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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 OCTOBER 1, 1994
COMMISSION FILE NO. 1-8045
___________________
GENRAD, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-1360950
(State or other Jurisdiction of Incorporation or Organization) (I.R.S. employer Identification Number)
</TABLE>
300 BAKER AVENUE
CONCORD, MASSACHUSETTS 01742
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 287-7000
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.
19,140,682 SHARES OF COMMON STOCK, $1 PAR VALUE, OUTSTANDING OCTOBER 20, 1994
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GENRAD, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheet Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheet Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Management's Discussion and Analysis of Financial Condition and Operating Results . . . . . . . . 6
PART II. OTHER INFORMATION:
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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PART I. FINANCIAL INFORMATION
GENRAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
Assets
(In thousands)
<TABLE>
<CAPTION>
October 1, January 1,
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 12,285 $ 8,418
Accounts receivable, net 32,207 30,994
Inventories:
Raw materials 8,017 6,480
Work in process 3,546 3,068
Finished goods 4,742 3,757
--------- ---------
16,305 13,305
--------- ---------
Other current assets 4,100 2,846
--------- ---------
Total current assets 64,897 55,563
--------- ---------
Property, plant and equipment:
Land 519 512
Buildings 25,133 25,591
Machinery and equipment 70,769 67,896
Service parts 18,117 16,640
--------- ---------
114,538 110,639
Less: Accumulated depreciation 99,066 94,566
--------- ---------
15,472 16,073
Other assets 1,441 1,380
Assets held for sale 2,000 4,100
--------- ---------
$ 83,810 $ 77,116
========= =========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
1
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GENRAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
Liabilities and Stockholders' Equity
(In thousands, except share amounts)
<TABLE>
<CAPTION>
October 1, January 1,
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes payable to banks $ - $ 3,475
Trade accounts payable 7,926 5,437
Accrued liabilities 30,157 27,330
Accrued compensation and
employee benefits 10,307 10,134
Accrued income taxes 980 -
--------- ---------
Total current liabilities 49,370 46,376
--------- ---------
Long-term Liabilities:
Long-term debt 48,901 48,851
Accrued pensions and benefits 14,121 12,985
Future lease costs of unused facilities 9,811 12,682
Other long-term liabilities 1,510 1,509
--------- ---------
Total long-term liabilities 74,343 76,027
--------- ---------
Stockholders' Equity (Deficit):
Common stock, $1 par value
Authorized 60,000,000 shares; issued and
outstanding 19,141,000 and 18,530,000 19,141 18,530
Additional paid-in capital 105,834 105,177
Accumulated deficit (162,419) (166,492)
Equity adjustment from foreign
currency translation (2,459) (2,502)
--------- ---------
Total stockholders' equity (deficit) (39,903) (45,287)
--------- ---------
$ 83,810 $ 77,116
========= =========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
2
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GENRAD, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Sales of products $ 29,303 $ 26,755 $ 87,194 $ 95,760
Sales of services 7,309 9,082 20,230 25,015
---------- ---------- ---------- ----------
36,612 35,837 107,424 120,775
---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold 14,693 15,056 46,244 55,633
Cost of services sold 4,326 5,978 10,411 14,535
---------- ---------- ---------- ----------
19,019 21,034 56,655 70,168
---------- ---------- ---------- ----------
Gross margin 17,593 14,803 50,769 50,607
Operating expenses:
Selling, general and administrative 12,015 12,556 32,960 37,404
Research and development 3,543 4,331 10,526 12,084
Reorganization and unusual charges - 41,876 - 41,876
---------- ---------- ---------- ----------
15,558 58,763 43,486 91,364
---------- ---------- ---------- ----------
Operating income (loss) 2,035 (43,960) 7,283 (40,757)
Other income (expense):
Interest income 64 74 178 208
Interest expense (1,017) (1,069) (3,035) (3,281)
Other-net 224 (279) 627 (307)
---------- ---------- ---------- ----------
(729) (1,274) (2,230) (3,380)
---------- ---------- ---------- ----------
Income (loss) before taxes 1,306 (45,234) 5,053 (44,137)
Income tax provision (benefit) 250 (460) 980 100
---------- ---------- ---------- ----------
