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, 1997
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, 1997, the Registrant had 73,725,894 shares of Common Stock,
no par value, outstanding and entitled to vote.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
Reynolds Metals Company
<CAPTION>
Quarters ended Six months ended
June 30 June 30
- --------------------------------------------------------------------------------------------------------
(In millions, except per share amounts) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net sales $1,783 $1,823 $3,398 $3,485
Equity, interest and other income 3 12 12 25
- --------------------------------------------------------------------------------------------------------
1,786 1,835 3,410 3,510
- --------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 1,463 1,508 2,823 2,878
Selling, administrative and general expenses 107 105 209 216
Depreciation and amortization 92 91 185 181
Interest 37 42 76 84
Operational restructuring effects - net 7 - (31) 37
- --------------------------------------------------------------------------------------------------------
1,706 1,746 3,262 3,396
- --------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect
of accounting change 80 89 148 114
Taxes on income 25 29 50 37
- --------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 55 60 98 77
Cumulative effect of accounting change - - - (15)
- --------------------------------------------------------------------------------------------------------
Net income 55 60 98 62
Preferred stock dividends - 9 - 18
- --------------------------------------------------------------------------------------------------------
Net income available to common stockholders $ 55 $ 51 $ 98 $ 44
========================================================================================================
Earnings per share
Average shares outstanding 73 64 73 64
Income before cumulative effect of accounting change $0.76 $0.81 $1.35 $0.93
Cumulative effect of accounting change - - - (0.24)
- --------------------------------------------------------------------------------------------------------
Net income $0.76 $0.81 $1.35 $0.69
========================================================================================================
Cash dividends per common share $0.35 $0.35 $0.70 $0.70
========================================================================================================
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -------------------------------------------------------------------------------------------
Reynolds Metals Company
<CAPTION>
June 30 December 31
- -------------------------------------------------------------------------------------------
(millions) 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 22 $ 38
Receivables, less allowances of $18 (1996 - $18) 1,102 961
Inventories 791 787
Prepaid expenses and other 94 87
- -------------------------------------------------------------------------------------------
Total current assets 2,009 1,873
Unincorporated joint ventures and associated companies 1,334 1,337
Property, plant and equipment 6,641 6,813
Less allowances for depreciation and amortization 3,548 3,576
- -------------------------------------------------------------------------------------------
3,093 3,237
Deferred taxes and other assets 1,043 1,069
- -------------------------------------------------------------------------------------------
Total assets $7,479 $7,516
===========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued and other liabilities $1,015 $1,020
Short-term borrowings 173 217
Long-term debt 104 96
- -------------------------------------------------------------------------------------------
Total current liabilities 1,292 1,333
Long-term debt 1,768 1,793
Postretirement benefits 1,069 1,087
Environmental, deferred taxes and other liabilities 663 669
Stockholders' equity
Common stock 1,489 1,451
Retained earnings 1,267 1,220
Cumulative currency translation adjustments (69) (37)
- -------------------------------------------------------------------------------------------
Total stockholders' equity 2,687 2,634
- -------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $7,479 $7,516
===========================================================================================
</TABLE>
<PAGE>
<TABLE>
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------------------
Reynolds Metals Company
<CAPTION>
Six Months Ended
June 30
- ---------------------------------------------------------------------------------------------------
(millions) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net Income $ 98 $ 62
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Depreciation and amortization 185 181
Operational restructuring effects - net (31) 37
Cumulative effect of accounting change - 15
Changes in operating assets and liabilities net of effects of dispositions:
Accounts payable, accrued and other liabilities 2 (89)
Receivables (234) (71)
Inventories (123) (10)
Other (6) (118)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (109) 7
Investing activities
Capital investments:
Operational (65) (89)
Strategic (65) (140)
Proceeds from sale of assets 291 7
Other (5) (13)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 156 (235)
Financing activities
Increase (decrease) in borrowings (principally short-term) (51) 276
Cash dividends paid (48) (63)
Stock issues and other 36 3
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (63) 216
Cash and cash equivalents
Net decrease (16) (12)
At beginning of period 38 39
- ---------------------------------------------------------------------------------------------------
At end of period $ 22 $ 27
===================================================================================================
</TABLE>
<PAGE>
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1997 and 1996
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements were
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, the statements include all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation.
Operating results for the interim periods of 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996. Certain amounts
were reclassified to conform to the 1997 presentation.
