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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED JANUARY 1, 1994 COMMISSION FILE NO. 1-8045
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GENRAD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
MASSACHUSETTS 04-1360950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
300 BAKER AVENUE, CONCORD, MASSACHUSETTS 01742-2174
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 369-4400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
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<S> <C>
Common Stock, $1 par value New York Stock Exchange
7-1/4% Convertible Subordinated New York Stock Exchange
Debentures due 2011
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of shares held by non-affiliates of the
registrant as of March 15, 1994 was $ 110,150,000. 18,760,000 shares of the
Common Stock of GenRad, Inc., $1 par value, were outstanding on March 15, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the definitive Proxy Statement of GenRad, Inc. for the Annual
Meeting of Shareholders to be held on May 12, 1994 (the "1994 Proxy
Statement"), which will be filed with the Securities and Exchange Commission
within 120 days after the close of the Company's fiscal year ended January 1,
1994, are incorporated by reference into Part III and Part IV.
2. Certain Exhibits in GenRad, Inc.'s reports on Form 10-K for the fiscal years
ended January 3, 1981, January 3, 1987, January 2, 1988, December 31, 1988,
December 30, 1989, December 28, 1991, and January 2, 1993 and certain
Exhibit's in GenRad's report on Form 10-Q for the quarter ended June 27, 1992
are incorporated by reference into Part IV.
3. Certain Exhibits in GenRad's Registration Statements on Form S-8 (File No.
2-92786), Form S-8 (File No. 2-92800), Form S-8 (File No. 33-1667), Form S-8
(File No. 33-35918), and Form S-8 (File No. 33-42789) are incorporated by
reference into Part IV.
Exhibit Index on pages 8 - 10
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PART I
ITEM 1. BUSINESS
GenRad, Inc. designs, develops, manufactures and sells integrated software,
test and measurement systems to manufacturers and users of electronic and
mechanical products. The Company has four product lines: Automatic Test
Equipment for testing electrical printed-circuit boards ("Concord Products"),
Automotive Test Products ("ATP"), Design Automation Products ("DAP"), and
Structural Test Products ("STP"). DAP and STP were designated discontinued
product lines in the third quarter of 1993 as part of the Company's
restructuring as more fully described in Managements Discussion and Analysis of
Financial Condition and Operating Results.
Electronic design and test products and services accounted for 95% of
consolidated sales in the fiscal year ended January 1, 1994 ("fiscal 1993"), 91%
in the fiscal year ended January 2, 1993 ("fiscal 1992"), and 89% in the fiscal
year ended December 28, 1991 ("fiscal 1991").
CONCORD PRODUCTS
Concord Products is comprised of the following products, each of which is
developed and manufactured at the Company's Concord, Massachusetts facility.
AUTOMATIC TEST EQUIPMENT (ATE)
The core ATE products include the 228X and 228Xe product families and are
used to test printed-circuit boards, which are used in virtually all electronic
products, during their manufacturing process. These systems sell for prices
ranging from under $100,000 to over $500,000. These testers primarily use the
in-circuit test technique and are reported by Prime Data of San Jose, California
to be the in-circuit market share leader as of the last published report.
Major competitors include Hewlett-Packard, Teradyne and Schlumberger. These
products are sold through a direct sales force in the United States, the United
Kingdom, Germany, France, Switzerland and Italy. Sales elsewhere are made
through these offices or independent representatives to whom GenRad provides
technical and administrative assistance.
GENEVA(TM) TEST AND MEASUREMENT SYSTEMS
GenRad's Extended VXI Architecture ("GENEVA") is a combined hardware and
software test and measurement system that uses the industry standard VXIbus for
instrument control. GenRad's extension adds a scanner bus above the instruments
to solve the signal interconnect problems not addressed by VXI. A patent has
been granted to GenRad for this VXIScan[TM] architectural extension. The GENEVA
architecture is capable of addressing the needs of a wide range of test and
measurement system applications.
The first standard products based on the new GENEVA architecture are the
GR9000 and the GENEVA Test & Measurement Systems. Each of these products is
aimed at very distinct markets: telecommunications, end-of-line compliance
testing and functional test applications.
TELECOMMUNICATIONS TEST AND MEASUREMENT SYSTEMS (GR9000)
The GR9000 is the first announced product based on the GENEVA architecture.
The GR9000 is an end-of-line telecommunications compliance test and measurement
system. The GR9000 can be used by telecommunications companies to run a full
range of CCITT tests at high throughput and accuracy. The major competitor thus
far is Schlumberger.
GENEVA TEST & MEASUREMENT SYSTEMS
With their architecture base in the VXIbus instrumentation standard, the
GENEVA Test & Measurement Systems GR1000 and GR5000 are open configurable
VXI-based test and measurement systems for functional test applications. Such
applications range from engineering verifications to manufacturing verifica-
1
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tion and calibration to field service and repair at the PC board, modular system
level. Pricing of product varies based on customer specifications.
AUTOMOTIVE TEST PRODUCTS
Automotive Test Products develops and produces test systems for service bay
diagnostics of electrical failures on cars. ATP designs and manufactures the
diagnostic units as well as provides the applications support to write the test
programs specific to each model car. Hewlett-Packard and Actia are ATP's most
significant competitors. Pricing of product varies based on customer
specifications.
DESIGN AUTOMATION PRODUCTS*
Design Automation Products develops, produces and sells System
HILO[TRADEMARK], a suite of logic simulation and synthesis software tools that
integrate into all leading Computer Aided Engineering (CAE) frameworks. The
Company's Design Automation Products are sold both by direct sales and a variety
of Original Equipment Manufacturers (OEM's). Customers can also purchase
simulation and synthesis hardware tools from Electronic Design Automation (EDA)
suppliers such as Mentor and Cadence. DAP's competitors include Viewlogic,
Mentor and Cadence.
STRUCTURAL TEST PRODUCTS*
Structural Test Products provides test systems for electromechanical and
mechanical testing applications. STP designs, manufactures, sells and provides
integration services for systems which ensure structural integrity and product
performance. STP's competitors include Schlumberger, Leuven Measurement Systems,
Unholtz-Dickie and Spectral Dynamics.
* Design Automation Products and Structural Test Products were designated
discontinued product lines in the third quarter of 1993 as part of the Company's
restructuring as more fully described in Managements Discussion and Analysis of
Financial Condition and Operating Results.
PRINCIPAL MARKETS
GenRad's principal customers are electronics manufacturers that fall into
the following major industries: computers and computer peripherals,
telecommunications, aerospace, automotive, process controls, medical equipment,
transportation, consumer products, office automation/information processing,
government/military equipment and contract manufacturing. GenRad has government
contracts which are generally subject to termination at the convenience of the
government. Sales to agencies of the United States Government amounted to 12% of
consolidated revenues in 1993, 4% in 1992 and 8% in 1991. Sales to Ford of
Europe amounted to 16% of consolidated revenues in 1993, 7% in 1992 and 4% in
1991.
SALES, SERVICE AND DISTRIBUTION
GenRad sells and services its products primarily through its own sales and
service organizations consisting of sales offices and service centers located in
the United States, the United Kingdom, Germany, France, Switzerland, Italy and
Singapore. Sales or service elsewhere is performed through these offices or
through independent representatives to whom GenRad provides technical and
administrative assistance.
FOREIGN OPERATIONS
GenRad's operations abroad consist of marketing and servicing products,
providing other types of customer support services such as software development
and manufacturing of Automotive Test Products. GenRad Fareham, located in
Fareham, England, is a division of GenRad's wholly-owned United Kingdom
subsidiary, GenRad Limited, and is the base of GenRad's Design Automation
Products business unit which was designated a discontinued product line in the
third quarter of 1993 as part of the Company's restructuring as more fully
described in Managements Discussion and Analysis of Financial Condition and
Operating
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Results. GenRad Manchester, located in Manchester, England, is also a division
of GenRad Limited and is the base of GenRad's Automotive Test Products business
unit.
GenRad is subject to the usual risks of international trade, including
unfavorable economic conditions, political instability, restrictive trade
policies, controls on funds transfers and foreign currency fluctuations.
During fiscal year 1993, sales in foreign countries were $88,839,000, or
56% of GenRad's total sales, compared with $83,220,000, or 58%, during fiscal
year 1992, and $85,958,000, or 55%, during fiscal year 1991. Additional
information regarding GenRad's foreign operations is contained in the
Consolidated Financial Statements incorporated in Item 8 of this report.
BACKLOG
Backlog at the end of 1993 was approximately $23 million as compared to
approximately $35 million at the end of 1992. Backlog relating to the U.S.
Marine Corps order as of the end of 1993 totaled $2.4 million compared to $12.6
million at the end of 1992. Backlog for 1993 excluded orders related to
discontinued products. Backlog for 1992 included $3.5 million of orders related
to discontinued products. Most orders are filled within three months of receipt.
It is expected that substantially all of the orders on hand on January 1, 1994,
will be filled during the current fiscal year. Although orders are subject to
cancellation by purchasers, GenRad's experience has been that cancellations are
not material.
COMPETITIVE CONDITIONS
Competition, from both U.S. and foreign competitors, is strong and active.
Some of these competitors are substantially larger companies with greater
resources. Typically, GenRad meets competition by carefully selecting its
markets and by developing its products to meet the needs of each group of
customers. Primary competitive factors are product performance, customer support
services and pricing. The Automatic Test Equipment (ATE) industry is subject to
rapid change and success is dependent on the development of new technologies and
new product introductions. A key competitive advantage for GenRad is the
Company's broad and integrated product family and its extensive software
capabilities.
RESEARCH AND DEVELOPMENT
GenRad's expenditures for the development of new products and services, and
the improvement of existing products and services, were $15,342,000 in fiscal
1993, $20,278,000 in fiscal 1992, and $24,210,000 in fiscal 1991. The 1993
expenditures were primarily for staffing and related expenses for the
development of printed-circuit board ATE and new architecture test and
measurement systems.
PATENTS AND TRADEMARKS
GenRad seeks patents in the United States and appropriate foreign countries
for significant technological inventions. GenRad also owns patents, copyrights,
trademarks and proprietary information, some of which are considered to be
valuable assets. In the opinion of management, no individual patent, copyright,
trademark or proprietary information is material to the business as a whole.
SUPPLIERS
Materials and components used by GenRad in manufacturing its products are
available primarily from domestic sources. Where possible, GenRad buys from
multiple sources to avoid dependence on any single supplier. However, certain
microcomputers, microprocessors, general-purpose digital computers and custom
semiconductor devices are only available from a limited number of suppliers.
ENVIRONMENT
GenRad's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment. GenRad does not anticipate that
compliance with such laws or regulations presently in effect will adversely
affect its capital expenditures, earnings or competitive position. GenRad does
not expect to make any material expenditures for environmental control
facilities in the current fiscal year.
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EMPLOYEES
GenRad had 1,184 employees, including contract employees, on January 1,
1994, and 1,363 employees on January 2, 1993. No GenRad employees are covered by
collective bargaining agreements, and GenRad believes relations with its
employees are good.
EXECUTIVE OFFICERS OF GENRAD, INC.
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NAME AGE OFFICE
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James F. Lyons.................. 59 President and Chief Executive Officer
Robert C. Aldworth.............. 41 Vice President, Chief Financial Officer, Clerk and Secretary
John K. Bulman.................. 47 Vice President, Sales and Service
Sarah H. Lucas.................. 34 Vice President, Strategic Planning and Analysis
Walter A. Shephard.............. 40 Treasurer
</TABLE>
The President, Treasurer and Clerk are elected and all other officers are
appointed by the Directors at their first meeting following the Annual Meeting
of Shareholders. Appointed officers hold office for one year and elected
officers hold office for one year and until a successor is chosen and qualified.
There are no family relationships among the officers.
Mr. Lyons joined the Company as President and Chief Executive Officer in
July 1993. From January 1992 until July 1993, Mr. Lyons served as President and
Chief Executive Officer of Harry Gray Associates, a management consulting and
investment company located in Farmington, Connecticut. From 1989 to 1992, he was
President and Chief Operating Officer of American Medical International, Dallas,
Texas. From 1987 to 1989 he was Chief Investment Officer of GKH Partners,
Farmington, Connecticut.
Mr. Aldworth was appointed Vice President and Chief Financial Officer of
GenRad in August 1991 and Clerk and Secretary in March 1993. Prior to that, he
had been Vice President, Finance and Chief Financial Officer of MPB Corporation,
Keene, New Hampshire, since 1984.
Mr. Bulman was appointed Vice President, Sales and Service of GenRad in
January 1994. He has been Vice President, Sales-Concord Products, at GenRad
since September 1992. From 1989 to September 1992, Mr. Bulman held various other
positions with the Company, including Director, North American Sales and Eastern
Region Sales Manager-U.S. From 1986 to 1989, Mr. Bulman was Director,
Schlumberger Technologies ATE, Western Operations, San Jose, California, and
Central Region Manager-Board Test Products, Dallas, Texas.
Ms. Lucas was appointed Vice President, Strategic Planning and Analysis of
GenRad in January 1994. From July 1990 to January 1994, Ms. Lucas served as an
Associate Consultant within McKinsey & Company. From September 1988 to June
1990, she attended the MBA program at Harvard Business School where she
graduated as a Baker Scholar in 1990. During this time from June 1989 through
August 1989, Ms. Lucas also served as an Associate Consultant with McKinsey &
Company in their London office. From 1986 to 1988, Ms. Lucas was a Senior
Business Analyst at the MAC group in Cambridge, Massachusetts.
Mr. Shephard was appointed Treasurer of GenRad in January 1991. From June
1985 to December 1990, he was Assistant Treasurer and Manager of Treasury
Operations of the Company.
ITEM 2. PROPERTIES
GenRad's executive offices are located in Concord, Massachusetts, where the
Company owns a 450,000 square foot building on 77 acres of land. GenRad also
owns a 254,000 square foot manufacturing facility on 85 acres of land in Bolton,
Massachusetts, and a 25,000 square foot research and development facility on
three acres of land in Fareham, England.
In addition, GenRad engages in research, design, manufacturing or marketing
operations in leased facilities in five states in the United States and in six
foreign countries. All of GenRad's properties are well maintained.
