<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File No. 2-83256
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
RELIABILITY INCORPORATED EMPLOYEE STOCK SAVINGS PLAN AND TRUST
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
RELIABILITY INCORPORATED
16400 Park Row
Houston, Texas 77084
P. O. Box 218370
Houston, Texas 77218-8370
1
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
December 31, 1995
TABLE OF CONTENTS
Financial Statements:
Report of Independent Auditors 3
Statements of Net Assets Available for Benefits 4
Statements of Changes in Net Assets Available for Benefits 5
Notes to Financial Statements 6
Additional Financial Information:
Line 27a - Schedule of Assets Held for Investment Purposes 21
Line 27d - Schedule of Reportable Transactions 22
Signatures 23
Exhibit 23 - Consent of Independent Auditors dated 25
May 23, 1996
2
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
REPORT OF INDEPENDENT AUDITORS
The Administrative Committee
Reliability Incorporated Employee
Stock Savings Plan and Trust
We have audited the accompanying statements of net assets available for
benefits of the Reliability Incorporated Employee Stock Savings Plan and
Trust (the Plan) as of December 31, 1995 and 1994, and the related statement
of changes in net assets available for benefits for the year ended December
31, 1995. These financial statements are the responsibility of the Plan'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 net assets available for benefits of
the Plan at December 31, 1995 and 1994, and the changes in its net assets
available for benefits for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental
schedule of assets held for investment purposes at December 31, 1995 and
schedule of reportable transactions for the year ended December 31, 1995,
are presented for purposes of complying with the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 and are not a required part of the basic
financial statements. The Fund Information in Note F is presented for
purposes of additional analysis rather than to present the net assets
available for benefits and changes in net assets available for benefits of
each fund. The supplemental schedules and Fund Information have been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ ERNST & YOUNG, LLP
Houston, Texas
April 8, 1996
3
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31
------------------
1995 1994
---- ----
Plan assets:
Investment in common stock of Reliability
Incorporated at fair value $2,516,878 $ 797,805
Investment in securities of unaffiliated
issuers:
Short-term investments at fair value,
which approximates cost 87,130 1,018,730
Investment (at fair value) in the Consulting
Group Capital Market Funds:
Large Capitalization Value Equity
Investments Fund 287,814 -
Large Capitalization Growth Investments
Fund 238,771 -
Small Capitalization Growth Investments
Fund 113,742 -
International Equity Investments Fund 146,911 -
Stable Value Investments Fund 661,575 -
Investment (at fair value) in The
Victory Funds of KeyCorp:
Intermediate Income Fund 668
Value Stock Fund 4,380
Growth Stock Fund 1,163
Special Growth Stock Fund 106
Participant Loans Outstanding 68,761 63,636
--------- ---------
Total Investments 4,121,582 1,886,488
Other assets 125 5,681
--------- ---------
Net assets available for benefits $4,121,707 $1,892,169
========= =========
See accompanying notes.
4
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 1995
Investment income:
Interest and dividends $ 52,882
Net appreciation in fair value
of investments 1,877,460
---------
Total investment income 1,930,342
Contributions:
Employee 298,527
Employer 121,029
---------
Total contributions 419,556
Withdrawals and terminations (120,360)
---------
Net increase 2,229,538
Net assets available for benefits
at beginning of year 1,892,169
---------
Net assets available for
benefits at end of year $4,121,707
=========
See accompanying notes.
5
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE A - PARTICIPATION AND CONTRIBUTIONS
In July 1983, Reliability Incorporated (the "Company" or "Employer") adopted
an Employee Stock Savings Plan and Trust (the "Plan"). Under the Plan,
employees of the Company who meet the requirements described below are
eligible to participate in the Plan.
The Plan is subject to certain provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). The Plan is administered by an Administrative
Committee (the "Committee") appointed by the Board of Directors of the
Company. All assets of the Plan are held under discretionary trust
agreements. The preparation of certain portions of the financial statements
of the Plan may require the use of estimates.
United States employees of the Employer who have attained the age of 21 and
have completed 1 year of service, as defined in the Plan, become a member
("Member") of the Plan on the January 1 or July 1 next following the date
on which they became eligible and may elect to make contributions to the
Plan as described below.