NOTE 2. OPERATIONAL RESTRUCTURING
The Company is conducting a review of all its operations and businesses. A
number of alternatives are being considered including, among other things,
asset sales, spin-offs, and the forming of strategic alliances to increase
scale. Certain actions, if taken, could affect the Company's results and
ongoing operating performance.
In the first quarter of 1997, the Company sold its U.S. residential
construction products business. In the second quarter of 1997, the Company
sold the following assets:
* an aluminum reclamation plant in Virginia
* aluminum extrusion plants in Virginia and Texas
* coal properties in Kentucky
The Company recognized pre-tax gains of $38 million in the first quarter of
1997 and $18 million in the second quarter of 1997 related to these sales.
Proceeds from these sales were used to reduce debt and to temporarily
support operating requirements.
Also in the second quarter, the Company recorded a pre-tax charge of $25
million for termination benefits applicable to approximately 500 corporate
headquarters employees. Another 100 positions are being reduced through
attrition. Most of the cash requirements relating to the termination
benefits are expected to be paid in 1997.
The Company has also signed non-binding letters of intent to sell the following:
* a rolling mill and related assets in Alabama (with an estimated
after-tax loss in the range of $225 to $250 million, a substantial portion
of which relates to employee termination costs)
* an aluminum powder and paste plant in Kentucky
* one-half of its wholly owned interest in a rolling mill and related
assets in Canada
These transactions are subject to regulatory and board approvals (in
certain cases), negotiation and execution of definitive agreements, and
other customary closing conditions. The Company hopes to complete these
transactions in the second half of 1997.
<PAGE>
NOTE 3. EARNINGS PER SHARE
In the first quarter of 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings Per Share". Statement No. 128 requires
a change in the method currently used to calculate earnings per share
(EPS). The change eliminates the presentation of primary EPS and requires
the presentation of basic EPS. The principal difference between these
methods is that common stock equivalents are not considered in the
computation of basic EPS. The statement also requires the presentation of
diluted EPS. Diluted EPS reflects the potential dilution that could occur
if securities, or other contracts to issue common stock, were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company. The Company is required to
adopt this statement beginning with its 1997 fourth quarter and year-end
financial statements, at which time all prior period EPS presentations will
be restated. The adoption will not have a material impact on EPS amounts
reported for the current interim periods or any prior periods.
NOTE 4. CONTINGENT LIABILITIES
As previously disclosed in the Company's 1996 Form 10-K, the Company is
involved in various worldwide environmental improvement activities
resulting from past operations, including designation as a potentially
responsible party (PRP), with others, at various Environmental Protection
Agency-designated Superfund sites. The Company has recorded amounts (on an
undiscounted basis) which, in management's best estimate, are expected to
be sufficient to satisfy anticipated costs of known remediation
requirements.
Estimated costs for future environmental compliance and remediation are
necessarily imprecise because of factors such as:
* continuing evolution of environmental laws and regulatory
requirements
* availability and application of technology
* identification of presently unknown remediation requirements
* cost allocations among PRPs
Further, it is not possible to predict the amount or timing of future costs
of environmental remediation that may subsequently be determined. 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 results of operations in a future interim or annual
reporting period.
NOTE 5. 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 footnotes to the financial statements of Reynolds
Metals Company. Summarized financial information is as follows:
<PAGE>
NOTE 5. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM COMPANY
OF CANADA, LTD. -- continued
Canadian Reynolds Metals Company, Ltd.
<TABLE>
<CAPTION>
Quarters Ended June 30 Six Months Ended June 30
----------------------------------------------------
1997 1996 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales:
Customers $ 55 $ 58 $ 99 $106
Parent and related companies 170 154 360 323
----------------------------------------------------
$225 $212 $459 $429
Cost of products sold 174 179 362 333
Net income $ 26 $ 15 $ 55 $ 52
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
-------------------------------
<S> <C> <C>
Current assets $ 250 $ 189
Noncurrent assets 1,183 1,225
Current liabilities (61) (50)
Noncurrent liabilities (626) (624)
</TABLE>
Reynolds Aluminum Company of Canada, Ltd.