Net income (loss) $ 1,056 $ (44,774) $ 4,073 $ (44,237)
========== ========== ========== ==========
Net income (loss) per share $ 0.05 $ (2.46) $ 0.21 $ (2.45)
Average common shares outstanding 19,852,000 18,170,000 19,784,000 18,049,000
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
3
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GENRAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 1, October 2,
1994 1993
----------- ----------
<S> <C> <C>
Operating activities:
Net income (loss) $ 4,073 $ (44,237)
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation and amortization 4,645 15,610
Stock option compensation expense - 2,602
Loss on sale and write-off of assets 114 1,434
Reserve for future lease costs of unused facilities, net (4,140) 6,314
Increase (decrease) resulting from changes
in operating assets and liabilities
Accounts receivable (19) 5,048
Inventories (2,629) (2,092)
Trade accounts payable 2,275 (2,814)
Accrued income taxes 980 (61)
Accrued liabilities 3,235 14,611
Accrued compensation and employee benefits 875 7,604
Prepaid expense (1,121) 2,396
Other, net 219 751
-------- ---------
Net cash provided (used) by operating activities 8,507 7,166
-------- ---------
Investing activities:
Purchases of property, plant and equipment (3,668) (5,053)
Sale of assets held for sale, net 1,736 -
Proceeds from sale of property, plant and equipment 134 78
-------- ---------
Net cash provided (used) by investing activities (1,798) (4,975)
-------- ---------
Financing activities:
Net change in notes payable (4,029) (1,490)
Proceeds from employee stock plan 1,268 833
-------- ---------
Net cash provided (used) by financing activities (2,761) (657)
-------- ---------
Effects of exchange rates on cash (81) 291
-------- ---------
Increase (decrease) in cash and equivalents 3,867 1,825
Cash and equivalents at beginning of period 8,418 8,621
-------- ---------
Cash and equivalents at end of period $ 12,285 $ 10,446
======== =========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
4
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GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING COMMENTS
Reference is made to the registrant's 1993 annual report to
stockholders, which contains, at pages 15 through 37, financial statements and
the notes thereto, including a summary of significant accounting policies.
Revenue from equipment sales is generally recognized at the time the
equipment is shipped or delivered based upon shipping terms. Service revenue
is recognized over the contractual period for service contracts or as services
are performed.
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.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
OPERATING RESULTS
Incoming orders for the Company's products and services increased to $44.6
million for the three months and $122.8 million for the nine months ended
October 1, 1994 from $29.9 million and $114.0 million, respectively, for the
comparable periods in 1993. Included in orders received during the nine months
ending October 2, 1993 were $11.9 million of orders related to product lines
discontinued in the 1993 third quarter. No orders were received for
discontinued product lines during the 1993 third quarter. Excluding orders for
these discontinued product lines, 1994 year-to-date product and service orders
increased reflecting increased demand for the Company's products and a U.S.
Marine Corps follow-on order in the amount of $12.2 million related to a
contract received by the Company in the third quarter of 1992.
Net product and service revenues were $36.6 million for the three months
and $107.4 million for the nine months ended October 1, 1994 as compared to
$35.8 million and $120.8 million, respectively, for the same periods in 1993.
The reduction between comparable nine month periods stems in part from the
Company's discontinuance of certain product lines during the 1993 third
quarter. Discontinued product lines contributed $3.8 million for the three
months and $12.0 million in revenues for the nine months ended October 2, 1993.
In addition, the three months and nine months ended October 2, 1993 included
$3.9 million and $24.0 million, respectively, in increased revenues derived
from contracts with Ford of Europe and the U.S. Marine Corps. Revenues derived
from the international market accounted for 54% and 59% of revenues for the
three and nine months ended October 1, 1994, as compared to 57% and 55% for the
similar periods in 1993. Product and service revenues derived from the
international market are subject to the risks of currency fluctuations.
