<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1430
REYNOLDS METALS COMPANY
A Delaware Corporation
(I.R.S. Employer Identification No. 54-0355135)
6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-7003
Telephone Number (804) 281-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
As of October 31, 1995, the Registrant had 63,587,225 shares of Common
Stock, no par value, outstanding and entitled to vote.
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- -----------------------------------------------------------------------------------------
Reynolds Metals Company
<CAPTION>
Quarter ended Nine months ended
September 30 September 30
- -----------------------------------------------------------------------------------------
(In millions, except per share amounts) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net sales $1,841 $1,531 $5,356 $4,240
Equity, interest and other income 4 13 24 25
Gain on sale of asset - 63 - 63
- -----------------------------------------------------------------------------------------
1,845 1,607 5,380 4,328
- -----------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 1,534 1,372 4,486 3,849
Selling, administrative and general expenses 115 98 335 283
Interest - principally on long-term obligations 42 40 129 114
- -----------------------------------------------------------------------------------------
1,691 1,510 4,950 4,246
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Income before income taxes 154 97 430 82
Taxes on income 42 35 125 29
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Net income 112 62 305 53
Preferred stock dividends 9 9 27 25
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Net income available to common stockholders $ 103 $ 53 $ 278 $ 28
=========================================================================================
Income per share (Note B)
Average shares outstanding 72 62 73 62
Net income $1.56 $0.86 $4.20 $0.45
Cash dividends per common share $0.30 $0.25 $0.85 $0.75
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</TABLE>
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<PAGE> 3
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
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Reynolds Metals Company
<CAPTION>
September 30 December 31
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994
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<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $187 $308
Short-term investments 61 126
Receivables, less allowances of $21 (1994 - $19) 1,065 962
Inventories 978 873
Prepaid expenses 55 53
- ------------------------------------------------------------------------------------------
Total current assets 2,346 2,322
Unincorporated joint ventures and associated companies 886 856
Property, plant and equipment 6,543 6,308
Less allowances for depreciation and amortization 3,373 3,200
- ------------------------------------------------------------------------------------------
3,170 3,108
Deferred taxes and other assets 1,174 1,175
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Total assets $7,576 $7,461
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued and other liabilities $1,136 $1,286
Short-term obligations 117 120
Long-term debt 15 18
- ------------------------------------------------------------------------------------------
Total current liabilities 1,268 1,424
Long-term debt 1,907 1,848
Postretirement benefits 1,094 1,145
Environmental, deferred taxes and other liabilities 721 772
Stockholders' equity
Preferred stock 505 505
Common stock 941 870
Retained earnings 1,203 980
Cumulative currency translation adjustments (23) (43)
Pension liability adjustment (40) (40)
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Total stockholders' equity 2,586 2,272
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Total liabilities and stockholders' equity $7,576 $7,461
==========================================================================================
</TABLE>
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<PAGE> 4
<TABLE>
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
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Reynolds Metals Company
<CAPTION>
Nine months ended
September 30
- --------------------------------------------------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net income $305 $ 53
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 229 217
Gain on sale of asset - (63)
Deferred taxes and other 40 44
Changes in operating assets and liabilities net of effects
from acquisitions and dispositions:
Accounts payable, accrued and other liabilities (178) 117
Receivables (105) (115)
Inventories (95) (88)
Other (69) 20
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 127 185
Investing activities
Capital investments (330) (272)
Proceeds from sales of assets 30 130
Investments in debt securities - (139)
Maturities of investments in debt securities 65 -
Other investing activities - net 1 (56)
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (234) (337)
Financing activities
Proceeds from preferred stock issue - 505
Proceeds from long-term obligations 64 -
Decrease in short-term borrowings (9) (66)
Cash dividends paid (77) (47)
Reduction of long-term debt and other financing activities 8 (137)
- --------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (14) 255
Cash and cash equivalents
Net increase (decrease) (121) 103
At beginning of period 308 19
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At end of period $187 $122
============================================================================================
</TABLE>
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<PAGE> 5
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1995 and 1994
Note A - Basis of presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the interim periods of 1995 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1995.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
Note B - Earnings per share
In the third quarter and nine months of 1995, earnings per share equals net
income divided by the weighted-average number of common shares and common
share equivalents outstanding during the period. The number of common
share equivalents outstanding was based on the assumed conversion of the
Company's 7% PRIDES(SM), Convertible Preferred Stock ("PRIDES"). In the
third quarter and nine months of 1994, earnings per share equals net
income, minus PRIDES dividends, divided by the weighted-average number of
common shares outstanding during the period. Common share equivalents
relating to the PRIDES were not included in the third quarter and nine
months of 1994 since their effect would have been anti-dilutive.
Note C - Financing Arrangements
In the first quarter of 1995, the Company amended its $500 million
revolving credit facility to extend the term and lower the cost. The
expiration date of the facility was extended from 1999 to 2000. The annual
commitment fee on the unused portion of the facility was lowered from .20%
to .125%. No amounts were outstanding under the facility at September 30,
1995.
Borrowings in the second quarter of 1995 included $22 million of tax-exempt
bonds which were issued to finance a portion of the costs of acquiring,
constructing and installing sewage and solid waste disposal facilities at
the Company's primary aluminum production plant in Massena, N.Y. The
bonds, which require a single repayment in 2025, bear interest at a
variable rate (4.2% at September 30, 1995).