<TABLE>
<CAPTION>
Quarters Ended June 30 Six Months Ended June 30
---------------------------------------------------
1997 1996 1997 1996
---------------------------------------------------
<S> <C>
Net Sales:
Customers $139 $142 $258 $259
Parent and related companies 159 134 335 277
---------------------------------------------------
$298 $276 $593 $536
Cost of products sold 237 237 481 436
Net income $ 30 $ 15 $ 57 $ 47
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
<S> <C> <C>
Current assets $ 351 $ 240
Noncurrent assets 1,334 1,370
Current liabilities (151) (95)
Noncurrent liabilities (668) (656)
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's 1996 Form 10-K along with the consolidated financial statements
and related footnotes included in and referred to in this report. In the
tables, dollars are in millions, except per share and 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 15, where we have 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
In the second quarter and six months of 1997, lower prices for aluminum
fabricated products were offset by higher sales volume in our distribution,
wheels, can and packaging businesses and progress in our performance
improvement program.
<TABLE>
<CAPTION>
Second Quarter Six Months
1997 1996 1997 1996
-----------------------------------------
<S> <C> <C> <C> <C>
Net income $55 $60 $98 $62
Special items included in net income:
Operational restructuring effects -- net (4) - 19 (23)
Cumulative effect of accounting change - - - (15)
Earnings per share $0.76 $0.81 $1.35 $0.69
Special items included in earnings per share:
Operational restructuring effects -- net (.05) - .27 (.36)
Cumulative effect of accounting change - - - (.24)
</TABLE>
Operational restructuring effects resulted from:
* the sale of U.S. residential construction products business in the
first quarter of 1997 resulting in an after-tax gain of $23 million
($.32 per share)
* the sale of an aluminum reclamation plant, two aluminum extrusion
plants and coal properties in the second quarter of 1997 resulting
in an after-tax gain of $11 million ($.16 per share)
* a charge in the second quarter of 1997 for termination benefits for
approximately 500 corporate headquarters employees resulting in an
after-tax charge of $15 million ($.21 per share)
* a charge in the first quarter of 1996 principally for employee
termination benefits associated with the closing of a can plant in
Texas
The accounting change resulted from adopting a new accounting standard in
the first quarter of 1996 that required us to recognize a loss for impaired
assets held for sale, principally undeveloped land.
<PAGE>
RESULTS OF OPERATIONS -- continued
<TABLE>
SHIPMENTS AND NET SALES
<CAPTION>
Second Quarter
------------------------------------------------
1997 1996
------------------------------------------------
Shipments Net Sales Shipments Net Sales
------------------------------------------------
<S> <C> <C> <C> <C>
Finished Products and Other Sales
Packaging and containers
Aluminum 106 $ 543 96 $ 502
Nonaluminum 138 149
Other aluminum 37 117 41 142
Other nonaluminum 106 139
------------------------------------------------
143 904 137 932
------------------------------------------------
Production and Processing
Primary aluminum 101 182 100 171
Sheet and plate 100 292 100 305
Extrusions 56 190 52 180
Other aluminum 32 112 43 127
Other nonaluminum 103 108
------------------------------------------------
289 879 295 891
------------------------------------------------
Total 432 $1,783 432 $1,823
================================================
Average realized price per pound:
Fabricated aluminum products $1.76 $1.81
Primary aluminum $0.82 $0.77
</TABLE>
<TABLE>
<CAPTION>
Six Months
---------------------------------------------
1997 1996
---------------------------------------------
Shipments Net Sales Shipments Net Sales
---------------------------------------------
<S> <C> <C> <C> <C>
Finished Products and Other Sales
Packaging and containers
Aluminum 191 $ 978 179 $ 940
Nonaluminum 270 279
Other aluminum 71 225 79 275
Other nonaluminum 198 266
---------------------------------------------
262 1,671 258 1,760
---------------------------------------------
Production and Processing
Primary aluminum 184 328 181 313
Sheet and plate 195 569 191 597
Extrusions 108 359 103 358
Other aluminum 73 236 82 240
Other nonaluminum 235 217
---------------------------------------------
560 1,727 557 1,725
---------------------------------------------
Total 822 $3,398 815 $3,485
=============================================
Average realized price per pound:
Fabricated aluminum products $1.74 $1.82
Primary aluminum $0.81 $0.78
</TABLE>
<PAGE>
RESULTS OF OPERATIONS -- continued
SHIPMENTS AND NET SALES -- continued
Finished Products and Other Sales
Shipments of aluminum packaging and containers (measured in metric tons of
aluminum) improved in both periods primarily as a result of higher can
shipments. Can shipments were up 13% in the second quarter and 7% for the
first six months of 1997 as compared to the same periods of 1996. Customer
growth and the addition of several soft drink accounts were the major
factors in the improved shipping levels. In addition to cans, shipments of
packaging and consumer products also improved in each of the 1997 periods
(second quarter - up 8%, six months - up 6%) due to strong demand.
