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, 1996
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, 1996, the Registrant had 63,683,734 shares of
Common Stock, no par value, outstanding and entitled to vote.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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<CAPTION>
Quarters ended Nine months ended
September 30 September 30
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(In millions, except per share amounts) 1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues
Net sales $1,751 $1,841 $5,236 $5,356
Equity, interest and other income 6 4 31 24
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1,757 1,845 5,267 5,380
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Costs and expenses
Cost of products sold 1,493 1,461 4,392 4,266
Selling, administrative and general expenses 106 112 322 326
Provision for depreciation and amortization 81 76 241 229
Interest - principally on long-term obligations 39 42 123 129
Operational restructuring costs - - 37 -
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1,719 1,691 5,115 4,950
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Income before income taxes and cumulative effect
of accounting change 38 154 152 430
Taxes on income 12 42 49 125
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Income before cumulative effect of accounting change 26 112 103 305
Cumulative effect of accounting change - - (15) -
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Net income 26 112 88 305
Preferred stock dividends 9 9 27 27
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Net income available to common shareholders $ 17 $ 103 $ 61 $ 278
====================================================================================================
Earnings per share
Average shares outstanding 64 72 64 73
Income before cumulative effect of accounting change $0.26 $1.56 $1.19 $4.20
Cumulative effect of accounting change - - (0.24) -
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Net income $0.26 $1.56 $0.95 $4.20
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Cash dividends per common share $0.35 $0.30 $1.05 $0.85
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</TABLE>
See notes beginning on page 5.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
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<CAPTION>
September 30 December 31
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(In millions) 1996 1995
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<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 22 $ 39
Receivables, less allowances of $22 (1995 - $20) 1,043 1,043
Inventories 837 891
Prepaid expenses 53 41
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Total current assets 1,955 2,014
Unincorporated joint ventures and associated companies 1,332 1,286
Property, plant and equipment 6,756 6,600
Less allowances for depreciation and amortization 3,536 3,377
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3,220 3,223
Deferred taxes and other assets 1,221 1,217
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Total assets $7,728 $7,740
====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued and other liabilities $1,080 $1,155
Short-term borrowings 254 111
Long-term debt 140 101
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Total current liabilities 1,474 1,367
Long-term debt 1,806 1,853
Postretirement benefits 1,199 1,213
Environmental, deferred taxes and other liabilities 646 690
Stockholders' equity
Preferred stock 505 505
Common stock 945 941
Retained earnings 1,250 1,256
Cumulative currency translation adjustments (34) (22)
Pension liability adjustment (63) (63)
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Total stockholders' equity 2,603 2,617
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Total liabilities and stockholders' equity $7,728 $7,740
====================================================================================================
</TABLE>
See notes beginning on page 5.
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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<CAPTION>
Nine Months Ended
September 30
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(In millions) 1996 1995
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<S> <C> <C>
Operating activities
Net Income $ 88 $ 305
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization 241 229
Operational restructuring costs 37 -
Cumulative effect of accounting change 15 -
Changes in operating assets and liabilities net of effects from
acquisitions & dispositions:
Accounts payable, accrued and other liabilities (71) (178)
Receivables (7) (105)
Inventories 50 (95)
Other (109) (29)
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 244 127
Investing activities
Capital investments:
Operational (135) (156)
Strategic (134) (129)
Investments (51) (45)
Maturities of investments in debt securities - 65
Other investing activities - net 13 31
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (307) (234)
Financing activities
Increase (decrease) in short-term borrowings 145 (9)
Cash dividends paid (94) (77)
Proceeds from (repayments of) long-term obligations and other - net (5) 72
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 46 (14)
Cash and cash equivalents
Net decrease (17) (121)
At beginning of period 39 308
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At end of period $ 22 $ 187
====================================================================================================
</TABLE>
See notes beginning on page 5.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1996 and 1995
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
1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-
K for the year ended December 31, 1995.
Note B - Inventories
Costs decreased $10 million in the third quarter of 1996 and $15
million in the nine months of 1996 resulting from the liquidation
of certain last-in, first-out (LIFO) inventories carried at lower
costs prevailing in prior years as compared with current costs.
Note C - Operational Restructuring Costs
In the first quarter of 1996, the Company recorded operational
restructuring costs of $37 million (pre-tax) that relate
principally to employee termination costs associated with the
planned closing of the Company's aluminum beverage can plant
located in Houston, Texas. The facility's 1.4-billion-can annual
capacity was determined to be in excess of the Company's domestic
customer needs due to productivity gains within the Company's can-
making system and slower overall growth in the domestic demand
for cans. Operations at the facility will cease at the end of
1996, at which time the Company intends to transfer some
equipment to other of its domestic and international can
operations and sell the plant and property.
Note D - Cumulative Effect of Accounting Change
In the first quarter of 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ("SFAS No. 121"). The Company recognized an after-
tax loss of $15 million for the cumulative effect of adopting
SFAS No. 121. The loss was for the impairment of assets held for
sale, principally undeveloped land.
