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 MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-01430
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 April 27, 2000, the Registrant had 63,681,199 shares of
Common Stock, no par value, outstanding and entitled to vote.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(millions, except per share amounts)
=================================================================
- -----------------------------------------------------------------
Quarters ended March 31 2000 1999
- -----------------------------------------------------------------
<S> <C> <C>
REVENUES $1,319 $1,068
COSTS AND EXPENSES
Cost of products sold 1,047 925
Selling, general and administrative expenses 88 82
Depreciation and amortization 61 57
Interest 18 20
Merger-related expenses 7 -
- -----------------------------------------------------------------
1,221 1,084
- -----------------------------------------------------------------
EARNINGS
Income (loss) before income taxes 98 (16)
Taxes on income (credit) 27 (6)
- -----------------------------------------------------------------
NET INCOME (LOSS) $ 71 $ (10)
=================================================================
EARNINGS PER SHARE
Basic:
Average shares outstanding 64 64
Net income (loss) $1.11 $(0.15)
Diluted:
Average shares outstanding 64 64
Net income (loss) $1.10 $(0.15)
- -----------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE $0.35 $0.35
=================================================================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
============================================================================
(millions) March 31 December 31
- ----------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 54 $ 55
Receivables, less allowances of $9 (1999 - $10) 722 654
Inventories 586 519
Prepaid expenses and other 62 61
- ----------------------------------------------------------------------------
Total current assets 1,424 1,289
Unincorporated joint ventures and associated companies 1,680 1,692
Property, plant and equipment 4,335 4,336
Less allowances for depreciation and amortization 2,343 2,320
- ----------------------------------------------------------------------------
1,992 2,016
Deferred taxes and other assets 943 953
- ----------------------------------------------------------------------------
Total assets $6,039 $5,950
============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities $ 798 $ 819
Short-term borrowings 177 180
Long-term debt 147 153
- ----------------------------------------------------------------------------
Total current liabilities 1,122 1,152
Long-term debt 1,150 1,067
Postretirement benefits 966 962
Environmental, deferred taxes and other liabilities 597 623
Stockholders' equity:
Common stock 1,588 1,575
Retained earnings 1,305 1,257
Treasury stock, at cost (626) (626)
Accumulated other comprehensive income (63) (60)
- ----------------------------------------------------------------------------
Total stockholders' equity 2,204 2,146
- ----------------------------------------------------------------------------
Contingent liabilities (Note 7)
Total liabilities and stockholders' equity $6,039 $5,950
============================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
============================================================================
- ----------------------------------------------------------------------------
Quarters ended March 31 (millions) 2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 71 $ (10)
Adjustments to reconcile to net cash used in
operating activities:
Depreciation and amortization 61 57
Merger-related expenses 5 -
Changes in operating assets and liabilities
net of effects of dispositions:
Accounts payable, accrued and other liabilities (18) (18)
Receivables (73) (21)
Inventories (69) (56)
Environmental and restructuring liabilities (4) (9)
Other (18) (55)
- ----------------------------------------------------------------------------
Net cash used in operating activities (45) (112)
INVESTING ACTIVITIES
Capital investments:
Operational (15) (26)
Strategic (71) (80)
Sales of assets - operational restructuring 56 193
Other 10 -
- ----------------------------------------------------------------------------
Net cash provided by (used in) investing activities (20) 87
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings (3) 41
Proceeds from long-term debt 100 150
Reduction of long-term debt (22) (46)
Cash dividends paid (23) (23)
Stock options exercised 12 -
- ----------------------------------------------------------------------------
Net cash provided by financing activities 64 122
CASH AND CASH EQUIVALENTS
Net increase (decrease) (1) 97
At beginning of period 55 94
- ----------------------------------------------------------------------------
At end of period $ 54 $ 191
============================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
============================================================================
- ----------------------------------------------------------------------------
Quarters ended March 31 2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