Net sales of aluminum packaging and containers improved primarily on the
higher volume of shipments for both 1997 periods. Prices were lower for
cans in both 1997 periods and were relatively stable for packaging and
consumer products. The reduction in nonaluminum revenues was due to lower
sales of can machinery and tolling services.
Shipments of other aluminum dropped because of the sale of our U.S.
residential construction products business in the first quarter of 1997. A
strong increase in shipments of aluminum distribution products for both
1997 periods (second quarter - up 13%, six months - up 12%) helped reduce
the effect of the sale of the construction products business. Shipments of
aluminum distribution products strengthened because of improved economic
conditions and milder weather conditions in 1997 compared to the severe
winter conditions in early 1996.
Net sales of other aluminum and other nonaluminum products were lower for
both 1997 periods because we sold our U.S. residential construction
products business. Lower net sales of stainless steel distribution
products were also realized in each period due to declining prices.
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. Improved prices for primary aluminum
in 1997 resulted from strong demand and a lowering of worldwide aluminum
inventories.
For fabricated products, shipments (measured in metric tons of aluminum)
were higher in both 1997 periods for aluminum sheet and extrusions at
European operations and aluminum wheels and plate. The increases in
shipments at European operations reflect improvements in the European
economy. The increases in aluminum wheel shipments (second quarter - up
20%, six months - up 28%) were due to strong demand. Aluminum plate
shipments were higher because of strong demand for tooling plate and
improvements in the aircraft industry. These volume increases were offset
by the effects of selling a construction products aluminum sheet plant and
an aluminum reclamation plant.
Lower prices for most fabricated aluminum products and the effects of
foreign currency translation adversely impacted net sales. The translation
effects were caused by the strengthening of the U.S. dollar against
European currencies. Nonaluminum revenues were slightly lower in the
second quarter of 1997 because of lower demand for alumina. Nonaluminum
revenues were higher in the six-month period of 1997 because of increased
technology sales.
<PAGE>
RESULTS OF OPERATIONS -- continued
EQUITY, INTEREST AND OTHER INCOME
The decline in this category of revenue in both 1997 periods was due to
lower amounts of equity income. Equity income was lower because of
increased competition for can operations in Latin America and losses
relating to the start-up of a Chinese foil and extrusion operation.
COSTS AND EXPENSES
Cost of products sold decreased in both 1997 periods because of:
* lower costs for certain purchased materials
* improved capacity utilization at fabricating facilities
* divestitures
* performance improvement programs
* the effects of translating European currencies
These benefits were somewhat offset by higher costs for labor. Labor costs
were higher because of new contracts entered into in the second quarter of
1996.
Interest expense decreased in both 1997 periods because of lower amounts of
debt outstanding.
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 our competitive or
financial position or our ongoing results of operations. However, it is
not possible to predict the amount or timing of future costs of
environmental requirements that 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 our competitive or financial position or our
ongoing results of operations. No assurance can be given, however, that
the disposition of one or more of such suits or claims in a particular
reporting period will not be material in relation to the reported results
for such period.
TAXES ON INCOME
The effective tax rates reflected in the income statement differ from the
U.S. federal statutory rate because of foreign taxes and the effects of
percentage depletion allowances.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
WORKING CAPITAL
<CAPTION>
June 30 December 31
1997 1996
------------------------
<S> <C> <C>
Working capital $717 $540
Ratio of current assets to current liabilities 1.6/1 1.4/1
</TABLE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES -- continued
OPERATING ACTIVITIES
Cash from operations was supplemented with cash provided by investing
activities to fund receivables and inventories. The increase in
receivables reflects higher sales activity. Inventories increased in
anticipation of continuing strong shipping volumes.
INVESTING ACTIVITIES
Cash provided by investing activities resulted from the sale of assets.
Capital investments totaled $130 million in the first six months of 1997.
This amount includes $65 million for operating requirements (replacement
equipment, environmental control projects, etc.). The remainder was for
strategic projects carried forward from 1996, including:
* the construction of a forged wheel plant in Virginia
* the expansion and modernization of can, foil and plastic film
plants
* the modernization of a primary aluminum plant in New York
FINANCING ACTIVITIES
Debt was reduced with part of the proceeds from the sale of assets.