Note E - Earnings per share
In the third quarter and nine months of 1996, earnings per share
equals net income, minus dividends on the Company's preferred
stock ("PRIDES"), divided by the weighted-average number of
common shares outstanding during the period. 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 PRIDES. For the purpose of this
computation, the respective conversion rates of common stock for
each share of PRIDES (0.82 share in the third quarter and 0.88
share in the nine month period of 1995) were based on the average
market value of the Company's common stock ($60.37 in the third
quarter and $53.48 in the nine-month period of 1995). Common
share equivalents relating to the PRIDES were not included in the
third quarter or nine months of 1996 since their effect would
have been anti-dilutive.
Note F - Financing arrangements
In the first quarter of 1996, the Company entered into $400
million of interest rate swap agreements, which effectively
convert a portion of its debt (principally medium-term notes)
from fixed rate to variable rate. Under these agreements,
payments are received based on a fixed rate (6.0%) and made based
on a variable rate (5.8% at September 30, 1996). These
arrangements mature in 2001. The variable rate is based on the
London Interbank Offer Rate.
In the second quarter of 1996, the Company amended its $500-
million revolving credit facility to extend the term and lower
the cost. The expiration date was extended from 2000 to 2001.
The annual commitment fee on the facility was lowered from .125%
to .10%. No amounts were outstanding under the facility at
September 30, 1996.
Note G - Contingent liabilities
As previously disclosed in the Company's annual report on Form 10-
K for the year ended December 31, 1995, 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
Environmental Protection Agency-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 on 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.
Note H - Canadian Reynolds Metals Company, Ltd. and Reynolds
Aluminum Company of Canada, Ltd.
Financial statements and financial statement schedules for
Canadian Reynolds Metals Company, Ltd. and Reynolds Aluminum
Company of Canada, Ltd. have been omitted because certain
securities registered under the Securities Act of 1933, of which
these entities are obligors (thus subjecting them to reporting
requirements under Section 13 or 15(d) of the Securities Exchange
Act of 1934), are fully and unconditionally guaranteed by
Reynolds Metals Company. Financial information relating to these
companies is presented herein in accordance with Staff Accounting
Bulletin 53 as an addition to the notes to the financial
statements of Reynolds Metals Company. Summarized financial
information is as follows:
Note H - Canadian Reynolds Metals Company, Ltd. and Reynolds
Aluminum Company of Canada, Ltd. - continued
<PAGE>
<TABLE>
Canadian Reynolds Metals Company, Ltd.
<CAPTION>
Quarters ended September 30 Nine Months ended September 30
------------------------------- ----------------------------------
1996 1995 1996 1995
------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net Sales:
Customers $ 53 $ 89 $159 $192
Parent company 140 139 463 495
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193 228 622 687
Cost of products sold 172 161 505 463
Net income $ 7 $ 50 $ 59 $156
</TABLE>
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------------ -----------------
<S> <C> <C>
Current assets $185 $112
Noncurrent assets 1,242 1,266
Current liabilities (64) (91)
Noncurrent liabilities (612) (617)
</TABLE>
<TABLE>
<CAPTION>
Reynolds Aluminum Company of Canada, Ltd.
Quarters ended September 30 Nine Months ended September 30
------------------------------- ----------------------------------
1996 1995 1996 1995
------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net Sales:
Customers $133 $161 $392 $410
Parent company 119 125 396 444
------------------------------- ----------------------------------
252 286 788 854
Cost of products sold 226 215 662 608
Net income $ 8 $ 52 $ 55 $161
</TABLE>
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
---------------- ----------------
<S> <C> <C>
Current assets $236 $221
Noncurrent assets 1,386 1,407
Current liabilities (130) (199)
Noncurrent liabilities (639) (632)
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The following information should be read in conjunction with
the consolidated financial statements and related notes included
in the Company's annual report on Form 10-K for the year ended
December 31, 1995, along with the consolidated financial
statements and related notes included in and referred to in this
report. In the tables, dollars are in millions, except per pound
amounts, and shipments are in thousands of metric tons. A metric
ton is equivalent to 2,205 pounds.
Management's Discussion and Analysis contains forecasts,
projections, estimates, statements of management's plans and
objectives for the Company and other forward-looking statements.
Please refer to the "Risk Factors" section beginning on page 14,
where the Company has summarized factors that could cause actual
results to differ materially from those projected in a forward-
looking statement or affect the extent to which a particular
projection is realized.
RESULTS OF OPERATIONS
The Company earned net income of $26 million ($0.26 per
share) and $88 million ($0.95 per share) in the third quarter and
nine months of 1996, respectively, compared to net income of $112
million ($1.56 per share) in the third quarter of 1995 and $305
million ($4.20 per share) in the nine months of 1995. The 1996
results included favorable after-tax effects from LIFO inventory
liquidations of $6 million ($0.10 per share) and $9 million
($0.15 per share) for the third quarter and nine month periods,
respectively. The results for the first nine months of 1996 also
included after-tax charges of $38 million ($0.60 per share) for
the effects of a restructuring charge and an accounting change
recorded in the first quarter of 1996. (See Notes C and D.)
The Company's results for the third quarter and nine months
were affected by lower realized prices for primary aluminum
(approximately 19% lower than the 1995 third quarter), as well as
price declines in a number of fabricated products. The Company's
results reflect softness in the overall global aluminum market,
primarily attributable to the soft landing in the U.S. economy
and weakness in Europe and other areas, that has caused end users
to liquidate excess inventories. Other factors affecting results
include higher costs for certain raw materials; severe winter
weather conditions earlier in the year that resulted in facility
curtailments and lower volumes; and reduced shipping levels in
the aluminum beverage can and can sheet businesses.
