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 June 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 July 31, 1996, the Registrant had 63,677,834 shares of
Common Stock, no par value, outstanding and entitled to vote.
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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Reynolds Metals Company
<CAPTION>
Quarters ended Six
months ended
June 30
June 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 $1,823 $1,864 $3,485
$3,515
Equity, interest and other income 12 10 25
20
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1,835 1,874 3,510
3,535
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Costs and expenses
Cost of products sold 1,519 1,486 2,899
2,805
Selling, administrative and general expenses 105 110 216
214
Provision for depreciation and amortization 80 77 160
153
Interest - principally on long-term obligations 42 44 84
87
Operational restructuring costs - - 37
-
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1,746 1,717 3,396
3,259
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Income before income taxes and cumulative
effect of accounting change 89 157 114
276
Taxes on income 29 46 37
83
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Income before cumulative effect of
accounting change 60 111 77
193
Cumulative effect of accounting change - -
(15) -
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Net income 60 111 62
193
Preferred stock dividends 9 9 18
18
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Net income available to common shareholders $ 51 $ 102 $ 44
$ 175
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==============
Earnings per share
Average shares outstanding 64 73 64
73
Income before cumulative effect of
accounting change $0.81 $1.51 $0.93
$2.64
Cumulative effect of accounting change - -
(0.24) -
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Net income $0.81 $1.51 $0.69
$2.64
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==============
Cash dividends per common share $0.35 $0.30 $0.70
$0.55
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</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
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Reynolds Metals Company
June 30 December 31
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(In millions) 1996 1995
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ASSETS
Current assets
Cash and cash equivalents $ 27 $ 39
Receivables, less allowances of $22 (1995 - $20) 1,102 1,043
Inventories 891 891
Prepaid expenses 54 41
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Total current assets 2,074 2,014
Unincorporated joint ventures and associated companies 1,341 1,286
Property, plant and equipment 6,690 6,600
Less allowances for depreciation and amortization 3,472 3,377
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3,218 3,223
Deferred taxes and other assets 1,235 1,217
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Total assets $7,868 $7,740
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued and other liabilities $1,051 $1,155
Short-term borrowings 389 111
Long-term debt 110 101
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Total current liabilities 1,550 1,367
Long-term debt 1,836 1,853
Postretirement benefits 1,205 1,213
Environmental, deferred taxes and other liabilities 671 690
Stockholders' equity
Preferred stock 505 505
Common stock 945 941
Retained earnings 1,255 1,256
Cumulative currency translation adjustments (36) (22)
Pension liability adjustment (63) (63)
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Total stockholders' equity 2,606 2,617
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Total liabilities and stockholders' equity $7,868 $7,740
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<PAGE>
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
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Reynolds Metals Company
Six Months Ended
June 30
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(In millions) 1996 1995
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Operating activities
Net Income $ 62 $193
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Depreciation and amortization 160 153
Operational restructuring costs 37 -
Cumulative effect of accounting change 15 -
Changes in operating assets and liabilities:
Accounts payable, accrued and other liabilities (89) (116)
Receivables (71) (187)
Inventories (10) (161)
Other (97) (63)
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Net cash provided by (used in) operating activities 7 (181)
Investing activities
Capital investments:
Operational (89) (91)
Strategic (94) (84)
Investments (46) (35)
Maturities of investments in debt securities - 54
Other investing activities - net (6) 24
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Net cash used in investing activities (235) (132)
Financing activities
Increase in borrowings (principally short-term) 279 95
Cash dividends paid (63) (49)
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Net cash provided by financing activities 216 46
Cash and cash equivalents
Net decrease ( 12) (267)
At beginning of period 39 308
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At end of period $ 27 $ 41
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<PAGE>
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 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 - Operational Restructuring Costs
In the first quarter of 1996, the Company recorded operational
restructuring costs of $37 million (pre-tax), which 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 in early 1997,
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 C - 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 D - Earnings per share
In the second quarter and six 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 second
quarter and six 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 (0.96 share in the second quarter and 0.94
share in the six month period of 1995) were based on the average
market value of the Company's common stock ($49.41 in the second
quarter and $50.03 in the six-month period of 1995). Common
share equivalents relating to the PRIDES were not included in the
second quarter or six months of 1996 since their effect would
have been anti-dilutive.
Note E - 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 (5.25% at June 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 June
30, 1996.