SHARES (thousands):
Common stock
Balance at January 1 74,826 74,105
Issued under employee benefit plans 201 -
- ----------------------------------------------------------------------------
Balance at March 31 75,027 74,105
- ----------------------------------------------------------------------------
Treasury stock
Balance at January 1 (11,344) (9,648)
Purchased and held as treasury stock (6) -
- ----------------------------------------------------------------------------
Balance at March 31 (11,350) (9,648)
- ----------------------------------------------------------------------------
Net common shares outstanding 63,677 64,457
- ----------------------------------------------------------------------------
DOLLARS (millions):
Common stock
Balance at January 1 $1,575 $1,533
Issued under employee benefit plans 13 -
- ----------------------------------------------------------------------------
Balance at March 31 $1,588 $1,533
- ----------------------------------------------------------------------------
Retained earnings
Balance at January 1 $1,257 $1,222
Net income (loss) 71 (10)
Cash dividends declared for common stock (23) (23)
- ----------------------------------------------------------------------------
Balance at March 31 $1,305 $1,189
- ----------------------------------------------------------------------------
Treasury stock
Balance at January 1 $ (626) $ (526)
Purchased and held as treasury stock - -
- ----------------------------------------------------------------------------
Balance at March 31 $ (626) $ (526)
- ----------------------------------------------------------------------------
Accumulated other comprehensive income (loss)
Balance at January 1 $ (60) $ (35)
Foreign currency translation adjustments (3) (19)
Income taxes - -
----------------------
Other comprehensive income (loss) (3) (19)
- ----------------------------------------------------------------------------
Balance at March 31 $ (63) $ (54)
- ----------------------------------------------------------------------------
Total stockholders' equity $2,204 $2,142
- ----------------------------------------------------------------------------
COMPREHENSIVE INCOME (millions):
Net income (loss) $ 71 $ (10)
Other comprehensive income (loss) (3) (19)
- ----------------------------------------------------------------------------
Comprehensive income (loss) $ 68 $ (29)
- ----------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
5
<PAGE> 6
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Quarters Ended March 31, 2000 and 1999
1. 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
period of 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Reynolds Metals Company (Reynolds) annual report on Form 10-K for the
year ended December 31, 1999. Certain amounts have been reclassified to
conform to the 2000 presentation. 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.
2. ACCOUNTING POLICIES
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes new accounting and reporting standards for derivative
instruments and hedging activities. Reynolds must adopt this statement by
January 1, 2001. Reynolds has not determined the impact this statement will
have on its financial position or results of operations.
3. PROPOSED MERGER
On August 18, 1999, Reynolds, Alcoa Inc. (Alcoa) and RLM Acquisition Corp., a
wholly owned subsidiary of Alcoa, entered into an agreement and plan of
merger. Under the merger agreement, each outstanding share of Reynolds common
stock would be converted into 1.06 shares of Alcoa common stock and Reynolds
would become wholly owned by Alcoa. In January 2000, Alcoa declared a 2-for-1
stock split, subject to approval by its shareholders at a meeting scheduled
for May 12, 2000. If approval is received, additional common shares will be
distributed on June 9, 2000 to Alcoa shareholders of record on May 26, 2000.
If the stock split is approved, and the Reynolds-Alcoa merger occurs after May
26, 2000, the exchange ratio will be adjusted from 1.06 to 2.12.
The proposed merger, which was approved by Reynolds stockholders at a special
meeting held on February 11, 2000, is subject to customary closing conditions,
including antitrust clearances.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Alcoa and
Reynolds from completing the merger until certain information has been
furnished to the Antitrust Division of the Department of Justice and the
Federal Trade Commission, and until certain waiting period requirements have
been satisfied. Alcoa filed a Hart-Scott-Rodino Premerger Notification and
Report Form on August 24, 1999 and Reynolds filed such a Form on August 30,
1999. On September 29, 1999, the Antitrust Division issued a request for
additional information and documentary material (a "second request"). On
February 11, 2000, both Reynolds and Alcoa announced that they believed that
they were in substantial compliance with the second request. They also
advised the Department of Justice that they would not close the merger before
March 31, 2000, in order to provide the Department sufficient time to review
the transaction. The agreement not to close the merger has been extended to
May 2000.