RESULTS OF OPERATIONS - continued
<PAGE>
<TABLE>
<CAPTION>
Shipments and Net Sales
Third Quarter
--------------------------------------------------------
1996 1995
Shipments Net Sales Shipments Net Sales
--------------------------------------------------------
<S> <C> <C> <C> <C>
Finished Products and Other sales
Packaging and containers:
Aluminum 88 $463 92 $479
Nonaluminum 155 138
Other aluminum 44 146 40 147
Other nonaluminum 127 131
--------------------------------------------------------
132 891 132 895
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Production and Processing
Primary aluminum 109 172 109 212
Sheet and plate 89 278 96 324
Extrusions 49 170 46 185
Other aluminum 41 119 45 122
Other nonaluminum 121 103
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288 860 296 946
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Total 420 $1,751 428 $1,841
========================================================
Average realized price per pound:
Fabricated aluminum products $1.81 $1.91
Primary aluminum $0.72 $0.89
</TABLE>
<TABLE>
<CAPTION>
Nine Months
--------------------------------------------------------
1996 1995
Shipments Net Sales Shipments Net Sales
--------------------------------------------------------
<S> <C> <C> <C> <C>
Finished Products and Other sales
Packaging and containers:
Aluminum 267 $1,403 275 $1,391
Nonaluminum 434 395
Other aluminum 123 421 125 445
Other nonaluminum 393 388
--------------------------------------------------------
390 2,651 400 2,619
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Production and Processing
Primary aluminum 290 485 248 504
Sheet and plate 280 875 308 1,013
Extrusions 152 528 154 585
Other aluminum 123 359 136 373
Other nonaluminum 338 262
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845 2,585 846 2,737
--------------------------------------------------------
Total 1,235 $5,236 1,246 $5,356
========================================================
Average realized price per pound:
Fabricated aluminum products $1.81 $1.83
Primary aluminum $0.76 $0.92
</TABLE>
<PAGE>
RESULTS OF OPERATIONS - continued
Finished Products and Other Sales
Shipments of aluminum packaging and containers in both 1996
periods were slightly lower principally due to decreased
shipments of aluminum beverage cans. Aluminum beverage can
shipments decreased because of reduced beer can volumes and lower
export sales to Latin America as the Company's partially owned
new facilities there start operations. Higher shipments of
laminated aluminum foil were realized in the nine-month period of
1996 due to the acquisition of a laminated aluminum products
plant in the second quarter of 1995. Shipments of other foil
products, especially REYNOLDS WRAP aluminum foil, were higher in
both periods due to strong demand.
Other aluminum product shipments were lower in the nine-
month period of 1996 due to severe winter weather conditions
experienced earlier in the year. These conditions adversely
affected the Company's distribution business, which was also
affected by lower activity in the transportation market,
especially for trucks and trailers. Shipments of other aluminum
products by the distribution business generally improved in the
third quarter of 1996. Construction product shipments,
benefiting from improved weather conditions in the second and
third quarters of 1996, were slightly higher in the nine-month
period due to the opening of new distribution centers.
In addition to reflecting the effect of aluminum volume
changes described above, the decline in net sales for Finished
Products and Other Sales in the third quarter of 1996 was due to
lower prices for distributor products (aluminum and stainless
steel). The deterioration in pricing for distributor products
was due to intense competition from foreign suppliers, especially
for aluminum plate and stainless steel. These effects were
mostly offset by higher nonaluminum sales for construction
products (principally residential vinyl siding), can machinery
and plastic packaging. The increase in sales of can machinery
was due to demand for technologically advanced machines and sales
to expanding can operations in Latin America. The increase in
sales of plastic packaging resulted from the acquisition of a
flexible packaging operation in the fourth quarter of 1995.
The increase in net sales in the nine-month period resulted
from higher prices for aluminum beverage cans and foil products
(especially REYNOLDS WRAP aluminum foil) and higher nonaluminum
sales for construction products, can machinery, plastic packaging
and printing cylinders. The increase in sales of printing
cylinders was due to the acquisition of a printing cylinder
engraving company in the second quarter of 1995. These effects
were somewhat offset by the lower aluminum shipping volumes and
lower prices for distributor products (aluminum and stainless
steel).
Production and Processing
Primary aluminum shipments fluctuate from period to period
because of variations in internal requirements and changes in
customer demand for value-added foundry ingot and billet. The
acquisition of an additional 25% interest in the Becancour,
Quebec primary aluminum production facility in the fourth quarter
of 1995 contributed to the increase in primary aluminum shipments
in the nine-month period of 1996, in addition to providing
primary aluminum for use in the Company's fabricating operations.
Weak economic conditions and the liquidation of excess
inventories has led to decreases in average realized prices for
primary aluminum.
Most other products in this operating group realized
declines in shipments and prices in both periods because of
factors described under "Results of Operations," and for the nine-
month period, the severe winter weather experienced earlier in
the year. These conditions generally affected most markets
served by this operating group. In addition, shipments of
recycled aluminum were lower due to greater internal consumption
by fabricating operations resulting principally from operational
improvements in can stock production. Higher shipments were
realized for aluminum wheels due to additional capacity at the
Company's new wheel facility in Wisconsin and for electrical rod
due to increased demand. The increases in other nonaluminum
sales were due to improved demand in 1996 compared to 1995 for
carbon products and alumina.
