the revised credit facility will
expire on July 16, 2001 subject to compliance with specified financial and
operating covenants. Interest is payable at the lesser of (i) the prime interest
rate, or (ii) under a LIBOR option, with borrowing spreads of LIBOR plus 0.75%
to LIBOR plus 1.50%. The unused commitment fee ranges from 0.25% to 0.50% based
upon the Company's financial performance.

Note 8: Treasury Stock

On June 11, 1998, the Company announced that its Board of Directors had
authorized the Company to repurchase up to 2,500,000 shares of its common stock,
which represents approximately 8% of the then issued and outstanding shares of
common stock of the Corporation. At July 4, 1998, the Company had repurchased
approximately 80,000 shares of common stock for $1.6 million. The Company
accounts for its treasury stock utilizing the cost method.

Note 9: Impact of Recently Issued Accounting Pronouncement

In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This Statement
requires disclosure of comprehensive income and its components in interim and
annual reports. Total comprehensive income components included in stockholder's
equity include any changes in equity during a period that are not the result of
transactions with owners, including cumulative translation adjustments,
unrealized gains and losses on available-for-sale securities and minimum pension
liabilities. For the six months ended July 4, 1998 and June 28, 1997,
comprehensive income items included in stockholders' equity consisted of
translation adjustments of ($0.6) million and ($0.4) million, respectively.


                                       9
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Operating Results

On April 7, 1998, GenRad acquired all of the then outstanding common shares of
Industrial Computer Corporation ("ICC") in exchange for 1,237,917 shares of
GenRad's common stock in a tax-free reorganization. The acquisition was
accounted for by the purchase method of accounting. The total consideration for
the acquisition was $36.6 million, plus merger costs of $1.5 million.
Approximately $21.7 million of the purchase price represented purchased
in-process technology that had not yet reached technological feasibility and was
expensed as an unusual charge in the statement of operations in the second
quarter of 1998. The remaining excess purchase price over the net assets
acquired was composed of $16.8 million of intangibles which will be amortized
straight line over their estimated useful lives (3 to 15 years); the majority of
the excess ($10.1 million) was related to goodwill. ICC is a software company
providing real-time manufacturing execution systems to electronic manufacturers.

On April 9, 1998, GenRad acquired certain assets of the Manufacturing Execution
Systems ("MES") business of Valstar Systems Limited located in Aberdeenshire,
Scotland. The acquisition was accounted for by the purchase method of
accounting. The acquisition was for $3.0 million in cash and was funded through
internally generated funds; acquisition costs were insignificant. Of the $3.0
million purchase price, $1.0 million is being held in escrow contingent upon the
retention of certain key personnel as well as certain operating targets being
achieved through October 3, 1998. The excess purchase price over the net assets
acquired was allocated to various intangible assets and will be amortized
straight line over their estimated useful lives (3 to 10 years).

Orders for the Company's products and services decreased to $52.9 million and
$106.8 million for the three months and six months ended July 4, 1998,
respectively, from $56.9 million and $118.2 million for the comparable periods
in 1997. The decrease in orders between the periods occurred primarily in
Automotive Diagnostic Solutions ("ADS"), which had unusually high orders in 1997
from BMW AG Motorcycles Division, Claas and SAAB Automobiles AB. The overall
decrease was offset by increased orders in GR Software due to the acquisition of
ICC in the second quarter of 1998. Year to date 1998 orders increased in North
America and decreased in both Europe and Asia.

Backlog at the end of the 1998 second quarter was $23.7 million compared to
$24.9 million at year-end 1997 and $29.3 million at the end of the 1997 second
quarter. This decrease in backlog is consistent with the overall decline in
orders. The Company believes that a substantial portion of the 1998 second
quarter backlog will be shipped prior to the end of 1998.

Net product and service sales were $58.9 million and $108.0 million for the
three months and six months ended July 4, 1998, respectively, as compared to
$61.1 million and $113.6 million for the comparable periods in 1997. The
decrease is due primarily to decreased sales in ADS. Sales increased in
Electronic Manufacturing Systems ("EMS"), primarily in the GR Pilot and GENEVA
product groups, and in GR Software due to the acquisition of ICC. Sales
increased in North America, which was more than offset by a decrease in sales in
both Europe and Asia.

Sales from international markets decreased to 53.7% for the three months ended
July 4, 1998 from 56.9% in the comparable 1997 period, primarily as a result of
decreased European ADS revenue. Sales from international markets decreased to
53.4% for the six months ended July 4, 1998 from 56.1% in the comparable 1997
period. The decrease is a result of decreased European

                                       10
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Operating Results (continued)


ADS sales, which was partially offset by increased European EMS sales. Product
and service revenues from international markets are subject to the risks of
currency fluctuations.