Under the Plan, a Member may contribute, through payroll deductions, an
amount ("Employee Contribution") equal to 2 to 15 percent of defined
compensation. The Member may further elect to have all or a portion of his
contributions not be subject to federal income taxes under Section 401(k)
of the Internal Revenue Code. Defined compensation excludes bonuses,
commissions, shift differentials, overtime premiums, and similar payments.
Participants may increase or decrease contribution percentages monthly.
The Employer matches the Employee Contribution by an amount ("Employer
Contribution") equal to 50 percent of the Employee Contributions to a
maximum of 2 percent of the Member's defined compensation. Also, the
Employer annually contributes to employed Members a supplemental amount
("Employer Voluntary Contribution") equal to 1 percent of the Members'
defined compensation for the period during which they were Members.
A Member receives a vested interest in the balances in the Employer
Contribution and Employer Voluntary Contributions for his benefit plus
allocated earnings and realized and unrealized gains and losses thereon (his
"Employer Account") based upon years of service (as defined in the Plan) as
follows:
Vested interest in
Years of Service Employer Accounts
---------------- ------------------
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
A Member always has a 100 percent vested interest in the balance in his
Employee Contributions plus allocated earnings and realized and unrealized
gains and losses thereon (his "Employee Account").
6
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE A - PARTICIPATION AND CONTRIBUTIONS - Continued
Upon death or total and permanent disability, a Member is automatically
fully vested in his Employer Accounts. If the Plan is terminated by the
Company, all Members become fully vested in all their accounts.
NOTE B - PLAN INVESTMENTS
Effective January 1, 1995, the Trustee of the Plan is the Consulting Group
of Smith Barney, Inc. A member may elect to invest his contribution in one
or more of six funds: (i) the Reliability Incorporated ("RI") Common Stock
Fund; (ii) the Large Capitalization Value Equity Investments Fund; (iii) the
Large Capitalization Growth Investments Fund; (iv) the Small Capitalization
Growth Investments Fund; (v) the International Equity Investments Fund; and
(vi) the Stable Value Investments Fund.
The contribution to each fund elected may not be less than 5 percent of the
Member's total contributions. The investment election for future
contributions and existing fund balances may be changed daily. The minimum
investment balance in any selected fund is 5% of the Member's Employee
Account.
Employee Contributions to the Large Capitalization Value Equity Investments
Fund are primarily invested in a diversified portfolio of highly liquid
common stocks, with an emphasis on companies with an above average total
return potential. The Fund's assets will be invested primarily in common
stocks of issuers with total market capitalization of $1 billion or greater
at the time of purchase. The fair value of the Fund is based on quoted
market prices of those stocks it owns.
Employee Contributions to the Large Capitalization Growth Investments Fund
are primarily invested in a diversified portfolio of common stocks, with an
emphasis on companies with superior prospects for long-term earnings growth.
The Fund's assets will be invested primarily in common stocks of issuers
with total market capitalization of $1 billion or greater at the time of
purchase. The fair value of the Fund is based on quoted market prices of
those stocks it owns.
Employee Contributions to the Small Capitalization Growth Investments Fund
are primarily invested in a diversified portfolio of common stocks, with an
emphasis on companies with capitalization of less than $1 billion and with
superior potential for capital appreciation. The fair value of the Fund is
based on quoted market prices of those stocks it owns.
Employee Contributions to the International Equity Investments Fund are
primarily invested in equity securities of companies domiciled outside the
United States. The fair value of the Fund is based on quoted market prices
of the equity securities it owns.
Employee Contributions to the Stable Value Investments Fund are primarily
invested in a portfolio of investment contracts issued by high quality life
insurance and investment companies. The fair value of the Fund is based on
the face value of the investments it owns.
7
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE B - PLAN INVESTMENTS - Continued
Employee Contributions to the RI Common Stock Fund are invested in the
common stock of the Company, which is purchased by the Trustee in the open
market, and in temporary short-term investments. The fair value of the RI
Common Stock Fund is based on quoted market prices.
During the year ended December 31, 1994, KeyCorp was the Trustee and a
Member could elect to invest his Employee Contributions in one or more of
six funds: (i) the RI Common Stock Fund; (ii) the EB Money Market Fund;
(iii) the Victory Intermediate Income Fund; (iv) the Victory Value Stock
Fund; (v) the Victory Growth Stock Fund; and (vi) the Victory Special Growth
Stock Fund.