RESULTS OF OPERATIONS - continued
Equity, Interest and Other Income
Improved operations at Latin American aluminum beverage can
and wheel facilities resulted in an increase in equity, interest
and other income in both periods. Lower interest income from a
reduction in invested funds somewhat offset these increases.
Costs and Expenses
Cost of products sold increased because of higher costs for
purchased materials, lower capacity utilization at aluminum
fabricating facilities and higher labor costs due to new
contracts as discussed below. Costs were favorably impacted by
continuous improvement efforts, the favorable effects of LIFO
inventory liquidations (see Note B), lower costs for outside
purchases of aluminum and lower quantities of outside purchases
of primary aluminum (due to the acquisition of an additional 25%
interest in the Becancour, Quebec primary aluminum production
facility in the fourth quarter of 1995).
The declines in interest expense resulted from lower
effective interest rates and higher amounts of capitalized
interest. These benefits were mostly offset by higher amounts of
debt outstanding.
The declines in selling, administrative and general expenses
were generally caused by a lower level of business activity.
The Company's shipments of alumina were greater in 1996
compared to 1995 despite deteriorating conditions in the alumina
market. Because of these deteriorating conditions, the Company
temporarily curtailed 250,000 metric tons of alumina production
capacity at its 1.6-million-metric-tons-per-year Texas alumina
refinery in the third quarter of 1996. This temporary
curtailment is not expected to have a material impact on future
operating results and will not affect the Company's ability to
meet the requirements of its primary aluminum production
operations.
In the second quarter of 1996, the Company signed new six-
year labor contracts with its major unions that represent a
majority of its domestic hourly employees. Major provisions of
the new agreements include wage increases of $1.15 an hour over
the first five years (plus incremental increases in 1997 and
1999), enhanced pension and other benefits. At the end of the
fifth year, the economic provisions of the contracts will be
reopened. If agreement cannot be reached, the economic
provisions will be submitted to arbitration for one additional
year. The Company and the unions also agreed to work
cooperatively on customer requirements, business objectives and
shareholder and union interests. In addition, the agreements
contain broad, new provisions for employee safety, job security,
and influence, control and accountability in the work
environment.
In the first quarter of 1996, the Company recorded
operational restructuring costs of $37 million (pre-tax) that
relate principally to employee termination costs associated with
the planned closing of an aluminum beverage can plant in Houston,
Texas. The Company's current strategy for its U.S. can business
is to aggressively reduce costs and increase production
efficiencies through modernization programs and new technologies.
The closing of the Houston facility will provide the Company with
annual cost savings of approximately $18 million. As a result of
improved efficiencies system-wide, the Company will essentially
maintain its current annual domestic aluminum beverage can
production capacity. (See Note C.)
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 cost estimates to satisfy known remediation
requirements, and adjusts its accruals accordingly. Based on
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 requirements which may
subsequently be determined. 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.
Taxes on Income
The effective tax rates reflected in the statement of income
differ from the U.S. federal statutory rate because of state and
foreign taxes and the effects of percentage-depletion allowances.
Cumulative Effect of Accounting Change
In the first quarter of 1996, the Company adopted Statement
of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. (See Note D.)
Operating Outlook
The deterioration in aluminum prices the Company and the
aluminum industry are currently experiencing will make it
difficult in the near term to achieve significant gains over
current operating results. The Company believes the inventory
liquidation process that has plagued the aluminum industry
throughout 1996 is substantially complete. The current buildup
of worldwide aluminum inventories (principally at London Metal
Exchange warehouses) appears to be demand-related as users of
aluminum products (as well as producers) are learning to operate
with leaner inventories.
The Company's short-term goals will be to concentrate on
operational excellence and improving its financial position. The
Company has set a goal to improve pre-tax performance in 1997 by
approximately $100 million, excluding the effect of price
changes. All of the Company's businesses are developing plans to
contribute to this goal. Operational improvements and
modernizations are already underway in the aluminum beverage can,
flexible packaging, can stock production and European sheet and
extrusion businesses.
The Company continues to remain optimistic regarding
favorable, long-term aluminum industry fundamentals. Consensus
expectations for next year indicate global economic growth of 3%
with aluminum consumption growing approximately 5%. If these
expectations are met, aluminum supply/demand should be in much
better balance and worldwide aluminum inventories should be
reduced substantially.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital totaled $481 million at September 30, 1996,
compared to $647 million at December 31, 1995. The ratio of
current assets to current liabilities was 1.3/1 at September 30,
1996, compared to 1.5/1 at December 31, 1995.
Operating Activities
In the first nine months of 1996, cash generated from
operations was used to fund investing activities.
Investing Activities
Capital investments totaling $320 million in the first nine
months of 1996 included $135 million for operating requirements
(i.e., replacement equipment, capital maintenance, environmental
control projects, etc.). The remainder was for continuing
performance improvement and strategic investment projects
including the modernization of aluminum beverage can facilities;
expansions at foil, plastic film and extrusion facilities;
quality improvements at a can sheet facility in Alabama; the
modification and equipping of a purchased facility in Wisconsin
to produce aluminum wheels that was substantially completed in
the second quarter of 1996; and, as discussed below, the
acquisition of an interest in a Chinese joint venture and the
construction of a new wheel facility in Virginia.