Note F - 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 G - 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 G - Canadian Reynolds Metals Company, Ltd. and Reynolds
Aluminum Company of Canada, Ltd. - continued
Canadian Reynolds Metals Company, Ltd.
Quarters ended June 30 Six Months ended June 30
---------------------- ------------------------
1996 1995 1996 1995
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Net Sales:
Customers $ 58 $ 61 $106 $103
Parent company 154 156 323 356
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212 217 429 459
Cost of products sold 179 135 333 302
Net income $ 15 $ 55 $ 52 $106
June 30 December 31
1996 1995
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Current assets $253 $112
Noncurrent assets 1,252 1,266
Current liabilities (149) (91)
Noncurrent liabilities (612) (617)
Reynolds Aluminum Company of Canada, Ltd.
Quarters ended June 30 Six Months ended June 30
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1996 1995 1996 1995
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Net Sales:
Customers $142 $136 $259 $249
Parent company 134 140 277 319
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276 276 536 568
Cost of products sold 237 178 436 393
Net income $15 $59 $47 $109
June 30 December 31
1996 1995
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Current assets $368 $221
Noncurrent assets 1,395 1,407
Current liabilities (279) (199)
Noncurrent liabilities (639) (632)
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.
RESULTS OF OPERATIONS
The Company earned net income of $60 million ($0.81 per
share) and $62 million ($0.69 per share) in the second quarter
and six months of 1996, respectively, compared to net income of
$111 million ($1.51 per share) in the second quarter of 1995 and
$193 million ($2.64 per share) in the six months of 1995. The
results for the first six months of 1996 include 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 B and C.)
The Company's results for the second quarter and six months
were affected by lower realized prices for primary aluminum
(approximately 16% lower than the 1995 second quarter), as well
as price declines in a number of fabricated products. The
Company's results reflect continued softness in the overall
global aluminum market, primarily attributable to a protracted
soft landing in the U.S. economy and continued 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, particularly in the production
of alumina, and severe winter weather conditions earlier in the
year which resulted in facility curtailments and lower volumes,
particularly in the distribution and building products
businesses.
OPERATING AREA ANALYSIS
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Shipments and Net Sales
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Second Quarter
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1996 1995
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Shipments Net Sales Shipments Net Sales
---------------------------------------------
Finished Products and Other sales
Packaging and containers:
Aluminum 96 $502 101 $510
Nonaluminum 149 134
Other aluminum 41 142 41 147
Other nonaluminum 139 129
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137 932 142 920
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Production and Processing
Primary aluminum 100 171 78 159
Sheet and plate 100 305 106 359
Extrusions 52 180 52 205
Other aluminum 43 127 48 128
Other nonaluminum 108 93
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295 891 284 944
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Total 432 $1,823 426 $1,864
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Average realized price per pound:
Fabricated aluminum products $1.81 $1.87
Primary aluminum $0.77 $0.92
Six Months
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1996 1995
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Shipments Net Sales Shipments Net Sales
Finished Products and Other sales
Packaging and containers:
Aluminum 179 $940 183 $912
Nonaluminum 279 257
Other aluminum 79 275 85 298
Other nonaluminum 266 257
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258 1,760 268 1,724
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Production and Processing
Primary aluminum 181 313 139 292
Sheet and plate 191 597 212 689
Extrusions 103 358 108 400
Other aluminum 82 240 91 251
Other nonaluminum 217 159
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557 1,725 550 1,791
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Total 815 $3,485 818 $3,515
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Average realized price per pound:
Fabricated aluminum products $1.82 $1.80
Primary aluminum $0.78 $0.95
SHIPMENTS AND NET SALES
Finished Products and Other Sales
Shipments of aluminum packaging and containers in both 1996
periods were slightly lower due to decreased shipments of cans
and ends. Lower can and end shipments were due to a decline in
beer can volumes and lower export sales to South America as the
Company's partially owned new facilities there are starting
operations. Higher shipments of laminated aluminum foil were
realized in both periods due to the acquisition of a laminated
aluminum products plant in the second quarter of 1995.
Shipments of other aluminum products were lower in the six-
month period of 1996 due to severe winter weather conditions
experienced earlier in the year. These conditions adversely
affected the Company's building products and distribution
businesses. The Company's distribution business was also
affected by lower activity in the transportation market,
especially for trucks and trailers. Shipments of building
products rebounded due to improved weather conditions in the
second quarter of 1996.