The Company extended the terms of its $150 million Canadian bank credit
agreement to 2001. The agreement was originally scheduled to mature in
early 1998.
The Company believes its available financial resources, together with
internally generated funds, are sufficient to meet its present and future
business needs. The Company continues to exceed the financial ratio
requirements contained in its financing arrangements and expects to do so
in the future. At June 30, 1997, $113 million of the Company's $1.65-
billion shelf registration remained available for the issuance of debt
securities.
PORTFOLIO REVIEW
We are conducting a review of all our operations and businesses with the
goals of improving focus and profitability, strengthening our financial
position, and thereby increasing shareholder value. The results of this
review are expected to improve the quality of earnings in the years ahead
during all parts of the business cycle. Major elements of the review are
as follows:
<PAGE>
PORTFOLIO REVIEW -- continued
Restructure
We have decided to stay in our bauxite, alumina, carbon products and
primary aluminum businesses because of their competitive cost bases. We
will keep and grow our distribution, specialty building products, and
aluminum wheel businesses. We have determined that certain operations
would not earn an adequate return through the business cycle and therefore
have decided to take the following actions:
* We have exited the U.S. residential construction products business.
* We have completed the sale of two U.S. extrusion plants, are in
the process of selling our aluminum powder and paste plant in
Kentucky, and are pursuing alternatives for our extrusion
operations in Canada and Spain.
* With respect to our rolling operations, we have signed a letter of
intent to sell our Alabama can stock complex (with an estimated after-
tax loss in the range of $225 to $250 million). We are in discussions
with several potential buyers regarding the sale of our Illinois sheet
and plate plant. We are pursuing a number of alternatives for our
European rolling operations.
* We recently announced plans to form a 50-50 joint venture to operate
and expand our rolling mill in Quebec, Canada and to operate our coil
coating facility in Ontario, Canada. The rolling mill is a supplier of
finstock to the automotive market and foil to the packaging market.
* We have also sold an aluminum reclamation plant in Virginia and our
coal properties in Kentucky.
We have not yet reached a decision about our can and packaging businesses
and are considering three options:
* Spin-off cans and packaging together
* Spin-off one business or the other
* Sell a portion of these businesses
Keeping all of these businesses is not an option we are considering.
Reorganize
We have reorganized the Company to streamline our business to focus on
global markets that hold the most promising opportunities for profitable
growth. The result of these changes was the formation of the following
six worldwide, market-focused businesses:
* Bauxite and Alumina
* Metals and Carbon Products
* Construction and Distribution
* Transportation
* Cans
* Packaging and Consumer
<PAGE>
PORTFOLIO REVIEW -- continued
Reorganize -- continued
In addition, we have formed a new unit that will focus on emerging markets,
such as China, Russia and India.
Our reorganization has resulted in personnel reductions in various
operational and staff functions at our corporate headquarters. The number
of positions involved is approximately 600, which includes 100 positions
that are being reduced through attrition. As a result, we expect to reduce
corporate overhead costs by approximately $40 million annually.
Strengthen Balance Sheet
In addition to improving our future earnings potential, our actions will
enable us to strengthen our balance sheet. We plan to use a portion of the
anticipated proceeds from asset sales to reduce debt. This should result
in a reduction in our annual interest expense and an improvement in our
debt-to-equity ratio. We expect to be in an excellent position to fund
future growth and to explore other methods of improving our financial
position, such as stock repurchases, that were not in our reach before.
We will continue our unrelenting focus on cost and inventory control. Our
ultimate inventory reduction goal is $300 million by 1999, and we have
achieved about one-half of it.
Over the next several years, we are committed to a capital spending
program of $250 million to $300 million average per year, excluding
acquisitions. In 1997, we plan to spend approximately $300 million.
Approximately 65% of this amount is for operating requirements. The
remainder is for continuing expenditures for those performance improvement
and strategic investment projects already underway. We expect to fund
capital investments in 1997 primarily with cash generated from operations.
Grow
We have begun a strategic planning process designed to establish future
growth programs. There are several excellent investment opportunities
currently available to us. These include a significant expansion program
at our alumina refinery in Australia, additional investment in our wheel
business, and several projects in our packaging business. While we have no
current plans to invest in any major greenfield expansions of our smelting
business, there will be opportunities for high-return cost reduction
projects in our plants.