6
<PAGE> 7
3. PROPOSED MERGER - continued
In Europe, certain regulations require that Alcoa file a premerger
notification form with the Commission of the European Communities prior to
consummation of the proposed merger. Alcoa filed such notification on
November 18, 1999. This filing began an initial one-month review period in
which the European Commission was required to determine whether there were
sufficiently "serious doubts" about the proposed merger's compatibility with
the common market to require a more complete review. The initial one-month
period expired on December 20, 1999, whereupon the European Commission issued
a determination that the proposed merger did require a more complete review.
The European Commission must complete its investigation and make a final
determination with respect to the proposed merger no later than May 10, 2000.
Reynolds and Alcoa have also made filings under the competition laws of
Canada, Australia and certain other countries where the companies have
significant operations. Alcoa and Reynolds have been advised that the
Canadian Competition Bureau has classified this merger as "very complex." Its
review is expected to be completed by May 24, 2000. The Australian review
process is also expected to be completed by the end of May 2000.
The merger agreement contains certain restrictions on the conduct of Reynolds'
business before completion of the merger. For example, Reynolds has agreed to
operate its business only in the ordinary course, to refrain from taking
certain corporate actions without Alcoa's consent, and not to solicit
alternative acquisition proposals.
In the first quarter of 2000, Reynolds recognized $7 million of merger-related
expenses. Merger-related expenses are principally for investment banking and
legal services. Reynolds expects total merger-related expenses to be at least
$35 million, including $19 million that was recognized in 1999.
4. EARNINGS PER SHARE
The following reconciles net income and average shares for the basic and
diluted earnings per share computations.
<TABLE>
<CAPTION>
Quarters ended March 31
------------------------------
2000 1999
------------------------------
<S> <C> <C>
Net income (numerator) $71 $(10)
Average shares (denominator):
Basic 63,718,000 64,475,000
Effect of dilutive securities 553,000 -
------------------------------
Diluted 64,271,000 64,475,000
------------------------------
Per share amount:
Basic $1.11 $(0.15)
Diluted $1.10 $(0.15)
Antidilutive securities excluded:
Stock options 675,000 4,977,000
</TABLE>
5. FINANCING ARRANGEMENTS
In the first quarter of 2000, Reynolds borrowed $100 million under its credit
facilities. The borrowing bears interest at a variable rate (6.5% at March
31, 2000) and requires repayment in a lump sum in 2001. The variable rate is
based on the London Interbank Offer Rate.