The increases in net sales in both periods were due to
higher prices for cans and foil products and higher nonaluminum
sales. The increases in nonaluminum sales resulted primarily
from higher sales of printing cylinders and plastics due to the
acquisitions of a printing cylinder engraving company and a
flexible packaging operation in the second and fourth quarters of
1995, respectively. These increases were slightly offset by
lower prices for distributor products.
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 second quarter and six-month periods of 1996, in addition
to providing primary aluminum for use in the Company's
fabricating operations. The decreases in average realized prices
for primary aluminum were attributable to weak economic
conditions and the continuing excess inventory liquidation
process.
Most other products in this operating area realized declines
in shipments and prices in both periods due to the factors
described under "Results of Operations," and for the six-month
period, the severe winter weather experienced earlier in the
year. These conditions generally affected most markets served by
this operating area. Higher shipments were realized for aluminum
wheels due to additional capacity at the Company's new wheel
facility in Wisconsin.
The increases in other nonaluminum sales were due to strong
demand for alumina earlier in the year and, in the six-month
period, carbon products. Due to subsequently deteriorating
conditions in the alumina market, however, the Company announced
early in the third quarter of 1996 that it has started the
process to temporarily curtail 250,000 metric tons of alumina
production capacity at its 1.6-million-metric-tons-per-year Texas
alumina refinery. 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.
Costs and Expenses
The increases in cost of products sold were due to higher
costs for purchased materials, particularly in the production of
alumina, and lower capacity utilization at aluminum fabricating
facilities. Costs were favorably impacted by performance-
improvement programs and lower 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 were due to lower effective
interest rates, which were mostly offset by higher amounts of
debt outstanding.
SHIPMENTS AND NET SALES- continued
Costs and Expenses- continued
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 benefits 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. Labor costs are expected to increase by
approximately $15 million in the second half of 1996.
In the first quarter of 1996, the Company recorded
operational restructuring costs of $37 million that relate
principally to employee termination costs associated with the
planned closing of an aluminum beverage can plant located in
Houston, Texas. The Company's 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 B.)
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 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 C.)
SHIPMENTS AND NET SALES- continued
Operating Outlook
The Company continues to remain optimistic regarding
favorable, long-term aluminum industry fundamentals. The Company
expects aluminum demand to benefit later in the year from a
strengthening U.S. economy, the beginning of a recovery in Europe
and strength in Asia and Latin America. These expected
improvements are coming later than the Company anticipated,
however, and the deterioration in aluminum prices the Company is
currently experiencing will make it difficult in the near term to
achieve significant gains over current operating results.
The Company has a number of programs underway to improve
performance and reduce costs. These programs include (1)
modernization of a California can plant that will improve
production efficiencies; (2) process improvements in the
Company's flexible packaging operations; (3) improvement of can
stock production through process improvements and completion of
capital projects underway; and (4) improvements at European sheet
and extrusion operations. These four programs alone are expected
to generate savings of approximately $5 million in the second
half of 1996 and more than $50 million annually when fully
implemented.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital totaled $524 million at June 30, 1996,
compared to $647 million at December 31, 1995. The ratio of
current assets to current liabilities was 1.3/1 at June 30, 1996,
compared to 1.5/1 at December 31, 1995.
Operating Activities
In the first six months of 1996, cash generated from
operations was mostly offset by reductions in accounts payable,
accrued and other liabilities and increases in receivables.
Investing Activities
Capital investments of $229 million in the first six months
of 1996 included $89 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 can and end 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 the acquisition of an interest in a Chinese
joint venture as discussed below.
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 building products markets.
Financing Activities
Cash provided by financing activities in the first six
months of 1996 was used to fund investing activities. The
principal source of funds was from the issuance of $255 million
of commercial paper at a weighted-average rate of 5.6%.
LIQUIDITY AND CAPITAL RESOURCES - continued
Financing Activities - continued
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 E.)
Financial Outlook
Capital investments in 1996 are expected to be between $450
and $475 million, with approximately 44% of this amount allocated
for operating requirements. Remaining investments to be spent in
1996 will be for continuing expenditures for those performance
improvement and strategic investment projects underway and the
construction of a new wheel facility as discussed below. Capital
investments in 1996 are expected to be funded with cash generated
from operations, supplemented with short-term borrowings as
needed. The Company plans to repay part of the short-term
borrowings later in the year as economic and business conditions
improve.