In the third quarter of 1995, the Company issued $32 million of medium term
notes. The Company also issued $40 million of medium term notes early in
the fourth quarter of 1995. The notes bear interest at an average rate of
6.0% and mature in 1996 and 1997. Also early in the fourth quarter, the
Company issued $200 million of commercial paper. The commercial paper
bears interest at an average rate of 5.9% and will be classified as short
term debt. The proceeds from the borrowings were supplemented with cash
and were used early in the fourth quarter to acquire an additional interest
(24.95%) in the Becancour primary aluminum facility for approximately $390
million, plus associated working capital.
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<PAGE> 6
Note D - Contingent liabilities
As previously disclosed in the Company's annual report on Form 10-K for the
year ended December 31, 1994, the Company is involved in various worldwide
environmental improvement activities resulting from past operations,
including designation as a potentially responsible party, with others, at
various EPA designated Superfund sites. The Company has recorded amounts
which, in management's best estimate, will be sufficient to satisfy
anticipated costs of known remediation requirements. As a result of
factors such as the continuing evolution of environmental laws and
regulatory requirements, the availability and application of technology,
the identification of presently unknown remediation sites and the
allocation of costs among potentially responsible parties, estimated costs
for future environmental compliance and remediation are necessarily
imprecise. Based upon information presently available, such future costs
are not expected to have a material adverse effect on the Company's
competitive or financial position or its ongoing results of operations.
However, such costs could be material to future quarterly or annual results
of operations.
Various suits and claims are pending against the Company. In the opinion
of management, after consultation with counsel, disposition of these suits
and claims, either individually or in the aggregate, will not have a
material adverse effect on the Company's competitive or financial position
or its ongoing results of operations. No assurance can be given, however,
that the disposition of one or more of such suits or claims in a particular
reporting period will not be material in relation to the reported results
for such period.
Note E - Canadian Reynolds Metals Company, Limited
Summarized financial information for Canadian Reynolds Metals Company,
Limited is as follows:
<TABLE>
<CAPTION>
Quarter ended September 30 Nine Months ended September 30
---------------------------- --------------------------------
1995 1994 1995 1994
---------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net Sales:
Customers $161 $102 $410 $268
Parent company 125 141 444 371
---------------------------- --------------------------------
286 243 854 639
Cost of products sold 215 200 608 568
Net income $44 $15 $153 $21
</TABLE>
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
-------------- -------------
<S> <C> <C>
Current assets $467 $238
Noncurrent assets 989 1,015
Current liabilities (97) (83)
Noncurrent liabilities (597) (564)
</TABLE>
Note F - Other Information
The Financial Accounting Standards Board issued in March, 1995, FAS No. 121
- - Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. The Company is in the process of evaluating the
provisions of this pronouncement and has not made a determination as to the
impact, if any, on the Company's financial position and/or results of
operations.
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<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto included in or
referred to in this report.
RESULTS OF OPERATIONS
The Company earned net income of $112 million ($1.56 per share) and
$305 million ($4.20 per share) in the third quarter and nine months of
1995, respectively, compared to net income of $62 million ($0.86 per share)
in the third quarter of 1994 and $53 million ($0.45 per share) in the nine
months of 1994. Net income in the third quarter and nine months of 1994
included $41 million ($0.66 per share) from the sale of Reynolds Australia
Metals, Ltd., which held a 40 percent interest in the Boddington Gold Mine
in Western Australia.
The Company's results for the third quarter and nine months of 1995
reflect continued strength in overall global demand for aluminum products,
improved prices and actions the Company has taken to improve performance
such as acquisitions, divestitures, restructurings and cost reduction.
Shipments and Revenues
Shipments, net sales and revenues per pound for the third quarter and
nine months of 1995 and 1994 were as follows (metric tons in thousands and
dollars in millions, except per pound amounts):
Third Quarter Nine Months
1995 1994 1995 1994
----------------- -----------------
Aluminum product shipments 428 410 1,246 1,161
Net sales:
Aluminum $1,469 $1,182 $4,311 $3,235
Nonaluminum 372 349 1,045 1,005
------------------ -----------------
Total $1,841 $1,531 $5,356 $4,240
================== =================
Revenues per pound:
Fabricated aluminum products $1.91 $1.51 $1.83 $1.45
Primary aluminum $0.89 $0.74 $0.92 $0.67
The soft landing of the U.S. economy and an economic slowdown in
Europe have had an impact on the Company's product mix with a higher
portion of shipments being in primary aluminum. Higher aluminum shipments
in both 1995 periods reflect higher shipments of primary aluminum, which
increased 38% and 21% respectively, in the third quarter and nine months
of 1995 over the corresponding 1994 periods. Shipments of fabricated
aluminum products declined 4% in the third quarter, primarily due to
lower shipments of cans and ends, but rose 4% in the nine month period
as a result of higher shipments of cans and ends, can sheet and
distributor sheet. Higher shipments of cans and ends and distributor
sheet in the nine month period were also attributable to the acquisitions
of a can manufacturing facility in the second quarter of 1994 and a metals
distribution business in the third quarter of 1994.