In the second quarter of 1996, the Company acquired an
interest in a joint venture in China that produces aluminum foil
and extrusions. The operation, Bohai Aluminium Industries, Ltd.,
includes a large aluminum fabricating facility that was built in
the mid-1980's and expanded later that decade. The facility
manufactures aluminum foil, primarily for the food,
pharmaceutical and tobacco industries, and extrusions for the
automotive and construction products markets.
In the third quarter of 1996, the Company began construction
of a $34-million facility in Virginia to manufacture aluminum
wheels. Production is expected to start in early 1997. The
facility will use a manufacturing process that combines the
Company's computer-controlled, flow-formed casting technology
with forging to produce lightweight wheels with added styling
flexibility. The facility will initially employ approximately 80
to 125 people.
Financing Activities
Cash provided by financing activities in the first nine
months of 1996 was used to fund investing activities. The
principal source of funds was from the issuance of $130 million
of commercial paper at a weighted-average rate of 5.6%.
In the first quarter of 1996, the Company entered into $400
million of interest rate swap agreements and, in the second
quarter of 1996, the Company amended its $500-million revolving
credit facility. (See Note F.)
Financial Outlook
Capital investments in 1996 are expected to be $450 million,
with approximately 46% of this amount allocated for operating
requirements. Remaining expenditures in 1996 will be for those
performance improvement and strategic investment projects
underway and are expected to be funded with cash generated from
operations, supplemented with short-term borrowings as needed.
LIQUIDITY AND CAPITAL RESOURCES - continued
Financial Outlook - continued
The Company announced previously that it intends to sell its
coal properties in western Kentucky. The Company has determined
that it will postpone indefinitely any sale of those properties
pending resolution of bankruptcy proceedings (and related
matters) with respect to a third party operator, which holds a
lease over, and conducts mining operations on, a significant
portion of such properties.
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. At September 30, 1996, $150
million of the Company's $1.65-billion shelf registration
remained available for the issuance of debt securities.
For the longer term, the Company is reviewing all of its
businesses with a view to the possibility, among other things, of
spin-offs, divestitures, recapitalizations, the forming of
strategic alliances to increase scale, or retention of a business
and funding its growth.
====================================================================
| RISK FACTORS |
| |
| This section should be read in conjunction with Part I, |
| Items 1 (Business), 3 (Legal Proceedings) and 7 (Management's |
| Discussion and Analysis of Financial Condition and Results of |
| Operations) of the Company's 1995 Form 10-K and Part II, Item 1 |
| (Legal Proceedings) of the Company's reports on Form 10-Q for the |
| first and second quarters of 1996. |
| |
| This report contains (and oral communications made by or on |
| behalf of the Company may contain) forecasts, projections, |
| estimates, statements of management's plans and objectives for |
| the Company and other forward-looking statements. The Company's |
| expectations for the future and related forward-looking |
| statements are based on a number of assumptions and forecasts as |
| to world economic growth and other economic indicators (including |
| rates of inflation, industrial production, housing starts and |
| light vehicle sales), trends in the Company's key markets, global |
| aluminum supply and demand conditions, and aluminum ingot prices, |
| among other things. By their nature, forward-looking statements |
| involve risk and uncertainty, and various factors could cause the |
| Company's actual results to differ materially from those |
| projected in a forward-looking statement or affect the extent to |
| which a particular projection is realized. |
| |
| The improvement in aluminum industry fundamentals that had |
| been anticipated for 1996 has not materialized, and the |
| deterioration in prices that the Company and the aluminum |
| industry have experienced will make it difficult to achieve any |
| improvement in operating results for the balance of the year. |
| These conditions may continue for the next several months. |
| Thereafter, barring a recession in any major world economy, the |
| Company expects improved conditions in aluminum industry |
| supply/demand fundamentals that will continue for the next |
| several years. Consensus expectations for next year indicate |
| global economic growth of 3% with aluminum consumption growing |
| approximately 5%. The Company's outlook for growth in aluminum |
| consumption for the remainder of this decade is an average of 4% |
| per year. The Company expects greater use of aluminum around the |
| world in automobiles and other light vehicles; a slowing in the |
| growth in U.S. aluminum beverage can shipments to about 2% per |
| year and a 5% annual increase in global shipments, with rapid |
| growth of the aluminum beverage can market in Latin America, |
| Asia, the Middle East, and other developing economies; and |
| increased use of |
====================================================================
====================================================================
| RISK FACTORS - continued |
| |
| aluminum in the building and construction markets, particularly |
| in Eastern Europe and the Commonwealth of Independent States and |
| as a result of new construction projects in emerging markets. |
| |
| Economic and/or market conditions other than as forecast by |
| the Company in the preceding paragraph, particularly in the U.S., |
| Japan and Germany (which are large consumers of aluminum) and in |
| Latin America, could cause the Company's actual results to differ |
| materially from those projected in a forward-looking statement or |
| affect the extent to which a particular projection is realized. |
| |
| The following factors also could affect the Company's |
| results: |
| |