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ITEM 3. LEGAL PROCEEDINGS
On October 19, 1993, the Hewlett-Packard Company ("H-P") brought an action
in the United States District Court in Colorado against GenRad for infringement
of one or more claims of H-P's U.S. Patents Nos. 5,124,660 and 5,254,953
directed to the use of capacitive coupling for detecting open component pins on
circuit boards. On October 19, 1993, GenRad brought an action in United States
District Court in Massachusetts against H-P to obtain a judgment declaring those
patents invalid and not infringed. In January 1994, H-P amended its complaint to
eliminate the infringement claim as to the former of those patents, but it is
still charging GenRad with infringement of the latter. GenRad is maintaining its
request that both patents be declared invalid and not infringed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
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PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The information set forth in Exhibit 27, under the captions "Supplementary
Information" and "Investors' Reference Guide", which is the same as the
information set forth on pages 37 and 39 of GenRad's 1993 Annual Report is
incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in Exhibit 27, under the caption "Selected
Financial Data, Five Year Summary", which is the same as the information set
forth under that caption on page 15 of GenRad's 1993 Annual Report, is
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth in Exhibit 27, under the caption "Management's
Discussion and Analysis of Financial Condition and Operating Results", which is
the same as the information set forth under that caption on pages 16 through 18
of GenRad's 1993 Annual Report, is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth in the Consolidated Financial Statements and the
Supplementary Information in Exhibit 27, which is the same information set forth
in the Consolidated Financial Statements and the Supplementary Information on
pages 21 through 37 of GenRad's 1993 Annual Report, is incorporated by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Executive Officers of GenRad,
Inc." on page 4 in Part I of this report, and on pages 5 through 12 of the 1994
Proxy Statement, is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth on pages 8 through 12 of the 1994 Proxy Statement
is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners
The information set forth in the table on pages 2 through 4 of the 1994
Proxy Statement is incorporated by reference.
(b) Security ownership of management
The information set forth under the column "Amount and Nature of Beneficial
Ownership" as of March 15, 1994 in the table on pages 2 through 4 of the 1994
Proxy Statement is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no such relationships or transactions.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following Consolidated Financial Statements of GenRad, Inc. and
Subsidiaries, which are the same as the Consolidated Financial Statements
in GenRad's 1993 Annual Report, are incorporated by reference to Exhibit
27:
A. Consolidated Statement of Operations.
B. Consolidated Balance Sheet.
C. Consolidated Statement of Stockholders' Equity (Deficit).
D. Consolidated Statement of Cash Flows.
E. Notes to Consolidated Financial Statements.
(a)(2) The following schedules to the Consolidated Financial Statements of
GenRad, Inc. and Subsidiaries are filed as part of this report:
A. Report of Independent Public Accountants on Schedules
B. Schedule V - Property, Plant and Equipment
C. Schedule VI - Accumulated Depreciation and Amortization of Property,
Plant and Equipment
D. Schedule VIII - Valuation and Qualifying Accounts
E. Schedule IX - Short-Term Borrowings
F. Schedule X - Supplementary Income Statement Information
All other schedules not listed above are inapplicable or are not required
under Securities and Exchange Commission regulations and therefore have been
omitted.
(a)(3) The following Exhibits are filed as part of this report:
<TABLE>
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3.1 -- Articles of Organization of GenRad, Inc. as amended to June 5, 1987,
incorporated by reference to Exhibit 3.1 to the Company's report on Form
10-K for the year ended January 2, 1988.
3.2 -- Bylaws of GenRad, Inc. (as amended), incorporated by reference to Exhibit
3.2 of the Company's report on Form 10-K for the year ended December 28,
1991.
4.1 -- Indenture dated as of May 1, 1986 between GenRad, Inc. and State Street
Bank and Trust Company, Trustee, related to 7-1/4% Convertible Subordinated
Debenture, incorporated by reference to Exhibit 4.1 to the Company's report
on Form 10-K for the year ended January 3, 1987.
4.2 -- Rights Agreement, dated as of June 17, 1988, between GenRad, Inc. and The
First National Bank of Boston, incorporated by reference to Exhibit 4.2 to
the Company's report on Form 10-K for the year ended December 31, 1988.
*10.1 -- Form of Employment Agreement between GenRad, Inc. and certain of GenRad's
Executive Officers, incorporated by reference to Exhibit 10.1 to the
Company's report on Form 10-K for the year ended December 28, 1991.
*10.2 -- Agreement between GenRad, Inc. and William R. Thurston dated as of June 1,
1988, incorporated by reference to Exhibit 10.2 to the Company's report on
Form 10-K for the year ended December 31, 1988.
10.3 -- Listing Agreement between GenRad, Inc. and the New York Stock Exchange,
Inc., incorporated by reference to Exhibit 10.7 to the Company's report on
Form 10-K for the year ended January 3, 1981.
</TABLE>
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<TABLE>
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*10.4 -- GenRad, Inc. 1991 Equity Incentive Plan, incorporated by reference to
GenRad's Registration Statement on Form S-8 (File No. 33-42789) filed on
September 17, 1991.
*10.5 -- GenRad, Inc. 1991 Directors' Stock Option Plan, incorporated by reference
to GenRad's Registration Statement on Form S-8 (File No. 33-42789) filed on
September 17, 1991.
*10.6 -- GenRad, Inc. Non-Qualified Stock Option Plan, incorporated by reference to
Appendix B to the prospectus in GenRad's Registration Statement on Form S-8
(File No. 2-92786) filed August 15, 1984.
*10.7 -- GenRad, Inc. 1982 Stock Option Plan, incorporated by reference to GenRad's
Registration Statement on Form S-8 (File No. 33-35918) filed on July 18,
1990.
*10.8 -- GenRad, Inc. Employee Stock Purchase Plan, incorporated by reference to
Exhibit 10 to GenRad's Registration Statement on Form S-8 (File No.
33-1667) filed on November 20, 1985.
*10.9 -- GenRad Choice Investment Plan Part II, Active Participation, incorporated
by reference to GenRad's Registration Statement on Form S-8 (File No.
2-92800) filed on August 16, 1984.
10.10 -- GenRad, Inc. Agreement and Plan of Reorganization, dated as of April 13,
1989, between GenRad, Inc. and Structural Measurement Systems, Inc.,
incorporated by reference to Exhibit 10.11 to the Company's report on Form
10-K for the year ended December 30, 1989.
10.11 -- General Loan and Security Agreement dated June 23, 1992 between GenRad,
Inc. and Foothill Capital Corporation, incorporated by reference to Exhibit
19.1 to the Company's report on Form 10-Q for the quarter ended June 27,
1992.
10.12 -- Mortgage, Security Agreement and Fixture Filing (300 Baker Avenue, Concord,
Massachusetts) dated June 23, 1992 between GenRad, Inc. and Foothill
Capital Corporation, incorporated by reference to Exhibit 19.2 to the
Company's report on Form 10-Q for the quarter ended June 27, 1992.
10.13 -- Assignment of Leases and Rents (300 Baker Avenue, Concord, Massachusetts)
dated June 23, 1992 between GenRad, Inc. and Foothill Capital Corporation,
incorporated by reference to Exhibit 19.3 to the Company's report on Form
10-Q for the quarter ended June 27, 1992.
10.14 -- Mortgage, Security Agreement and Fixture Filing (37 East Main Street,
Bolton, Massachusetts) dated June 23, 1992 between GenRad, Inc. and
Foothill Capital Corporation, incorporated by reference to Exhibit 19.4 to
the Company's report on Form 10-Q for the quarter ended June 27, 1992.
10.15 -- Assignment of Leases and Rents (37 East Main Street, Bolton Massachusetts)
dated June 23, 1992 between GenRad, Inc. and Foothill Capital Corporation,
incorporated by reference to Exhibit 19.5 to the Company's report on Form
10-Q for the quarter ended June 27, 1992.
*10.16 -- Form of Bonus Agreement between GenRad, Inc. and certain of GenRad's
Executive Officers, incorporated by reference to Exhibit 10.16 to the
Company's report on Form 10-K for the year ended January 2, 1993.
*10.17 -- Form of Non-Statutory Stock Option Agreement between GenRad, Inc. and
certain of GenRad's Executive Officer's, incorporated by reference to
Exhibit 10.17 to the Company's report on Form 10-K for the year ended
January 2, 1993.
*10.18 -- Second Amended and Restated Employment Agreement between GenRad, Inc. and
Robert E. Anderson effective as of March 19, 1993, incorporated by
reference to Exhibit 10.18 to the Company's report on Form 10-K for the
year ended January 2, 1993.
</TABLE>
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<TABLE>
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10.19 -- Amendment No. 1 dated as of October 26, 1992 to General Loan and Security
Agreement between GenRad, Inc. and Foothill Capital Corporation, dated as
of June 23, 1992, incorporated by reference to Exhibit 19.1 to the
Company's report on Form 10-Q for the quarter ended June 27, 1992.
10.20 -- Amendment No. 2 dated as of November 24, 1993 to General Loan and Security
Agreement between GenRad, Inc. and Foothill Capital Corporation, dated as
of June 23, 1992, incorporated by reference to Exhibit 19.1 to the
Company's report on Form 10-Q for the quarter ended June 27, 1992.
*10.21 -- First Amendment dated as of May 18, 1993 to the Second Amended and Restated
Employment Agreement between GenRad, Inc. and Robert E. Anderson effective
as of March 19, 1993, attached.
*10.22 -- Employment Agreement between GenRad, Inc. and James F. Lyons effective as
of July 7, 1993, attached.
*10.23 -- Non-Statutory Stock Option Agreement between GenRad, Inc. and James F.
Lyons effective as of July 7, 1993, attached.
*10.24 -- GenRad, Inc. 1994 Director Restricted Stock Plan, incorporated by reference
to GenRad's 1994 Proxy Statement for year ended January 1, 1994.
21 -- List of Subsidiaries, attached.
23 -- Consent of Arthur Andersen & Co., attached.
27 -- Financial Statements including Notes and Supplementary Data, attached.
</TABLE>
(b) None
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(1) and (2) above.
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* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (a) and (c) of this Report.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED DULY AUTHORIZED.
GENRAD, INC.
(REGISTRANT)
BY: /S/ JAMES F. LYONS
------------------------
JAMES F. LYONS
------------------------
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Date: March 28, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - - ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
(1) Principal executive officer
/S/ JAMES F. LYONS President and Chief Executive March 28, 1994
..................................... Officer
JAMES F. LYONS
(2) Principal financial officer
/S/ ROBERT C. ALDWORTH Vice President, Chief March 28, 1994
..................................... Financial Officer, Clerk and
Secretary
ROBERT C. ALDWORTH
(3) Principal accounting officer
/S/ ROBERT C. ALDWORTH Vice President, Chief Financial March 28, 1994
..................................... Officer, Clerk and Secretary
ROBERT C. ALDWORTH
(4) A majority of the Board of Directors:
/S/ JAMES F. LYONS Director March 28, 1994
.....................................
JAMES F. LYONS
/S/ EDWIN M. MARTIN, JR. Director March 28, 1994
.....................................
EDWIN M. MARTIN, JR.
/S/ PAUL PENFIELD, JR. Director March 28, 1994
.....................................
PAUL PENFIELD, JR.
/S/ WILLIAM G. SCHEERER Director March 28, 1994
.....................................
WILLIAM G. SCHEERER
/S/ WILSON WILDE Director March 28, 1994
.....................................
WILSON WILDE
/S/ JAMES H. WRIGHT Director March 28, 1994
.....................................
JAMES H. WRIGHT
</TABLE>
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ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
GenRad, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in GenRad, Inc.'s annual report
to shareholders incorporated by reference in this Form 10-K, and have issued our
report theron dated February 4, 1994. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedules listed in
the accompanying index are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts,
February 4, 1994
12
<PAGE> 14
GENRAD, INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- - - ------------------------------------------------------------------------------------------------------------
OTHER
BALANCE AT CHANGES BALANCE
BEGINNING ADDITIONS AT ADD AT END OF
CLASSIFICATION OF PERIOD COST RETIREMENTS (DEDUCT)(A) PERIOD
- - - ------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended January 1, 1994:
Land and improvements................... $ 1,414 $-- $ -- $ (902) $ 512
Buildings and improvements.............. 46,638 240 (2,642) (18,645) 25,591
Machinery and equipment................. 75,390 3,838 (6,572) (4,760) 67,896
Service parts........................... 17,182 1,839 (1,717) (664) 16,640
-------- ------ -------- -------- --------
$140,624 $5,917 $(10,931) $(24,971) $110,639
-------- ------ -------- -------- --------
For the year ended January 2, 1993:
Land and improvements................... $ 1,486 $-- $ -- $ (72) $ 1,414
Buildings and improvements.............. 47,468 727 (486) (1,071) 46,638
Machinery and equipment................. 81,695 3,821 (8,099) (2,027) 75,390
Service parts........................... 20,061 472 (1,436) (1,915) 17,182
-------- ------ -------- -------- --------
$150,710 $5,020 $(10,021) $ (5,085) $140,624
-------- ------ -------- -------- --------
For the year ended December 28, 1991:
Land and improvements................... $ 1,496 $-- $ -- $ (10) $ 1,486
Buildings and improvements.............. 47,808 1,789 (1,958) (171) 47,468
Machinery and equipment................. 84,947 3,711 (10,676) 3,713 81,695
Service parts........................... 32,971 580 (13,112) (378) 20,061
-------- ------ -------- -------- --------
$167,222 $6,080 $(25,746) $ 3,154 $150,710
-------- ------ -------- -------- --------
</TABLE>
- - - ---------------
(a) Amounts include transfers to assets held for sale, as more fully described
in the Provision for Restructuring and Unusual Charges Note to the
Consolidated Financial Statements, foreign currency translation adjustments
resulting from the provisions of Statement of Financial Accounting Standards
#52 and certain reclassifications of demonstration equipment from inventory
to property, plant and equipment.
13
<PAGE> 15
GENRAD, INC. AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- - - -----------------------------------------------------------------------------------------------------------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES BALANCE
BEGINNING COST AND ADD AT END OF
CLASSIFICATION OF PERIOD EXPENSE RETIREMENTS (DEDUCT)(A) PERIOD
- - - -----------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended January 1, 1994:
Land and improvements.................... $ 724 $ 202 $ -- $ (592) $ 334
Buildings and improvements............... 27,622 947 (2,010) (4,685) 21,874
Machinery and equipment.................. 63,996 6,570 (5,436) (5,981) 59,149
Service parts 13,573 1,788 (1,533) (619) 13,209
-------- -------- --------- --------- --------
$105,915 $ 9,507 $ (8,979) $ (11,877) $ 94,566
-------- -------- --------- --------- --------
For the year ended January 2, 1993:
Land and improvements.................... $ 666 $ 58 $ -- $ -- $ 724
Buildings and improvements............... 25,893 1,869 14 (154) 27,622
Machinery and equipment.................. 65,361 6,856 (5,990) (2,231) 63,996
Service parts............................ 14,825 2,077 (1,741) (1,588) 13,573
-------- -------- --------- --------- --------
$106,745 $ 10,860 $ (7,717) $ (3,973) $105,915
-------- -------- --------- --------- --------
For the year ended December 28, 1991:
Land and improvements.................... $ 606 $ 60 $ -- $ -- $ 666
Buildings and improvements............... 25,542 2,077 (1,680) (46) 25,893
Machinery and equipment.................. 65,446 7,905 (8,993) 1,003 65,361
Service parts............................ 20,909 1,552 (7,338) (298) 14,825
-------- -------- --------- --------- --------
$112,503 $ 11,594 $ (18,011) $ 659 $106,745
-------- -------- --------- --------- --------
</TABLE>
- - - ---------------
(a) Amounts include transfers to assets held for sale and asset write-offs as
more fully described in the Provisions for Restructuring and Unusual Charges
Note to the Consolidated Financial Statements, foreign currency translation
adjustments resulting from the provisions of Statement of Financial
Accounting Standards #52 and certain reclassifications of demonstration
equipment from inventory to property, plant and equipment.