Product margins were 50.9% and 54.0% for the three months and six months ended
July 4, 1998, respectively, as compared to 50.8% and 53.5% for the comparable
periods in 1997. Product margins were favorably impacted by a greater proportion
of sales from EMS products and the inclusion of ICC, which typically have higher
margins than ADS. This was offset by lower than planned manufacturing levels,
which resulted in under absorption of manufacturing overhead, and an unfavorable
mix of lower margin products in EMS. Management has taken steps in the 1998
second quarter, which will continue through the remainder of fiscal 1998, to
eliminate the excess capacity in manufacturing by downsizing the headcount to
improve future product margins.

Service margins increased to 43.4% for the three months ended July 4, 1998 from
39.7% in the comparable 1997 period. The increase is due to the inclusion of the
favorable service margins of ICC in the second quarter of 1998, as well as
improved utilization in the EMS service organization, primarily Board Test and
Integrated Customer Services. ADS service margins declined in the second quarter
of 1998 from 1997 due primarily to lower margin contracts in process. Service
margins decreased to 40.0% for the six months ended July 4,1998 from 45.6% in
the comparable 1997 period. The decrease is primarily due to an overall decline
in the service utilization rate and from competitive pricing pressure,
particularly in the first quarter of 1998.

Selling, general and administrative expenses increased in the three and six
month periods ended July 4, 1998 to $17.2 million and $35.6 million,
respectively, from $16.0 million and $33.5 million in the comparable periods in
1997. The increase in 1998 periods as compared to 1997 is primarily in global
selling and support infrastructure costs. For the six months ended July 4, 1998,
marketing and overhead expenses declined due to the restructuring measures that
occurred in the second quarter of 1998. Management is taking steps to reduce
selling, general and administrative expenses for the balance of 1998 and into
1999.

Research and development expenses increased for the three and six month periods
ended July 4, 1998 to $5.4 million and $10.4 million, respectively, from $4.6
million and $9.2 million in the comparable periods in 1997. As a percentage of
product and service sales, research and development expenses increased to 9.2%
and 9.6% for the three and six month periods ended July 4, 1998, respectively,
as compared to 7.5% and 8.1% in the comparable periods of 1997. The Company
continues to invest in new product development and enhancements to existing
products.

In the second quarter of 1998, the Company recorded unusual charges of $31.5
million. The majority of the charges related to purchased in-process technology
in connection with the acquisition of ICC and certain diagnostic software for
which technological feasibility had not been established ($23.4 million). An
intangible asset impairment ($4.9 million) was recorded related to the fiscal
1996 acquisitions of Test Technology Associates, Inc., Testware, Inc. and Field
Oriented Engineering, AG. Lastly, the Company restructured current operations,
which resulted in a workforce reduction of approximately 130 employees or 9% of
the Company's workforce. The Company will incur severance costs, post-employment
benefits and termination fees for certain equipment and real-estate leases ($3.2
million).


                                       11
<PAGE>

                          GENRAD, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Operating Results (continued)

Net interest expense was $0.2 million and $0.3 million for the three and six
month periods ended July 4, 1998, respectively, from $0.1 million and $0 million
in the comparable periods in 1997. The 1998 interest expense relates to the five
year term loan entered into on June 26, 1997 that provided approximately $12
million for the purchase of furniture and fixtures for the Company's new
corporate headquarters and manufacturing facilities in Westford, Massachusetts.

A net income tax benefit of $7.5 million was recorded in the first quarter of
1998 as compared to $5.4 million in the comparable period in 1997. The tax
benefit represents a reduction in the Company's valuation allowance for deferred
taxes and was recorded due to management's expectations of future income and
expected utilization of the Company's domestic net operating loss carryforwards.

The income tax benefit for the three months ended July 4, 1998 was $0.7 million
as compared to income tax expense of $0.8 million in the comparable period in
1997. Excluding the deferred tax benefits, the income tax benefit was $0.6
million for the six months ended July 4, 1998 as compared to income tax expense
of $1.5 million for the comparable period in 1997. Income taxes decreased year
to date 1998 as compared to 1997 due to lower pre-tax income levels.

As a result of the above, the Company reported a net loss of $24.8 million for
three months and $15.9 million for the six months ended July 4, 1998, as
compared to net income of $7.9 million and $19.6 million, respectively, for the
comparable periods in 1997.

Liquidity and Sources of Capital

Cash and equivalents at the end of the second quarter of 1998 totaled $16.1
million as compared to $21.9 million at year-end 1997 and $14.5 million at the
end of the 1997 second quarter. The Company's current ratio increased to 3.6 at
the end of the second quarter of 1998, which was consistent with year-end 1997,
as compared to 3.3 at the end of the 1997 second quarter.

