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, 1996
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
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
December 31, 1996
TABLE OF CONTENTS
Financial Statements:
Report of Independent Auditors 3
Statements of Net Assets Available for Benefits 4
Statement of Changes in Net Assets Available for Benefits 5
Notes to Financial Statements 6
Supplemental Schedules:
Line 27a - Schedule of Assets Held for Investment Purposes 20
Line 27d - Schedule of Reportable Transactions 21
Signatures 22
Exhibit 23 - Consent of Independent Auditors dated 24
June 2, 1997
2
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, 1996 and 1995, and the related statement
of changes in net assets available for benefits for the year ended December
31, 1996. 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, 1996 and 1995, and the changes in its net assets
available for benefits for the year ended December 31, 1996, 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
schedules of assets held for investment purposes at December 31, 1996 and
reportable transactions for the year ended December 31, 1996, 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 supplemental schedules 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 30, 1997
3
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31
------------------
1996 1995
---- ----
Plan assets:
Investment in common stock of Reliability
Incorporated at fair value $2,025,975 $2,516,878
Investment in securities of unaffiliated
issuers:
Short-term investments at fair value,
which approximates cost 60,374 87,130
Investment (at fair value) in the Consulting
Group Capital Market Funds:
Large Capitalization Value Equity
Investments Fund 431,258 287,814
Large Capitalization Growth Investments
Fund 352,048 238,771
Small Capitalization Growth Investments
Fund 307,681 113,742
International Equity Investments Fund 205,445 146,911
Stable Value Investments Fund 709,864 661,575
Participant Loans Outstanding 90,766 68,761
--------- ---------
Total Investments 4,183,411 4,121,582
Other assets 192 125
--------- ---------
Net assets available for benefits $4,183,603 $4,121,707
========= =========
See accompanying notes.
4
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 1996
Investment income (loss):
Interest and dividends $ 20,178
Net depreciation in fair value
of investments (119,821)
---------
Total investment loss (99,643)
Contributions:
Employee 323,034
Employer 129,566
---------
Total contributions 452,600
Withdrawals and terminations (291,061)
---------
Net increase 61,896
Net assets available for benefits
at beginning of year 4,121,707
---------
Net assets available for
benefits at end of year $4,183,603
=========
See accompanying notes.
5
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 following description of the Plan provides only general information.
Participants should refer to the Plan Agreement for a more complete
description of the Plan's provisions. 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 financial
statements in conformity with generally accepted accounting principles
requires management to make estimates that affect the amounts reported in
the financial statements and accompanying notes. Actual results could
differ from those 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 first day of the next month following the date
on which they became eligible and may elect to make contributions to the
Plan as described below. Prior to April 1, 1996, the entry date was the
January 1 or July 1 next following the date on which they became eligible.
Under the Plan, a Member may contribute, through payroll deductions, an
amount ("Employee Contribution") equal to 2 to 15 percent of defined
compensation. Through January 31, 1996, 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 each pay period.
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:
6
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
NOTE A - PARTICIPATION AND CONTRIBUTIONS - Continued
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"). 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 be any whole percentage 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 may be any whole percentage 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.
7
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
NOTE B - PLAN INVESTMENTS - Continued
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 approximates
the contract value of the investment contracts held.
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.
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.
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.
8
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
NOTE C - WITHDRAWALS AND TERMINATIONS - Continued
The non-vested 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 ($17,745 in 1996 and $8,036
in 1995) 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.
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 for general loans and 15 years for home loans. Loan payments are
made through payroll deductions. Loans are stated at cost which
approximates fair value.
NOTE E - FEDERAL INCOME TAX AND ERISA
A favorable determination letter dated January 17, 1997, was received from
the Internal Revenue Service for the Plan as amended on April 3, 1995 and
February 28, 1996, 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).
Additionally, 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 an
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.
The Plan was amended on April 30, 1997 (effective January 1, 1997) to change
the definition of compensation for the purposes of allocating the Employer
Voluntary Contribution to include bonuses, commissions, shift differentials,
overtime premiums, and similar payments.