In addition to these internal opportunities, we will be looking for high-
return acquisition projects in several of our businesses. One focus will
be to participate in the ongoing consolidation of the metals distribution
industry. Additionally, we will look for opportunities to grow the
packaging business through U.S. and foreign acquisitions.
Conclusion and Outlook
The results of these actions are expected to contribute to earnings this
year and should have an even greater impact in 1998. We expect to enter
1998 a dramatically improved company, repositioned for growth, against a
backdrop of strong industry fundamentals.
<PAGE>
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 1996 Form
10-K; Part II, Item 1 (Legal Proceedings) of this report; and the preceding
portions of this Item.
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(1). 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 items.
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.
Consensus expectations for 1997 indicate global economic growth of 3%. The
Company is forecasting a 4-5% increase in U.S. aluminum industry shipments
and a 5-6% increase in global aluminum consumption for the year, with
especially strong transportation and packaging markets. The Company is
forecasting the worldwide supply of aluminum to grow 3-3.5% in 1997.
Barring a recession in any major world economy, the Company expects these
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. The Company also expects U.S.
aluminum beverage can shipments to grow at about 2% per year (2-3% in 1997)
and global shipments to grow 5% annually, with rapid growth of the aluminum
beverage can market in Latin America, Asia, the Middle East and other
developing economies.
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
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.
__________________
(1) Forward-looking statements can be identified generally as those
containing words such as "should", "forecast", "project",
"estimate", "expect", "anticipate" or "plan" and words of similar
effect.
<PAGE>
RISK FACTORS -- continued
* 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 and uncertainties about
their application to the Company's operations, 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. The Company's contract with the
Bonneville Power Administration for the period October 1996 - September
2001 provides fixed rates for electrical power that are 16% less than
rates previously in effect for the Company's Washington and Oregon
primary aluminum production plants. These rates are subject to
regulatory review and approval. In addition, third parties are
challenging the contract in court, and the rates are subject to further
appeal in the courts by third parties following regulatory review.
* The Company's key transportation market is cyclical, and sales to
that market in particular can be influenced by economic conditions.
* A strike at a customer facility or a significant downturn in the
business of a key customer supplied by the Company could affect the
Company's results.
<PAGE>
RISK FACTORS -- continued
* The Company is conducting a portfolio review of all its operations and
businesses. The Company is considering alternatives that include, among
other things, asset sales, spin-offs and formation of strategic
alliances. In connection with the portfolio review, the Company has
announced the signing of a letter of intent for the sale of its
Sheffield, Alabama rolling mill and related assets and its Louisville,
Kentucky aluminum powder and paste plant, and an agreement in principle
to form a joint venture to operate its Cap-de-la-Madeleine, Quebec,
rolling mill and its Toronto, Ontario, coil coating facility. These
pending transactions are subject to certain conditions, including due
diligence reviews by the purchasers and joint venture partner,
respectively, negotiation of definitive agreements and obtaining
regulatory approvals and third party consents. As a result, the
transactions may or may not be completed as contemplated. In addition,
the Company is in discussions with potential buyers regarding the sale
of its McCook, Illinois sheet and plate plant, and is pursuing a number
of alternatives for its European rolling operations and its extrusion
operations in Canada and Spain. Whether and when these transactions
will be completed is not certain. The Company is considering three
options with respect to its can and packaging businesses: (1) spin off
the two businesses together; (2) spin off one business or the other; or
(3) sell a portion of the two businesses. The timing, nature and
magnitude of the option that will be chosen are not certain and 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.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported in the Registrant's 1996 Form 10-K, an oil tank
failed at the Registrant's Massena, New York primary aluminum production
plant in December 1995, resulting in an oil spill at the plant. On July 8,
1997, the Registrant paid to the New York Department of Environmental
Conservation a $100,000 civil penalty for failing to comply with State tank
management regulations, resolving the Registrant's liability in connection
with the matter.
Item 2. CHANGES IN SECURITIES
(a) Recent Sales of Unregistered Securities
Under the Registrant's Stock Plan for Outside Directors (the
"Plan"), 71.529 phantom shares, in the aggregate, were granted to
eight of the Registrant's nine outside Directors on April 1, 1997,
based on an average price of $63.25 per share. These phantom shares
represent dividend equivalents paid on phantom shares previously
granted under the Plan. 506.25 phantom shares, in the aggregate, were
granted to the nine outside Directors on June 30, 1997, based on an
average price of $71.00 per share. These phantom shares represent the
second quarterly installment of each outside Director's annual grant
under the Plan.