14
<PAGE> 16
GENRAD, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- - - --------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES (A) OF PERIOD
- - - --------------------------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended January 1, 1994
Deducted from asset accounts:
Allowance for doubtful accounts.......... $1,251 $368 $157 $ 1,462
Year ended January 2, 1993
Deducted from asset accounts:
Allowance for doubtful accounts.......... $ 929 $650 $328 $ 1,251
Year ended December 28, 1991
Deducted from asset accounts:
Allowance for doubtful accounts.......... $ 702 $341 $114 $ 929
</TABLE>
- - - ---------------
(a) Uncollectable accounts written off, net of recoveries.
15
<PAGE> 17
GENRAD, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
(IN THOUSANDS)
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- - - -------------------------------------------------------------------------------------------------
WEIGHTED
AVERAGE
MAXIMUM AVERAGE INTEREST
WEIGHTED AMOUNT AMOUNT RATE
BALANCE AVERAGE OUTSTANDING OUTSTANDING DURING
CATEGORY OF AGGREGATE AT END OF INTEREST DURING THE DURING THE THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(A) PERIOD(B)
- - - -------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended January 1, 1994:
Notes payable to banks......... $ 3,475 7.00% $ 5,999 $ 3,650 7.95%
Year ended January 2, 1993:
Notes payable to banks......... $ 4,713 13.78% $ 7,806 $ 6,068 11.16%
Year ended December 28, 1991:
Notes payable to banks......... $ 4,916 12.04% $11,430 $ 8,145 13.08%
</TABLE>
- - - ---------------
Notes payable to banks represent domestic borrowings by the registrant and
borrowings by foreign subsidiaries under line of credit borrowing arrangements.
(a) The average amount outstanding during the period was computed by dividing
the total of month-end outstanding principal balances by 12.
(b) The weighted average interest rate during the period was computed by
dividing the actual interest expense by average short-term debt outstanding
during the period.
16
<PAGE> 18
GENRAD, INC. AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTAL INCOME STATEMENT INFORMATION
(IN THOUSANDS)
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B
<S> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------
ITEM CHARGED TO COSTS AND EXPENSES
- - - -----------------------------------------------------------------------------------------------
YEARS ENDED
--------------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 28,
1994 1993 1991
- - - -----------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------
Maintenance and repairs............................ $1,531 $1,879 $2,612
</TABLE>
- - - ---------------
Note: Amounts for depreciation and amortization of intangible assets; taxes,
other than payroll taxes and income taxes; royalties; and advertising are
not presented herein as such amounts are either less than 1% of total
sales and revenues or such amounts have been disclosed in the Consolidated
Financial Statements or Notes thereto, incorporated by reference herein.
17
<PAGE> 1
EXHIBIT 10.19
AMENDMENT NO. ONE TO THE GENERAL LOAN
AND SECURITY AGREEMENT
GENRAD, INC.
This Amendment No. One To The General Loan And Security Agreement (the
"Amendment") is entered into as of the 26th day of October, 1992, by and
between GENRAD, INC., a Massachusetts corporation ("Borrower"), whose chief
executive office is located at 300 Baker Avenue, Concord, Massachusetts
01742-2174 and FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the
following facts:
FACTS
-----
FACT ONE: Foothill and Borrower have previously entered into that
certain General Loan And Security Agreement, dated June 23, 1992 (the
"Agreement").
FACT TWO: Foothill and Borrower desire to further amend the
Agreement as provided herein. Terms defined in the Agreement which are used
herein shall have the same meanings as set forth in the Agreement, unless
otherwise specified.
NOW, THEREFORE, Foothill and Borrower hereby modify and amend the
Agreement as follows:
1. Paragraph 7.1(c) of the Agreement is hereby amended in its
entirety to read as follows:
"(c) dispositions of Equipment, and patents, trade names,
trademarks, servicemarks, copyrights, monies due under royalty or licensing
agreements, and/or infringement claims in the ordinary course of business
pursuant to Section 6.9, provided (i) Borrower shall remit to Foothill the
proceeds of any such disposition to be applied on account of the
Obligations, and (ii) borrower shall not dispose of any individual item of
Equipment, patents, trade names, trademarks, servicemarks, copyrights,
monies due under royalty or licensing agreements, and/or infringement claims
having a net book or market value in excess of One Hundred Thousand Dollars
$100,000), or in any fiscal year dispose of Equipment having an aggregate
net book or market value in excess of Two Hundred Fifty Thousand Dollars
($250,000);"
<PAGE> 2
2. A new Paragraph 15.10 shall be inserted into the Agreement to
read as follows: "15.10 DISPOSITIONS OF CERTAIN COLLATERAL. With regard
to disposition of Equipment, patents, trade names, trademarks,
servicemarks, copyrights, monies due under royalty or licensing agreements,
and/or infringement claims in the ordinary course of business pursuant to
Paragraph 7.1(c), Foothill shall reasonably cooperate with Borrower and
shall, upon request therefor, provide Borrower with such evidence of the
release of Foothill's interest therein as Borrower may reasonably request."
3. In the event of a conflict between the terms and provisions of
this Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the
Agreement, as supplemented, amended and modified, shall remain in full
force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the day and year first written above.
FOOTHILL CAPITAL CORPORATION GENRAD, INC.
By /s/ LISA M. VASQUEZ By /s/ WALTER A. SHEPHARD
------------------------- -----------------------------
Its AVP Its Treasurer
-----------------------------------------------------------------
By its acceptance below this 26th day of October, 1992, the undersigned
guarantor hereby reaffirms its Continuing Guaranty dated June 23, 1992 and
consents to the above-stated terms.
The undersigned further confirms that the Guaranty continues to be secured
by that certain Stock Pledge Agreement dated June 23, 1992.
GENRAD HOLDINGS, LIMITED
By /s/ WALTER SHEPHARD
---------------------
Walter Shephard
Its Director
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NUMBER TWO TO THE GENERAL
LOAN AND SECURITY AGREEMENT
GENRAD, INC.
This Amendment Number Two To The General Loan And Security Agreement
(this "Amendment") is entered into this 24th day of November, 1993, by and
between GENRAD, INC., a Massachusetts corporation ("Borrower"), whose chief
executive office is located at 300 Baker Avenue, Concord, Massachusetts
01742-2174 and FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the
following facts:
FACTS
-----
FACT ONE: Foothill and Borrower have previously entered into that certain
General Loan And Security Agreement, dated June 23, 1992, as amended (the
"Agreement").
FACT TWO: Foothill and Borrower desire to further amend the Agreement as
provided herein. Terms defined in the Agreement which are used herein shall
have the same meanings as set forth in the Agreement, unless otherwise
specified.
NOW, THEREFORE, Foothill and Borrower hereby modify and amend the
Agreement as follows:
1. Unless earlier terminated by Foothill pursuant to Section 3.1 of
the Agreement, the term of the Agreement shall be extended to
January 1, 1995.
2. Section 6.13 of the Agreement is hereby amended in its entirety to
read as follows:
"6.13 FINANCIAL COVENANTS. As of the end of any fiscal quarter during the
term of this Agreement:
<PAGE> 2
(a) Minimum Current Ratio.
---------------------
(i) CONSOLIDATED. Borrower and its Subsidiaries will not
permit the ratio of (A) Consolidated Current Assets to (B) Consolidated
Current Liabilities to be less than .8 to 1.0.
(ii) DOMESTIC. Borrower will not permit the ratio of (A)
Borrower's Current Assets to (B) Borrower's Current Liabilities to be less
than .55 to 1.0.
<TABLE>
(b) Minimum Capital Funds.
---------------------
(i) CONSOLIDATED. Borrower and its Subsidiaries will not
permit Consolidated Capital Funds to be less than:
<S> <C>
4th Quarter, 1993 $2,000,000
1st Quarter, 1994 $2,000,000
2nd Quarter, 1994 $2,500,000
3rd Quarter, 1994 $3,500,000
4th Quarter, 1994 $3,500,000
<FN>
(ii) DOMESTIC. Borrower will not permit Borrower's Capital
Funds to be less than Twelve Million Dollars ($12,000,000).
</TABLE>
<TABLE>
(c) Leverage Ratio.
--------------
(i) CONSOLIDATED. Borrower and its Subsidiaries will not
permit the ratio of (A) Indebtedness to (B) Consolidated Capital Funds to
be greater than:
<S> <C>
4th Quarter, 1993 4.75 to 1.0
1st Quarter, 1994 4.75 to 1.0
2nd Quarter, 1994 4.75 to 1.0
3rd Quarter, 1994 2.75 to 1.0
4th Quarter, 1994 2.75 to 1.0
</TABLE>
(ii) DOMESTIC. Borrower will not permit the ratio of (A)
Indebtedness to (B) Borrower's Capital Funds to be greater than 1.0 to
1.0."
3. Borrower shall pay to Foothill a contract extension fee in the
amount of $60,000 and a covenant amendment fee in the amount of $15,000,
for a total of $75,000, due and payable upon execution hereof. Said
contract extension fee and
<PAGE> 3
covenant amendment fee shall be earned at the time of payment and shall be
non-refundable.
4. In the event of a conflict between the terms and provisions of
this Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the
Agreement, as supplemented, amended and modified, shall remain in full
force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the day and year first written above.
FOOTHILL CAPITAL CORPORATION GENRAD, INC.
By /s/ LISA M. GONZALES By /s/ ROBERT C. ALDWORTH
--------------------------- ----------------------------
Its AVP Its VICE PRESIDENT & CFO
-------------------------- ----------------------------
----------------------------------------------------------------
By its acceptance below this 30th day of November, 1992, the undersigned
guarantor hereby reaffirms its Continuing Guaranty dated June 23, 1992 and
consents to the above-stated terms.
The undersigned further confirms that the Guaranty continues to be secured
by that certain Stock Pledge Agreement dated June 23, 1992.
GENRAD HOLDINGS, LIMITED
By /s/ WALTER SHEPHARD
--------------------
Walter Shephard
Its Director
--------------------
<PAGE> 1
EXHIBIT 10.21
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
The Second Amended and Restated Employment Agreement,
effective as of the 19th day of March, 1993 (the "Agreement"),
between GenRad, Inc., a Massachusetts corporation (the "Company"),
and Robert E. Anderson (the "Employee"), is hereby amended as
follows:
1. Section 3 of the Agreement shall be amended by deleting
paragraph A in its entirety and inserting the following in
lieu thereof:
"The Company shall have the right, commencing on August 17,
1993, to terminate the Employee's employment at any time upon 30
days' notice to the Employee (such notice to be effective no earlier
than September 16, 1993), subject to the Employee's rights in Section
2A above; and"
2. Capitalized terms used in this First Amendment to Second
Amended and Restated Employment Agreement (the "Amendment")
and not otherwise defined shall have the respective meanings
ascribed to them in the Agreement.
3. In all other respects, the Agreement is hereby ratified and
confirmed and shall remain in full force and effect.
4. This Amendment may be executed in counterparts, all of which
together shall for all purposes constitute one agreement
binding on both parties, notwithstanding that both parties
have not signed the same counterpart.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the 18th day of May, 1993.
EMPLOYEE: GENRAD, INC.
/S/ ROBERT E. ANDERSON By:/s/ PAUL PENFIELD, JR.
- - - ---------------------- ------------------------
Robert E. Anderson Title:
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of the 7th day of July,
1993 (the "Agreement"), is entered into between GenRad, Inc., a
Massachusetts corporation with offices at 300 Baker Avenue,
Concord, Massachusetts 01742 (the "Company"), and James F. Lyons,
an individual residing at 8 Pinnacle Mountain Road, Simsbury,
Connecticut 06070 (the "Employee").
In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Term of Employment.
------------------
A. The Company agrees to employ the Employee and the
Employee agrees to serve the Company until July 7, 1996,
unless the employment of the Employee is terminated earlier
in accordance with the terms of this Agreement. During the
period of employment, the Employee shall devote his full
business time during normal business hours to the business
and affairs of the Company, except that the Employee shall
have the right to participate in civic, cultural and
charitable activities and to manage personal investments so
long as such activities in the aggregate do not significantly
interfere with the performance of the Employee's duties for
the Company. During such period of employment, the Company
shall pay the Employee a salary of not less than $325,000 per
annum, payable in accordance with the Company's standard
payroll practices, provided that the Employee's base salary
may be reduced prior to a Change in Control of the Company
(as such term is defined in Section 2 below) in accordance
with a general salary reduction applicable to substantially
all of the officers of the Company and the Company's
affiliates, taken as a whole (for purposes hereof,
"affiliates" means any entities controlled by, controlling or
under common control with the Company at the time of any such
reduction, and "Company" includes any successors to the
business of the Company). During such period of employment,
the Employee shall also be entitled to receive fringe
benefits at a level consistent with those for which employees
of the same grade level and seniority are eligible, including
participation in retirement plans, stock plans and incentive
compensation and bonus programs, vacation and sick time, and
medical, dental, life insurance and other similar benefits.
B. The Employee shall serve as the President and Chief
Executive Officer and as a director of the Company, and shall
report to the Company's Board of Directors.
<PAGE> 2
2. Salary Continuation.
-------------------
A. If the Company terminates the Employee's employment
without cause prior to July 7, 1996 (any such action being
hereafter referred to as an "Involuntary Termination"), the
Company shall:
(i) Continue to provide the Employee, at the
Company's expense, with the full level of medical,
dental and similar health benefits for which the
Employee was eligible immediately prior to the
Involuntary Termination, until the earlier to occur of
(a) the Employee's full time employment by another
company, or (b) the second anniversary of the
Involuntary Termination (whether or not such period ends
after July 7, 1996).
(ii) During the period commencing with the date of
the Involuntary Termination and ending 12 months
thereafter (whether or not such period ends after
July 7, 1996 and regardless of whether the Employee has
become employed by another company), continue to pay the
Employee's base salary as in effect immediately prior to
the Involuntary Termination at the same time intervals
as salary payments were made to the Employee immediately
prior to the Involuntary Termination.
(iii) During the period, if any, following
completion of the 12-month period referred to in
paragraph (ii) above, and ending 12 months thereafter
(whether or not such period ends after July 7, 1996 and
regardless of whether the Employee has become employed
by another Company), pay the Employee, at the same time
intervals as salary payments were made to the Employee
immediately prior to the Involuntary Termination, an
amount equal to (a) his base salary immediately prior to
the Involuntary Termination minus (b) any salary or
other compensation earned by the Employee from other
employment; it being understood that the Employee shall
use reasonable efforts to find new employment suitable
to his training and performance (provided that the
Employee shall not be required to move his residence to
accept new employment).