The increases in net sales for aluminum products in both periods were
due to higher prices for most aluminum products and the higher shipping
volume.
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<PAGE> 8
RESULTS OF OPERATIONS - continued
Shipments and Revenues - continued
The increase in nonaluminum sales was due to strong demand and
improved prices for alumina and stainless steel. Due to the strength in
the alumina market, the Company has restarted the idle capacity at its
alumina plant near Corpus Christi, Texas. The increase in sales of
stainless steel was also attributable to the acquisition of the metals
distribution business mentioned above.
For further information concerning shipments and revenues, see the
discussion under "Operating Area Analysis".
Markets
Revenues by principal markets were:
Third Quarter Nine Months
1995 1994 1995 1994
------------- -----------
Packaging and Containers 45% 45% 43% 45%
Distributors and Fabricators 13 13 14 13
Automotive and Transportation 13 12 13 11
Building and Construction 13 14 13 13
Electrical 2 3 3 3
Other 14 13 14 15
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Total 100% 100% 100% 100%
============= ===========
Demand was strong in most of the Company's principal markets. Sales
to the packaging and containers market improved 19% and 20%, respectively,
in the third quarter and nine months of 1995. Sales to this market
provided a lower percentage of total revenues in the nine month period due
to more substantial gains in sales to other markets. Higher sales were
realized in the third quarter and nine month period to the distributors and
fabricators market (up 25% and 40%, respectively), the automotive and
transportation market (up 32% and 51%, respectively), and the building and
construction market (up 12% and 28%, respectively). The increases in
revenues to these markets were due primarily to higher prices for most
aluminum products.
Costs and Expenses
The increases in cost of products sold were due to the higher shipping
volume and higher costs for purchased materials. Costs were favorably
impacted by performance improvement programs and, in the nine month period,
higher capacity utilization at aluminum fabricating facilities.
Selling, administrative and general expenses increased in both 1995
periods due to the higher level of business activity, but declined slightly
as a percent of sales. Interest expense increased in both 1995 periods due
to higher rates.
In the third quarter of 1995, the Company announced plans to close its
can manufacturing facility located in Fulton, New York in the fourth
quarter of 1995. The facility's 1-billion-can annual capacity was
determined to be in excess of the Company's customer needs at the present
time due to other productivity gains, a geographic shift in customer demand
and slower overall growth in demand for cans. The Company intends to
remove the equipment and sell the plant and property. This action is not
expected to have a material impact on revenues, operating results or
financial position.
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<PAGE> 9
RESULTS OF OPERATIONS - continued
Costs and Expenses - continued
On a quarterly basis, the Company updates the status of all
significant existing or potential environmental issues, develops or revises
estimates of costs to satisfy known remediation requirements and adjusts
its accruals accordingly. Based upon information presently available, such
future costs are not expected to have a material adverse effect on the
Company's competitive or financial position or its ongoing results of
operations. However, it is not possible to predict the amount or timing of
future costs of environmental remediation requirements which may
subsequently be determined. Such costs could be material to future
quarterly or annual results of operations.
On August 29, 1994 and March 30, 1995, the Company received civil
investigative demands from the U.S. Department of Justice relating to
production of primary aluminum and the pricing of aluminum can stock,
respectively. The Company is cooperating with both inquiries and is
confident that its conduct has been in compliance with U.S. antitrust laws.
Various suits and claims are pending against the Company. In the
opinion of management, after consultation with counsel, disposition of
these suits and claims, either individually or in the aggregate, will not
have a material adverse effect on the Company's competitive or financial
position or its ongoing results of operations. No assurance can be given,
however, that the disposition of one or more of such suits or claims in a
particular reporting period will not be material in relation to the
reported results for such period.
Taxes on Income
The effective tax rates reflected in the income statement differ from
the U.S. federal statutory rate because of state and foreign taxes and the
effects of percentage depletion allowances.
Operating Outlook
The effects of the soft landing of the U.S. economy and the economic
slowdown in Europe are expected to continue in the fourth quarter of 1995,
particularly in the transportation and building and construction markets.
Growth in demand for the Company's products is expected to continue, but at
a slower rate. Shipments of fabricated aluminum products in the fourth
quarter of 1995 are not expected to match the strong shipments of the
fourth quarter of 1994 which were impacted by buy-ahead purchases,
especially for cans. The fourth quarter of 1995 should be favorably
impacted by strong consumer products business and the continuing effects
from acquisitions and performance improvement efforts.
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<PAGE> 10
OPERATING AREA ANALYSIS
(Dollars in millions, metric tons in thousands)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
------------------------------- --------------------------------
Net Sales Shipments Net Sales Shipments
1995 1994 1995 1994 1995 1994 1995 1994
------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finished products and other
sales
Packaging and containers:
Aluminum $479 $422 92 96 $1,391 $1,185 275 269
Nonaluminum 138 132 395 381
Other aluminum 147 122 40 41 445 320 125 110
Other nonaluminum 131 127 388 338
------------------------------- --------------------------------
895 803 132 137 2,619 2,224 400 379
------------------------------- --------------------------------
Production and processing
Primary aluminum 212 127 109 79 504 304 248 205
Flat rolled 324 249 96 102 1,013 706 308 305
Extruded and drawn 185 157 46 51 585 442 154 158
Other aluminum 122 105 45 41 373 278 136 114
Other nonaluminum 103 69 262 193
Gold 21 93
------------------------------- --------------------------------
946 728 296 273 2,737 2,016 846 782
------------------------------- --------------------------------
Net sales $1,841 $1,531 428 410 $5,356 $4,240 1,246 1,161
=============================== ================================
</TABLE>
Finished Products and Other Sales
Shipments were lower in the third quarter of 1995 compared to the
third quarter of 1994, due primarily to lower shipments of cans and ends.