To the extent that these grants constitute sales of equity
securities, the Registrant issued these phantom shares in reliance on
the exemption provided by Section 4(2) of the Securities Act of 1933,
as amended, taking into account the nature of the Stock Plan, the
number of outside Directors participating in the Stock Plan, the
sophistication of the outside Directors and their access to the kind
of information that a registration statement would provide.
A description of the Plan is contained in the Registrant's Form 10-
Q for the first quarter of 1997 in Part II, Item 2, subparagraph (b),
under the caption "Recent Sales of Unregistered Securities".
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 1997.
<PAGE>
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, 1997
<PAGE>
INDEX TO EXHIBITS
EXHIBIT 2 - None
* EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended.
(File No. 1-1430, 1996 Form 10-K Report, EXHIBIT 3.1)
* EXHIBIT 3.2 - By-Laws, as amended. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
March 31, 1997, EXHIBIT 3.2)
EXHIBIT 4.1 - Restated Certificate of Incorporation.
See EXHIBIT 3.1.
EXHIBIT 4.2 - By-Laws. See EXHIBIT 3.2.
* EXHIBIT 4.3 - Indenture dated as of April 1, 1989
(the "Indenture") between Reynolds Metals
Company and The Bank of New York,
as Trustee, relating to Debt Securities. (File
No. 1-1430, Form 10-Q Report for the Quarter Ended
March 31, 1989, EXHIBIT 4(c))
* EXHIBIT 4.4 - Amendment No. 1 dated as of November 1,
1991 to the Indenture. (File No. 1-1430,
1991 Form 10-K Report, EXHIBIT 4.4)
* EXHIBIT 4.5 - Rights Agreement dated as of November 23,
1987 (the "Rights Agreement") between
Reynolds Metals Company and The Chase
Manhattan Bank, N.A. (File No. 1-1430,
Registration Statement on Form 8-A dated November
23, 1987, pertaining to Preferred Stock Purchase
Rights, EXHIBIT 1)
* EXHIBIT 4.6 - Amendment No. 1 dated as of December 19,
1991 to the Rights Agreement. (File No.
1-1430, 1991 Form 10-K Report, EXHIBIT 4.11)
* EXHIBIT 4.7 - Form of 9-3/8% Debenture due June 15, 1999.
(File No. 1-1430, Form 8-K Report dated
June 6, 1989, EXHIBIT 4)
* EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note.
(Registration Statement No. 33-30882
on Form S-3, dated August 31, 1989, EXHIBIT 4.3)
* EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note.
(Registration Statement No. 33-30882
on Form S-3, dated August 31, 1989,
EXHIBIT 4.4)
* EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term
Note. (File No. 1-1430, 1991 Form 10-K
Report, EXHIBIT 4.15)
* EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 1-1430, 1991 Form 10-K Report,
EXHIBIT 4.16)
* EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003.
(File No. 1-1430, Form 8-K Report dated
August 16, 1991, Exhibit 4(a))
_______________________
*Incorporated by reference.
<PAGE>
* 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. (File No. 1-1430,
1995 Form 10-K Report, EXHIBIT 4.13)
* EXHIBIT 4.14 - By-Laws of REYCAN, as amended. (File No.
1-1430, Form 10-Q Report for the Quarter
Ended March 31, 1997, EXHIBIT 4.14)
* EXHIBIT 4.15 - Articles of Incorporation of Societe
Canadienne de Metaux Reynolds, Ltee/Canadian
Reynolds Metals Company, Ltd. ("CRM"),
as amended. (File No. 1-1430, 1995
Form 10-K Report, EXHIBIT 4.15)
* EXHIBIT 4.16 - By-Laws of CRM, as amended. (File No.
1-1430, Form 10-Q Report for the Quarter
Ended March 31, 1997, 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 1987 Nonqualified
Stock Option Plan. (Registration Statement
No. 33-13822 on Form S-8, dated April 28,
1987, EXHIBIT 28.1)
* EXHIBIT 10.2 - 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 10.3 - 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 10.4 - 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 10.5 - Supplemental Death Benefit Plan for Officers.
(File No. 1-1430, 1986 Form 10-K Report,
EXHIBIT 10.8)
* EXHIBIT 10.6 - Financial Counseling Assistance Plan for Officers.