Employee Contributions to the EB Money Market Fund were primarily invested
in high grade money market instruments. The average life of the Fund's
investments was less than 120 days and a minimum of 20% of the Fund was
invested in overnight investments. The fair value of the Fund is based on
the face value of its interest bearing certificates.
Employee Contributions to the Victory Intermediate Income Fund were invested
in investment-grade debt securities issued by corporations and obligations
of the U.S. Government and its agencies or instrumentalities. The Fund may
also invest in preferred stocks and intends to maintain a dollar weighted
average portfolio maturity of approximately three to eight years. The fair
value of the Fund is based on quoted market prices of those securities it
owns.
Employee Contributions to the Victory Value Stock Fund were primarily
invested in a diversified group of common stocks, with an emphasis on
companies with above average total return potential. The fair value of the
Fund is based on quoted market prices of those stocks it owns.
Employee Contributions to the Victory Growth Stock Fund were invested in a
diversified group of common stocks, with an emphasis on companies with
superior prospects for long-term earnings growth and price appreciation.
The fair value of the Fund is based on quoted market prices of those stocks
it owns.
Employee Contributions to the Victory Special Growth Stock Fund were
invested in common stocks of small companies with a market value of less
than $1 billion and medium-sized companies with a market value of $1-$5
billion that are believed to have superior prospects for long-term earnings
growth and price appreciation. The fair value of the Fund is based on
quoted market prices of those stocks it owns.
Employer Contributions and Employer Voluntary Contributions are invested
solely in the RI Common Stock Fund. Purchases of securities are reflected
on the trade dates. A participant who is 55 years of age and who is 100%
vested in his Employer Accounts may elect to have a portion of his balance
in these accounts diversified to other investment funds offered under the
Plan. This election may be made only once during each Plan year.
8
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE B - PLAN INVESTMENTS - Continued
Administrative expenses are paid by the Company. Gains and losses realized
on the sale of securities in the RI Common Stock Fund are recorded on an
average cost basis.
NOTE C - WITHDRAWALS AND TERMINATIONS
A Member may elect to withdraw all or a portion of his Employee
Contributions. If the employee elected to have his contributions treated
as not subject to federal income taxes, as described in Note A, certain
restrictions may apply. A Member making such an election is not permitted
to make future Employee Contributions prior to the first day of the month
following the expiration of twelve months from the date of such withdrawal.
Upon a Member's termination of employment, the Member may elect the method
of distribution of his Employee and vested Employer Accounts from the
following settlement options:
(1) Lump-sum payment or
(2) Periodic (monthly or quarterly) installments over a period not
to exceed 20 years. If distributions are payable in this
manner, the Member's Employee and Employer Accounts are
segregated and placed in a Distribution Account where gains,
losses, and earnings thereon are allocated. The Distribution
Account is invested in one of the six funds as elected by the
Member as described in Note B. This option is only available
for amounts accrued prior to January 1, 1995.
The nonvested portions of the Employer Accounts of a Member whose employment
is terminated prior to the attainment of seven years of service or who
retires prior to Normal Retirement Age (as defined in the Plan), are
forfeited and allocated among the other Members ($8,036 in 1995 and $9,238
in 1994) as follows:
(1) The portion related to Employer Contributions is allocated to
the Members who have made Employee Contributions through the
entire Plan year in the ratio that each such Member's Employee
Contributions during the Plan year bears to the Employee
Contributions for all Members for the Plan Year; and
(2) The portion related to Employer Voluntary Contributions is
allocated to those Members receiving such contributions in the
ratio that each such Member's defined compensation for the Plan
Year, or that portion of the Plan Year during which he was a
Member of the Plan, bears to the total defined compensation for
all Members for the Plan year.
Forfeitures do not reduce the Employer's Contribution or the Employer's
Voluntary Contribution.
9
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE D - PARTICIPANT LOANS
A participant may borrow up to the lesser of 1) $50,000, 2) 50% of his or
her non-forfeitable accrued benefit or 3) the total of his or her Employee
Account. The minimum loan amount is $1,000 and the maximum loan term is
five years. Loan payments are made through payroll deductions.