Shipments increased in the nine month period, resulting from higher
shipments of cans and ends and distributor sheet. The increases in
aluminum sales were principally due to improved prices for most aluminum
products, with some benefit from increased volume in the nine months. The
increases in nonaluminum sales were primarily attributable to strong demand
and improved prices for stainless steel. Higher shipments of cans and
ends, distributor sheet and stainless steel were due to 1994 acquisitions.
Production and Processing
Higher shipments were realized in both 1995 periods, particularly for
primary and recycled aluminum and can sheet. The increases in aluminum
sales were due to the higher shipping volume and improved prices for most
aluminum products. The increases in nonaluminum sales were due to improved
prices for alumina, as well as higher demand which was met by the restart
of idle capacity at an alumina facility. There were no gold revenues due
to the divestiture of gold operations in 1994 and early 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital totaled $1,078 million at September 30, 1995, compared
to $898 million at December 31, 1994. The ratio of current assets to
current liabilities was 1.9/1 at September 30, 1995, compared to 1.6/1 at
December 31, 1994. The increase in working capital primarily reflects
the higher level of business activity. In addition, a portion of the
increase relates to inventories built up in the first half of 1995, which
are taking longer than expected to be utilized due to the soft landing of
the U.S. economy. The Company expects to reduce inventories by the end
of the year.
- 10 -
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES - continued
Operating Activities
In the first nine months of 1995, cash provided by operations was
supplemented with cash on hand to fund investing activities.
Investing Activities
Capital investments for continuing performance improvement and
strategic investment projects totaled approximately $190 million in the
first nine months of 1995 and included amounts for the modernization
of a primary aluminum production plant in New York; the modernization
and expansion of can manufacturing facilities (including participation
in the construction of can plants in South America as discussed below);
expansions at foil and plastic film facilities; modification and
equipping of a new wheel facility; equipment upgrades at a number of
other facilities; and two acquisitions and a major project as discussed
below. Capital investments for this period also included approximately
$140 million for operating requirements (i.e., replacement equipment,
capital maintenance, environmental control projects, etc.).
The Company is participating in the construction of several new can
plants in South America through a 42.5%-owned Brazilian affiliate. The
affiliate completed construction of a second can plant in Brazil in the
second quarter of 1995 and a can plant in Chile in the third quarter of
1995. A can plant in Argentina is scheduled for completion in the fourth
quarter of 1995 and a third can plant in Brazil is expected to be completed
in 1996. In addition to the South American can plants, construction has
begun on a 27.5%-owned can plant in Saudi Arabia which is expected to be
completed in early 1997.
In the second quarter of 1995, the Company acquired a foil
plant located in Louisville, Ky. The facility laminates aluminum foil onto
paper and primarily serves the flexible packaging needs of the tobacco and
pharmaceutical industries. The facility complements the Company's current
product and customer mix, and further strengthens the Company's ability to
serve customers in this market.
Also in the second quarter of 1995, the Company acquired an engraving
company that serves the flexographic and lithographic printers that supply
the packaging and publication industries in the U.S., Canada and Mexico.
The acquired company operates facilities in Texas, Louisiana and Washington
which manufacture printing plates. The acquisition will strengthen
the Company's operation that manufactures printing cylinders and
engravings for the rotogravure, flexographic and lithographic printing
industries.
A three-year, $75 million modernization is underway at the Company's
can sheet facility in Alabama. The project will include two new furnaces,
as well as improvements to existing equipment. The modernization will
allow for enhanced overall product quality and will reduce costs.
In the first quarter of 1995, the Company sold its remaining gold
mining assets in Australia for $28 million. The sale is not expected to
have a material effect on the Company's ongoing results of operations.
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<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES - continued
Financing Activities
In the first quarter of 1995, the Company amended its $500 million
revolving credit facility to extend the term and lower the cost. The
expiration date of the facility was extended from 1999 to 2000. The annual
commitment fee on the unused portion of the facility was lowered from .20%
to .125%. No amounts were outstanding under the facility at September 30,
1995.
Borrowings in the second quarter of 1995 included $22 million of tax-
exempt bonds which were issued to finance a portion of the costs of
acquiring, constructing and installing sewage and solid waste disposal
facilities at the Company's primary aluminum production plant in Massena,
N.Y. The bonds, which require a single repayment in 2025, bear interest at
a variable rate (4.2% at September 30, 1995).