7
<PAGE> 8
6. COMPANY OPERATIONS
<TABLE>
<CAPTION>
Packaging Construction
Base and and
Materials Consumer Distribution
=============================================================================
<S> <C> <C> <C>
FIRST QUARTER 2000
Customer aluminum shipments 222 35 55
Intersegment aluminum shipments 49 - -
- -----------------------------------------------------------------------------
Total aluminum shipments 271 35 55
=============================================================================
Revenues:
Aluminum $403 $189 $187
Nonaluminum 95 152 130
Intersegment revenues - aluminum 78 - -
- -----------------------------------------------------------------------------
Total revenues $576 $341 $317
=============================================================================
Segment operating income (loss) $124 $ 24 $ 13
Corporate amounts
Merger expenses
- -----------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- -----------------------------------------------------------------------------
Net income
=============================================================================
FIRST QUARTER 1999
Customer aluminum shipments 212 33 47
Intersegment aluminum shipments 56 - -
- -----------------------------------------------------------------------------
Total aluminum shipments 268 33 47
=============================================================================
Revenues:
Aluminum $302 $178 $159
Nonaluminum 75 134 78
Intersegment revenues - aluminum 81 - -
- -----------------------------------------------------------------------------
Total revenues $458 $312 $237
=============================================================================
Segment operating income (loss) $ 14 $ 26 $ 8
Inventory accounting adjustments
Corporate amounts
- -----------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- -----------------------------------------------------------------------------
Net income (loss)
=============================================================================
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Total
Transportation Other Segments
=============================================================================
<S> <C> <C> <C>
FIRST QUARTER 2000
Customer aluminum shipments 20 13 345
Intersegment aluminum shipments - - 49
- ----------------------------------------------------------------------------
Total aluminum shipments 20 13 394
=============================================================================
Revenues:
Aluminum $111 $39 $ 929
Nonaluminum - 8 385
Intersegment revenues - aluminum - - 78
- ----------------------------------------------------------------------------
Total revenues $111 $47 $1,392
=============================================================================
Segment operating income (loss) $ (7) $ 4 $ 158
Corporate amounts
Merger expenses
- ----------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- ----------------------------------------------------------------------------
Net income
=============================================================================
FIRST QUARTER 1999
Customer aluminum shipments 17 14 323
Intersegment aluminum shipments - - 56
- ----------------------------------------------------------------------------
Total aluminum shipments 17 14 379
=============================================================================
Revenues:
Aluminum $ 94 $25 $ 758
Nonaluminum - 1 288
Intersegment revenues - aluminum - - 81
- ----------------------------------------------------------------------------
Total revenues $ 94 $26 $1,127
=============================================================================
Segment operating income (loss) $ (2) $ 3 $ 49
Inventory accounting adjustments
Corporate amounts
- ----------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- ----------------------------------------------------------------------------
Net income (loss)
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
Reconciling
Items Consolidated
=================================================================
<S> <C> <C>
FIRST QUARTER 2000
Customer aluminum shipments - 345
Intersegment aluminum shipments (49) -
- ----------------------------------------------------------------
Total aluminum shipments (49) 345
=================================================================
Revenues:
Aluminum $ - $ 929
Nonaluminum 5 390
Intersegment revenues - aluminum (78) -
- -----------------------------------------------------------------
Total revenues $(73) $1,319
=================================================================
Segment operating income (loss) $ - $ 158
Corporate amounts (35)
Merger expenses (7)
- -----------------------------------------------------------------
Corporate operating income 116
Interest expense (18)
Taxes on income (27)
- -----------------------------------------------------------------
Net income $ 71
=================================================================
FIRST QUARTER 1999
Customer aluminum shipments - 323
Intersegment aluminum shipments (56) -
- ---------------------------------------------------------------
Total aluminum shipments (56) 323
================================================================
Revenues:
Aluminum $ - $ 758
Nonaluminum 22 310
Intersegment revenues - aluminum (81) -
- ---------------------------------------------------------------
Total revenues $(59) $1,068
================================================================
Segment operating income (loss) $ - $ 49
Inventory accounting adjustments 2
Corporate amounts (47)
- ---------------------------------------------------------------
Corporate operating income 4
Interest expense (20)
Taxes on income 6
- ---------------------------------------------------------------
Net income (loss) $ (10)
================================================================
</TABLE>
9
<PAGE> 10
7. CONTINGENT LIABILITIES
As previously disclosed in Reynolds' 1999 Form 10-K, Reynolds 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. Reynolds has recorded amounts (on an undiscounted basis) which, in
management's best estimate, will 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 Reynolds' competitive or financial position.
However, such costs could be material to results of operations in a future
interim or annual reporting period.
8. 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 wholly owned subsidiaries of Reynolds 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. 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. Summarized financial
information is as follows:
<TABLE>
<CAPTION>
CANADIAN REYNOLDS METALS COMPANY, LTD.