Backlog at the end of the 1994 third quarter was $34.4 million as compared
to $19.0 million at year-end 1993 and $28.6 million at the end of the 1993
third quarter. The 1993 third quarter backlog included $3.4 million related to
the discontinued product lines. Approximately 50% of the 1994 third quarter
ending backlog is scheduled for shipment prior to the end of 1994.
Gross margin as a percent of revenues increased to 48% and 47%,
respectively, for the three and nine months ended October 1, 1994 from 41% and
42% in the comparable periods in 1993. Gross margin percentages increased due
to changes in product mix and as a result of a relative decrease in revenue
levels of automotive electronics diagnostic systems and revenues under the
U.S. Marine Corps contract which have overall lower margins than the Company's
electronic manufacturing test products. In addition, margins have improved as
a percentage of revenues due to cost reductions achieved as a result of the
1993 restructuring. The margin improvements noted above have been partially
offset, however, by the adverse effects of competitive pricing pressures.
Selling, research and development and general and administrative expenses
decreased for the three and nine month periods of 1994 to $15.6 million and
$43.5 million, respectively, from $16.9 million and $49.5 million in the
comparable periods in 1993. The decline in expenses is directly related to the
Company's 1993 restructuring which was initiated at the end of the third
quarter of 1993 and resulted in a reduction in workforce, discontinued product
lines, reduced facility costs and reduced depreciation. Exclusive of the
benefits of the restructuring, the Company's operating expenses increased as a
result of the Company's establishment of two additional sales offices to
service its automotive customers, from increased costs associated with sales
and operating performance incentive programs and from severance costs
associated with various personnel changes.
6
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During the 1993 third quarter, the Company developed and began the
implementation of a worldwide restructuring program. The results for the three
and nine month periods ended October 1, 1994 reflect the benefits of a
company-wide reduction in force and reflect cash outflows for severance pay of
approximately $1.0 million and $3.4 million, respectively, related to the third
quarter 1993 restructuring. Asset write-offs resulted in $0.7 million of
depreciation savings in the three months and $2.1 million in the nine months
ended October 1, 1994. Excess facilities reserves relate primarily to lease
losses for vacated or excess domestic and European facilities. Net cash
outflows related to excess facilities were $0.6 million and $1.8 million for
the three months and nine months ended October 1, 1994, respectively, related
to the third quarter 1993 restructuring and $0.8 and $2.3 million,
respectively, related to earlier restructurings. During the 1994 third
quarter, the Company received net cash of $1.7 million related to the sale of a
facility previously held for sale as part of the 1993 product line
discontinuances. Operating expense reductions for discontinued product lines
related to the third quarter 1993 restructuring totaled $2.9 million for the
three months and $8.8 million for the nine months ended October 1, 1994 in
relation to the 1993 periods.
The Company is a named defendant in a patent infringement litigation matter
with a competitor. During the 1993 fourth quarter, the Company established a
reserve to cover its best estimate of the outcome of settlement negotiations.
During the 1994 first quarter, the Company increased its estimate of legal
costs and recorded such increase in General & Administrative Expenses. In
management's opinion, current reserves are adequate to cover the expected
outcome of the dispute.
Other net income and expense includes foreign currency exchange gains and
losses, the cost of hedging and certain miscellaneous expenses. During the
1994 periods, favorable foreign currency fluctuations in relation to the
Company's hedged position resulted in exchange gains which more than offset the
cost of hedging and other expenses.
The provision for taxes in 1994 and 1993 represents foreign and state
income taxes. The Company utilized existing operating loss carryforwards to
offset current requirements for United States Federal Income Taxes.