The Company issued $32 million of medium-term notes in the third
quarter of 1995 and an additional $40 million of medium-term notes early in
the fourth quarter of 1995. The notes bear interest at an average rate of
6.0% and mature in 1996 and 1997. Also early in the fourth quarter, the
Company issued $200 million of commercial paper. The commercial paper
bears interest at an average rate of 5.9% and will be classified as short-
term debt. The proceeds from the borrowings were supplemented with cash on
hand and were used early in the fourth quarter to acquire an additional
interest (24.95%) in the Becancour, Quebec primary aluminum production
facility for approximately $390 million, plus associated working capital
(see "Financial Outlook").
In the second quarter of 1995, the Company increased the quarterly
dividend on its common stock by 5 cents to 30 cents a share. The dividend
was increased in view of the Company's improved performance and
outlook for the future.
In the first half of 1995, the Company contributed 906,000 shares of
common stock, valued at approximately $45 million, to its pension plans.
This completes the contribution of three million shares of common stock to
the Company's pension plans which were the subject of a registration
statement filed in 1993.
Financial Outlook
Capital investments in 1995 are expected to total approximately $850
million. Of this amount, approximately $660 million is expected to be
spent in continuing expenditures for those performance improvement and
strategic investment projects that are underway and the acquisition of
an additional interest in the Becancour primary aluminum production
facility (as discussed below). In addition, approximately $190 million
is expected to be spent for operating requirements. These
investments will be funded primarily with cash generated from
operations, a portion of the remaining proceeds from the Company's
preferred stock issued in early 1994, and external financing.
Early in the fourth quarter of 1995, the Company purchased an
additional interest (24.95%) in the Becancour primary aluminum production
facility for approximately $390 million, plus associated working capital.
The transaction increases the Company's ownership in the Becancour facility
to 50 percent and its worldwide primary aluminum capacity to 1.09 million
metric tons. The acquisition will reduce the Company's dependence on
outside purchases of primary aluminum and provide the Company with low-cost
primary aluminum to support the continuing strong demand for fabricated
aluminum products. The Company expects that the debt issued for this
acquisition will be repaid by the end of 1997.
The Company believes its available financial resources, together with
internally generated funds, are sufficient to meet its business needs at
the present time and for the foreseeable future. The Company continues to
exceed the financial ratio requirements contained in its financing
arrangements and expects to do so for the foreseeable future. After the
issuance of medium-term notes in the third quarter and early in the fourth
quarter of 1995, $150 million of the Company's $1.65 billion shelf
registration remained available for the issuance of debt securities.
- 12 -
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES - continued
Financial Outlook - continued
Rates for electricity charged by the Bonneville Power Administration
("BPA"), which serves the Company's Troutdale, Oregon and Longview,
Washington primary aluminum production plants, have been settled through
October, 1996, with a four percent increase over the prior rate. The
Company and BPA have entered into a new five-year contract that would
supersede the existing power contract for the period October, 1996 -
September, 2001 (when the existing contract was due to expire). The new
contract establishes a fixed rate, which is 16% less than rates now
applicable under the existing contract, that would apply for the entire
term of the new contract. This contract is, however, subject to review and
approval both in BPA's currently pending rate case and in a subsequent
review process conducted by the Federal Energy Regulatory Commission.
Further, as part of a BPA rate decision, the contract is subject to appeal
in the courts by third parties. Should the new contract be rejected in any
of these processes, the Company could continue service under the existing
contract, renegotiate with BPA, or contract for competitive power supplies
from third parties.
OTHER INFORMATION
The Financial Accounting Standards Board issued in March, 1995, FAS
No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of. The Company is in the process of
evaluating the provisions of this pronouncement and has not made a
determination as to the impact, if any, on the Company's financial position
and/or results of operations.
- 13 -
<PAGE> 14
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
During the third quarter of 1995, the Registrant filed with the
Commission a Current Report on Form 8-K dated September 15, 1995 reporting
under Item 5 that it had agreed to purchase an additional 24.95 percent
interest in the Becancour, Quebec, Canada, primary aluminum production
plant from Societe Generale de Financement du Quebec, an agency of the
Government of Quebec.
- 14 -
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
REYNOLDS METALS COMPANY
By Allen M. Earehart
Allen M. Earehart
Vice President, Controller
(Principal Accounting Officer)
DATE: November 13, 1995
- 15 -
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT 2 - None
* EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended to
the date hereof. (File No. 1-1430, 1994 Form 10-K
Report, EXHIBIT 3.1)
* EXHIBIT 3.2 - By-Laws, as amended to the date hereof. (File No. 1-
1430, Form 10-Q Report for the Quarter Ended June
30, 1995, EXHIBIT 3.2)
EXHIBIT 4.1 - Restated Certificate of Incorporation. See EXHIBIT
3.1.
EXHIBIT 4.2 - By-Laws. See EXHIBIT 3.2.