NOTE E - FEDERAL INCOME TAX AND ERISA
A favorable determination letter dated June 28, 1995, was received from the
Internal Revenue Service for the Plan as amended on March 23, 1993,
regarding its qualification under Section 401(a) of the Internal Revenue
Code, and the Plan is exempt from federal income taxes under the provisions
of Section 501(a) of the Internal Revenue Code. The Plan was amended and
restated on April 3, 1995 (effective January 1, 1995) and on February 28,
1996 and the Plan's Administrative Committee believes that the Plan, as
amended and restated, continues to be qualified. The Administrative
Committee is currently in the process of obtaining a determination letter
for the Plan. See Note G for information on the February 28, 1996 amendment.
10
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
December 31, 1995
-----------------------------------
Reliability Incorporated
Common Stock Fund
Non-Par-
Total Participant ticipant
Plan Directed Directed
----- ----------- --------
Plan assets (at fair value):
Investment in common stock of
Reliability Incorporated $2,516,878 $336,529 $2,180,349
Investment in securities of
unaffiliated issuers:
Short-term investments 87,130 36,057 19,773
Investment in the Consulting Group
Capital Market Funds:
Large Capitalization Value
Investments Fund 287,814
Large Capitalization Growth
Investments Fund 238,771
Small Capitalization Growth
Investments Fund 113,742
International Equity Invest-
ments Fund 146,911
Stable Value Fund 661,575
Loan Fund 68,761
--------- ------- ---------
4,121,582 372,586 2,200,122
Other assets 125 7 40
--------- ------- ---------
Net Assets Available for Benefits $4,121,707 $372,593 $2,200,162
========= ======= =========
11
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
(Continued)
December 31, 1995
---------------------------
Large Large Small
Capital- Capital- Capital-
ization ization ization
Value Growth Growth
Fund Fund Fund
Participant Directed
-------- ------- ------
Plan assets (at fair value):
Investment in common stock of
Reliability Incorporated $ - $ - $ -
Investment in securities of
unaffiliated issuers:
Short-term investments 6,806 5,178 4,175
Investment in the Consulting Group
Capital Market Funds:
Large Capitalization Value
Investments Fund 287,814
Large Capitalization Growth
Investments Fund 238,771
Small Capitalization Growth
Investments Fund 113,742
------- ------- -------
294,620 243,949 117,917
Other assets 12 15 11
------- ------- -------
Net Assets Available for Benefits $294,632 $243,964 $117,928
======== ======= =======
12
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
(Continued)
December 31, 1995
-------------------------
Interna-
tional Stable
Equity Value Loan
Fund Fund Fund
Participant Directed
------ ------- ----
Plan assets (at fair value):
Investment in common stock of
Reliability Incorporated $ - $ - $ -
Investment in securities of
unaffiliated issuers:
Short-term investments 3,930 11,211 -
Investment in the Consulting Group
Capital Market Funds:
International Equity Invest-
ments Fund 146,911
Stable Value Fund 661,575
Loan Fund 68,761
------- ------- ------
150,841 672,786 68,761
Other assets 11 29 -
------- ------- ------
Net Assets Available for Benefits $150,852 $672,815 $68,761
======= ======= ======
13
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
(Continued)
December 31, 1994
----------------------------------
Reliability Incorporated
Common Stock Fund
Non-Par-
Total Participant ticipant
Plan Directed Directed
----- ----------- --------
Plan assets (at fair value):
Investment in common stock of
Reliability Incorporated $ 797,805 $104,210 $693,595
Investment in securities of
unaffiliated issuers:
Short-term investments 1,018,730 6,324 42,094
Investment in The Victory Funds
of KeyCorp:
Intermediate Income Fund 668
Value Stock Fund 4,380
Growth Stock Fund 1,163
Special Growth Stock Fund 106
Loan Fund 63,636
--------- ------- -------
1,886,488 110,534 735,689
Other assets 5,681 3,502 39
--------- ------- -------
Net Assets Available for Benefits $1,892,169 $114,036 $735,728
========= ======= =======
14
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
(Continued)
December 31, 1994
------------------------------------
EB Interme-
Money diate Value
Market Income Stock
Fund Fund Fund
Participant Directed
-------- ------- ------
Plan assets (at fair value):
Investment in common stock of
Reliability Incorporated $ - $ - $ -
Investment in securities of
unaffiliated issuers:
Short-term investments 378,169 93,741 177,279
Investment in The Victory Funds
of KeyCorp:
Intermediate Income Fund 668
Value Stock Fund 4,380
Growth Stock Fund
Special Growth Stock Fund
Loan Fund
------- ------- -------
378,169 94,409 181,659
Other assets 1,821 1 2
------- ------- -------
Net Assets Available for Benefits $379,990 $94,410 $181,661
======= ====== =======
15
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