(iv) Provide reasonable executive outplacement
support.
<PAGE> 3
Notwithstanding the foregoing, an Involuntary Termination
shall be deemed to have occurred, and the Employee shall be
entitled to the benefits set forth in this Section 2A, if the
Employee voluntarily terminates his employment on account of
the occurrence of any of the following events after a Change
in Control of the Company: (i) the assignment to the Employee
of any duties inconsistent in any respect with the highest
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities attained
by the Employee during the period of his employment by the
Company; (ii) a failure of the Company to comply with the
terms of Section 1; (iii) a relocation of the Employee
outside the metropolitan Boston area; or (iv) a decrease in
the Employee's compensation (including base salary, bonus or
fringe benefits). For purposes hereof, "Change in Control of
the Company" shall have the meaning set forth in the
Company's 1991 Equity Incentive Plan, as adopted by the Board
of Directors of the Company on March 29, 1991 (and without
regard to any subsequent amendments thereto).
B. If the Employee voluntarily elects to terminate his
employment (any such action being hereafter referred to as a
"Voluntary Termination"), the Company shall:
(i) Continue to provide the Employee, at the
Company's expense, with the full level of medical,
dental and similar health benefits for which the
Employee was eligible immediately prior to the Voluntary
Termination, until the last day of the Employee's full
time employment by the Company.
(ii) Continue to pay the Employee's base salary as
in effect immediately prior to the Voluntary
Termination, at the same time intervals as salary
payments were made to the Employee immediately prior to
the Voluntary Termination, until the last day of the
Employee's full time employment by the Company.
3. DEATH, RESIGNATION OR TERMINATION FOR CAUSE. The
Employee shall have no rights under Sections 1 and 2, and this
Agreement shall immediately terminate, in the event the Employee
dies, is incapacitated for a continuous period of 180 days or is
terminated for cause (as defined in Section 4 below). Notwithstanding
anything herein to the contrary, the parties shall have the right to
terminate the Employee's employment with the Company under the
following terms and conditions:
-3-
<PAGE> 4
A. The Company shall have the right to terminate the
Employee's employment at any time upon 30 days' notice to the
Employee, subject to the Employee's rights in Section 2A
above; and
B. The Employee shall have the right to terminate his
employment at any time upon 60 days' notice to the Company,
subject to the Employee's rights in Section 2B above.
4. TERMINATION FOR CAUSE. The Company may terminate the
employment of the Employee for cause. For purposes hereof,
"cause" shall exist only if the Employee (i) engages in fraud in
the performance of his duties for the Company, or (ii) is
convicted of or pleads guilty or no contest to any felony
involving moral turpitude.
5. NON-DISCLOSURE AND NON-COMPETITION.
A. The Employee agrees that all confidential
information relating to the Company's business is the
exclusive property of the Company. The Employee agrees not
to make unauthorized use or disclosure of such confidential
information during the period of his employment by the
Company and for a period of five years thereafter.
B. During the period of employment and, in the event
the Employee's employment is terminated for cause or if the
Employee voluntarily terminates his employment with the
Company (other than for reasons set forth in the first
sentence of the last paragraph of Section 2A), for a period
of one year after the expiration thereof, the Employee will
not, directly or indirectly, as an individual proprietor,
partner, stockholder, officer, employee, director, joint
venturer, investor, lender or in any other capacity
whatsoever (other than as the holder of not more than one
percent (1%) of the total outstanding stock of a publicly
held company), engage in the business of developing,
producing, marketing or selling automatic test equipment for
electronic printed-circuit boards or automotive applications.
6. MISCELLANEOUS.
A. The Company may assign its rights and obligations
under this Agreement to a successor to all or substantially
all of the business and/or assets of the Company. The
Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this
Agreement to the same extent that the Company would be
-4-
<PAGE> 5
required to perform it had no such succession taken place.
The obligations of the Employee under this Agreement are
personal and shall not be assigned.
B. The Company agrees to pay promptly as incurred, to
the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company,
the Employee or others of the validity or enforceability of,
or liability under, any provision of this Agreement.
C. This Agreement may be amended only by a written
agreement signed by the Employee and the Company.
D. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
E. All notices or elections required or permitted
under this Agreement shall be in writing, signed by the party
giving such notice or election, and shall be effective upon
personal delivery, three days after deposit in the United
States Post Office, by registered or certified mail, postage
prepaid, or one business day following deposit with Federal
Express or another nationally recognized overnight courier
service, postage prepaid, addressed to the other party at the
address shown above, or at such other address or addresses as
either party may designate to the other in accordance with
this Section 6E.
F. The provisions of Sections 2 and 5 shall survive
the termination of this Agreement.
IN WITNESS WHEREOF, the Employee and the Company have
executed this Agreement as of the date set forth above.
EMPLOYEE: GENRAD, INC.
/s/ JAMES F. LYONS By: /s/ JAMES H. WRIGHT
------------------ -------------------------
James F. Lyons Title: Director
<PAGE> 1
EXHIBIT 10.23
GENRAD, INC.
Non-Statutory Stock Option Agreement
------------------------------------
1. GRANT OF OPTION. GenRad, Inc., a Massachusetts
corporation (the "Company"), hereby grants to James F. Lyons
(the "Optionee") an option, pursuant to the Company's 1991 Equity
Incentive Plan (the "Plan"), to purchase an aggregate of 500,000
shares of Common Stock ("Common Stock") of the Company at a price
of $3.50 per share, purchasable as set forth in and subject to the
terms and conditions of this option and the Plan. Except where
the context otherwise requires, the term "Company" shall include
the parent and all present and future subsidiaries of the Company
as defined in Sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended or replaced from time to time (the
"Code").
2. NON-STATUTORY STOCK OPTION. This option is not intended
to qualify as an incentive stock option within the meaning of
Section 422 of the Code.
3. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) Vesting Schedule.
----------------
<TABLE>
(i) Except as otherwise provided in this
Agreement, this option may be exercised prior to the tenth
anniversary of the date of grant (the "Expiration Date") in
installments as to not more than the number of shares set forth in
the table below during the respective installment periods set
forth in the table below.
<CAPTION>
Number of
Shares as to which
Exercise Period Option is Exercisable
--------------- ---------------------
<S> <C>
Prior to the first day on which the
Average Closing Price (as such term
is defined below) for the Company's
Common Stock equals or exceeds -0-
$5.00 per share
On or after the first day on which
the Average Closing Price
for the Company's Common Stock
equals or exceeds $5.00 per share
but prior to the first day on
which the Average Closing
Price for the Company's Common
Stock equals or exceeds $6.67 125,000
per share
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
On or after the first day on which
the Average Closing Price for the
Company's Common Stock equals or
exceeds $6.67 per share but prior
to the first day on which the
Average Closing Price for the
Company's Common Stock equals or 125,000
exceeds $8.33 per share
On or after the first day on which
the Average Closing Price for the
Company's Common Stock equals or
exceeds $8.33 per share but prior
to the first day on which the
Average Closing Price for the
Company's Common Stock equals or 125,000
exceeds $10.00 per share
On or after the first day on which
the Average Closing Price for the
Company's Common Stock equals or 125,000
exceeds $10.00 per share
</TABLE>
(ii) The right of exercise shall be cumulative so
that if the option is not exercised to the maximum extent
permissible during any exercise period, it shall be exercisable,
in whole or in part, with respect to all shares not so purchased
at any time prior to the Expiration Date or the earlier
termination of this option. This option may not be exercised at
any time on or after the Expiration Date, except as otherwise
provided in Section 3(e) below.
(iii) Notwithstanding the provisions of
Section 3(a)(i) above, this option may be exercised with respect
to all 500,000 shares of Common Stock covered by this Agreement,
to the extent such shares have not been previously purchased
pursuant to the terms hereof, from and after the eighth
anniversary of the date of grant and prior to the Expiration Date
or the earlier termination of this option.
(iv) For purposes of this Agreement, "Average
Closing Price" means, as of a particular date, the average of the
closing bid and asked prices for the Common Stock in the over-the-
counter market as reported by NASDAQ, or, if the Common Stock is
then listed on the national market system or a national securities
exchange, of the closing price of the Common Stock on such system
or exchange, as published in THE WALL STREET JOURNAL, for a period
of 20 consecutive trading days prior to such date.
-2-
<PAGE> 3
(b) EXERCISE PROCEDURE. Subject to the conditions set forth in this
Agreement, this option shall be exercised by the Optionee's delivery of
written notice of exercise to the Secretary or Director of Compensation and
Benefits of the Company, specifying the number of shares to be purchased
and the purchase price to be paid therefor and accompanied by payment in
full in accordance with Section 4. Such exercise shall be effective upon
receipt by the Secretary or Director of Compensation and Benefits of the
Company of such written notice together with the required payment. The
Optionee may purchase less than the number of shares covered hereby,
provided that no partial exercise of this option may be for any fractional
share or for fewer than ten whole shares.
(c) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 3, this option may not be exercised
unless the Optionee, at the time he exercises this option, is, and has been
at all times since the date of grant of this option, an employee, officer
or director of, or consultant or advisor to, the Company (an "Eligible
Optionee").
(d) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the Optionee
ceases to be an Eligible Optionee for any reason, then, except as provided
in paragraphs (e), (f) and (g) below, the right to exercise this option
shall terminate three months after such cessation (but in no event after
the Expiration Date), PROVIDED THAT this option shall be exercisable only
to the extent that the Optionee was entitled to exercise this option on
the date of such cessation.
(e) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Optionee dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Expiration Date while he is an Eligible Optionee, or if the Optionee
dies within three months after the Optionee ceases to be an Eligible
Optionee (other than as the result of a termination of such relationship by
the Company for "cause" as specified in paragraph (f) below), this option
shall be exercisable, within the period of six months following the date of
death or disability of the Optionee (whether or not such exercise occurs
before the Expiration Date), by the Optionee or by the person to whom this
option is transferred by will or the laws of descent and distribution,
PROVIDED THAT this option shall be exercisable only to the extent that this
option was exercisable by the Optionee on the date of his death or
disability. Except as otherwise indicated by the context, the term
"Optionee", as used in this option, shall be deemed to include the estate
of the Optionee or any person who acquires the right to exercise this
option by bequest or inheritance or otherwise by reason of the death of the
Optionee.
-3-
<PAGE> 4
(f) DISCHARGE FOR CAUSE. If the Optionee, prior to the
Expiration Date, ceases his relationship with the Company because
such relationship is terminated by the Company for "cause" (as
defined below), the right to exercise this option shall terminate
immediately upon such cessation. For purposes of this Agreement,
"cause" shall exist only if the Optionee (i) engages in fraud in
the performance of his duties for the Company, or (ii) is
convicted of or pleads guilty or no contest to any felony
involving moral turpitude.
(g) VOLUNTARY TERMINATION WITH BOARD APPROVAL. If the
Optionee ceases to be an Eligible Optionee as a result of his
voluntary election to terminate his employment, the Board of
Directors of the Company (the "Board of Directors") approves of
such voluntary termination (whether or not such approval is
required), and the Board of Directors determines, in its sole
discretion, that a satisfactory successor management team is then
in place, then the right to exercise this option shall continue
until the Expiration Date.
4. PAYMENT OF PURCHASE PRICE.
(a) METHOD OF PAYMENT. Payment of the purchase price
for shares purchased upon exercise of this option shall be made
(i) by delivery to the Company of cash or a check to the order of
the Company in an amount equal to the purchase price of such
shares, (ii) by delivery to the Company of shares of Common Stock
of the Company then owned by the Optionee having a fair market
value equal in amount to the purchase price of such shares,
(iii) by any other means which the Board of Directors determines
are consistent with the purpose of the Plan and with applicable
laws and regulations (including, without limitation, the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934
and Regulation T promulgated by the Federal Reserve Board), or
(iv) by any combination of such methods of payment.
(b) VALUATION OF SHARES OR OTHER NON-CASH CONSIDERATION
TENDERED IN PAYMENT OF PURCHASE PRICE. For the purposes hereof,
the fair market value of any share of the Company's Common Stock
or other non-cash consideration which may be delivered to the
Company in exercise of this option shall be determined in good
faith by the Board of Directors.
(c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE
PRICE. If the Optionee exercises this option by delivery of
shares of Common Stock of the Company, the certificate or
certificates representing the shares of Common Stock of the
Company to be delivered shall be duly executed in blank by the
Optionee or shall be accompanied by a stock power duly executed in
blank suitable for purposes of transferring such shares to the
Company. Fractional shares of Common Stock of the Company will
-4-
<PAGE> 5
not be accepted in payment of the purchase price of shares
acquired upon exercise of this option.
(d) RESTRICTIONS ON USE OF OPTION STOCK.
Notwithstanding the foregoing, no shares of Common Stock of the
Company may be tendered in payment of the purchase price of shares
purchased upon exercise of this option if the shares to be so
tendered were acquired within twelve (12) months before the date
of such tender, through the exercise of an option granted under
the Plan or any other stock option or restricted stock plan of the
Company.
5. DELIVERY OF SHARES; COMPLIANCE WITH SECURITIES LAWS,
ETC.
(a) GENERAL. The Company shall, upon payment of the
option price for the number of shares purchased and paid for, make
prompt delivery of such shares to the Optionee, provided that if
any law or regulation requires the Company to take any action with
respect to such shares before the issuance thereof, then the date
of delivery of such shares shall be extended for the period
necessary to complete such action.
(b) LISTING, QUALIFICATION, ETC. This option shall be
subject to the requirement that if, at any time, counsel to the
Company shall determine that the listing, registration or
qualification of the shares subject hereto upon any securities
exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any
other condition is necessary as a condition of, or in connection
with, the issuance or purchase of shares hereunder, this option
may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval, disclosure or
satisfaction of such other condition shall have been effected or
obtained on terms acceptable to the Board of Directors. Nothing
herein shall be deemed to require the Company to apply for, effect
or obtain such listing, registration, qualification or disclosure,
or to satisfy such other condition.
6. NONTRANSFERABILITY OF OPTION. This option is personal
and no rights granted hereunder may be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or
otherwise) nor shall any such rights be subject to execution,
attachment or similar process, except that this option may be
transferred (i) by will or the laws of descent and distribution or
(ii) pursuant to a qualified domestic relations order as defined
in Section 414(p) of the Code. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of this option or
of such rights contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon this option or such
rights, this option and such rights shall, at the election of the
Company, become null and void.
-5-
<PAGE> 6
7. NO SPECIAL EMPLOYMENT OR SIMILAR RIGHTS. Nothing
contained in the Plan or this option shall be construed or deemed
by any person under any circumstances to bind the Company to
continue the employment or other relationship of the Optionee with
the Company for the period within which this option may be
exercised.