* EXHIBIT 4.3 - Indenture dated as of April 1, 1989 (the
"Indenture") between Reynolds Metals Company and The
Bank of New York, as Trustee, relating to Debt
Securities. (File No. 1-1430, Form 10-Q Report for
the Quarter Ended March 31, 1989, EXHIBIT 4(c))
* EXHIBIT 4.4 - Amendment No. 1 dated as of November 1, 1991 to the
Indenture. (File No. 1-1430, 1991 Form 10-K Report,
EXHIBIT 4.4)
* EXHIBIT 4.5 - Rights Agreement dated as of November 23, 1987 (the
"Rights Agreement") between Reynolds Metals Company
and The Chase Manhattan Bank, N.A. (File No. 1-
1430, Registration Statement on Form 8-A dated
November 23, 1987, pertaining to Preferred Stock
Purchase Rights, EXHIBIT 1)
* EXHIBIT 4.6 - Amendment No. 1 dated as of December 19, 1991 to the
Rights Agreement. (File No. 1-1430, 1991 Form 10-K
Report, EXHIBIT 4.11)
* EXHIBIT 4.7 - Form of 9-3/8% Debenture due June 15, 1999. (File
No. 1-1430, Form 8-K Report dated June 6, 1989,
EXHIBIT 4)
* EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note. (Registration
Statement No. 33-30882 on Form S-3, dated August 31,
1989, EXHIBIT 4.3)
* EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note.
(Registration Statement No. 33-30882 on Form S-3,
dated August 31, 1989, EXHIBIT 4.4)
* EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term Note.
(File No. 1-1430, 1991 Form 10-K Report, EXHIBIT
4.15)
* EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term Note.
(File No. 1-1430, 1991 Form 10-K Report, EXHIBIT
4.16)
* EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003. (File No.
1-1430, Form 8-K Report dated August 16, 1991,
Exhibit 4(a))
____________________________
* Incorporated by reference.
- 16 -
<PAGE> 17
* EXHIBIT 4.13 - Articles of Continuance of Canadian Reynolds Metals
Company, Limited -- Societe Canadienne de Metaux
Reynolds, Limitee ("CRM"), as amended to the date
hereof. (Registration Statement No. 33-59168 on
Form S-3, dated March 5, 1993, EXHIBIT 4.1)
* EXHIBIT 4.14 - By-Laws of CRM, as amended to the date hereof.
(File No. 1-1430, Form 10-Q Report for the Quarter
Ended September 30, 1993, EXHIBIT 4.19)
* EXHIBIT 4.15 - Indenture dated as of April 1, 1993 among CRM,
Reynolds Metals Company and The Bank of New York, as
Trustee. (File No. 1-1430, Form 8-K Report dated
July 14, 1993, EXHIBIT 4(a))
* EXHIBIT 4.16 - Form of 6-5/8% Guaranteed Amortizing Note due July
15, 2002. (File No. 1-1430, Form 8-K Report dated
July 14, 1993, EXHIBIT 4(d))
* EXHIBIT 10.1 - Reynolds Metals Company 1982 Nonqualified Stock
Option Plan, as amended through May 17, 1985. (File
No. 1-1430, 1985 Form 10-K Report, EXHIBIT 10.2)
* EXHIBIT 10.2 - Reynolds Metals Company 1987 Nonqualified Stock
Option Plan. (Registration Statement No. 33-13822
on Form S-8, dated April 28, 1987, EXHIBIT 28.1)
* EXHIBIT 10.3 - Reynolds Metals Company 1992 Nonqualified Stock
Option Plan. (Registration Statement No. 33-44400
on Form S-8, dated December 9, 1991, EXHIBIT 28.1)
* EXHIBIT 10.4 - Reynolds Metals Company Performance Incentive Plan,
as amended and restated effective January 1, 1996.
(File No. 1-1430, Form 10-Q Report for the Quarter
Ended March 31, 1995, EXHIBIT 10.4)
* EXHIBIT 10.5 - Agreement dated December 9, 1987 between Reynolds
Metals Company and Jeremiah J. Sheehan. (File No.
1-1430, 1987 Form 10-K Report, EXHIBIT 10.9)
* EXHIBIT 10.6 - Supplemental Death Benefit Plan for Officers. (File
No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.8)
* EXHIBIT 10.7 - Financial Counseling Assistance Plan for Officers.
(File No. 1-1430, 1987 Form 10-K Report, EXHIBIT
10.11)
* EXHIBIT 10.8 - Management Incentive Deferral Plan. (File No.
1-1430, 1987 Form 10-K Report, EXHIBIT 10.12)
* EXHIBIT 10.9 - Deferred Compensation Plan for Outside Directors as
Amended and Restated Effective December 1, 1993.
(File No. 1-1430, 1993 Form 10-K Report, EXHIBIT
10.12)
* EXHIBIT 10.10 - Retirement Plan for Outside Directors. (File
No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.10)
____________________________
* Incorporated by reference.
- 17 -
<PAGE> 18
* EXHIBIT 10.11 - Death Benefit Plan for Outside Directors.
(File No. 1-1430, 1986 Form 10-K Report, EXHIBIT
10.11)
* EXHIBIT 10.12 - Form of Indemnification Agreement for
Directors and Officers. (File No. 1-1430, Form 8-K
Report dated April 29, 1987, EXHIBIT 28.3)
* EXHIBIT 10.13 - Form of Executive Severance Agreement between
Reynolds Metals Company and key executive personnel,
including each of the individuals listed in Item 4A
of the Reynolds Metals Company 1994 Form 10-K
Report, Paul S. Hayden, John F. Rudin and F. Robert
Newman. (File No. 1-1430, 1987 Form 10-K Report,
EXHIBIT 10.18)
* EXHIBIT 10.14 - Amendment to Reynolds Metals Company 1987 Non-
qualified Stock Option Plan effective May 20, 1988.