As a result of the above, the Company reported net income of $1,056,000 for
the three months and $4,073,000 for the nine months ended October 1, 1994 as
compared to a net loss of ($44,774,000) and ($44,237,000), respectively, for
the similar periods last year.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and equivalents increased by $3.9 million for the nine months ended
October 1, 1994. The increase reflects improved operating results which
generated $8.5 million in cash, proceeds from employee stock purchases which
generated $1.3 million in cash and the sale of assets held for sale which
generated $1.7 million in cash, partially offset by the Company's investment in
research and development and productive equipment of $3.7 million and the
repayment of short-term borrowings of $4.0 million.
The Company is a party to long-term leases related to closed offices and
vacated domestic and European facilities provided for in the Company's 1993 and
prior restructurings. During the nine months ended October 1, 1994, cash of
approximately $4.1 million was used to fund these arrangements. Additional
1994 funding of approximately $1.2 million is projected in the fourth quarter
of 1994. Such amounts do not include any benefit or additional cash outlays
that may result from surrendering or sub-leasing any of the facilities since it
is uncertain as to whether any such arrangements can be consummated during
1994. During the nine months ended October 1, 1994, cash of approximately $1.3
million was used to fund severance and other items provided in the 1993
restructuring.
7
<PAGE> 10
The Company's primary source of liquidity is internally generated funds.
The Company also has existing available secured lines of credit of up to $14.2
million of which no borrowings were outstanding at the end of the third quarter
of 1994. The total available borrowings consist of a $12 million U.S. credit
facility and a $2.2 million U.K. credit facility.
Borrowings under the U.S. credit facility are secured by all of the
Company's domestic assets and are subject to compliance tests and restrictions.
Under these terms, as of October 1, 1994, the Company had an available
borrowing capacity of $12 million under the U.S. credit facility. On October
20, 1994, the Company amended and extended its U.S. credit facility to December
31, 1996. The amendment provides in general for more favorable terms,
including pricing and available borrowing capacity.
Borrowings under the U.K. credit facility are secured by all of the
Company's U.K. assets and are payable on demand. During July 1994, the U.K.
credit facility was reduced from $3.7 million to $2.2 million to reflect a
reduction in available collateral which resulted from the Company's sale of its
facility in Fareham, England. The Fareham facility previously housed one of
the discontinued product lines.
The Company buys and sells foreign currencies using forward contracts
intended to hedge payables and receivables denominated in foreign currencies.
The Company primarily trades in U.S. dollars and European currencies. At
October 1, 1994 the Company had forward exchange contracts to buy $10.3 million
and sell $10.3 million in foreign currencies, all of which were European
denominated.
The Company's ability to fund its working capital and capital expenditure
requirements, make interest payments on its convertible debentures and other
borrowings and meet its other cash obligations, including those arising from
its recent restructurings, may depend, among other things, on the continued
availability and compliance with its credit facilities. Management believes
that internally generated funds and its available credit facilities will
provide the Company with sufficient sources of funds to satisfy its anticipated
requirements in 1994. However, if revenues or margins decrease significantly,
thereby reducing internally generated funds, the Company may require
significant funds from outside financing sources. In such event, there can be
no assurance that the Company would be able to obtain such funding as and when
required or on acceptable terms.
8
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a named defendant in a patent infringement litigation
matter with the Hewlett-Packard Company ("H-P"). The information
set forth in Part 1, Item 3 of its Form 10-K for the fiscal year
ended January 1, 1994 is incorporated herein by reference.
On June 2, 1994, H-P filed a motion for injunctive relief. The
Company has opposed the motion and is awaiting a decision. If such
motion is granted, the Company expects that it will suffer a
material adverse impact to its operations.
Item 6. Exhibits and Reports on Form 8-K
10.1 (a) Amendment Number Three to General Loan and Security Agreement
dated October 20, 1994 from Foothill Capital Corporation and
the Company amending and extending the credit facility.
(b) There were no reports on Form 8-K filed during the quarter
ended October 1, 1994.