In the second quarter of 1996, the Company announced plans
to build 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.
A part of the Company's strategy is to sell non-core assets
and redeploy the proceeds into strategic businesses. The Company
announced in the third quarter of 1996 that it intends to sell
its coal properties in western Kentucky, which it acquired in the
1960's when it considered building an aluminum reduction plant in
the area. The properties include surface and mineral rights on
about 16,000 acres, mineral rights on an additional 32,000 acres
(approximately) and varying percentages of oil and gas rights on
about 6,400 of the acres. A recent study by an independent firm
estimated coal reserves on the properties at approximately 280
million tons. The Company expects a gain on the sale.
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 June 30, 1996, $150
million of the Company's $1.65- billion shelf registration
remained available for the issuance of debt securities.
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 annual report on Form 10-K for the
year ended December 31, 1995 and Part II, Item 1 (Legal
Proceedings) of the Company's quarterly report on Form 10-Q for
the quarter ended March 31, 1996 and this report.
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 from
RISK FACTORS - continued
those projected in a forward-looking statement or affect the
extent to which a particular projection is realized.
The Company believes aluminum industry fundamentals will
improve later in 1996, although the improvement will not
materialize as soon as had been earlier anticipated. The
Company's outlook for improvement is based on its expectations of
a strengthening U. S. economy, the beginning of a recovery in
Europe, and strength in Asia and Latin America. After the
current liquidation of excess inventories by customers is
completed, which the Company anticipates will occur by the end of
the 1996 third quarter, and barring a recession in any major
world economy, the Company expects improved conditions in
aluminum industry supply/demand fundamentals to continue for the
next several years. 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 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
South America, could cause the Company's actual results to differ
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 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.
RISK FACTORS - continued
* 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 would provide a
fixed rate for electrical power that is 16% less than rates
now 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
and is critical to the competitive position of those two
smelters.
* 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.
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 1. LEGAL PROCEEDINGS
As previously reported in the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995 and Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996, a
private antitrust lawsuit styled Hammons v. Alcan Aluminum Corp.
et al. was filed in the Superior Court of California for the
County of Los Angeles on March 5, 1996 against the Registrant and
other aluminum producers. Estimated damages of approximately $26
billion were sought in the lawsuit, which claims class action
status. Defendants removed the case to the U.S. District Court
for the Central District of California (the "District Court").
On July 1, 1996, the District Court granted summary judgment for
defendants. Plaintiff filed a motion for reconsideration with
the District Court, which was denied on July 16, 1996. On July
18, 1996, plaintiff filed a notice of appeal to the U.S. Court of
Appeals for the 9th Circuit. The Registrant is confident that
its conduct has been in compliance with the antitrust laws.
Item 5. OTHER INFORMATION
The following changes in the Registrant's management and
Board of Directors will become effective on October 1, 1996: (a)
Richard G. Holder will retire as Chairman of the Board and Chief
Executive Officer and as a member of the Board of Directors; (b)
Jeremiah J. Sheehan (currently President and Chief Operating
Officer and a member of the Board of Directors) will succeed Mr.
Holder as Chairman of the Board and Chief Executive Officer, the
office of President and Chief Operating Officer to remain vacant;
(c) Randolph N. Reynolds (currently Vice Chairman and a member of
the Board of Directors) and J. Wilt Wagner (currently Executive
Vice President, Raw Materials, Metals and Industrial Products)
each will become Vice Chairman and Executive Officer; and (d) Mr.
Wagner will become a member of the Board of Directors.
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
second 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: August 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)
* EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 1-1430, 1991 Form 10-K
Report, EXHIBIT 4.16)
_______________________
*Incorporated by reference.
* 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)
* 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)
_______________________
*Incorporated by reference.
* 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)
* 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)
____________________________
* Incorporated by reference.
* 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)
* 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)
____________________________
* Incorporated by reference.
* 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)
EXHIBIT 10.41 - Form of Stock Option Agreement, as approved
May 17, 1996 by the Compensation
Committee of the Company's Board of
Directors
____________________________
* Incorporated by reference.
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
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.