8. RIGHTS AS A SHAREHOLDER. The Optionee shall have no
rights as a shareholder with respect to any shares which may be
purchased by exercise of this option (including, without
limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered
to the Optionee. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date such
stock certificate is issued.
9. ADJUSTMENT PROVISIONS.
(a) GENERAL. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of
the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar
transaction, (i) the outstanding shares of Common Stock are
increased or decreased or are exchanged for a different number or
kind of shares or other securities of the Company, or
(ii) additional shares or new or different shares or other
securities of the Company or other non-cash assets are distributed
with respect to such shares of Common Stock or other securities,
(A) the Optionee shall, with respect to this option or any
unexercised portion hereof, be entitled to the rights and
benefits, and be subject to the limitations, set forth in
Section 16(a) of the Plan, and (B) the criteria for the vesting
schedule set forth in Section 3(a)(i) of this Agreement shall be
adjusted accordingly.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any
adjustments under this Section 9 will be made by the Board of
Directors, whose determination as to what adjustments, if any,
will be made and the extent thereof will be final, binding and
conclusive. No fractional shares will be issued pursuant to this
option on account of any such adjustments.
10. MERGERS, CONSOLIDATION, DISTRIBUTIONS, LIQUIDATIONS ETC.
In the event of a merger or consolidation or sale of all or
substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for securities,
cash or other property of any other corporation or business
entity, or in the event of a liquidation of the Company, prior to
the Expiration Date or termination of this option, the Optionee
shall, with respect to this option or any unexercised portion
hereof, be entitled to the rights and benefits, and be subject to
the limitations, set forth in Section 17(a) of the Plan.
-6-
<PAGE> 7
11. WITHHOLDING TAXES. The Company's obligation to deliver
shares upon the exercise of this option shall be subject to the
Optionee's satisfaction of all applicable federal, state and local
income and employment tax withholding requirements.
12. CHANGE IN CONTROL. Section 18 of the Plan shall be
applicable to this option.
13. MISCELLANEOUS.
(a) Except as provided herein, this option may not be
amended or otherwise modified unless evidenced in writing and
signed by the Company and the Optionee.
(b) All notices under this option shall be mailed or
delivered by hand to the parties at their respective addresses set
forth beneath their names below or at such other address as may be
designated in writing by either of the parties to one another.
(c) This option shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
Date of Grant: GENRAD, INC.
July 7, 1993
By: /s/ JAMES H. WRIGHT
------------------------------
Title: Director
Address: 300 Baker Avenue
Concord, MA 01742
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and
agrees to the terms and conditions thereof. The undersigned
hereby acknowledges receipt of a copy of the Company's 1991 Equity
Incentive Plan.
OPTIONEE
/s/ JAMES F. LYONS
---------------------------------
James F. Lyons
ADDRESS: 8 Pinnacle Mtn. Road
Simsbury, CT 06070
-7-
<PAGE> 1
EXHIBIT 21
GENRAD, INC.
SCHEDULE OF SUBSIDIARIES AS OF MARCH 28, 1994
<TABLE>
<CAPTION>
STATE/JURISDICTION
SUBSIDIARY NAME OF INCORPORATION
--------------- ------------------
<S> <C>
GenRad........................................................... France
GenRad GmbH...................................................... Germany
GenRad S.p.A..................................................... Italy
GenRad (Schweiz) AG.............................................. Switzerland
GenRad Benelux B.V............................................... Netherlands
GenRad Europe Limited............................................ England
GenRad Limited................................................... England
GenRad Holdings Limited.......................................... England
GenRad Securities Corporation.................................... Massachusetts
</TABLE>
All Subsidiaries are Consolidated Subsidiaries and do business under their own
name.
18
<PAGE> 1
EXHIBIT 23
ARTHUR ANDERSEN & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports, dated February 4, 1994, included in, and incorporated
by reference in, GenRad, Inc.'s Form 10-K, into the Company's previously filed
Registration Statement File No. 2-84893, No. 2-85614, No. 2-89950 and No.
33-28715 on Form S-3 and Registration Statement File No. 2-92786, No. 2-92800,
No. 33-1667, No. 33-10658, No. 33-26058, No. 33-35918 and No. 33-52009 on Form
S-8.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts,
March 28, 1994
<PAGE> 1
EXHIBIT 27
GENRAD, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY
- - - -------------------------------------
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share amounts)
- - - --------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales and service revenues......... $158,704 $142,609 $156,391 $179,349 $188,906
Gross margin........................... 66,653 63,696 69,252 82,058 96,393
Loss before extraordinary gain......... $(43,797) $ (7,406) $(39,081) $(26,197) $ (6,090)
Extraordinary gain..................... -- -- -- 5,083 --
- - - --------------------------------------------------------------------------------------------
Net loss............................... $(43,797) $ (7,406) $(39,081) $(21,114) $ (6,090)
================================================
Per share amounts:
Loss before extraordinary gain......... $ (2.42) $ (.42) $ (2.22) $ (1.51) $ (.36)
Extraordinary gain..................... -- -- -- .29 --
- - - --------------------------------------------------------------------------------------------
Net loss............................... $ (2.42) $ (.42) $ (2.22) $ (1.22) $ (.36)
================================================
Balance sheet:
Current ratio.......................... 1.2 1.8 1.7 2.3 2.5
Inventories............................ 13,305 15,519 19,213 32,161 37,922
Total assets........................... 77,116 100,151 117,024 150,463 180,107
Long-term debt......................... 48,851 48,785 48,719 48,653 55,874
Stockholders' equity (deficit)......... (45,287) (5,280) 3,547 42,375 60,946
Other data:
Number of employees*................... 1,184 1,363 1,370 1,661 1,869
Average common shares (in thousands)... 18,132 17,798 17,642 17,391 17,046
<FN>
*Includes contract employees
</TABLE>
<PAGE> 2
GENRAD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
- - - ----------------------------------------------
Operating results - 1993 vs. 1992:
Orders for the Company's products and services were $144 million in 1993 as
compared to $155 million in 1992. The 1992 amount reflects the initial orders
for the Company's FDS 2000 automotive electronics diagnostic system from Ford of
Europe as well as the initial order from the U.S. Marine Corps in the amount of
$14.2 million for specialty board test products. Orders for 1993 and for 1992
included $12 million and $22 million, respectively, related to discontinued
product lines. Without the preceding, orders in 1993 increased for in-circuit
testers, including the current GR228X combinational testers and automotive test
products.
The Company's sales increased by $16 million or 11% in 1993 to $159 million from
$143 million in 1992. The increase resulted in part from greater shipments to
Ford of Europe during 1993 under the terms of a contract in which shipments
initiated in November 1992 and from revenues under the U.S. Marine Corps
contract which were $12.8 million in 1993 and $1.3 million in 1992. In addition,
revenues from the Company's core board-test business also increased during 1993
in relation to 1992. Partially offsetting the above revenue increases was a
decline in revenues from discontinued products which amounted to $12 million in
1993 and $22 million in 1992 and from a decline in service revenues of
approximately 12% during 1993. The decline in service revenues is the result of
a reduction in the active installed base due to lower unit shipments in recent
years and from a general reduction in service requirements by many customers.
Sales to the international market accounted for 56% of sales for 1993, as
compared to 58% in 1992.
Backlog at the end of 1993 was $23 million as compared to $35 million
at the end of 1992. Backlog relating to the U.S. Marine Corps order as of the
end of 1993 totaled $2.4 million compared to $12.6 million at the end of 1992.
Backlog for 1993 excluded orders related to discontinued products. Backlog for
1992 included $3.5 million of orders related to discontinued products.
Gross margin as a percent of sales decreased to 42% for 1993 from 45% in 1992.
Gross margin has continued to be adversely impacted by competitive pricing
pressures and generally lower margins on sales to automotive and government
customers, which in 1993 represented an increased portion of the Company's
revenues in relation to prior periods. Service gross margins as a percent of
sales decreased slightly mainly as a result of the decline in revenues.
Selling, general and administrative expenses increased for 1993 due to
increased incentive costs in support of higher sales volume, a $1.6 million
charge in the second quarter of 1993 for severance and related costs associated
with the realignment of certain members of senior corporate and international
management and compensation related to employee stock options. As a percentage
of sales, these expenses were 31% in 1993 and 33% in 1992. Research and
development expenses declined in 1993 in comparison to 1992 by $4.9 million as
a result of the previous restructuring which began in 1991, from direct
absorbtion of certain expenses into product costs related to the U.S. Marine
Corps contract and a reduction in the number of engineers. Research and
development expenses declined as a percentage of sales, reflecting higher sales
volume and a decrease in expenses.
The Company is in the process of realigning its operations and expense base on
a worldwide basis. As a result, a restructuring charge of $36.8 million was
required in 1993. The restructuring charge included severance of $6.5 million,
asset write-offs of $12.3 million, excess facilities reserves of $12.5 million,
$3.2 million for discontinued product lines and $2.3 million for other items. A
12% company-wide reduction in force was recognized beginning in the fourth
quarter of 1993 and is expected to result in cash outflows for severance pay of
approximately $1.3 million in 1993, $4.5 million in 1994 and $.7 million
thereafter. Asset write-offs of $12.3 million relating principally to building
and leasehold improvements of vacated and excess space had no cash flow effect
and will result in estimated annual depreciation savings of $1.4 million in
1994. Excess facilities reserves relate primarily to lease losses for vacated
domestic and European facilities. Cash outflows related to excess facilities
are estimated at $.4 million in 1993, $2.2 million in 1994 and $9.7 million
thereafter. As the Company continues to restructure current leasing
arrangements, the utilization of the excess facilities reserves and related
cash flows may change. $3.2 million related to discontinued product lines
consists primarily of non-cash write-offs resulting from the sale or
discontinuance of certain product lines which are expected to be disposed of by
the end of 1994.
Unusual charges of $5 million were recognized in 1993 as a result of the
accelerated recognition of compensation expense associated with previously
granted stock options and stock awards, and from the establishment of patent
litigation reserves.
Interest income decreased in 1993 in relation to 1992 as a result of an overall
reduction in cash balances available for investing and a general decline in
interest rates. During the same periods, interest expense decreased due to lower
short-term borrowings and lower interest rates. Other net in
<PAGE> 3
GENRAD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS (CONTINUED)
- - - ------------------------------------------------------
1992 included the following non-operating items: the receipt of a customs
rebate, royalty income and a payment on the sale of a product line.
The 1993 tax benefit results from tax refunds from net operating loss carryback
claims, net of foreign and state income taxes. For tax purposes, the Company has
a $155 million net operating loss carryforward and investment and research tax
credit carryforwards totaling $9.7 million available to reduce United States
federal income taxes.
In December 1990, the Financial Accounting Standards Board issued Statement No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions".
This Statement requires employers to accrue the cost of postretirement benefits
during the years that the employee renders the service and was effective for
fiscal year 1993. The Company adopted this statement in 1993, and it will
recognize the unrecognized transition obligation of approximately $11 million on
the delayed recognition method over a period of 20 years. A curtailment loss of
$1.1 million due to work force reductions was recorded in 1993. The Company's
postretirement benefit plans have been modified and include a limit on the cost
of the Company's contribution for all retirees and increased contributions by
future retirees.
In February 1992, the Financial Accounting Standards Board issued Statement No.
109, "Accounting for Income Taxes". The Company was required to adopt the
statement in 1993. The adoption of this statement did not have a material impact
on the Company's financial position or results of operations.
OPERATING RESULTS - 1992 VS. 1991:
Since 1985, the Automatic Test Equipment (ATE) market has been declining,
notwithstanding periodic minor upturns in certain years. Orders for the
Company's ATE remained weak in 1992 and 1991 due primarily to the continued
U.S. economic downturn and weak U.S. computer market. Additionally, since the
second half of 1991, the Company experienced a similar weakening in the European
markets. As a result of the weak market for ATE, a trend towards lower priced
systems, competitive discounting and the substitution of used equipment for new
equipment, sales and service revenues for 1992 decreased 9% from 1991. Sales of
board-test-systems, structural test and design automation products decreased
while automotive test products increased. Service revenues were stable.
The decline in business activity impacted the Company's international markets
to a great extent and resulted in a decrease in sales to $83 million including
Ford of Europe, as compared to $86 million for 1991. Backlog increased from $23
million at year-end 1991 to $35 million in 1992 due primarily to substantial
orders from the U.S. Marine Corps (board-test-system products) and Ford of
Europe (automotive test products).
The revenue recorded for the U.S. Marine Corps contract was $1.3 million
and the Company commenced shipments under the Ford of Europe contract in 1992.
Gross margin as a percent of sales increased from 44% in 1991 to 45% in 1992.
Gross margin continued to be adversely impacted from spreading certain fixed
manufacturing costs over reduced production volumes, competitive pricing
pressures and lower margins on lower priced systems. In addition, and as part of
the 1991 restructuring program (described below), the Company has been reducing
the levels of demonstration units in support of current business levels. These
units were sold at higher than normal discount levels. Service gross margin
increased primarily due to the centralization of the service function in 1992
and write-off of service parts in 1991.
During the third quarter of 1991, the Company developed and began the
implementation of a worldwide restructuring program. The 1992 results from
operations reflect benefits of a reduction in employment levels of approximately
25% since the program's inception, and the related impact on all expense levels.
Primarily as a result of this program and asset write-off and facility accruals
in 1991 of $3.3 million, selling, general and administrative expenses declined
by $13.9 million in 1992 in relation to 1991. As a percentage of sales, these
expenses decreased to 33% in 1992 from 39% in 1991. Research and development
expenses declined during the period by $3.9 million. As a percentage of sales,
research and development expenses decreased from 15% to 14% for the period. The
Company continues to invest in support of existing products and in the
development of new products.
Interest expense (net) decreased slightly in 1992 as compared to 1991. The
benefits of reduced borrowing levels in the 1992 period in relation to 1991
were partially offset by European market interest rate increases in 1992.
Other-net increased from an expense in 1991 of $.8 million to income of $.2
million in 1992 due to the receipt of a customs rebate, increase in sub-lease
income, reduction in foreign exchange losses, and the income recognized on the
Precision Products Line sale (discussed below).
On March 30, 1991, the Company sold to QuadTech, Inc. its Precision Products
Line for $6,235,000; $3,400,000 paid at the closing, and the balance payable in
sixteen quarterly installments commencing June 28, 1991. The Company
<PAGE> 4
GENRAD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS (CONTINUED)
- - - ------------------------------------------------------
received deferred purchase price installments through March 31, 1992 of
$580,000. The Company and QuadTech, Inc. reached a settlement with respect to
the remaining installments and the Company received $.5 million in settlement
for all outstanding installments in 1992.