Once qualified, the Plan is required to operate in conformity with the
Internal Revenue Code to maintain its qualification. The Plan
Administrative Committee is not aware of any course of action or series of
events that have occurred that might adversely affect the Plan's qualified
status.
9
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, 1996
-----------------------------------
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 $2,025,975 255,758 1,770,217
Investment in securities of
unaffiliated issuers:
Short-term investments 60,374 5,077 48,377
Investment in the Consulting Group
Capital Market Funds:
Large Capitalization Value
Equity Investments Fund 431,258 - -
Large Capitalization Growth
Investments Fund 352,048 - -
Small Capitalization Growth
Investments Fund 307,681 - -
International Equity Invest-
ments Fund 205,445 - -
Stable Value Fund 709,864 - -
Loan Fund 90,766 - -
--------- ------- ---------
4,183,411 260,835 1,818,594
Other assets 192 8 54
--------- ------- ---------
Net Assets Available for Benefits $4,183,603 $260,843 $1,818,648
========= ======= =========
10
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, 1996
---------------------------
Large Large Small
Capital- Capital- Capital-
ization ization ization
Value Equity 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 1,087 710 467
Investment in the Consulting Group
Capital Market Funds:
Large Capitalization Value
Equity Investments Fund 431,258 - -
Large Capitalization Growth
Investments Fund - 352,048 -
Small Capitalization Growth
Investments Fund - - 307,681
------- ------- -------
432,345 352,758 308,148
Other assets 25 26 26
------- ------- -------
Net Assets Available for Benefits $432,370 $352,784 $308,174
======= ======= =======
11
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, 1996
-------------------------
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 2,532 2,124 -
Investment in the Consulting Group
Capital Market Funds:
International Equity Invest-
ments Fund 205,445 - -
Stable Value Fund - 709,864 -
Loan Fund - - 90,766
------- ------- ------
207,977 711,988 90,766
Other assets 18 35 -
------- ------- ------
Net Assets Available for Benefits $207,995 $712,023 $90,766
======= ======= ======
12
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
Equity 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
========= ======= =========
13
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 Equity 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
Equity 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
======== ======= =======
14
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
======= ======= ======
15
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, 1996
---------------------------------
Reliability Incorporated
Common Stock Fund
Non-Par-
Total Participant ticipant
Plan Directed Directed
--------- ------------ ---------
Investment income (loss):
Interest and dividends $ 20,178 $ 48 $ 350
Net appreciation (depreciation)
in fair value of investments (119,821) (37,218) (273,571)
--------- ------- ---------
Total investment income (loss) (99,643) (37,170) (273,221)
Contributions:
Employee 323,034 19,618 -
Employer 129,566 - 129,566
--------- ------- ---------
Total contributions 452,600 19,618 129,566
Withdrawals and terminations (291,061) (24,626) (158,699)
Investment transfers - (70,113) (79,160)
Transfers (to) from Loan Fund - 541 -
--------- ------- ---------
Net increase (decrease) 61,896 (111,750) (381,514)
Net assets available for
benefits at beginning of year 4,121,707 372,593 2,200,162
--------- ------- ---------
Net assets available for benefits
at end of year $4,183,603 $ 260,843 $1,818,648
========= ======= =========
16
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, 1996
-----------------------------------
Large Cap- Large Small
italiza- Capital- Capital-
tion Value ization ization
Equity Growth Growth
Fund Fund Fund
Participant Directed
------- ------- -----
Investment income (loss):
Interest and dividends $ 11,293 $ 2,137 $ 191
Net appreciation (depreciation)
in fair value of investments 62,493 59,240 23,897
------- ------- -------
Total investment income (loss) 73,786 61,377 24,088
Contributions:
Employee 57,785 62,219 60,216
Employer - - -
------- ------- -------
Total contributions 57,785 62,219 60,216
Withdrawals and terminations (27,346) (22,276) (13,836)
Investment transfers 38,085 12,122 124,557
Transfers (to) from Loan Fund (4,572) (4,622) (4,779)
------- ------- -------
