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graphic of integrated circuit wafer
Logo RELIABILITY INCORPORATED
ANNUAL REPORT 1994
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TABLE OF CONTENTS
SELECTED FINANCIAL INFORMATION I
TO OUR SHAREHOLDERS II
CORPORATE INFORMATION IV
FORM 10-K 1
FIVE YEAR SELECTED FINANCIAL DATA 8
MANAGEMENT'S DISCUSSION 9
CONSOLIDATED FINANCIAL STATEMENTS F-1
NOTES TO CONSOLIDATED FINANCIAL F-7
STATEMENTS
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SELECTED FINANCIAL INFORMATION
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
1993 1994 % Change
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Revenues $27,022 $23,427 -13%
Net Income 2,369 2,645 +12
Net Income Per Share .56 .62 +11
Working Capital 5,846 8,854 +52
Stockholders' Equity 8,114 10,759 +33
Total Assets 11,018 13,284 +21
Average Shares Outstanding 4,243 4,243 -
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REVENUES NET INCOME (LOSS)
Graph Graph
WORKING CAPITAL STOCKHOLDERS' EQUITY
Graph Graph
TOTAL ASSETS
Graph See following pages
for the graphs
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REVENUES (Thousands of Dollars)
1994 |XXXXXX|XXXXXX|X $23,427
1993 |XXXXXX|XXXXXX|XXXX $27,022
1992 |XXXXXX|XXXXXX|XXXXXX|X $31,413
$0 $10,000 $20,000 $30,000 $40,000
WORKING CAPITAL (Thousands of Dollars)
1994 |XXXXX|XXXXX|XXXXX|XXXXX|XXX $ 8,854
1993 |XXXXX|XXXXX|XXXX $ 5,846
1992 |XXXXX|XX $ 2,413
$0 $2,000 $4,000 $6,000 $8,000 $10,000
TOTAL ASSETS (Thousands of Dollars)
1994 |XXXXXXXX|XXXXXXXX|XXXX $13,284
1993 |XXXXXXXX|XXXXXXXX|X $11,018
1992 |XXXXXXXX|XXXXXXXX|XXXXXXX $14,693
$0 $5,000 $10,000 $15,000
NET INCOME (Loss) (Thousands of Dollars
1994 $2,645 |XXXXXXXX|XXX
1993 $2,369 |XXXXXXXX|X
1992 | XXX|XXXXXXXX|$(2,645)
$(4,000) $(2,000) 0 $2,000 $4,000
STOCKHOLDER'S EQUITY (Thousands of Dollars)
1994 |XXXXXXX|XXXXXXX|XXXXX $10,759
1993 |XXXXXXX|XXXXXXX|XX $ 8,114
1992 |XXXXXXX|XXXX $ 5,745
$0 $4,000 $8,000 $12,000
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TO OUR SHAREHOLDERS
1994 FINANCIAL REVIEW 1994 was another good year for both the
semiconductor industry and Reliability. We earned $2.6 million in profits
on $23.4 million in revenue, as compared to $2.4 million in profits on
revenue of $27.0 million in 1993. Although our fourth quarter was soft, as
forecasted, the rate of new orders increased, raising our backlog by
approximately $1.3 million during the fourth quarter.
We continued to improve our balance sheet in 1994. Cash increased from
$2.9 million as of December 31, 1993, to $6.0 million as of December 31,
1994. There was no debt at the end of 1994, and our working capital
increased to $8.9 million. Our current ratio was 4.7 and book value was
$2.53 per share. We have a strong balance sheet for a company of our size,
and it should permit us to finance the programs we need to grow our revenues
in 1995.
OPERATIONS REVIEW During 1994 we continued to aggressively reduce cost
and increase productivity, which resulted in profits in all our products and
services for the first time since 1988. Increased productivity in 1994
allowed us to increase profits by $276,000 on $3.6 million less of revenues.
However, we did not reduce our R&D expense to achieve these results. In
fact, R&D expenditures increased to over $1 million to help position us for
the balance of the '90s.
Our R&D expenditures yielded our first low-cost Intersect(tm) Burn-In
Test System specifically targeted at 16, 64, and 256 Meg DRAM manufacturers.
The first system is scheduled to ship in the first quarter of 1995.
Development was also started on a second low cost system in the Intersect
family, which will be targeted at manufacturers of large volumes of 16, 64,
and 256 Meg DRAMs that are 8, 16, and 32 BITs wide. This second new system
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is scheduled to begin shipping in the second quarter of 1995. These lower
cost systems will offer our customers some of the functional test features
of the high performance Intersect 30 at 30-50% of the cost.
Development of the first Criteria(r) 18 Burn-In System with the
capability to dissipate 15,000 watts of energy was completed in 1994, and
shipments should begin in the first quarter of 1995. This system is
specifically targeted at the new, high performance microprocessors and
micrologic circuits that are sensitive to switching noise, operate at high
frequencies, and require a high dissipating chamber for burn-in.
Phase I of our new burn-in management software package was started, and
we received our first order in 1994. This software will provide burn-in
process control and data collection. Demand for all of these new products
should be strong in 1995, and our growth will only be limited by our ability
to tailor our products to the specifications of our customers and deliver
them within a short window of opportunity.