| * Primary aluminum is an internationally traded commodity. |
| The price of primary aluminum is subject to worldwide market |
| forces of supply and demand and other influences. Prices can be |
| volatile. The Company's current strategy of being a vertically |
| integrated producer of value-added aluminum products, and its use|
| of contractual arrangements including fixed-price sales |
| contracts, fixed-price supply contracts, and forward, futures and|
| option contracts, reduces its exposure to this volatility but |
| does not eliminate it. |
| |
| * The markets for most aluminum products are highly |
| competitive. Certain of the Company's competitors are larger |
| than the Company in terms of total assets and operations and have|
| greater financial resources. Certain foreign governments are |
| involved in the operation and/or ownership of certain |
| competitors, and may be motivated by political as well as |
| economic considerations. In addition, aluminum competes with |
| other materials, such as steel, vinyl, plastics and glass, among |
| others, for various applications in the Company's key markets. |
| Unanticipated actions or developments by or affecting the |
| Company's competitors and/or the willingness of customers to |
| accept substitutions for the products sold by the Company could |
| affect results. |
| |
| * The Company spends substantial capital and operating amounts |
| relating to ongoing compliance with environmental laws. In |
| addition, the Company is involved in remedial investigations and |
| actions in connection with past disposal of wastes. Estimating |
| future environmental compliance and remediation costs is |
| imprecise due to the continuing evolution of environmental laws |
| and regulatory requirements, the availability and application of |
| technology, the identification of currently unknown remediation |
| sites, and the allocation of costs among potentially responsible |
| parties. |
| |
| * Unanticipated material legal proceedings or investigations, |
| or the disposition of those currently pending against the Company|
| other than as anticipated by management and counsel, could affect|
| the Company's results. |
| |
| * Changes in the costs of power, resins, caustic soda, green |
| coke and other raw materials can affect results. A new five-year|
| contract with the Bonneville Power Administration for the period |
| October 1996 - September 2001 will provide a fixed rate for |
| electrical power that is 16% less than rates previously in effect|
| for the Company's Longview, Washington and Troutdale, Oregon |
| primary aluminum production plants. The new contract is subject |
| to regulatory review and approval. |
| |
| * The Company's key transportation and building and |
| construction markets are cyclical, and sales to those markets in |
| particular can be influenced by economic conditions. |
====================================================================
====================================================================
| RISK FACTORS - continued |
| |
| * A strike at a customer facility supplied by the Company |
| could affect the Company's results. |
| |
| * The Company has begun a portfolio review of all of its |
| operations and businesses. The Company is considering |
| alternatives including, among other things, asset sales, spin- |
| offs, recapitalizations and formation of strategic alliances. |
| The timing, nature and magnitude of the actions, if any, that |
| will be taken are not certain. Such actions, if taken, could |
| affect the Company's results and ongoing operating performance. |
| |
| In addition to the factors referred to above, the Company is |
| exposed to general financial, political, economic and business |
| risks in connection with its worldwide operations. The Company |
| continues to evaluate and manage its operations in a manner to |
| mitigate the effects from exposure to such risks. In general, |
| the Company's expectations for the future are based on the |
| assumption that conditions relating to costs, currency values, |
| competition and the legal, regulatory, financial, political and |
| business environments in the economies and markets in which the |
| Company operates will not change significantly overall. |
====================================================================
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
The Registrant filed no reports on Form 8-K during the
third quarter of 1996.
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
(Chief Accounting Officer)
DATE: November 13, 1996
INDEX TO EXHIBITS
EXHIBIT 2 - None
* EXHIBIT 3.1 - Restated Certificate of Incorporation,
as amended to the date hereof.
(Registration Statement No. 333-00929 on
Form S-8, dated February 14, 1996,
EXHIBIT 4.1)
* EXHIBIT 3.2 - By-Laws, as amended to the date hereof.
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended March 31, 1996,
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)
_______________________
*Incorporated by reference.
* 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))
* EXHIBIT 4.13 - Articles of Continuance of Societe
d'Aluminium Reynolds du Canada,
Ltee/Reynolds Aluminum Company of
Canada, Ltd. (formerly known as Canadian
Reynolds Metals Company, Limited --
Societe Canadienne de Metaux Reynolds,
Limitee) ("REYCAN"), as amended to the
date hereof. (File No. 1-1430, 1995
Form 10-K Report, EXHIBIT 4.13)
* EXHIBIT 4.14 - By-Laws of REYCAN, as amended to the date
hereof. (File No. 1-1430, 1995 Form 10-
K Report, EXHIBIT 4.14)
* EXHIBIT 4.15 - Articles of Incorporation of Societe
Canadienne de Metaux Reynolds,
Ltee/Canadian Reynolds Metals Company,
Ltd. ("CRM"), as amended to the date
hereof. (File No. 1-1430, 1995 Form 10-
K Report, EXHIBIT 4.15)
* EXHIBIT 4.16 - By-Laws of CRM, as amended to the date
hereof. (File No. 1-1430, 1995 Form 10-
K Report, EXHIBIT 4.16)
* EXHIBIT 4.17 - Indenture dated as of April 1, 1993
among REYCAN, 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 4.18 - First Supplemental Indenture, dated as of
December 18, 1995 among REYCAN, Reynolds
Metals Company, CRM and The Bank of New
York, as Trustee. (File No. 1-1430,
1995 Form 10-K Report, EXHIBIT 4.18)
* EXHIBIT 4.19 - 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)
_______________________
*Incorporated by reference.