9
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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/ ROBERT C. ALDWORTH
----------------------
Robert C. Aldworth
CHIEF FINANCIAL OFFICER
Date: October 31, 1994
10
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EXHIBIT 10.1(a)
AMENDMENT NUMBER THREE TO
GENERAL LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER THREE TO GENERAL LOAN AND SECURITY AGREEMENT
(this "Amendment"), dated as of October 20, 1994, is entered into by and
between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with its place of business located at 11111 Santa Monica Boulevard, Suite 1500,
Los Angeles, California 90025-3333, and GENRAD, INC., a Massachusetts
corporation ("Borrower"), with its chief executive office located at 300 Baker
Avenue, Concord, Massachusetts 01742-2174, in light of the following facts:
RECITALS
A. Borrower and Foothill are parties to that certain General Loan
and Security Agreement, dated as of June 23, 1992, as amended by that certain
Amendment Number One to General Loan and Security Agreement, dated as of
October 14, 1992, and as further amended by that certain Amendment Number Two
to General Loan and Security Agreement, dated November 24, 1993 (collectively,
the "Loan Agreement"), pursuant to which Foothill has extended certain
revolving loans and letter of credit accommodations to Borrower.
B. The Loan Agreement is currently scheduled to terminate on
January 1, 1995. Borrower and Foothill wish to extend the term of the Loan
Agreement until the second anniversary of the date of this Amendment on the
terms and conditions set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. Any and all initially capitalized terms set
forth in this Amendment without definition shall have the respective meanings
assigned thereto in the Loan Agreement.
2. Additional Definition. Section 1.1 of the Loan Agreement is
hereby amended and supplemented by adding therein, in alphabetical order, a new
definition of "Third Amendment" as follows:
"'Third Amendment' means that certain Amendment Number
Three to General Loan and Security Agreement, dated
as of October 20, 1994, by and between Foothill and
Borrower."
3. Amendment to Definition of "Real Property". Section 1.1 is
further amended by adding the following proviso to the end of the definition of
"Real Property":
<PAGE> 2
"; provided, however, Borrower's real property located
in Bolton, Massachusetts shall be excluded from this
definition of "Real Property" and shall cease to be
"Real Property" for all purposes under this Agreement
following its sale by Borrower.
4. Increase in Advance Rates for Eligible Accounts and
Discretionary Foreign Accounts. Section 2.1(a) of the Loan Agreement is hereby
deleted in its entirety and a new Section 2.1(a) substituted therefor as
follows:
"(a) an amount equal to the sum of: (i) eighty-five
percent (85%) of the amount of Eligible Accounts and
(ii) sixty percent (60%) of the amount of Discretionary
Foreign Accounts; plus"
5. Increase in Inventory/Fixed Asset Subline. Section 2.1(b) of
the Loan Agreement is hereby deleted in its entirety and a new Section 2.1(b)
substituted therefor as follows:
"(b) an amount equal to the lesser of: (i) seventy-five
percent (75%) of the outstanding balance of advances of
Eligible Accounts and (ii) Four Million Five Hundred
Thousand Dollars ($4,500,000) less One Hundred Thousand
Dollars ($100,000) on the first day of each month
commencing on the first day of the first month after the
date on the Third Amendment hereto, and, further, less the
value (as determined by Foothill in its reasonable discretion)
of any Equipment sold or otherwise disposed of by Borrower,
destroyed, obsolete or no longer actively used for its
original purpose."
6. Reduction of Interest Rate. Section 2.5(a) of the Loan
Agreement is hereby amended by deleting therefrom the reference to "three and
one-half (3 1/2) percentage points above the Reference Rate" and by adding
therein a reference therein to "two and one-half (2 1/2) percentage points
above the Reference Rate."
7. Reduction of Number of Clearance Days. Section 2.6 of the
Loan Agreement is hereby amended by deleting the reference to "three (3)
Business Day(s)," from both places in which it appears within the second
sentence of such Section, and by substituting therefor a reference to "two (2)
calendar days."