Our testing facilities had another good year. During 1994, we increased
our capacity for processing high density DRAMs in both North Carolina and
Singapore. This expansion meshed with our customers' increased demand for
DRAM processing and led to another successful year in our service
operations. Reliability would like to expand both of our test facilities
by providing more functions on higher volumes to our existing customers. We
are also actively looking for opportunities to provide similar services for
other large volume memory and micrologic manufacturers who would benefit
from a contract-captive facility operated to their specifications.
Our DC/DC converter line was profitable for the first year since 1989
on slightly lower revenues. This is a market where prices constantly
decrease, so cost reduction must continue to be a priority. Our facility
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in Costa Rica decreased its total manufacturing costs by reducing scrap and
rework, increasing productivity, and reducing lead times. Our R&D
investment in this area also yielded a number of new products in 1994. We
introduced our first wide input range 10 watt DC/DC converter and we
completed the design for a new series of wide input range, 15 watt high
power density 5, 12, and 15 volt converters. These are our first products
in the new wide input range 15 watt family and are offered in the smallest
package available to the commercial market. During 1995, we plan to
introduce a new 3.3 volt model for portable applications plus some dual and
triple output converters in this product family.
Even though the DC/DC market softened during the fourth quarter of 1994,
as predicted, we continue to feel that the correct strategy is to reposition
our product line away from the low cost high volume LAN market to the higher
watt, higher price, lower volume DC/DC market. In 1995, we plan to continue
to lower our manufacturing costs, increase our R&D expenditures, develop
more new high wattage products, and reduce our time to market.
LOOKING AHEAD TO 1995 We look forward to 1995. We have taken a number of
different actions in the past two years to reduce our expenses and target
our new products at key customers who are producing semiconductors for the
computer and communications markets, i.e. high performance memory and
micrologic devices. Although some analysts who follow the semiconductor
industry are forecasting that semiconductor growth will slow from the 30%
rate of 1993 and 1994 to 15% for 1995, the majority agrees that DRAMs,
microprocessors and micrologic devices will all sustain much higher growth
rates through the balance of the '90s. Because our strategy is focused on
the memory and micrologic market, and on key customers who are leaders in
these markets, we believe the company is well positioned to enjoy another
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good year in 1995. In fact, we believe that our growth in 1995 will only be
limited by our ability to tailor our products to meet key customers'
specifications within their defined window of opportunity. We are
forecasting that the year will start slowly for Reliability, gain momentum
through the year, and result in higher revenues for the year.
Larry Edwards
President and Chief Executive Officer
February 20, 1995
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CORPORATE INFORMATION
DIRECTORS Paul Nesrsta INQUIRIES CONCERNING
W.L. Hampton Vice President THE COMPANY
Retired If you have any
Margaret Bauer questions concerning
Everett Hanlon Assistant Vice the Company's
Retired President operations, recent
results, historical
John R. Howard Lane Petterson performance or wish
Attorney Assistant Vice to receive previous
President annual reports, press
Thomas L. Langford releases or other
President, Margaret A. Chapman Company information
The Parsons Assistant Secretary please contact:
Corporation*
A.C. Lederer, Jr. Investor Relations
Chairman LEGAL COUNSEL Manager
Investments Butler & Reliability
Binion, L.L.P. Incorporated
OFFICERS Houston, Texas P.O. Box 218370
Larry Edwards Houston, Texas 77218
President and AUDITORS TEL: (713) 492-0550
Chief Executive Ernst & Young, L.L.P.FAX: (713) 492-0615
Officer Houston, Texas
INQUIRIES CONCERNING
Max T. Langley ANNUAL MEETING THE COMPANY'S STOCK
Senior Vice President Shareholders are If you have any
Finance, Chief Finan- cordially invited questions concerning
cial Officer, Secretary to attend the annual stock certificates,
and Treasurer meeting of share- change of address,
holders of Relia- consolidation of
James M. Harwell bility Incorporated, accounts, transfer
Vice President to be held at the of ownership or
Company's executive other stock account
Robert W. offices, matters, please
Hildenbrand, Jr. 16400 Park Row, contact the Company's
Vice President Houston, Texas on stock transfer agent
April 26, 1995 at the following
J.E. (Jim) Johnson at 10:00 a.m. address:
Vice President
Society National Bank
C/O KeyCorp Shareholder
Services, Inc.
700 Louisiana St.
Suite 2620
*The Parsons Corporation is a holding Houston, Texas 77002-2729
company whose subsidiaries are engaged TEL: (713) 546-5500
in the engineering and construction (800) 539-6549
business. FAX: (713) 546-5510
IV
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Reliability Incorporated
P.O. Box 218370
Houston, Texas 77218
(713) 492-0550
Reliability Incorporated
North Carolina Operations
2810 Meridian Parkway, #144
Durham, North Carolina 27713
(919) 544-6704
Reliability Singapore Pte Ltd.
5004 Ang Mo Kio Ave. 5 #04-01
Singapore 2056
65-481-9266
RICR de Costa Rica, S.A.
P.O. Box 1-3006
Zona Franca Metropolitana
Barreal, Heredia
Costa Rica, A.C.
506-293-4384
logo
Quality is Reliability
A Zero-Defects Company
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