* 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)
* 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 1995 Form 10-K
Report. (File No. 1-1430, 1987 Form 10-
K Report, EXHIBIT 10.18)
* EXHIBIT 10.14 - Amendment to Reynolds Metals Company
1987 Nonqualified 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)
____________________________
* Incorporated by reference.
* 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 10.27)
* 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))
* 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)
____________________________
* Incorporated by reference.
* 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)
* 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 10.39 - Reynolds Metals Company 1996
Nonqualified Stock Option Plan.
(Registration Statement No. 333-03947 on
Form S-8, dated May 17, 1996, EXHIBIT
4.6)
* EXHIBIT 10.40 - Amendment to Reynolds Metals Company
1992 Nonqualified Stock Option Plan
effective January 1, 1993.
(Registration Statement No. 333-03947 on
Form S-8, dated May 17, 1996, EXHIBIT
99)
____________________________
* Incorporated by reference.
* EXHIBIT 10.41 - Form of Stock Option Agreement, as approved
May 17, 1996 by the Compensation
Committee of the Company's Board of
Directors. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1996, EXHIBIT 10.41)
* EXHIBIT 10.42 - Form of Three Party Stock Option Agreement,
as approved May 17, 1996 by the
Compensation Committee of the Company's
Board of Directors. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
June 30, 1996, EXHIBIT 10.42)
EXHIBIT 10.43 - Stock Option Agreement dated August 30, 1996
between Reynolds Metals Company and
Jeremiah J. Sheehan
EXHIBIT 10.44 - Amendment to Deferred Compensation Plan
for Outside Directors effective August
15, 1996
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
____________________________
* Incorporated by reference.
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.
EXHIBIT 10.43
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated August 30, 1996, between REYNOLDS
METALS COMPANY, a Delaware corporation ("Reynolds"), and Jeremiah
J. Sheehan "Optionee").
WHEREAS, the Committee designated to administer the
Reynolds Metals Company 1996 Nonqualified Stock Option Plan
("Plan") has selected Optionee as a key employee of Reynolds to
whom an option is to be granted under the Plan, and has
recognized that through Optionee's efforts and because of
Optionee's responsibilities, Optionee is in a position to
contribute substantially to the overall success and growth of
Reynolds;
NOW, THEREFORE, the parties agree as follows:
1. Reynolds grants to Optionee an option to
purchase from Reynolds 150,000 shares of its Common
Stock, no par value, at a price of $53.50 per share,
and otherwise in accordance with the terms and
conditions stated in the Plan.
2. Subject to the terms of the Plan and of this
Agreement (including paragraph 3 below), the option
granted hereunder shall be exercisable in whole or
part, from time to time, on and after August 30, 1997,
but in no event later than the earlier of (a) March 31,
2000 or (b) the date specified in the Plan relating to
Optionee's termination of employment with Reynolds and
its subsidiaries. No option may be exercised for less
than 100 shares of Common Stock unless the Optionee is
electing to exercise all the remaining options then
exercisable under this Agreement.
3. The option granted hereunder shall be exercisable
only if (a) on or before September 30, 1999, the Fair
Market Value (as defined in the Plan) of the Common
Stock equals or exceeds 150% of the exercise price for
a period of 30 consecutive calendar days and (b)
Optionee becomes Chief Executive Officer of Reynolds
and remains in that position through the date the
condition set forth in clause (a) is satisfied. For
purposes of applying the 150% ratio in clause (a) of
the previous sentence, proportionate adjustments shall
be made as appropriate in accordance with Section 6.02
of the Plan in the event of a recapitalization.
4. This Agreement is at all times subject to the
terms and conditions of the Plan, which terms and
conditions are incorporated herein by reference.
5. All notices to Reynolds must be in writing,
addressed to the Director, Employee Financial Services,
Reynolds Metals Company, 6601 West Broad Street,
Richmond, Virginia 23230-1701, and are effective upon
receipt.
6. The effectiveness of this Agreement and of any
grant of an option hereunder are subject to compliance
with all applicable laws and regulations and to receipt
of any governmental approvals necessary for the
performance by the parties of their obligations
hereunder, including but not limited to compliance with
and approvals under all applicable exchange control and
securities laws.
IN WITNESS WHEREOF, Reynolds and Optionee have executed
this Agreement in duplicate as of the date first above written.