8. Reduction of Loan Servicing Fee. Section 2.8(e) of the Loan
Agreement is hereby amended by deleting therefrom the reference to "Two
Thousand Five Hundred Dollars ($2,500) per
2
<PAGE> 3
month" and by substituting therefor a reference to "Two Thousand Dollars
($2,000) per month."
9. Amendment to Initial Facility Fee Provision. Section 2.8(a)
of the Loan Agreement is hereby deleted in its entirety and a new Section
2.8(a) substituted therefor as follows:
"(a) Initial Facility Fee. Concurrently with the execution
and delivery of the Third Amendment hereto, a fee (the "Initial
Facility Fee") in the amount of One Hundred Twenty Thousand
Dollars ($120,000). The Initial Facility Fee shall be fully
earned at the time of payment and non-refundable;"
10. Reduction of Annual Facility Fee. Section 2.8(c) of the Loan
Agreement is hereby amended by deleting therefrom the reference to "one percent
(1%) of the Maximum Amount" and by substituting therefor a reference to
"one-half percent (1/2%) of the Maximum Amount".
11. Increase in Field Examination Fee. Section 2.8(d) of the Loan
Agreement is hereby amended by deleting therefrom the reference to "Five
Hundred Dollars ($500), appearing on the first line thereof, and by
substituting therefor a reference to "Six Hundred Dollars ($600) per day".
12. Reduction of Repurchase Fee. Section 2.8(f) of the Loan
Agreement is hereby deleted in its entirety and a new Section 2.8(f)
substituted therefor as follows:
"(f) Repurchase Fee. Immediately upon purchase, a sum
equal to one percent (1.0%) of the face amount of all
Subordinated Debentures repurchased; provided, however,
Borrower shall not be obligated to pay Foothill any
such repurchase fee either (i) in connection with any
exchange by Borrower of Subordinated Debentures
solely for other debt equity securities of Borrower,
or (ii) if at the time of and after giving effect to
any such repurchase there are no Obligations outstanding
hereunder."
13. Extension of Term of the Loan Agreement. Section 3.1 of the
Loan Agreement is hereby amended by deleting therefrom the first sentence of
such Section in its entirety and by substituting therefor a new first sentence
as follows:
"This Agreement shall become effective upon acceptance
of the Third Amendment by Foothill and shall continue in
full force and effect until December 31, 1996 (the
"Renewal Date") and shall be automatically renewed for
3
<PAGE> 4
successive two (2) year periods thereafter, unless sooner terminated
pursuant to the terms hereof."
14. Amendment to Collateral Reports Provision. Section 6.2 of the
Loan Agreement is hereby amended and supplemented by adding the following
sentences to the end of such Section:
"Notwithstanding the foregoing, at any time that there are no
outstanding Obligations hereunder (a "Zero Balance Period"),
Borrower's sole collateral reporting requirements under this Section
6.2 shall be to deliver to Foothill no later than the tenth (10th)
day of each month during the term of this Agreement, (i) a detailed
aging, by total, of the Accounts, (ii) a summary aging, by vendor, of
all accounts payable and of any book overdraft, and (iii) a borrowing
base certificate, in form and detail acceptable to Foothill in its
reasonable discretion. Unless it complies with the prior notice
requirements described below, Borrower may not request advances
during any Zero Balance Period. Any Obligations which become
outstanding for any reason during a Zero Balance Period shall be
deemed to be Overadvances and shall be immediately payable to
Foothill, in cash. Borrower may resume borrowing hereunder following
a Zero Balance Period only after providing Foothill with prior
written notice, of not less than fifteen (15) Business Days, of
Borrower's intention to resume borrowing, which written notice shall
be accompanied by up-to-date versions of each of the collateral
reports normally required under this Section 6.2 (i.e., when a Zero
Balance Period is not in effect). Following the termination of a
Zero Balance Period, Borrower shall comply with its original (i.e.,
non-Zero Balance Period) collateral reporting requirements set forth
in this Section 6.2."