The 1992 tax benefit of $314,000 results from the reversal of foreign tax
reserves no longer needed and tax refunds from net operating loss carryback
claims in certain foreign countries. The provision for taxes in 1991 represents
primarily foreign and state income taxes. For tax purposes the Company has a
$142 million tax loss carryforward and a $9.7 million investment and research
tax credit carryforward available to reduce United States federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES:
Cash and equivalents decreased $0.2 million in 1993. Operating activities
provided $5.0 million in cash.
The primary additions to property, plant and equipment in 1993 were for
equipment used in research and development and manufacturing. Capital
expenditure commitments were not significant at 1993 year-end. Planned capital
expenditures for 1994 consist of approximately $4.7 million, primarily for
equipment to be used in research and development and manufacturing.
The Company is a party to long-term leases related to a product line
discontinued in 1987 and other office closings provided for in the Company's
1993 and prior restructurings. The Company is projecting that cash of
approximately $6.5 million will be used in 1994 to fund these arrangements.
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.
Additionally, the Company projects that $8.3 million is expected to be used in
1994 to fund severance, patent infringement litigation and other items provided
in restructuring and other unusual charges.
The Company's primary source of liquidity is internally generated funds. The
Company also has existing available secured lines of credit of up to $15.7
million of which $3.5 million was outstanding at the end of 1993. The total
available borrowings consist of a $12 million U.S. credit facility entered into
in June 1992 which expires January 1, 1995, and $3.7 million in a U.K. credit
facility. At January 1, 1994, the Company had an available borrowing capacity
of $9.8 million under the U.S. 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. Additionally, the borrowings
under the U.K. credit facility are secured by all of the Company's U.K. assets
and are payable on demand.
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 will depend, among other things, on the continued
availability of its credit lines. Management believes that internally generated
funds and its available credit lines 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.
The terms of the Debenture require the Company to make annual sinking fund
payments of $2.875 million starting in May 1995. As a result of the Company
having repurchased $7.5 million of the Debentures during 1990, the Company may
use the previous repurchase in lieu of sinking fund payments and defer the
initiation of such payments until 1997.
It is the intention of the Company to reinvest unremitted earnings of foreign
subsidiaries outside the United States. Accordingly, federal income taxes have
not been provided and foreign withholding taxes would be due upon remittance.
There are no restrictions on the payment of inter-company accounts.
Inflation during the years presented did not have any significant
effects on the operations of the Company. Due to the current market
environment, certain products have been repositioned in the market with product
changes and various price changes, both upward and downward. The Company
attempts to mitigate inflationary cost increases by continued improvements in
manufacturing efficiency achieved through the use of improved methods and
technology.
<PAGE> 5
GENRAD, INC. AND SUBSIDIARIES
MANAGEMENT REPORT
- - - -----------------------------
The accompanying consolidated financial statements and related information
included in the Annual Report are the responsibility of management. The
financial statements were prepared in conformity with generally accepted
accounting principles appropriate in the circumstances, based on management's
best estimates and judgments.
Management believes that the Company's internal control systems provide
reasonable assurance that assets are safeguarded and that transactions are
properly recorded and executed in accordance with management's authorization.
Judgments are required to assess and balance the relative cost and expected
benefits of these control systems.
The current financial statements have been audited by Arthur Andersen & Co.,
the Company's independent public accountants whose audit report appears on page
20. Their audit included a review of the system of internal controls to the
extent considered necessary by them to determine the audit procedures required
to support their opinion.
The Board of Directors, through its Audit Committee consisting solely of
outside directors of the Company, is responsible for reviewing and monitoring
the Company's financial reporting and accounting practices. Arthur Andersen &
Co. has full and free access to the Audit Committee, and meets with the
Committee, with and without the presence of management.
/s/ROBERT C. ALDWORTH
Robert C. Aldworth
Vice President,
Chief Financial Officer and Secretary
<PAGE> 6
GENRAD, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - - ----------------------------------------
STOCKHOLDERS AND BOARD OF DIRECTORS
GENRAD, INC.
We have audited the accompanying consolidated balance sheets of GenRad,Inc. and
subsidiaries as of January 1, 1994 and January 2, 1993, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended January 1, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GenRad, Inc. and subsidiaries
as of January 1, 1994 and January 2, 1993, and the results of their operations
and their cash flows for each of the three years in the period ended January 1,
1994 in conformity with generally accepted accounting principles.
As described in the Retirement Benefits Note to the Consolidated Financial
Statements, effective January 3, 1993, the Company changed its method of
accounting for postretirement benefits other than pensions.
/s/ARTHUR ANDERSEN & CO.
Boston, Massachusetts
February 4, 1994
<PAGE> 7
<TABLE>
GENRAD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
- - - ------------------------------------
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
(In thousands, except per share amounts)
- - - --------------------------------------------------------------------------------
<CAPTION>
1993 1992 1991
- - - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales of products................................ $127,416 $107,133 $120,815
Sales of services................................ 31,288 35,476 35,576
- - - --------------------------------------------------------------------------------
158,704 142,609 156,391
- - - --------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold............................ 75,314 60,183 65,339
Cost of services sold............................ 16,737 18,730 21,800
- - - --------------------------------------------------------------------------------
92,051 78,913 87,139
Selling, general and administrative.............. 49,023 47,362 61,304
Research and development......................... 15,342 20,278 24,210
Reorganization and unusual charges............... 41,831 -- 17,908
- - - --------------------------------------------------------------------------------
198,247 146,553 190,561
- - - --------------------------------------------------------------------------------
Operating loss..................................... (39,543) (3,944) (34,170)
- - - --------------------------------------------------------------------------------
Other income (expense):
Interest income.................................. 258 582 757
Interest expense................................. (4,234) (4,558) (4,783)
Other, net....................................... (307) 200 (810)
- - - --------------------------------------------------------------------------------
(4,283) (3,776) (4,836)
- - - --------------------------------------------------------------------------------
Loss before income taxes........................... (43,826) (7,720) (39,006)
Income tax provision (benefit)..................... (29) (314) 75
- - - --------------------------------------------------------------------------------
Net loss........................................... $(43,797) $(7,406) $(39,081)
============================
Net loss per share................................. $ (2.42) $ (.42) $ (2.22)
============================
The accompanying notes are an integral part of these Consolidated Financial
Statements.
</TABLE>
<PAGE> 8
GENRAD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- - - -----------------------------
<TABLE>
<CAPTION>
January 1, 1994 and January 2, 1993
(In thousands)
- - - ------------------------------------------------------------------------------------------------
1993 1992
- - - ------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents............................................. $ 8,418 $ 8,621
Accounts receivable, less allowances of $1,462 and $1,251........ 30,994 33,568
Inventories...................................................... 13,305 15,519
Other current assets............................................. 2,846 5,671
- - - ------------------------------------------------------------------------------------------------
Total current assets.......................................... 55,563 63,379
- - - ------------------------------------------------------------------------------------------------
Property, plant and equipment, net................................ 16,073 34,709
Other assets...................................................... 1,380 2,063
Assets held for sale.............................................. 4,100 --
- - - ------------------------------------------------------------------------------------------------
$ 77,116 $100,151
========================
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Notes payable to banks............................................ $ 3,475 $ 4,713
Trade accounts payable............................................ 5,437 8,681
Accrued liabilities............................................... 27,330 16,078
Accrued compensation and employee benefits ....................... 10,134 6,696
- - - ------------------------------------------------------------------------------------------------
Total current liabilities.................................... 46,376 36,168
- - - ------------------------------------------------------------------------------------------------
Long-term Liabilities:
Long-term debt.................................................... 48,851 48,785
Accrued pensions and benefits..................................... 12,985 11,851
Future lease costs of unused facilities........................... 12,682 8,126
Other long-term liabilities....................................... 1,509 501
- - - ------------------------------------------------------------------------------------------------
Total long-term liabilities.................................... 76,027 69,263
- - - ------------------------------------------------------------------------------------------------
Stockholders' Equity (Deficit):
Common stock, $1 par value-authorized 60,000,000 shares;
issued and outstanding 18,530,000 and 17,843,000................. 18,530 17,843
Additional paid-in capital......................................... 105,177 101,897
Accumulated deficit................................................ (166,492) (122,695)
Cumulative foreign currency translation loss....................... (2,502) (2,325)
- - - ------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit)............................. (45,287) (5,280)
- - - ------------------------------------------------------------------------------------------------
$ 77,116 $100,151
========================
<FN>
The accompanying notes are an integral part of these Consolidated Financial Statements.
</TABLE>
<PAGE> 9
GENRAD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
- - - --------------------------------------------------------
<TABLE>
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
(In thousands)
- - - ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total
Common Cumulative Stock-
Stock, Additional Foreign holders'
$1 par Paid-In Accumulated Currency Equity
value Capital Deficit Translation Loss (Deficit)
- - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 29, 1990........... $17,537 $101,157 $ (76,208) $ (111) $42,375
Net loss............................... -- -- (39,081) -- (39,081)
Translation adjustment................. -- -- -- (247) (247)
Cash proceeds from stock issued under..
Employee Stock Plans............... 235 265 -- -- 500
- - - ------------------------------------------------------------------------------------------------------------------
Balance at December 28, 1991........... 17,772 101,422 (115,289) (358) 3,547
Net loss............................... -- -- (7,406) -- (7,406)
Translation adjustment................. -- -- -- (1,967) (1,967)
Cash proceeds from stock issued under
Employee Stock Plans............... 71 475 -- -- 546
- - - ------------------------------------------------------------------------------------------------------------------
Balance at January 2, 1993............. 17,843 101,897 (122,695) (2,325) (5,280)
Net loss............................... -- -- (43,797) -- (43,797)
Translation adjustment................. -- -- -- (177) (177)
Cash proceeds from stock issued under
Employee Stock Plans............... 458 728 -- -- 1,186
Stock option and Restricted
Stock awards ........................ 229 2,552 -- -- 2,781
- - - ------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1994 ............ $18,530 $105,177 $(166,492) $(2,502) $(45,287)
=====================================================================
The accompanying notes are an integral part of these Consolidated Financial Statements.
</TABLE>
<PAGE> 10
GENRAD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- - - ------------------------------------
<TABLE>
Years ended January 1, 1994, January 2, 1993 and December 28, 1991
(In thousands)
- - - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
1993 1992 1991
- - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net loss........................................................................ $(43,797) $(7,406) $(39,081)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization................................................. 9,714 11,715 12,195
Loss on sales, write-off and write-down of property, plant, and equipment .... 11,413 779 6,981
Provision for losses on accounts receivable................................... 340 458 227
Provision for deferred income taxes........................................... 8 (80) (462)
Provision for stock option and award compensation expense..................... 2,781 444 60
Provision (payment) for lease costs of excess facilities, net ................ 8,174 (2,691) 5,678
Gain on sale of product line.................................................. -- (645) (437)
Increase (decrease) resulting from changes in
operating assets and liabilities:
Accounts receivable........................................................ 1,226 (7,020) 9,469
Inventories................................................................ 1,116 2,728 9,764
Prepaid expenses........................................................... 2,712 (1,323) 448
Trade accounts payable..................................................... (3,135) 2,775 (2,140)
Accrued liabilities........................................................ 7,983 (1,479) 4,538
Accrued compensation and employee benefits................................. 5,094 (3,691) 2,564
Other, net................................................................. 1,412 (276) (2,687)
- - - -----------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 5,041 (5,712) 7,117
- - - -----------------------------------------------------------------------------------------------------------------
Investing activities:
Purchases of property, plant and equipment...................................... (5,917) (5,020) (6,080)
Proceeds from sale of property, plant and equipment............................. 211 475 601
Sale of product line............................................................ -- 645 3,835
- - - -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities..................................... (5,706) (3,900) (1,644)
- - - -----------------------------------------------------------------------------------------------------------------
Financing activities:
Net change in notes payable..................................................... (1,028) 1,455 (4,240)
Proceeds from employee stock plans.............................................. 1,186 546 500
- - - -----------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities ......................... 158 2,001 (3,740)
- - - -----------------------------------------------------------------------------------------------------------------
Effects of exchange rates on cash................................................. 304 722 883
- - - -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents....................................... (203) (6,889) 2,616
- - - -----------------------------------------------------------------------------------------------------------------
Cash and equivalents at beginning of year......................................... 8,621 15,510 12,894
- - - -----------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year............................................... $ 8,418 $ 8,621 $15,510
============================
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
<PAGE> 11
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - - ------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. All significant inter-
company transactions and balances have been eliminated.
CASH AND EQUIVALENTS: All highly liquid investments with a maturity of three
months or less when purchased are classified as cash equivalents.
INVENTORY VALUATION: Inventories include material, labor and overhead and are
stated at the lower of cost (first-in, first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT: These assets are stated at cost. Depreciation is
computed by the straight-line method over the estimated useful lives of the
assets (buildings and improvements -10 to 40 years, machinery and equipment -3
to 8 years and service parts -7 years).
INTANGIBLE ASSETS: The cost of patents and trademarks is amortized on a
straight-line basis over their estimated useful lives.
INCOME TAXES: Effective January 3, 1993 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This statement determines deferred taxes based on the estimated future
tax effects of differences between the financial statement and tax basis of
assets and liabilities given the provisions of the currently enacted tax laws.
Prior to the implementation of this statement, the Company accounted for
income taxes under SFAS No. 96. The change did not have a material impact on
the financial statements.
LOSS PER SHARE: Net loss per share is computed by dividing net loss by the
weighted average number of shares outstanding during the periods. Such shares
are as follows: 18,132,000 in 1993, 17,798,000 in 1992 and 17,642,000 in 1991.
FOREIGN CURRENCY TRANSLATION: All balance sheet accounts of foreign
subsidiaries are translated at the current exchange rates and statement of
operations items are translated at the average exchange rates during the year.
Resulting translation adjustments are made directly to a separate component of
stockholders' equity (deficit).
The effect of foreign currency transaction gains and losses included in the
determination of 1993, 1992 and 1991 results of operations was not material.
FOREIGN EXCHANGE CONTRACTS: The Company enters into foreign exchange contracts
as a hedge against certain foreign currency transactions. Market value gains
and losses are recognized and the resulting gain or loss offsets foreign
exchange gains or losses on those transactions.
FISCAL YEAR: The Company's fiscal year ends on the Saturday nearest December
3l. Fiscal years 1993 and 1991 include 52 weeks and fiscal year 1992
includes 53 weeks.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1992 and
1991 financial statements to conform to the 1993 classification.
- - - ------------------------------------------------------------------------------
PROVISIONS FOR RESTRUCTURING AND UNUSUAL CHARGES
In 1993, the Company provided $41,831,000 for a world-wide restructuring
program and other unusual charges. These charges included $12,460,000 for
excess facilities, $6,572,000 for severance, $3,232,000 for discontinued
products, $12,375,000 for asset write-offs, $1,983,000 for the compensation
associated with the acceleration of stock options and $5,209,000 for patent
litigation reserves, consulting fees and miscellaneous other items.