Quarters ended March 31
--------------------------------
2000 1999
--------------------------------
<S> <C> <C>
Net Sales:
Customers $ 84 $110
Parent and related companies 206 100
--------------------------------
$290 $210
Cost of products sold 229 196
Net income $ 38 $ 6
</TABLE>
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
-------------------------------
<S> <C> <C>
Current assets $ 361 $ 176
Noncurrent assets 1,119 1,184
Current liabilities (127) (148)
Noncurrent liabilities (445) (345)
</TABLE>
10
<PAGE> 11
8. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM COMPANY OF
CANADA, LTD. - continued
<TABLE>
<CAPTION>
REYNOLDS ALUMINUM COMPANY OF CANADA, LTD.
Quarters ended March 31
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
Net Sales:
Customers $ 84 $ 110
Parent and related companies 206 100
-----------------------------
$ 290 $ 210
Cost of products sold 229 195
Net income $ 39 $ 7
</TABLE>
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
-----------------------------
<S> <C> <C>
Current assets $ 351 $ 224
Noncurrent assets 1,128 1,192
Current liabilities (127) (129)
Noncurrent liabilities (447) (347)
</TABLE>
11
<PAGE> 12
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 Reynolds' 1999 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, objectives and strategies for
Reynolds and other forward-looking statements. Please refer to the "Risk
Factors" section beginning on page 17, 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.
PROPOSED MERGER
- ---------------
On August 18, 1999, Reynolds, Alcoa Inc. (Alcoa) and RLM Acquisition Corp., a
wholly owned subsidiary of Alcoa, entered into an agreement and plan of
merger. Under the merger agreement, each outstanding share of Reynolds common
stock would be converted into 1.06 shares of Alcoa common stock and Reynolds
would become wholly owned by Alcoa. In January 2000, Alcoa declared a 2-for-1
stock split, subject to approval by its shareholders at a meeting scheduled
for May 12, 2000. If approval is received, additional common shares will be
distributed on June 9, 2000 to Alcoa shareholders of record on May 26, 2000.
If the stock split is approved, and the Reynolds-Alcoa merger occurs after May
26, 2000, the exchange ratio will be adjusted from 1.06 to 2.12.
The proposed merger, which was approved by Reynolds stockholders at a special
meeting held on February 11, 2000, is subject to customary closing conditions,
including antitrust clearances.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Alcoa and
Reynolds from completing the merger until certain information has been
furnished to the Antitrust Division of the Department of Justice and the
Federal Trade Commission, and until certain waiting period requirements have
been satisfied. Alcoa filed a Hart-Scott-Rodino Premerger Notification and
Report Form on August 24, 1999 and Reynolds filed such a Form on August 30,
1999. On September 29, 1999, the Antitrust Division issued a request for
additional information and documentary material (a "second request"). On
February 11, 2000, both Reynolds and Alcoa announced that they believed that
they were in substantial compliance with the second request. They also
advised the Department of Justice that they would not close the merger before
March 31, 2000, in order to provide the Department sufficient time to review
the transaction. The agreement not to close the merger has since been
extended to May 2000.
In Europe, certain regulations require that Alcoa file a premerger
notification form with the Commission of the European Communities prior to
consummation of the proposed merger. Alcoa filed such notification on
November 18, 1999. This filing began an initial one-month review period in
which the European Commission was required to determine whether there were
sufficiently "serious doubts" about the proposed merger's compatibility with
the common market to require a more complete review. The initial one-month
period expired on December 20, 1999, whereupon the European Commission issued
a determination that the proposed merger did require a more complete review.
The European Commission must complete its investigation and make a final
determination with respect to the proposed merger no later than May 10, 2000.
Reynolds and Alcoa have also made filings under the competition laws of
Canada, Australia and certain other countries where the companies have
significant operations. Alcoa and Reynolds have been advised that the
Canadian Competition Bureau has classified this merger as "very complex." Its
review is expected to be completed by May 24, 2000. The Australian review
process is also expected to be completed by the end of May 2000.