EXHIBIT 10.41
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated ____________________ between
REYNOLDS METALS COMPANY, a Delaware corporation ("Reynolds"), and
___________________________________________ ("Optionee").
WHEREAS, the Committee designated to administer the
Reynolds Metals Company 1996 Nonqualified Stock Option Plan
("Plan") has selected Optionee as an Eligible Employee (as
defined in the Plan) 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 the number of shares of its
Common Stock, no par value, listed on the Schedule(s)
hereto and executed by Reynolds and Optionee, at the
prices indicated opposite such shares on such
Schedule(s), and otherwise in accordance with the terms
and conditions stated in the Plan.
2. Subject to the terms of the Plan, the option
shall be exercisable in whole or part, from time to
time, on and after the date or dates indicated opposite
such shares on the Schedule(s) hereto, but in no event
later than the earlier of (a) ten years from the date
of the grant 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 on the applicable
Schedule.
3. This Agreement is at all times subject to the
terms and conditions of the Plan, which terms and
conditions are incorporated herein by reference.
Optionee is aware that under the Plan no option may be
exercised if his or her employment terminates for any
reason within one year of the date of the grant, except
as otherwise permitted under the terms of the Plan.
4. 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.
5. 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
By____________________________
______________________________
Optionee
SCHEDULE DATED __________
TO
Stock Option Agreement
dated __________
between
Reynolds Metals Company
and
[Optionee]
No. Shares of Option Exercisable
Common Stock Price On and After
- ------------- ------ ------------
This Schedule is subject at all times to the terms and conditions
of the above-referenced Agreement and of the Reynolds Metals
Company 1996 Nonqualified Stock Option Plan.
REYNOLDS METALS COMPANY
By: _______________________________
___________________________________
Optionee
EXHIBIT 10.42
THREE PARTY STOCK OPTION AGREEMENT
THIS AGREEMENT, dated _________________ among REYNOLDS
METALS COMPANY, a Delaware corporation ("Reynolds"), __________
_______________________________________________________________,
a ____________ corporation ("Subsidiary"), and ________________
___________________________________ ("Optionee").
WHEREAS, the Committee designated to administer the
Reynolds Metals Company 1996 Nonqualified Stock Option Plan
("Plan") has selected Optionee as an Eligible Employee (as
defined in the Plan) 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 and Subsidiary;
NOW, THEREFORE, the parties agree as follows:
1. Optionee will have an option to purchase from
Subsidiary the number of shares of Reynolds Common
Stock, no par value, listed on the Schedule(s) hereto,
at the prices indicated opposite such shares on such
Schedule(s), and otherwise in accordance with the terms
and conditions stated in the Plan. Reynolds agrees on
the date of any option exercise by Optionee to transfer
to Subsidiary the number of shares of Reynolds Common
Stock to which such exercise relates in exchange for
the payment to Reynolds by Subsidiary of the Fair
Market Value (as defined in the Plan) of such shares.
2. Subject to the terms of the Plan, the option
shall be exercisable in whole or part, from time to
time, on and after the date or dates indicated opposite
such shares on the Schedule(s) hereto, but in no event
later than the earlier of (a) ten years from the date
of the grant 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 on the applicable
Schedule.
3. This Agreement is at all times subject to the
terms and conditions of the Plan, which terms and
conditions are incorporated herein by reference.
Optionee is aware that under the Plan no option may be
exercised if his or her employment terminates for any
reason within one year of the date of the grant, except
as otherwise permitted under the terms of the Plan.
4. All notices by Optionee hereunder must be
delivered both to Reynolds and to Subsidiary and must
be in writing, in the English language, and addressed
to, in the case of Subsidiary, _______________________,
and in the case of Reynolds, the Director, Employee
Financial Services, Reynolds Metals Company, 6601 West
Broad Street, Richmond, Virginia 23230-1701. Notices
by Optionee will be effective upon the later of their
receipt by Reynolds or by Subsidiary.
5. Subsidiary's obligations hereunder may be
assigned to Reynolds or to any corporation now or
hereafter in existence (a) in which Reynolds owns,
directly or indirectly, a voting stock interest of more
than fifty percent (50%) or (b) which is otherwise
considered a "Subsidiary" for purposes of the Plan.
Any such assignment shall relieve Subsidiary of all
obligations hereunder.
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, Subsidiary and Optionee
have executed this Agreement in triplicate as of the date first
above written.