Net increase (decrease) 137,738 108,820 190,246
Net assets available for
benefits at beginning of year 294,632 243,964 117,928
------- ------- -------
Net assets available for benefits
at end of year $432,370 $352,784 $308,174
======= ======= =======
17
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, 1996
----------------------------
Inter-
national Stable
Equity Value Loan
Fund Fund Fund
Participant Directed
------- ------- ----
Investment income (loss):
Interest and dividends $ 2,722 $ 319 $ 3,118
Net appreciation (depreciation)
in fair value of investments 5,725 39,613 -
------- ------- ------
Total investment income (loss) 8,447 39,932 3,118
Contributions:
Employee 41,305 81,891 -
Employer - - -
------- ------- ------
Total Contributions 41,305 81,891 -
Withdrawals and terminations (14,220) (30,058) -
Investment transfers 21,436 (46,927) -
Transfers (to) from Loan Fund 175 (5,630) 18,887
------- ------- ------
Net increase (decrease) 57,143 39,208 22,005
Net assets available for benefits
at beginning of year 150,852 672,815 68,761
------- ------- ------
Net assets available for benefits
at end of year $207,995 $712,023 $90,766
======= ======= ======
18
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE G - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
December 31,
1996 1995
---- ----
Net assets available for benefits per
the financial statements $4,183,603 $4,121,707
Amounts allocated to withdrawing
participants (7,464) -0-
-------- ---------
Net assets available for benefits
per Form 5500 $4,176,139 $4,121,707
========= =========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year ended
December 31, 1996
-----------------
Benefits paid to participants per the
financial statements $291,061
Add: Amounts allocated to withdrawing
participants at December 31, 1996 7,464
Less: Amounts allocated to withdrawing
participants at December 31, 1995 -0-
-------
Benefits paid to participants per the Form 5500 $298,525
=======
Amounts allocated to withdrawing participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
19
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
LINE 27a - SCHEDULE OF ASSETS
HELD FOR INVESTMENT PURPOSES
December 31, 1996
------------------------------------
Identity Fair
of Issue Description Cost Value
- -------- ----------- ---- -----
Reliability Incorporated*
Common stock $1,158,343 $2,025,975
--------- ---------
The Consulting Group
Capital Market Funds*
Large Capitalization
Value Equity Investments 375,879 431,258
Large Capitalization
Growth Investments 308,166 352,048
Small Capitalization
Growth Investments 323,851 307,681
International Equity Investments 209,472 205,445
Stable Value 660,277 709,864
--------- ---------
1,877,645 2,006,296
--------- ---------
Smith Barney*
Short-term investments 60,374 60,374
--------- ---------
Loan Fund - Participant Loans
(Interest Rates: 7% - 9.5%) -0- 90,766
--------- ---------
TOTAL INVESTMENTS $3,096,362 $4,183,411
========= =========
*Party-in-interest
See accompanying notes.
20
RELIABILITY INCORPORATED
EMPLOYEE STOCK SAVINGS PLAN AND TRUST
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
Year ended December 31, 1996
----------------------------------------------------
Identity Descrip- Purchases Dispositions Dispositions Gain on
of Issue tion Price Cost Price Dispositions
- -------- -------- --------- ------------ ------------ ------------
Series of transactions in excess
of 5% of Plan assets:
Reliability
Incorporated
Common Stock$ 114,871 $164,147 $293,543 $129,396
========= ======= ======= =======
The Consulting Group
Capital Market Funds
Large Capitaliza-
tion Value Equity
Investments $ 194,018 $ 78,218 $ 92,111 $13,893
Large Capitaliza-
tion Growth
Investments 197,575 110,291 130,816 20,525
Small Capitaliza-
tion Growth
Investments 288,718 75,448 82,437 6,989
International
Equity Investments 145,296 75,679 79,337 3,658
Stable Value 345,535 315,211 336,859 21,648
--------- -------- -------- -------
$1,171,142 $654,847 $721,560 $66,713
========= ======== ======== =======
Smith Barney
Short-term
investment funds $ 857,586 $884,342 $884,342 $ -
========= ======== ======== =======
See accompanying notes.
21
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: June 2, 1997
22
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 24
June 2, 1997
23
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 18, 1997, 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, 1996.
By: /s/ Ernst & Young LLP
- --------------------------
Houston, Texas
June 2, 1997
24