12
<PAGE> 13
PROPOSED MERGER - continued
- ---------------
The merger agreement contains certain restrictions on the conduct of Reynolds'
business before completion of the merger. For example, Reynolds has agreed to
operate its business only in the ordinary course, to refrain from taking
certain corporate actions without Alcoa's consent, and not to solicit
alternative acquisition proposals.
In the first quarter of 2000, Reynolds recognized $7 million of merger-related
expenses. Merger-related expenses are principally for investment banking and
legal services. Reynolds expects total merger-related expenses to be at least
$35 million, including $19 million that was recognized in 1999.
RESULTS OF OPERATIONS
- ---------------------
<TABLE>
<CAPTION>
First Quarter
---------------------------
2000 1999
---------------------------
<S> <C> <C>
Aluminum shipments 345 323
Revenues $1,319 $1,068
Net income (loss) 71 (10)
EPS (diluted) $1.10 $(0.15)
</TABLE>
Net income for the first quarter of 2000 includes after-tax merger-related
expenses of $6 million. The net loss for the first quarter of 1999 includes
foreign currency related losses, principally in Brazil, of $12 million.
The first quarter 2000 results reflect strong demand and higher pricing for
aluminum, alumina and stainless steel. The increase in income before income
taxes of $114 million was primarily due to the following:
<TABLE>
<CAPTION>
<S> <C>
Higher prices for aluminum products $86
Higher prices for alumina and stainless steel products 19
Higher shipments and sales 12
</TABLE>
The increase in selling, general and administrative expenses was wholly
attributable to 1999 acquisitions.
Looking forward, results are expected to further benefit from increased sales
of Packaging and Consumer products as the year progresses, peaking in the
fourth quarter. In addition, we expect the start-up of the expansion of the
Worsley Alumina Refinery to be under way in the second quarter of 2000. We
also expect to benefit from continuing cost reduction efforts in all of our
businesses.
GLOBAL BUSINESS UNITS
Reynolds is organized into four market-based, global business units. The four
global business units and their principal products are as follows:
. Base Materials - alumina, carbon products, primary aluminum ingot and
billet, and electrical rod
. Packaging and Consumer - aluminum and plastic packaging, foodservice,
consumer, and printing products
. Construction and Distribution - architectural construction products and
the distribution of a wide variety of aluminum and stainless steel products
. Transportation - aluminum wheels, heat exchangers and automotive
structures
13
<PAGE> 14
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
BASE MATERIALS
<TABLE>
<CAPTION>
First Quarter
-----------------------
2000 1999
-----------------------
<S> <C> <C>
Aluminum shipments:
Customer 222 212
Internal 49 56
-----------------------
Total 271 268
=======================
Revenues:
Customer - aluminum $403 $302
- nonaluminum 95 75
Internal - aluminum 78 81
-----------------------
Total $576 $458
=======================
Operating income $124 $ 14
=======================
</TABLE>
Customer aluminum shipments increased during the first quarter of 2000 because
of higher demand for our value-added products (foundry and sheet ingot, billet
and rod). Value-added products made up a record 82% of our primary aluminum
shipments in this period and 73% in the first quarter of 1999.
Aluminum revenues increased principally due to higher primary aluminum prices.
The average realized price for primary aluminum was $0.82 per pound in the
first quarter of 2000 compared to $0.64 per pound in the same period of 1999.
The increase in non-aluminum revenues resulted from strong demand and higher
prices for alumina.
The increase in operating income was due to strong prices for aluminum and
alumina. Costs were lower as a result of higher production volume. These
lower costs were somewhat offset by an increase in power costs that are
indexed to the LME aluminum price.