(Continued)
December 31, 1994
--------------------------------
Special
Growth Growth
Stock Stock Loan
Fund Fund Fund
Participant Directed
------ ------- ----
Plan assets (at fair value):
Investment in common stock of
Reliability Incorporated $ - $ - $ -
Investment in securities of
unaffiliated issuers:
Short-term investments 153,653 167,470
Investment in The Victory Funds
of KeyCorp:
Intermediate Income Fund
Value Stock Fund
Growth Stock Fund 1,163
Special Growth Stock Fund 106
Loan Fund 63,636
------- ------- ------
154,816 167,576 63,636
Other assets 3 2 311
------- ------- ------
Net Assets Available for Benefits $154,819 $167,578 $63,947
======= ======= ======
16
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY
INVESTMENT FUND
December 31, 1995
---------------------------------
Reliability Incorporated
Common Stock Fund
Non-Par-
Total Participant ticipant
Plan Directed Directed
--------- ------------ ---------
Investment income:
Interest and dividends $ 52,882 $ 201 $ 990
Net appreciation in fair
value of investments 1,877,460 299,088 1,470,660
--------- ------- ---------
Total investment income 1,930,342 299,289 1,471,650
Contributions:
Employee 298,527 45,469 -
Employer 121,029 - 121,029
--------- ------- ---------
Total contributions 419,556 45,469 121,029
Withdrawals and terminations (120,360) (18,179) (73,457)
Investment transfers - (68,895) (54,788)
Transfers (to) from Loan Fund - 873 -
--------- ------- ---------
Net increase 2,229,538 258,557 1,464,434
Net assets available for
benefits at beginning of year 1,892,169 114,036 735,728
--------- ------- ---------
Net assets available for benefits
at end of year $4,121,707 $372,593 $2,200,162
========= ======= =========
17
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS BY INVESTMENT FUND - Continued
December 31, 1995
-----------------------------------
Large Cap- Large Small
italiza- Capital- Capital-
tion Value ization ization
Equity Growth Growth
Fund Fund Fund
Participant Directed
------- ------- -----
Investment income:
Interest and dividends $ 10,050 $ 10,797 $ 16,800
Net appreciation in fair value
of investments 34,435 18,647 3,463
------- ------- -------
Total investment income 44,485 29,444 20,263
Contributions:
Employee 38,449 47,706 36,336
Employer - - -
------- ------- -------
Total contributions 38,449 47,706 36,336
Withdrawals and terminations (4,057) (2,229) (1,473)
Investment transfers 207,384 164,451 59,350
Transfers (to) from Loan Fund 8,371 4,592 3,452
------- ------- -------
Net increase 294,632 243,964 117,928
Net assets available for
benefits at beginning of year - - -
------- ------- -------
Net assets available for benefits
at end of year $294,632 $243,964 $117,928
======= ======= =======
18
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE F - STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS BY INVESTMENT FUND - Continued
December 31, 1995
-------------------------------------
Inter-
national Stable
Equity Value Loan Victory
Fund Fund Fund Funds
Participant Directed
------- ------- ---- -------
Investment income:
Interest and dividends $ 6,681 $ 756 $ 6,607 $ -
Net appreciaiton in fair
value of investments 7,730 43,437 - -
------- ------- ------ --------
Total investment income 14,411 44,193 6,607 -
Contributions:
Employee 35,549 95,018 - -
Employer - - - -
------- ------- ------ --------
Total Contributions 35,549 95,018 - -
Withdrawals and terminations (2,514) (18,451) - -
Investment transfers 98,362 535,454 37,140 (978,458)
Transfers (to) from Loan Fund 5,044 16,601 (38,933) -
------- ------- ------ --------
Net increase (decrease) 150,852 672,815 4,814 (978,458)
Net assets available for benefits
at beginning of year - - 63,947 978,458
------- ------- ------ --------
Net assets available for benefits
at end of year $150,852 $672,815 $68,761 $ -
======= ======= ====== ========
19
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE G - SUBSEQUENT EVENT
The Plan was amended on February 28, 1996. Effective April 1, 1996, the
participation requirement was changed from one year of service to six months
of service and entry into the Plan is allowed on the first day of the month
following the completion of the waiting period of six months. Additionally,
the amendment provided that all Employee Contributions subsequent to
February 1, 1996 will not be subject to federal income taxes under Section
401(k) of the Internal Revenue Code. Prior to the amendment, Employee
Contributions could be deducted from defined compensation after federal
income taxes had been withheld. Effective January 1, 1995 the amendment
confirmed the Plan's policies regarding (i) diversification of Employee
Contributions for participants over age 55 as discussed in Note B, (ii) loan
procedures, as discussed in Note D, and (iii) the limitation of the Plan's
investment in Reliability Incorporated common stock to ninety (90%) percent
of Plan assets.