(File No. 1-1430, 1987 Form 10-K Report, EXHIBIT
10.11)
_______________________
*Incorporated by reference.
<PAGE>
* EXHIBIT 10.7 - Management Incentive Deferral Plan.
(File No. 1-1430, 1987 Form 10-K Report,
EXHIBIT 10.12)
* EXHIBIT 10.8 - 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 10.9 - Form of Indemnification Agreement for Directors and
Officers. (File No. 1-1430, Form 8-K Report dated
April 29, 1987, EXHIBIT 28.3)
* EXHIBIT 10.10 - Form of Executive Severance Agreement between
Reynolds Metals Company and key executive personnel,
including each of the current executive officers
(other than Donna C. Dabney) listed in Item 4A of
the Reynolds Metals Company 1996 Form 10-K Report.
(File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.18)
* EXHIBIT 10.11 - 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 10.12 - 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 10.13 - 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 10.14 - 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 10.15 - 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 10.16 - 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 10.17 - 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 10.18 - 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)
____________________________
* Incorporated by reference.
<PAGE>
* EXHIBIT 10.19 - 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 10.20 - 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 10.21 - 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 10.22 - 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 10.23 - 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 10.24 - 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 10.25 - 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 10.26 - 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 10.27 - 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 10.28 - 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 10.29 - 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 10.30 - 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.
<PAGE>
* EXHIBIT 10.31 - 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 10.32 - 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 10.33 - Stock Option Agreement dated August 30, 1996
between Reynolds Metals Company and Jeremiah J.
Sheehan. (File No. 1-1430, Form 10-Q Report for
the Quarter Ended September 30, 1996, EXHIBIT 10.43)
* EXHIBIT 10.34 - Amendment to Deferred Compensation Plan for Outside
Directors effective August 15, 1996. (File No.
1-1430, Form 10-Q Report for the Quarter Ended
September 30, 1996, EXHIBIT 10.44)
* EXHIBIT 10.35 - Amendment to Reynolds Metals Company New Management
Incentive Deferral Plan effective January 1, 1996.
(File No. 1-1430, 1996 Form 10-K Report, EXHIBIT
10.38)
* EXHIBIT 10.36 - Amendment to Reynolds Metals Company Performance
Incentive Plan effective January 1, 1996. (File No.
1-1430, 1996 Form 10-K Report, EXHIBIT 10.39)
* EXHIBIT 10.37 - Reynolds Metals Company Supplemental Incentive Plan.
(File No. 1-1430, 1996 Form 10-K Report, EXHIBIT
10.40)
* EXHIBIT 10.38 - Reynolds Metals Company Stock Plan for Outside
Directors. (File No. 1-1430, 1996 Form 10-K Report,
EXHIBIT 10.41)
* EXHIBIT 10.39 - Special Executive Severance Package for Certain
Employees who Terminate Employment between
January 1, 1997 and June 30, 1998, as approved by
the Compensation Committee of the Company's Board
of Directors on January 17, 1997. (File No. 1-1430,
1996 Form 10-K Report, EXHIBIT 10.42)
* EXHIBIT 10.40 - Special Award Program for Certain Executives or Key
Employees, as approved by the Compensation Committee
of the Company's Board of Directors on January 17,
1997. (File No. 1-1430, 1996 Form 10-K Report,
EXHIBIT 10.43)
EXHIBIT 11 - Omitted. See Part I, Item 1 for computation of
earnings per share
EXHIBIT 15 - None
EXHIBIT 18 - None
EXHIBIT 19 - None
____________________________
* Incorporated by reference.
<PAGE>
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.
<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,
1997 and Consolidated Statement of Income (Unaudited) for the Six Months ended
June 30, 1997 and is qualified in its entirity by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 1120<F1>
<ALLOWANCES> 18
<INVENTORY> 791
<CURRENT-ASSETS> 2009
<PP&E> 6641
<DEPRECIATION> 3548
<TOTAL-ASSETS> 7479
<CURRENT-LIABILITIES> 1292
<BONDS> 1768
0
0
<COMMON> 1489
<OTHER-SE> 1198
<TOTAL-LIABILITY-AND-EQUITY> 7479
<SALES> 3398
<TOTAL-REVENUES> 3410
<CGS> 2823
<TOTAL-COSTS> 2823
<OTHER-EXPENSES> 154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 148
<INCOME-TAX> 50
<INCOME-CONTINUING> 98
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98
<EPS-PRIMARY> 1.35
<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>