<TABLE>
<CAPTION>
PACKAGING AND CONSUMER
First Quarter
----------------------
2000 1999
----------------------
<S> <C> <C>
Customer aluminum shipments 35 33
Revenues:
Customer - aluminum $189 $178
- nonaluminum 152 134
----------------------
Total $341 $312
======================
Operating income $ 24 $ 26
======================
</TABLE>
The increase in aluminum shipments and revenues was due to strong demand for
packaging and foodservice products. Nonaluminum revenues were higher because
of strong demand for plastic packaging and consumer products. These increases
were realized from domestic and international growth, and new products.
Operating profit was lower because of higher material costs. This effect was
somewhat offset by the increased shipping volumes and pricing improvements.
14
<PAGE> 15
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
<TABLE>
<CAPTION>
CONSTRUCTION AND DISTRIBUTION
First Quarter
---------------------
2000 1999
---------------------
<S> <C> <C>
Customer aluminum shipments 55 47
Revenues:
Customer - aluminum $187 $159
- nonaluminum 130 78
---------------------
Total $317 $237
=====================
Operating income $ 13 $ 8
=====================
</TABLE>
The increase in aluminum shipments in the first quarter of 2000 resulted from
strong demand for distribution products, particularly aluminum mill products,
and Reynobond aluminum composite material. The increase in aluminum revenues
reflects the strong shipping volume and higher prices.
The increase in non-aluminum revenues was due to acquisitions and higher prices
for stainless steel products.
The increase in operating income resulted from the higher shipping volume and
prices. The benefits from higher prices were partly offset by increased
material costs.
<TABLE>
<CAPTION>
TRANSPORTATION
First Quarter
---------------------
2000 1999
---------------------
<S> <C> <C>
Customer aluminum shipments 20 17
Customer revenues $111 $94
Operating loss (7) (2)
=====================
</TABLE>
Shipments and revenues were higher in the first quarter of 2000 because of
strong demand for cast aluminum wheels and increased shipments of engine
cradles.
The increased loss resulted from higher conversion costs due to manufacturing
difficulties in wheel operations and higher material costs. Profit margins
were adversely affected as a result of higher aluminum costs not being offset
by price increases because of a time lag in the pricing formula.
OTHER
In the "Other" category, revenues were higher because of real estate sales and
improvements at European extrusion and Latin American can operations.
The improvement in corporate amounts reflects the effects of foreign currency
related losses of $12 million recognized in the first quarter of 1999.
For additional information concerning the global business units, see Note 6 to
the consolidated financial statements.
INTEREST EXPENSE
Interest expense was lower in the first quarter of 2000 because of an increase
in capitalized interest.
15
<PAGE> 16
RESULTS OF OPERATIONS - continued
- ---------------------
TAXES ON INCOME
The effective tax rates reflected in the income statement differ from the U.S.
federal statutory rate principally because of the following:
. foreign taxes at different rates
. the effects of percentage depletion allowances
. credits and other tax benefits
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
<TABLE>
<CAPTION>
WORKING CAPITAL
March 31 December 31
2000 1999
------------ -------------
<S> <C> <C>
Working capital $302 $137
Ratio of current assets to current liabilities 1.3/1 1.1/1
</TABLE>
The increase in working capital was due principally to higher receivables and
inventories. The increase in receivables resulted from lower sales of
customer accounts receivable and an increase in swap arrangements. The
increase in inventories is in anticipation of higher shipping levels in the
second quarter of 2000.
OPERATING ACTIVITIES
Cash generated from operating activities was supplemented with cash provided
by financing activities to fund the increase in working capital.
INVESTING ACTIVITIES
Capital investments totaled $86 million in the first quarter of 2000. This
amount includes $15 million for operating requirements (replacement equipment,
environmental control projects, etc.). The remainder was for strategic
projects (performance improvements, investments, etc.) principally carried
forward from 1999, including:
. expansion of the Worsley Alumina Refinery in Australia
. modernization of U.S. foil plants
. small capacity expansions, equipment upgrades, improvement programs and
other initiatives that have been completed or are currently under way at a
number of facilities
Capital investments planned for 2000 (in the range of $250 - $275) are
primarily for those strategic projects now under way and continuing operating
requirements. We expect to fund these capital investments primarily with cash
provided by operating activities.