15. Reaffirmation of Loan Agreement; No Default; No Defenses, Etc.
Borrower hereby reaffirms the Loan Agreement and its obligations to Foothill
thereunder. Borrower represents and warrants to Foothill that there are no
outstanding Events of Default under the Loan Agreement. Borrower acknowledges
that Foothill has fully complied with its obligations under the Loan Agreement
and that Borrower has no defenses to the validity, enforceability or binding
effect of the Loan Agreement or of any of the amendments thereto.
4
<PAGE> 5
16. Effectiveness of Amendment. This Amendment shall become
effective upon (i) the delivery by Borrower to Foothill of this Amendment duly
executed by an authorized officer of Borrower, and (ii) the delivery of the
attached Acknowledgement of Guarantor, duly executed by an authorized officer
of GenRad Holdings, Limited.
17. Conflicts; Continued Effectiveness of Loan Agreement. In the
event of a conflict between the terms and provisions of this Amendment and the
terms and provisions of the Loan Agreement, the terms and provisions of this
Amendment shall govern. In all other respects, the Loan Agreement, as amended
hereby, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
by their respective duly authorized officers as of the date first above
written.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Beth A Pease
----------------------------
Title: Assistant Vice President
------------------------
GENRAD, INC.,
a Massachusetts corporation
By /s/ Robert C. Aldworth
----------------------------
Title: Vice President
------------------------
5
<PAGE> 6
ACKNOWLEDGEMENT OF GUARANTOR
GenRad Holdings, Limited, a company registered in England (the
"Guarantor"), has reviewed, and is familiar with, the foregoing Third Amendment
to General Loan and Security Agreement, and hereby acknowledges and agrees as
follows:
(i) that its obligations to Foothill under that certain
Continuing Guaranty, dated June 23, 1992 (the "Guaranty"), and under that
certain Stock Pledge Agreement, dated as of June 23, 1992, by and between the
Guarantor and Foothill (the "Stock Pledge Agreement"), shall remain in full
force and effect notwithstanding Borrower's execution of the Third Amendment;
(ii) that although Foothill has informed the Guarantor of the
matter set forth above, and the Guarantor has acknowledged same, the Guarantor
understands and agrees that Foothill has no duty under the Loan and Security
Agreement, as amended, under the Guaranty, under the Stock Pledge Agreement, or
under any other agreement with the Guarantor, to notify it or to seek such an
acknowledgement, and nothing contained herein is intended to, or shall create
such a duty as to any advances or transactions hereafter; and
(iii) that the Guarantor reaffirms the Guaranty and the Stock
Pledge Agreement.
GENRAD HOLDINGS, LIMITED.
a company registered in England
By /s/ Robert C. Aldworth
----------------------------
Title: Director
------------------------
Dated: As of October 20, 1994.
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GENRAD, INC. FOR THE QUARTER ENDED OCTOBER 1, 1994, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-1994
<PERIOD-START> JAN-02-1994
<PERIOD-END> OCT-01-1994
<EXCHANGE-RATE> 1
<CASH> 12,285
<SECURITIES> 0
<RECEIVABLES> 33,705
<ALLOWANCES> 1,498
<INVENTORY> 16,305
<CURRENT-ASSETS> 64,897
<PP&E> 114,538
<DEPRECIATION> 99,066
<TOTAL-ASSETS> 83,810
<CURRENT-LIABILITIES> 49,370
<BONDS> 48,901
<COMMON> 19,141
0
0
<OTHER-SE> (59,044)
<TOTAL-LIABILITY-AND-EQUITY> 83,810
<SALES> 107,424
<TOTAL-REVENUES> 107,424
<CGS> 56,655
<TOTAL-COSTS> 56,655
<OTHER-EXPENSES> 42,681
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,035
<INCOME-PRETAX> 5,053
<INCOME-TAX> 980
<INCOME-CONTINUING> 4,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,073
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