REYNOLDS METALS COMPANY
By____________________________
[SUBSIDIARY]
By____________________________
______________________________
Optionee
SCHEDULE DATED _______________
TO
Three Party Stock Option Agreement
dated __________________
among
Reynolds Metals Company
[Subsidiary]
and
[Optionee]
No. Shares of Option Exercisable
Reynolds Common Stock Price On and After
- --------------------- ------ ------------
This Schedule is subject at all times to the terms and conditions
of the above-referenced Agreement and of the Reynolds Metals
Company 1996 Nonqualified Stock Option Plan.
REYNOLDS METALS COMPANY
By: __________________________
[SUBSIDIARY]
By: __________________________
______________________________
Optionee
EXHIBIT 11
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions, except per share data)
EARNINGS PER SHARE
In the second quarter and six 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 second
quarter and six 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
second quarter or six months of 1996 since their effect would
have been anti-dilutive.
<PAGE>
<TABLE>
<CAPTION>
QUARTERS ENDED SIX
MONTHS ENDED
JUNE 30
JUNE 30
-----------------------
- ------------------------
1996 1995 1996
1995
-----------------------
- ------------------------
<S> <C> <C> <C>
<C>
Weighted-average shares outstanding:
Common shares 63,666,000 62,926,000
63,635,000 62,573,000
Common share equivalents - 10,518,000
- - 10,388,000
-----------------------
- ------------------------
Total 63,666,000 73,444,000
63,635,000 72,961,000
=======================
========================
Income before cumulative effect of
accounting change $60 $111
$77 $193
Less preferred stock dividends 9 -
18 -
-----------------------
- ------------------------
51 111
59 193
-----------------------
- ------------------------
Cumulative effect of accounting
change - -
(15) -
-----------------------
- ------------------------
$51 $111
$44 $193
=======================
========================
Earnings per share:
Income before cumulative effect of
accounting change $0.81 $1.51
$0.93 $2.64
Cumulative effect of accounting
change - -
(0.24) -
-----------------------
- ------------------------
Net income $0.81 $1.51
$0.69 $2.64
=======================
========================
Conversion rate - 0.96
- - 0.94
Average market value of common
stock - $49.41
- - $50.03
/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 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 anti-dilutive in
1996 and was not material in 1995.
<PAGE>
<TABLE>
<CAPTION>
QUARTERS ENDED SIX
MONTHS ENDED
JUNE 30
JUNE 30
-------------------------
- --------------------------
1996 1995 1996
1995
-------------------------
- --------------------------
<S> <C> <C> <C>
<C>
Weighted-average shares outstanding:
Common shares 63,666,000 62,926,000
63,635,000 62,573,000
Common share equivalents 11,000,000 11,000,000
11,000,000 11,000,000
-------------------------
- --------------------------
Total 74,666,000 73,926,000
74,635,000 73,573,000
=========================
==========================
Income before cumulative effect of
accounting change $60 $111
$77 $193
Cumulative effect of accounting
change - -
(15) -
-------------------------
- --------------------------
Net income $60 $111
$62 $193
=========================
==========================
Earnings per share (fully diluted):
Income before cumulative effect of
accounting change $0.81 $1.50
$1.04 $2.62
Cumulative effect of accounting
change - -
(0.21) -
-------------------------
- --------------------------
Net income $0.81 $1.50
$0.83 $2.62
=========================
==========================
</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 June
30,
1996 and Consolidated Statement of Income (Unaudited) for the Six Months
ended
June 30, 1996 and is qualified in its entirety by reference to such
financial
statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 27
<SECURITIES> 0
<RECEIVABLES> 1124<F1>
<ALLOWANCES> 22
<INVENTORY> 891
<CURRENT-ASSETS> 2074
<PP&E> 6690
<DEPRECIATION> 3472
<TOTAL-ASSETS> 7868
<CURRENT-LIABILITIES> 1550
<BONDS> 1836
0
505
<COMMON> 945
<OTHER-SE> 1156
<TOTAL-LIABILITY-AND-EQUITY> 7868
<SALES> 3485
<TOTAL-REVENUES> 3510
<CGS> 2899
<TOTAL-COSTS> 2899
<OTHER-EXPENSES> 197
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 114
<INCOME-TAX> 37
<INCOME-CONTINUING> 77
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (15)
<NET-INCOME> 62
<EPS-PRIMARY> .69
<EPS-DILUTED> 0.0
<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>