In 1991, the Company provided $17,908,000 for a world-wide restructuring
program and write-offs. These charges included $4,881,000 for severance,
$3,839,000 for inventory and equipment write-offs, and $1,188,000 for excess
facilities. In addition, and as part of the restructuring charge, $8,000,000
was added to the reserve for the Milipitas, California excess facility lease.
<PAGE> 12
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
<TABLE>
<CAPTION>
Inventories
(In thousands)
- - - --------------------------------------------------------------------------------
1993 1992
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials.............................................. $ 6,480 $ 6,998
Work in process............................................ 3,068 2,710
Finished goods............................................. 3,757 5,811
- - - --------------------------------------------------------------------------------
$13,305 $15,519
================
</TABLE>
<TABLE>
Property, Plant and Equipment
<CAPTION>
(In thousands)
- - - --------------------------------------------------------------------------------
1993 1992
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Land ....................................................... $ 512 $ 1,414
Buildings................................................... 25,591 46,638
Machinery and equipment..................................... 67,896 75,390
Service parts............................................... 16,640 17,182
- - - --------------------------------------------------------------------------------
110,639 140,624
Less: Accumulated depreciation..... ........................ 94,566 105,915
- - - --------------------------------------------------------------------------------
$ 16,073 $ 34,709
===================
</TABLE>
<TABLE>
Accrued Liabilities
<CAPTION>
(In thousands)
- - - --------------------------------------------------------------------------------
1993 1992
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Lease costs of unused facilities........................... $ 6,472 $ 2,854
Customer prepayments....................................... 5,098 4,744
Warranty and installation.................................. 2,849 1,391
Other accrued liabilities.................................. 12,911 7,089
- - - --------------------------------------------------------------------------------
$27,330 $16,078
==================
</TABLE>
<TABLE>
Accrued Pensions and Benefits
<CAPTION>
(In thousands)
- - - --------------------------------------------------------------------------------
1993 1992
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Accrued U.S. pension cost................................... $ 7,533 $ 8,042
Accrued Foreign pension cost................................ 3,818 3,809
Postretirement health care and life insurance benefits...... 1,634 --
- - - --------------------------------------------------------------------------------
$12,985 $11,851
==================
</TABLE>
<PAGE> 13
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
<TABLE>
Debt
<CAPTION>
(In thousands)
- - - --------------------------------------------------------------------------------
1993 1992
- - - --------------------------------------------------------------------------------
<S> <C> <C>
7 1/4% Convertible Subordinated Debentures, due 2011...........$48,851 $48,785
</TABLE>
In May 1986, the Company issued $57,500,000 principal amount of 7 1/4%
Convertible Subordinated Debentures. The Debentures are convertible at the
option of the holder into Common Stock of the Company at $14 3/8 per share. The
Debentures are subject to redemption at par through the operation of a mandatory
sinking fund beginning May 1, 1995, which is calculated to retire 75% of the
Debentures prior to maturity. The Debentures are unsecured and subordinated to
senior indebtedness of the Company. Interest is payable May 1 and November 1.
The unamortized original issue discount was $1,149,000 at January 1, 1994 and
$1,215,000 at January 2, 1993. In 1990, the Company retired early $7,500,000
principal amount of the Debentures. The payment of dividends and the repurchase
of Common Stock of the Company is restricted by the indenture agreement.
In June 1992, the Company entered into a secured Revolving Credit Agreement
which provides for eligible borrowings of up to $12 million at prime lending
rates (6% at January 1, 1994) plus 3 1/2% or 9%, whichever is greater. This
agreement has been extended to January 1, 1995, at which time outstanding
borrowings will be due and payable unless the agreement is renewed. Eligible
borrowings under the agreement are based upon accounts receivable and other
assets and determined according to a formula. At January 1, 1994, $9.8 million
was available under the formula. The borrowings under the credit facility are
secured by all of the Company's domestic assets and are subject to compliance
tests and restrictions. At year-end, the Company had no borrowings outstanding
under this agreement.
The Company has a line of credit of $3,700,000 with a U.K. bank. At January 1,
1994, the Company had international borrowings of $3,475,000 which were due on
demand and secured by the U.K. assets of the Company and classified as notes
payable to banks.
Interest paid amounted to $4,264,000 in 1993, $4,493,000 in 1992 and $4,788,000
in 1991.
The terms of the Debenture require the Company to make annual sinking fund
payments of $2,875,000 starting in May 1995. As a result of the Company having
repurchased $7,500,000 of the Debentures during 1990, the Company may use the
previous repurchase in lieu of sinking fund payments and defer the initiation of
such payments until 1997.
Management believes that internally generated funds and its available credit
lines will provide the Company with sufficient sources of funds to satisy its
anticipated requirements in 1994.
At January 1, 1994, the Company had contracts maturing through May 19, 1994 to
sell $8,464,295, net, of foreign currency (sell 17,645,000 French francs,
2,891,000 British pounds, 2,061,009,000 Italian lira; purchase 217,000 Swiss
francs) at various rates.
<PAGE> 14
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
STOCK PLANS
STOCK OPTION PLANS: The Company has three stock option plans; a 1982 plan of
2,700,000 shares (terminated in 1991), a 1991 plan of 2,500,000 shares, under
which key employees are participants and a 1991 plan of 100,000 shares under
which directors participate.
In general, shares granted under these plans are exercisable in installments.
Shares issued under each plan may be either non-qualified stock options or
incentive stock options. No accounting recognition is given to stock options
with exercise prices equal to fair market value on the grant date until the
options are exercised, at which time the proceeds are credited to the
stockholders' equity accounts. For options with an exercise price less than
fair market value on the grant date, the difference between the fair market
value and the option price is charged to compensation expense and credited to
the stockholders' equity accounts over the period the options vest.
In 1993, the Company charged $2,781,000 to compensation expense for stock
options and restricted stock awards, of which $1,983,000 is included in unusual
charges since it relates to the acceleration of vesting of certain options and
awards voted by the Compensation Committee of the Board of Directors during the
year. Compensation amounts in 1992 and 1991 were immaterial.
<TABLE>
Stock option activity is summarized below (thousands of shares):
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - ---------------------------------------------------------------------------------------------------------------------
Total Average Total Average Total Average
Shares Option Price Shares Option Price Shares Option Price
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options:
Outstanding at beginning of year............ 1,710 $2.31 2,017 $3.25 1,880 $6.80
Granted..................................... 1,065 2.13 316 .24 664 2.08
Exercised................................... (469) 2.32 (71) 2.84 (85) 3.50
Cancelled................................... (235) 2.83 (552) 3.56 (442) 7.55
----- ----- -----
Outstanding at end of year.................. 2,071 2.41 1,710 2.31 2,017 3.25
===== ===== =====
Options exercisable......................... 1,522 845 704
===== ===== =====
Shares reserved for future grants........... 1,032 565 896
===== ===== =====
</TABLE>
In 1991, the Company allowed eligible employees to substitute existing options
granted under the 1982 Option Plan for new options at $3.50 per share which was
the market price at the time of repricing. The option agreements for the new
options are substantially the same as the existing options except for the
exercise prices and the vesting schedule. After the waiting period which ended
in July 1991, they are subject to the same exercise schedule that existed prior
to the exchange plus one year and the expiration date has been extended one year
from the original expiration date.
RESTRICTED STOCK AWARDS: In 1991, the Company adopted the 1991 Equity Incentive
Plan which contains provisions for stock options, as described above, and
restricted stock awards. All stock awards are granted subject to restrictions as
to continuous employment, except in the case of death, permanent disability or
retirement. Prior to September 1993, one half of the shares vest at the end of
two years from the date of the grant and the remaining one half at the end of
the third year. The cost of the awards, determined as the fair market value of
the shares on the date of grant, is charged to expense ratably over the vesting
period. The Company issued 229,000 shares and their vesting was accelerated
in 1993.
STOCK PURCHASE PLAN: Under an Employee Stock Purchase Plan, eligible employees
may invest up to 10% of their base compensation in shares of the Company's
Common Stock. The purchase price of the shares is 85% of the fair market value
of the stock on the offering commencement date or the offering termination date
(typically six months after commencement date), whichever is lower. Under the
plan, 164,000 shares were issued in 1991. At December 28, 1991, January 2,
1993 and January 1, 1994, no shares were available for future issuance.
<PAGE> 15
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
<TABLE>
INCOME TAXES
The components of loss before income taxes consist of the following (in thousands):
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------
1993 1992 1991
- - - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic............................................................. $(37,089) $(3,608) $(36,537)
Foreign.............................................................. (6,737) (4,112) (2,469)
- - - ---------------------------------------------------------------------------------------------------
$(43,826) $(7,720) $(39,006)
============================
</TABLE>
<TABLE>
The provision (benefit) for income taxes consists of the following (in thousands):
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------
1993 1992 1991
- - - ---------------------------------------------------------------------------------------------------
Current Deferred Current Deferred Current Deferred
- - - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal.............................. $ -- $ -- $ -- $ -- $ -- $ --
Foreign.............................. (98) -- 63 (447) 356 (374)
State................................ 69 -- 70 -- 93 --
- - - ---------------------------------------------------------------------------------------------------
$(29) $ -- $133 $(447) $449 $(374)
==========================================================
</TABLE>
The deferred tax benefit recorded in 1992 and 1991 totaling $447,000 and
$374,000, respectively, relates principally to reductions in deferred taxes due
to operating losses and differences in depreciation for book and tax reporting.
<TABLE>
A reconciliation of tax on income (loss) at the Federal statutory rate to the
recorded income tax provision (benefit) is presented below (in thousands):
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax (benefit) at statutory rate............................................ $(14,901) $(2,625) $(13,262)
State income taxes less related federal income tax benefit................. 69 70 93
Effect of losses for which no tax carryback is available................... 14,774 1,923 13,131
Foreign earnings taxed at different rates, including withholding taxes..... -- 63 (194)
Goodwill amortization...................................................... -- 184 184
Other nondeductible items.................................................. 29 71 123
- - - ------------------------------------------------------------------------------------------------------------
Recorded income tax provision (benefit).................................... $ (29) $ (314) $ 75
</TABLE>
<PAGE> 16
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
INCOME TAXES (CONTINUED)
Effective January 3, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes." This standard determines deferred taxes based on the estimated future
tax effects of differences between the financial statement and tax basis of
assets and liabilities given the provisions of the currently enacted tax laws.
Prior to the implementation of this statement, the Company accounted for income
taxes under SFAS No. 96. The adoption of SFAS No. 109 had no material impact on
the results of operations.
The temporary differences and carryforwards which gave rise to the significant
deferred tax assets and liabilities as of January 1, 1994 and January 3, 1993,
as adjusted for the adoption of SFAS No. 109, were as follows (in thousands):
<TABLE>
Deferred Tax Assets:
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------
January 1, 1994 January 3, 1993
- - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic net operating losses not yet benefited.................................... $52,745 $ 48,280
Research and development tax credits............................................... 9,700 9,700
Foreign net operating losses not yet benefited..................................... 514 4,032
Inventory valuation reserves....................................................... 4,364 3,823
Retirement benefit accruals........................................................ 4,026 3,372
Restructuring reserves, including lease costs of unused facilities ................ 10,551 1,841
Other reserves..................................................................... 1,343 1,740
- - - -----------------------------------------------------------------------------------------------------------------
Total deferred tax assets..................................................... 83,243 72,788
Valuation allowance................................................................ (80,995) (68,692)
- - - -----------------------------------------------------------------------------------------------------------------
Net deferred tax assets............................................................ $ 2,248 $ 4,096
============================
Deferred Tax Liabilities:
- - - -----------------------------------------------------------------------------------------------------------------
Depreciation....................................................................... $ (2,248) $ (2,584)
Other.............................................................................. -- (1,512)
- - - -----------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities..................................................... (2,248) (4,096)
- - - -----------------------------------------------------------------------------------------------------------------
Net deferred taxes recorded........................................................ $ -- $ --
============================
</TABLE>
<PAGE> 17
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
INCOME TAXES (CONTINUED)
The valuation allowance relates to uncertainty surrounding the realization of
the deferred tax assets, principally tax loss carryforwards.
It has been the practice and it is the intention of the Company to reinvest
unremitted earnings of foreign subsidiaries in the business outside the United
States. Accordingly, the Company does not provide for federal income taxes which
would result from the remittance of such earnings.
At January 1, 1994, the Company had, for tax purposes, domestic unused net
operating loss carryforwards of $155,000,000 which are available to offset
future taxable income and begin expiring in 2000. The Tax Reform Act of 1986
contains provisions that limit the net operating loss carryforwards available to
be used in any given year upon the occurrence of certain events, including
significant changes in ownership interests. For tax purposes, the Company has
investment and research credit carryforwards, which begin expiring in 1996, of
$9,700,000.
At January 1, 1994, one of the Company's European subsidiaries had a tax loss
carryforward of $1.5 million. Of that amount, $.4 million will expire commencing
in 1996, with the remainder able to be carried forward indefinitely.
Net taxes paid (refunded) were $(199,000) in 1993, $133,000 in 1992 and $238,000
in 1991.
<PAGE> 18
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
RETIREMENT BENEFITS
Pension Plan: The Company has a noncontributory defined benefit pension plan
covering substantially all domestic employees. The benefits are based on years
of service, age and the average of the employee's highest five consecutive
years of compensation during the last ten years of employment. The Company's
funding policy is to contribute amounts to the plan sufficient to meet the
minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974, plus such additional amounts as the Company may determine
to be appropriate from time to time.
<TABLE>
Net pension cost included the following components (in thousands):
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned during the period)............................................ $ 723 $ 687 $ 853
Interest cost on projected benefit obligation............................................... 2,615 2,506 2,493
Actual return on plan assets................................................................ (3,841) (1,949) (4,962)
Net amortization and deferral............................................................... 772 (1,313) 1,962
- - - ---------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost................................................................... $ 269 $ (69) $ 346
==========================
</TABLE>
In addition, the Company recorded curtailment gains of $778,000 in 1993 and
$800,000 in 1992 associated with work force reductions.
<TABLE>
The plan's funded status and amounts recognized in the Company's consolidated
financial statements are as follows (in thousands):
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------------
1993 1992
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits,
including vested benefits of $31,981 and $27,214............................................... $(32,080) $(27,277)
=======================
Actuarial present value of projected benefit obligation for service rendered to date .......... $(37,172) $(31,863)
Plan assets at fair value, primarily listed stocks and U.S. bonds.............................. 32,954 31,231
- - - ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets ......................................... (4,218) (632)
Unrecognized net asset at transition........................................................... (4,512) (4,922)
Unrecognized prior service cost................................................................ 523 615
Unrecognized net actuarial gain (loss)......................................................... 674 (3,103)
- - - ---------------------------------------------------------------------------------------------------------------------------
Accrued U.S. pension cost...................................................................... $ (7,533) $ (8,042)
=======================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 7.5% and 5%, respectively, at December 31, 1993 and 8.5% and
5%, respectively, at December 31, 1992. The expected long-term rate of return
on plan assets was 9% in 1993, 1992 and 1991.