(File No. 1-1430, Form 10-Q Report for the Quarter
Ended June 30, 1988, EXHIBIT 19(a))
* EXHIBIT 10.15 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective October 21,
1988. (File No. 1-1430, Form 10-Q Report for the
Quarter Ended September 30, 1988, EXHIBIT 19(a))
* EXHIBIT 10.16 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective January 1,
1987. (File No. 1-1430, 1988 Form 10-K Report,
EXHIBIT 10.22)
* EXHIBIT 10.17 - Form of Stock Option and Stock Appreciation
Right Agreement, as approved February 16, 1990 by
the Compensation Committee of the Company's Board of
Directors. (File No. 1-1430, 1989 Form 10-K Report,
EXHIBIT 10.24)
* EXHIBIT 10.18 - Amendment to Reynolds Metals Company 1982
Nonqualified Stock Option Plan effective January 18,
1991. (File No. 1-1430, 1990 Form 10-K Report,
EXHIBIT 10.25)
* EXHIBIT 10.19 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective January 18,
1991. (File No. 1-1430, 1990 Form 10-K Report,
EXHIBIT 10.26)
* EXHIBIT 10.20 - Letter Agreement dated January 18, 1991
between Reynolds Metals Company and William O.
Bourke. (File No. 1-1430, 1990 Form 10-K Report,
EXHIBIT 10.29)
* EXHIBIT 10.21 - Form of Stock Option Agreement, as approved April
22, 1992 by the Compensation Committee of the
Company's Board of Directors. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended March 31,
1992, EXHIBIT 28(a))
* EXHIBIT 10.22 - Consulting Agreement dated May 1, 1992 between
Reynolds Metals Company and William O. Bourke.
(File No. 1-1430, Form 10-Q Report for the Quarter
Ended March 31, 1992, EXHIBIT 28(b))
____________________________
* Incorporated by reference.
- 18 -
<PAGE> 19
* EXHIBIT 10.23 - Renewal dated February 18, 1994 of Consulting
Agreement dated May 1, 1992 between Reynolds Metals
Company and William O. Bourke. (File No. 1-1430,
1993 Form 10-K Report, EXHIBIT 10.28)
* EXHIBIT 10.24 - Reynolds Metals Company Restricted Stock Plan for
Outside Directors. (Registration Statement No. 33-
53851 on Form S-8, dated May 27, 1994, EXHIBIT 4.6)
* EXHIBIT 10.25 - Reynolds Metals Company New Management Incentive
Deferral Plan. (File No. 1-1430, Form 10-Q Report
for the Quarter Ended June 30, 1994, EXHIBIT 10.30)
* EXHIBIT 10.26 - Reynolds Metals Company Salary Deferral Plan for
Executives. (File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1994, EXHIBIT 10.31)
* EXHIBIT 10.27 - Reynolds Metals Company Supplemental Long Term
Disability Plan for Executives. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended June 30,
1994, EXHIBIT 10.32)
* EXHIBIT 10.28 - Amendment to Reynolds Metals Company 1982
Nonqualified Stock Option Plan effective August 19,
1994. (File No. 1-1430, Form 10-Q Report for the
Quarter Ended September 30, 1994, EXHIBIT 10.33)
* EXHIBIT 10.29 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective August 19,
1994. (File No. 1-1430, Form 10-Q Report for the
Quarter Ended September 30, 1994, EXHIBIT 10.34)
* EXHIBIT 10.30 - Amendment to Reynolds Metals Company 1992
Nonqualified Stock Option Plan effective August 19,
1994. (File No. 1-1430, Form 10-Q Report for the
Quarter Ended September 30, 1994, EXHIBIT 10.35)
* EXHIBIT 10.31 - Amendment to Reynolds Metals Company New Management
Incentive Deferral Plan effective January 1, 1995.
(File No. 1-1430, 1994 Form 10-K Report, EXHIBIT
10.36)
* EXHIBIT 10.32 - Amendment to Reynolds Metals Company New Management
Incentive Deferral Plan effective January 1, 1995
through December 31, 1996. (File No. 1-1430, 1994
Form 10-K Report, EXHIBIT 10.37)
* EXHIBIT 10.33 - Amendment to Reynolds Metals Company Salary Deferral
Plan for Executives effective January 1, 1995
through December 31, 1996. (File No. 1-1430, 1994
Form 10-K Report, EXHIBIT 10.38)
* EXHIBIT 10.34 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Trustee Pays Premiums). (File No. 1-
1430, Form 10-Q Report for the Quarter Ended June
30, 1995, EXHIBIT 10.34)
* EXHIBIT 10.35 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Employee Pays Premium). (File No. 1-
1430, Form 10-Q Report for the Quarter Ended June
30, 1995, EXHIBIT 10.35)
____________________________
* Incorporated by reference.
- 19 -
<PAGE> 20
* EXHIBIT 10.36 - Form of Split Dollar Life Insurance Agreement
(Employee Owner, Employee Pays Premium). (File No.