Cash provided by operating activities was $7.4 million in the second quarter of
1998. The net loss of $15.9 million for the six months ended July 4, 1998
included a $7.5 million non-cash benefit resulting from the deferred tax asset
that was recorded in the first quarter of 1998 and $26.6 million of unusual
non-cash charges. The decrease in accounts receivable provided cash of $9.2
million as a result of significant collections during 1998. Increases in
inventory used cash of $7.2 million as a result of work in process for the Ford
WDS project, and the maintenance of higher inventory levels due to a decrease in
sales volume. A decrease in current liabilities used cash of $3.1 million as a
result of the timing of payments to employees and vendors.

                                       12
<PAGE>



                          GENRAD, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Liquidity and Sources of Capital (continued)

During the six months ended July 4, 1998, $8.1 million of cash was used for the
purchase of property, plant and equipment. Capital expenditures were primarily
for equipment used in manufacturing and in research and development. The
purchase of ICC and MES in the second quarter of 1998 used cash of $2.9 million.
Investments in intangible assets of $2.4 million were primarily for capitalized
software.

The issuances of stock under the Company's employee stock plans provided cash of
$3.5 million for the six months ended July 4, 1998, while the purchase of
treasury stock used $1.6 million of cash.

The Company's primary source of liquidity is internally generated funds. The
Company also has an existing unsecured line of credit up to $50 million, against
which there were no borrowings outstanding on July 4, 1998. Borrowings under the
credit facility are subject to compliance with specified financial and operating
covenants. The credit facility expires on July 16, 2001. The Company also has a
five year term loan which provided approximately $12 million for the purchase of
furniture and fixtures for the Company's new corporate headquarters and
manufacturing facilities in Westford, Massachusetts. The principal of the loan
is repayable in twenty equal quarterly payments of $0.6 million to be paid
through the second quarter of 2002. Interest is payable quarterly in arrears at
LIBOR plus 1.25%.

The Company anticipates that in fiscal 1998 it will fund its working capital and
capital expenditure requirements, make interest payments on its borrowings and
meet its cash obligations from internally generated funds, and from the
available credit facility. The Company expects to make cash payments of
approximately $3.1 million in the third and fourth quarters of fiscal 1998 and
$1.2 million in fiscal 1999 in connection with the unusual charges, previously
described. The Company also plans to continue its stock repurchase plan.

The Company buys and sells foreign currencies using forward contracts intended
to hedge payables and receivables denominated in foreign currencies. The Company
primarily operates in U.S. dollars and European currencies. At July 4, 1998, the
Company had forward exchange contracts to sell approximately $33.4 million of
foreign currencies.

Inflation during the periods presented did not have a significant effect on the
operations of the Company. The Company attempts to mitigate inflationary cost
increases by continuously improving manufacturing methods and technologies.

This Quarterly Report contains certain forward-looking statements which involve
risks and uncertainties. The Company's actual results of operations and future
financial conditions 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.

Factors That May Affect Future Results

While the Company's sales cycle varies substantially from customer to customer,
a high percentage of the Company's revenues are expected to be realized in the
third month of each fiscal quarter. The Company's backlog at the beginning of a
quarter will not generally be large enough to assure that it will meet its
revenue targets for any particular quarter. In addition, the Company's operating
expenses are

                                       13
<PAGE>




                          GENRAD, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Factors That May Affect Future Results (continued)

based on expected future revenue and are relatively fixed for the short term.
Accordingly, the Company's quarterly results may be difficult to predict until
late in the quarter and a shortfall in shipments or contract orders at the end
of any particular quarter may cause the results for that quarter to fall short
of anticipated levels.

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 Company is subject to various legal proceedings and claims related to
products, contracts, employees and other matters that arise in the ordinary
course of business. An adverse result beyond the Company's current insurance
coverage could have a material adverse effect on the Company's financial
condition, results of operations and liquidity.

The Year 2000 issue is the result of a computer program being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company is in the process of rectifying the Year 2000 issue
in its core business systems, and it is projected to be complete by the first
quarter of 1999. Both internal and external resources will be utilized, and the
projected costs, which are expected to be minimal, will be expensed as incurred.
The Company has established a task force to ensure that the software utilized
within its currently produced products is Year 2000 compliant and any vendor or
customer related issues are addressed. At this point, the Company cannot project
when it will be completed nor the estimated total costs associated with the
remediation plan.

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
inflations.

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.