<PAGE> 19
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - -----------------------------------------------------
Retirement Benefits (continued)
No contribution were required for 1993 or 1992.
The Company has a defined benefit pension plan and two defined contribution
plans outside the U.S. for three of its subsidiaries.
<TABLE>
For the non-U.S. defined benefit pension plan, the net pension cost included
the following components (in thousands):
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned during the period)............................................... $127 $204 $231
Interest cost on projected benefit obligation.................................................. 211 228 198
Net amortization and deferral.................................................................. (56) (38) (26)
- - - -----------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost...................................................................... $282 $394 $403
========================
</TABLE>
The plan's unfunded status and amounts recognized in the Company's financial
statements are as follows (in thousands):
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------------------
1993 1992
- - - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits, including vested benefits of $2,055 and $1,669.... $(2,123) $(1,786)
=================
Actuarial present value of projected benefit obligation for service rendered to date ................... $(2,667) $(2,560)
Unrecognized net obligation at transition............................................................... (96) (111)
Unrecognized net actuarial gain......................................................................... (1,055) (1,138)
- - - -----------------------------------------------------------------------------------------------------------------------------
Accrued pension......................................................................................... $(3,818) $(3,809)
=================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
7 1/2% and 4%, respectively, at December 31, 1993 and 8% and 5%, respectively,
at December 31, 1992.
For the non-U.S. defined contribution pension plans, the Company's contribution
to the plans was $674,000 in 1993, $559,000 in 1992 and $784,000 in 1991. These
plans are consistent with local practices and contributions are based on
compensation levels and age.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS: Effective January 3,
1993, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 106 (SFAS #106), "Employer's Accounting for Postretirement
Benefits Other Than Pensions," for its postretirement benefit plan. The Company
provides certain health care and life insurance benefits for retired United
States employees. Employees become eligible for these benefits when they reach
retirement age while working for the Company. Prior to the adoption of this
statement, the cost was recognized as claims were paid.
The Company's postretirement benefit plans have been modified and include a
limit on the cost of the Company's contribution for all retirees and increased
contributions for future retirees. The plan is not funded.
<PAGE> 20
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
RETIREMENT BENEFITS (CONTINUED)
<TABLE>
The following table sets forth the plan's projected funded status at December 31, 1993.
The accumulated postretirement benefit obligation (in thousands):
- - - --------------------------------------------------------------------------------
<S> <C>
Retired employees................................................ $(10,316)
Active employees................................................. (1,769)
- - - --------------------------------------------------------------------------------
Total............................................................ (12,085)
Plan assets at fair value........................................ --
- - - --------------------------------------------------------------------------------
Unfunded accumulated benefit obligation in excess of plan assets. (12,085)
Unrecognized net gain............................................ (614)
Unrecognized prior service cost.................................. --
Unrecognized transition obligation............................... 11,065
- - - --------------------------------------------------------------------------------
Accrued postretirement benefit cost.............................. $(1,634)
========
</TABLE>
The Company will recognize the actuarial present value of the accumulated
postretirement benefit obligation at transition on the delayed recognition
method over a period of 20 years.
<TABLE>
Net periodic postretirement benefit cost for fiscal 1993 includes the following
components:
- - - --------------------------------------------------------------------------------
<S> <C>
Service cost..................................................... $ 104
Interest cost.................................................... 1,065
Amortization of transition obligation............................ 654
- - - --------------------------------------------------------------------------------
Net periodic postretirement benefit cost......................... 1,823
Curtailment loss................................................. 1,100
- - - --------------------------------------------------------------------------------
$2,923
======
</TABLE>
Included in the 1993 expense of $2,923,000 is a curtailment loss as a
result of terminations related to the 1993 work force reduction.
Postretirement benefit expense was $1,290,000 in 1992 and $1,111,000 in 1991.
For measurement purposes, a 15% annual rate of increase in the per capita cost
of covered health care benefits was assumed for fiscal 1993. The Company's
annual per capita cost commitment for retiree medical care is capped at 1995
levels. As a result, the health care cost trend rate assumption does not have a
significant effect on the amounts reported.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at December 31, 1993 and 8.5% at
December 31, 1992.
<PAGE> 21
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
Leases
The Company leases certain manufacturing facilities, sales and service offices
and equipment under operating leases. Total rental expense for these leases
amounted to $6,036,000 in 1993, $5,768,000 in 1992 and $6,569,000 in 1991.
<TABLE>
The future minimum rental commitments as of January 1, 1994 for noncancellable
operating leases are as follows (in thousands):
<CAPTION>
- - - -------------------------------------------------------------------
Real Estate Equipment Total
- - - -------------------------------------------------------------------
<S> <C> <C> <C>
1994 ............... $ 5,565 $1,108 $ 6,673
1995 ............... 4,876 356 5,232
1996 ............... 3,929 175 4,104
1997 ............... 3,606 37 3,643
1998 ............... 1,720 14 1,734
Thereafter.......... 13,065 -- 13,065
- - - -------------------------------------------------------------------
$32,761 $1,690 $34,451
===========================================
</TABLE>
At January 1, 1994 the Company has reserved $18,965,000 for future lease
commitments relating to idle facilities which are included in the above chart.
CONTINGENCIES
The Company is subject to legal proceedings and claims arising out of its
business which cover a wide range of matters, including contracts, environmental
issues, product liability, patent and trademark matters.
The Company is a named defendant in a patent infringement litigation matter with
a competitor. Management, after review and consultation with legal counsel, has
recorded in 1993 reserves to cover its best estimate of the outcome of
settlement negotiations currently in process.
<PAGE> 22
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- - - ------------------------------------------------------
FINANCIAL INFORMATION BY GEOGRAPHIC AREA
The Company is a worldwide supplier of integrated software systems and automatic
test equipment, to manufacturers and users of electronic and mechanical
equipment, for product testing, and process quality management. Business is
conducted in two major geographic areas, North America and Europe, with most of
its manufacturing activities conducted domestically.
Sales and service activities outside the United States are conducted primarily
through subsidiaries and, to a lesser extent, through foreign agents or
representatives. Transfer prices to foreign subsidiaries, combined with
supplemental commission arrangements, are intended to produce profit margins
commensurate with the sales and service effort associated with the products
sold.
<TABLE>
Certain information on a geographic basis follows (in thousands):
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
1993 North America Europe Eliminations Consolidated
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues-unaffiliated customers..................... $ 82,790 $75,914 $ -- $158,704
Transfer between geographic areas....................... 20,841 -- (20,841) --
- - - ---------------------------------------------------------------------------------------------------------------------
$103,631 $75,914 $(20,841) $158,704
========================================================
Operating income (loss) before general corporate expenses $(34,274) $ 2,946 $ 757 $(30,571)
General corporate expenses............................... 8,972
--------
Operating loss........................................... $(39,543)
========
Identifiable assets...................................... $ 44,098 $33,018 $ -- $ 77,116
</TABLE>
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
1992 North America Europe Eliminations Consolidated
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues-unaffiliated customers...................... $ 77,165 $65,444 $ -- $142,609
Transfer between geographic areas........................ 19,473 -- (19,473) --
- - - ---------------------------------------------------------------------------------------------------------------------
$ 96,638 $65,444 $(19,473) $142,609
========================================================
Operating income (loss) before general corporate expenses $ 5,832 $(1,613) $ 350 $ 4,569
General corporate expenses............................... 8,513
--------
Operating loss........................................... (3,944)
========
Identifiable assets...................................... $ 59,489 $40,662 $ -- $100,151
</TABLE>
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
1991 North America Europe Eliminations Consolidated
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues-unaffiliated customers...................... $ 93,012 $63,379 $ -- $156,391
Transfer between geographic areas........................ 19,277 -- (19,277) --
- - - ---------------------------------------------------------------------------------------------------------------------
$112,289 $63,379 $(19,277) $156,391
========================================================
Operating income (loss) before general corporate expenses $(24,226) $(2,627) $ 2,294 $(24,559)
General corporate expenses............................... 9,611
--------
Operating loss........................................... $(34,170)
========
Identifiable assets...................................... $ 79,221 $37,803 $ -- $117,024
<FN>
North America revenues include export sales of $12,699,000 in 1993, $17,650,000
in 1992 and $22,825,000 in 1991.
Sales to the United States government and related agencies amounted to 12% of
consolidated revenues in 1993, 4% in 1992 and 8% in 1991. Sales to a
non-government customer amounted to 16% of consolidated revenues in 1993, 7% in
1992 and 4% in 1991.
</TABLE>
<PAGE> 23
GENRAD, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
- - - -----------------------------
<TABLE>
QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share amounts)
<CAPTION>
- - - -----------------------------------------------------------------------------------
First Second Third Fourth Year
- - - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Net sales and service revenues..... $42,749 $42,189 $35,837 $37,929 $158,704
Gross margin....................... 18,148 17,656 14,803 16,046 66,653
Net income (loss).................. 1,330 (793) (44,774) 440 (43,797)
Net income (loss) per share........ .07 (.04) (2.46) .02 (2.42)
YEAR ENDED JANUARY 2, 1993
Net sales and service revenues..... $30,762 $34,932 $32,727 $44,188 $142,609
Gross margin....................... 13,507 15,758 15,030 19,401 63,696
Net income (loss).................. (3,179) (1,838) (2,503) 114 (7,406)
Net income (loss) per share........ (.18) (.10) (.14) .01 (.42)
</TABLE>
The third quarter of 1993 net loss includes $41,876,000, or $2.28 per share, for
a worldwide restructuring program and other unusual charges. These charges
included provisions for excess facilities, severance, discontinued products,
equipment write-offs, consulting and miscellaneous other items.
COMMON STOCK
As of February 18, 1994 there were 4,217 stockholders of record, holding
18,725,000 shares.
DIVIDENDS
It is the policy of the Company to retain earnings to support the growth and
expansion of the Company's business. Although the Company has paid dividends in
the past, there are no plans to resume paying dividends. Payment of dividends in
the industry in which the Company competes is not common and the payment of
future dividends is restricted as set forth in financing agreements to which the
Company is a party.
<TABLE>
STOCK PRICE INFORMATION
<CAPTION>
- - - -----------------------------------------------------------
1993 1992
- - - -----------------------------------------------------------
High Low High Low
- - - -----------------------------------------------------------
<S> <C> <C> <C> <C>
1st Quarter......... 6-1/8 3-3/4 3-3/4 1-3/4
2nd Quarter......... 5-1/4 2-5/8 3-3/8 1-3/4
3rd Quarter......... 4-1/4 2-3/4 2-5/8 1-1/2
4th Quarter......... 6-1/4 3 5-1/8 1-3/4
</TABLE>
<PAGE> 24
GENRAD, INC. AND SUBSIDIARIES
CORPORATE DATA
- - - -----------------------------
DIRECTORS
James F. Lyons
President and Chief Executive Officer
Edwin M. Martin, Jr.*
Partner
Piper & Marbury
Paul Penfield, Jr.
Head,
Department of Electrical
Engineering and Computer Science,
Massachusetts Institute of Technology
William G. Scheerer
Quality, Engineering,
Software & Technologies
Vice President,
AT&T Bell Laboratories
Wilson Wilde*
Chairman and
Chief Executive Officer,
The Hartford Steam Boiler Inspection
and Insurance Company
James H. Wright*
Attorney-at-Law
*Member of the Audit Committee
- - - -------------------------------------------------------------------------------
OFFICERS
Robert C. Aldworth
Vice President,
Chief Financial Officer and Secretary
John K. Bulman
Vice President,
Sales and Service
Sarah H. Lucas
Vice President,
Strategic Planning and Analysis
James F. Lyons
President and Chief Executive Officer
Walter A. Shephard
Treasurer
- - - -------------------------------------------------------------------------------
FELLOWS *
Malcolm C. Holtje
Henry P. Hall
*The GenRad Fellows Program was established in 1991 to honor senior
technologists for their exceptional achievements in the field of design and
test technology.
- - - -------------------------------------------------------------------------------
CORPORATE OFFICE
300 Baker Avenue
Concord, MA
MANUFACTURING CENTERS
Electronics Manufacturing Test
Concord, MA USA
Automotive Diagnostics
Bredbury, Stockport, Cheshire
SALES AND SERVICE OFFICES
Concord, MA
Arlington Heights, IL
Detroit, MI
Irvine, CA
Munich, Germany
Cheadle Hulme, Cheshire UK
Maidenhead, Berkshire UK
Milan, Italy
Paris, France
Zurich, Switzerland
Science Park, Singapore
Tokyo Electron Ltd. (Sales)
Shinju-Ku, Tokyo
Tokyo Electron Ltd. (Service)
Shinju-Ku, Tokyo
<PAGE> 25
GENRAD, INC. AND SUBSIDIARIES
INVESTORS' REFERENCE GUIDE
- - - -----------------------------------
COMMON STOCK
The Company's Common Stock is listed and traded on the New York Stock Exchange
(trading symbol "GEN").
INVESTOR RELATIONS
Inquiries from stockholders and the financial community are welcome by
telephone, fax, or letter and should be directed to:
Robert C. Aldworth
Chief Financial Officer
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
TEL (508) 369-4400
FAX (508) 369-5884
FORM 10-K
The GenRad, Inc. Annual Report on Form 10-K for the fiscal year ended January
1, 1994, filed with the Securities and Exchange Commission, will be sent to
stockholders without charge upon written request to the Investor Relations
office. The Company's Annual Report, filings with the Securities and Exchange
Commission, interim reports and additional information about the Company, its
products, and the markets it serves, can be obtained by request from the
Investor Relations office.
TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK
Bank of Boston is the Company's stock transfer agent and registrar and
maintains the stockholder accounting records. The agent will respond to
questions regarding change of ownership, lost stock certificates and
consolidation of accounts. Please direct questions of this nature to Bank of
Boston's Customer Service Department at (617) 575-2900.
A change of address should be reported promptly by sending a signed and dated
letter to Bank of Boston. Stockholders should state the name in which the stock
is registered, account number (if known) and/or social security number, and the
new address. Please mail correspondence to:
Bank of Boston
Transfer Processing
Mail Stop: 45-01-05
P.O. Box 644
Boston, MA 02102-0644
AUDITORS
Arthur Andersen & Co.
One International Place
Fort Hill Square
Boston, MA 02110-2604
ANNUAL MEETING
The Annual Meeting of Stockholders will be held in Boston on Thursday, May 12,
1994, 11:00 a.m. at the Bank of Boston's auditorium, Street Floor, 100 Federal
Street, Boston. All stockholders are cordially invited to attend.