1-1430, Form 10-Q Report for the Quarter Ended June
30, 1995, EXHIBIT 10.36)
* EXHIBIT 10.37 - Form of Split Dollar Life Insurance Agreement (Third
Party Owner, Third Party Pays Premiums). (File No.
1-1430, Form 10-Q Report for the Quarter Ended June
30, 1995, EXHIBIT 10.37)
* EXHIBIT 10.38 - Form of Split Dollar Life Insurance Agreement (Third
Party Owner, Employee Pays Premiums). (File No. 1-
1430, Form 10-Q Report for the Quarter Ended June
30, 1995, EXHIBIT 10.38)
EXHIBIT 11 - Computation of Earnings Per Share
EXHIBIT 15 - None
EXHIBIT 18 - None
EXHIBIT 19 - None
EXHIBIT 22 - None
EXHIBIT 23 - None
EXHIBIT 24 - None
EXHIBIT 27 - Financial Data Schedule
Pursuant to Item 601 of Regulation S-K, certain instruments with
respect to long-term debt of Reynolds Metals Company (the "Registrant") and
its consolidated subsidiaries are omitted because such debt does not exceed
10 percent of the total assets of the Registrant and its subsidiaries on a
consolidated basis. The Registrant agrees to furnish a copy of any such
instrument to the Commission upon request.
F:\BFH\SEC\10Q\FORM10Q.395
- 20 -
<PAGE>
EXHIBIT 11
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions, except per share data)
EARNINGS PER SHARE
In the third quarter and nine months of 1995, earnings per share equals net
income divided by the weighted-average number of common shares and common
share equivalents outstanding during the period. The number of common
share equivalents outstanding was based on the assumed conversion of the
Company's preferred stock ("PRIDES"). For the purpose of this computation,
the conversion rate was based on the average market value of the Company's
common stock during the period. In the third quarter and nine months of
1994, earnings per share equals net income, minus PRIDES dividends, divided
by the weighted-average number of common shares outstanding during the
period. Common share equivalents relating to the PRIDES were not included
in the third quarter or nine months of 1994 since their effect would have
been anti-dilutive.
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- --------------------------
1995 1994 1995 1994
---------------------- --------------------------
<S> <C> <C> <C> <C>
Weighted-average shares outstanding:
Common shares 63,463,000 62,018,000 62,870,000 61,650,000
Common share equivalents 9,020,000 - 9,719,000 -
------------------------ -------------------------
Total 72,483,000 62,018,000 72,589,000 61,650,000
======================== =========================
Net income (loss) $112 $62 $305 $53
Less preferred stock dividends - 9 - 25
------------------------ -------------------------
$112 $53 $305 $28
======================== =========================
Earnings per share $1.56 $0.86 $4.20 $0.45
======================== =========================
Conversion rate 0.82 - 0.88 -
Average market value of common stock $60.37 - $53.48 -
</TABLE>
<PAGE>
EARNINGS PER SHARE (FULLY DILUTED):
Earnings per share (fully diluted) equals net income divided by the
weighted-average number of common shares and common share equivalents
outstanding during the period. The number of common share equivalents
outstanding was based on the maximum potential issuance of common shares
upon conversion of PRIDES, which is one share of common for each share of
PRIDES. This computation was made for presentation purposes only since its
effect was not material in 1995 and was anti-dilutive in 1994. The
difference between the number of common share equivalents for the nine
months ended September 30, 1995 and 1994 is due to the PRIDES having been
issued on January 25, 1994.
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -------------------------
1995 1994 1995 1994
------------------------- -------------------------
<S> <C> <C> <C> <C>
Weighted-average shares outstanding:
Common shares 63,463,000 62,018,000 62,870,000 61,650,000
Common share equivalents 11,000,000 11,000,000 11,000,000 10,022,000
------------------------- -------------------------
Total 74,463,000 73,018,000 73,870,000 71,672,000
========================= =========================
Net income (loss) $112 $62 $305 $53
========================= =========================
Earnings per share (fully diluted) $1.51 $0.85 $4.13 $0.74
========================= =========================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Reynolds
Metals Company Condensed Consolidated Balance Sheet (Unaudited) for September
30, 1995 and Consolidated Statement of Income (Unaudited) for the Nine Months
ended September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 187
<SECURITIES> 61
<RECEIVABLES> 1086<F1>
<ALLOWANCES> 21
<INVENTORY> 978
<CURRENT-ASSETS> 2346
<PP&E> 6543
<DEPRECIATION> 3373
<TOTAL-ASSETS> 7576
<CURRENT-LIABILITIES> 1268
<BONDS> 1907
<COMMON> 941
0
505
<OTHER-SE> 1140
<TOTAL-LIABILITY-AND-EQUITY> 7576
<SALES> 5356
<TOTAL-REVENUES> 5380
<CGS> 4486
<TOTAL-COSTS> 4486
<OTHER-EXPENSES> 335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 430
<INCOME-TAX> 125
<INCOME-CONTINUING> 305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 305
<EPS-PRIMARY> 4.20
<EPS-DILUTED> 0
<FN>
<F1>This amount represents total receivables, since trade
receivables are not broken out separately at interim dates,
in accordance with S-X 10-01(2).
</FN>
</TABLE>