                                       14
<PAGE>

                          GENRAD, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Impact of Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board issued Statement No. 131, "Disclosure
about Segments of an Enterprise and Related Information". This Statement
requires an enterprise to report financial and descriptive information about its
reportable operating income. Operating segments are components that are
evaluated regularly by chief operating decision makers in deciding how to
allocate resources and in assessing performance. This Statement requires a
business enterprise to report a measure of segment profit or loss, certain
specific revenue and expense items (including interest, depreciation, and income
taxes), and segment assets. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Financial Accounting Standards Board issued Statement No. 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits". This statement
revises employer's disclosures about pensions and other postretirement plans.
The Statement does not change the measurement or recognition of those types of
plans. These Statements are required to be adopted in the Company's fiscal
year-end 1998. These statements will not affect the Company's consolidated
financial position or results of operations as they impact disclosure only.

On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company) 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 that the adoption of this Statement will have on its
earnings or statement of financial position.



                                       15
<PAGE>



                           PART II. OTHER INFORMATION
Item 1. Legal Proceeding

On April 28, 1998, the Company and James F. Lyons, President and Chief Executive
Officer were served with a lawsuit purported to be a class action suit on behalf
of persons who purchased Company stock in the open market over a specified
period of time. The lawsuit is entitled Duck Enterprises, LPV GenRad and James
F. Lyons, CA No. 98-10706-PBS, and was filed in the United States District Court
for the District of Massachusetts. The complaint seeks unspecified damages, as
well as costs and attorney's fees. The Company has reviewed the complaint and
believes that the allegations are without merit. The Company intends to
vigorously defend the suit and has notified its insurance carrier of the claim.
Due to the preliminary nature of the action, it is not possible at this time to
assess the outcome of the suit.

On May 27, 1998, William E. Gaines, William E. Masskaker, Frank B. Wingate and
Heritage Investment Limited Partnership ("the plaintiffs") filed a Demand for
Arbitration with the American Arbitration Association in Boston (No. 11 168
00247 98) against the Company, James F. Lyons and Paul Pronsky, Jr., Vice
President and Chief Financial Officer. The claims arise out of the merger
transaction between GenRad and ICC. The plaintiffs are seeking damages of $13.6
million, plus interest charges and legal fees, based upon the decline in the
market price of GenRad's common stock subsequent to the merger. The Company
denies the allegations made in the Demand for Arbitration. The Company intends
to vigorously defend the claim and has notified its insurance carrier. Due to
the preliminary nature of the action, it is not possible at this time to assess
the outcome of the claim.


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

(a) The Annual Meeting of Shareholders of GenRad, Inc. was held on May 14, 1998
    (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:

<TABLE>
<CAPTION>
Name of Director                            For            Withheld
----------------                        ----------         --------
<S>                                     <C>                 <C>    
William S. Antle III                    21,487,675          755,462
Richard G. Rogers                       21,491,025          752,112
Ed Zschau                               21,486,751          756,386
</TABLE>

Votes were cast or withheld in connection with the following proposals, more
fully described in the Company's Proxy Statement dated April 13, 1998 at the
Annual Meeting.

<TABLE>
<CAPTION>
                                                           Affirmative        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.                                16,352,596        5,604,012        286,529

2)  To amend the Company's 1991
    Directors' Stock Option Plan by
    increasing by 50,000 the shares of
    Common Stock available for
    issuance.                                              20,348,915        1,627,128        267,094

3)  To amend the Company's 1994 Director
    Restricted Stock Plan by increasing
    by 50,000 the shares of Common Stock
    available for issuance.                                20,225,330        1,740,048        277,759
</TABLE>

                   16
<PAGE>

                     PART II. OTHER INFORMATION (continued)


Item 6. Exhibits and Reports on Form 8-K

(a)(3) The following Exhibits are filed:

       10.  Amended and restated revolving credit agreement dated July 16, 1998
            between GenRad, Inc. and BankBoston, N.A., attached.

       10.1 Agreement and Plan of Merger dated April 7, 1998 by and among
            GenRad, Inc., Industrial Computer Corporation, Frank B. Wingate,
            William E. Massaker, William E. Gaines and Heritage Investment
            Limited Partnership, incorporated by reference to the Company's
            Registrations Statement on Form S-3 (File No. 333-57251).

       11.  Statement re: Computation of Earnings Per Share.

       27.  Financial Data Schedule.

(b)    The Company filed a Current Report on Form 8-K dated July 10, 1998
       reporting the acquisition of Industrial Computer Corporation.



                                       17
<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/ Paul Pronsky, Jr.
                                ---------------------------------------------
                                    Paul Pronsky, Jr.
                                    Vice President and
                                    Chief Financial Officer and Secretary






Date:  August 18, 1998

                                       18