REYNOLDS METALS COMPANY
Richard G. Holder
By Richard G. Holder
Jeremiah J. Sheehan
______________________________
Optionee
EXHIBIT 10.44
AMENDMENTS TO
REYNOLDS METALS COMPANY
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
Sections 4.02(b) and 4.04(d) of the Reynolds Metals Company
Deferred Compensation Plan for Outside Directors shall be amended
effective August 15, 1996 to be read in their entirety as follows:
4.02(b) If Stock Equivalent Additional Compensation is
being paid on the Deferred Compensation, the amount of a
lump sum payment shall be equal to (i) the total number of
equivalent shares of Company Stock credited to the
Participant's account under this Plan as of the last day on
which the New York Stock Exchange, Inc. is open in the year
the Deferral Termination Date occurs, multiplied by (ii) the
closing sales price of Company Stock as reported on New York
Stock Exchange - Composite Transactions on such date. This
lump sum payment shall be paid as soon as administratively
feasible following the later of (i) the end of the year in
which the Participant's Deferral Termination Date with
respect to such compensation occurs, or (ii) the date on
which all of the Participant's transactions under the Plan
shall be exempt or excluded from liability under Section
16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). If annual installments are elected
instead of a lump sum, the amount of the installment payment
to be made in a calendar year shall be computed by taking
(y) the amount that would have been payable after the end of
the preceding year had the entire amount remaining as of the
end of such year been paid as a single lump sum, divided by
(z) the number of installment payments remaining, including
the installment about to be paid. The first annual
installment shall be paid as soon as administratively
feasible following the later of (i) the end of the year in
which the Participant's Deferral Termination Date with
respect to such compensation occurs, or (ii) the date on
which all of the Participant's transactions under the Plan
shall be exempt or excluded from liability under Section
16(b) of the Exchange Act. Each annual installment
thereafter shall be paid as soon as administratively
feasible in each calendar year following the year in which
the Deferral Termination Date occurs.
* * * * *
4.04(d) Anything herein to the contrary notwith-
standing, the Plan Committee shall not accelerate any
payment of Deferred Compensation with respect to which Stock
Equivalent Additional Compensation is to be paid for so long
as such payment could reasonably cause the Participant to
become subject to liability under Section 16(b) of the
Exchange Act in connection with such payment or any other
transaction under the Plan.
Executed and adopted pursuant to action taken by the Board
of Directors at its meeting held on August 16, 1996.
REYNOLDS METALS COMPANY
F. Robert Newman
By: F. Robert Newman
Its: Vice President, Human Resources
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(In millions, except share and per share data)
EARNINGS PER SHARE
In the third quarter and nine months of 1996, earnings per share
equals net income, minus dividends on the Company's preferred
stock ("PRIDES"), divided by the weighted-average number of
common shares outstanding during the period. 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 PRIDES. For the purpose of this
computation, the respective conversion rates of common stock for
each share of PRIDES were based on the average market value of
the Company's common stock during the applicable period. Common
share equivalents relating to the PRIDES were not included in the
third quarter or nine months of 1996 since their effect would
have been anti-dilutive.
<PAGE>
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- ---------------------------
1996 1995 1996 1995
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Weighted-average shares outstanding:
Common shares 63,679,000 63,463,000 63,650,000 62,870,000
Common share equivalents - 9,020,000 - 9,719,000
-------------------------- ---------------------------
Total 63,679,000 72,483,000 63,650,000 72,589,000
========================== ===========================
Income before cumulative effect of
accounting change $26 $112 $103 $305
Less preferred stock dividends 9 - 27 -
-------------------------- ---------------------------
$17 $112 $76 $305
-------------------------- ---------------------------
Cumulative effect of accounting
change - - (15) -
-------------------------- ---------------------------
$17 $112 $61 $305
========================== ===========================
Earnings per share:
Income before cumulative effect of
accounting change $0.26 $1.56 $1.19 $4.20
Cumulative effect of accounting
change - - (0.24) -
-------------------------- ---------------------------
Net income $0.26 $1.56 $0.95 $4.20
========================== ===========================
Conversion rate - 0.82 - 0.88
Average market value per share
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 the PRIDES, which is
one share of common for each share of PRIDES. This computation
was made for presentation purposes only since its effect was anti-
dilutive in 1996 and was not material in 1995.
<PAGE>
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- ------------------------
1996 1995 1996 1995
-------------------------- ------------------------
<S> <C> <C> <C> <C>
Weighted-average shares outstanding:
Common shares 63,679,000 63,463,000 63,650,000 62,870,000
Common share equivalents 11,000,000 11,000,000 11,000,000 11,000,000
-------------------------- ------------------------
Total 74,679,000 74,463,000 74,650,000 73,870,000
========================== ========================
Income before cumulative effect of
accounting change $26 $112 $103 $305
Cumulative effect of accounting
change - - (15) -
-------------------------- ------------------------
Net income $26 $112 $88 $305
========================== ========================
Earnings per share (fully diluted):
Income before cumulative effect of
accounting change $0.34 $1.51 $1.38 $4.13
Cumulative effect of accounting
change - - (0.21) -
-------------------------- ------------------------
Net income $0.34 $1.51 $1.17 $4.13
========================== ========================
</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, 1996 and Consolidated Statement of Income (Unaudited) for the Nine Months
ended September 30, 1996 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 1065<F1>
<ALLOWANCES> 22
<INVENTORY> 837
<CURRENT-ASSETS> 1955
<PP&E> 6756
<DEPRECIATION> 3536
<TOTAL-ASSETS> 7728
<CURRENT-LIABILITIES> 1474
<BONDS> 1806
0
505
<COMMON> 945
<OTHER-SE> 1153
<TOTAL-LIABILITY-AND-EQUITY> 7728
<SALES> 5236
<TOTAL-REVENUES> 5267
<CGS> 4392
<TOTAL-COSTS> 4392
<OTHER-EXPENSES> 278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> 152
<INCOME-TAX> 49
<INCOME-CONTINUING> 103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (15)
<NET-INCOME> 88
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.00
<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>