20
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
LINE 27a - SCHEDULE OF ASSETS
HELD FOR INVESTMENT PURPOSES
December 31, 1995
------------------------------------
Identity Shares Fair
of Issue Description or Units Cost Value
- -------- ----------- -------- ---- -----
Reliability Incorporated*
Common stock 353,246 $1,207,619 $2,516,878
--------- ---------
The Consulting Group
Capital Market Funds*
Large Capitalization
Value Equity 26,236 260,079 287,814
Large Capitalization
Growth 19,492 220,882 238,771
Small Capitalization
Growth 7,221 110,581 113,742
International Equity 14,112 139,855 146,911
Stable Value 75,094 629,953 661,575
--------- ---------
1,361,350 1,448,813
--------- ---------
Smith Barney*
Short-term investments 87,130 87,130 87,130
--------- ---------
Loan Fund - Participant Loans
(Interest Rates: 7% - 9.5%) 68,761 -0- 68,761
--------- ---------
TOTAL INVESTMENTS $2,656,099 $4,121,582
========= =========
*Party-in-interest
See accompanying notes.
21
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RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
LINE 27d - SCHEDULE OF REPORTABLE TRANSCTIONS
1995
----------------------------------------------------
Identity Descrip- Purchases Dispositions Dispositions Gain on
of Issue tion Price Cost Price Dispositions
- -------- -------- --------- ------------ ------------ ------------
Single transactions in excess
of 5% of Plan assets:
Smith Short-term
Barney investment
funds $ - $ 960,000 $ 960,000 $ -
KeyCorp Short-term
investment funds - 1,018,730 1,018,730 -
Consulting Group Capital
Market Funds:
Stable Value 960,000 - - -
Stable Value 171,917 - - -
Series of transactions in excess
of 5% of Plan assets:
Reliability
Incorporated
Common Stock$ 324,484 $ 162,469 $ 375,159 $212,690
========= ========= ========= =======
The Consulting Group
Capital Market Funds
Large Capitaliza-
tion Value
Equity 481,208 221,129 227,828 6,699
Large Capitaliza-
tion Growth 271,254 50,372 51,130 758
Small Capitaliza-
tion Growth 122,213 11,632 11,934 302
International
Equity 179,080 39,225 39,899 674
Stable Value 1,390,026 760,073 771,889 11,816
--------- --------- --------- -------
$2,443,781 $1,082,431 $1,102,680 $ 20,249
========= ========= ========= =======
Smith Barney
Short-term
investment
funds $1,831,350 $1,744,220 $1,744,220 $ -
========= ========= ========= =======
See accompanying notes.
22
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed by the undersigned
thereunto duly authorized.
RELIABILITY INCORPORATED EMPLOYEE
STOCK SAVINGS PLAN AND TRUST
/s/ Max T. Langley
- ------------------------
Max T. Langley
Administrative Committee Member Date: May 23, 1996
23
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
INDEX TO EXHIBITS
Exhibit Page
Number Description of Exhibits Number
- ------- ----------------------- ------
23. Consent of Independent Auditors dated Page 25
May 23, 1996
24
<PAGE>
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No.33-47803) pertaining to the Reliability Incorporated Employee
Stock Savings Plan and Trust of our report dated April 8, 1996, with respect
to the financial statements and schedules of the Reliability Incorporated
Employee Stock Savings Plan and Trust included in this Annual Report (Form
11-K) for the year ended December 31, 1995.
By: /s/ Ernst & Young LLP
- --------------------------
Houston, Texas
May 23, 1996
25