In the first quarter of 2000, we sold our remaining investment in a Canadian
rolling mill and related assets. No material gain or loss was realized. This
investment was included in our "Other" category.
FINANCING ACTIVITIES
In the first quarter of 2000, we borrowed $100 million under our credit
facilities and increased the amount of debt securities we can issue under our
shelf registration to $163 million. We used the proceeds from the borrowing
to fund investing activities and to partially fund an increase in working
capital.
16
<PAGE> 17
RISK FACTORS
- ------------
This section should be read in conjunction with Part I, Item 1 (Business),
Item 3 (Legal Proceedings) and Item 7 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) of Reynolds' 1999 Form 10-K and
the preceding portions of this Item.
This report contains (and oral communications made by or on behalf of Reynolds
may contain) forecasts, projections, estimates, statements of management's
plans, objectives and strategies for Reynolds and other forward-looking
statements<F1>. Reynolds' expectations for the future and related forward-
looking statements are based on a number of assumptions and forecasts,
including:
. world economic growth and other economic indicators (including rates of
inflation, industrial production, housing starts and light vehicle
sales)
. trends in Reynolds' key markets
. global aluminum supply and demand conditions
. primary aluminum prices
By their nature, forward-looking statements involve risk and uncertainty, and
various factors could cause Reynolds' actual results to differ materially from
those projected in a forward-looking statement or affect the extent to which a
particular projection is realized.
Reynolds remains optimistic about the demand for aluminum for the balance of
2000. The strong recovery in 1999, when aluminum consumption grew by more
than 5%, has set the stage for further strength in 2000. While some
uncertainty exists about the extent of the economic expansion in the United
States, the outlook for continuing growth in Europe and Asia remains very
positive. We expect that consumption of aluminum will continue to grow at a
rate of 4% to 6% per year for 2000 and 2001.
Economic and/or market conditions other than those forecasted by Reynolds in
the preceding paragraph could cause Reynolds' 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 Reynolds' 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. Because primary aluminum makes
up a significant portion of Reynolds' shipments, changes in aluminum pricing
have a rapid effect on its operating results. Reynolds' use from time to time
of contractual arrangements, including fixed-price sales contracts, fixed-
price supply contracts, and forward, futures and option contracts, reduces its
exposure to price volatility but does not eliminate it.
. The markets for most aluminum products are highly competitive. Certain
of Reynolds' competitors are larger than Reynolds 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, plastics and glass,
among others, for various applications in Reynolds' key markets. Plastic
products compete with similar products made by Reynolds' competitors, as well
as with products made of glass, aluminum, steel, paper, wood and ceramics,
among others. Unanticipated actions or developments by or affecting Reynolds'
competitors and/or the willingness of customers to accept substitutions for
the products sold by Reynolds could affect results.
[FN]
____________
<FN1>Forward-looking statements can be identified generally as those containing
words such as "should," "will," "will likely result," "hope," "forecast,"
"outlook," "project," "estimate," "expect," "anticipate," "scheduled," or
"plan" and words of similar effect.
</FN>
17
<PAGE> 18
RISK FACTORS - continued
- ------------
. Reynolds spends substantial capital and operating amounts relating to
ongoing compliance with environmental laws. In addition, Reynolds is involved
in remedial investigations and actions in connection with past disposal of
wastes. The identification of additional material remediation sites in the
future at which Reynolds may be named as a potentially responsible party (that
are presently unknown) could have a material adverse effect on its results of
operations in a future interim or annual reporting period. Moreover,
estimating future environmental compliance and remediation costs is imprecise
due to:
- continuing evolution of environmental laws and regulatory
requirements and uncertainties about their application to
Reynolds' operations
- availability and application of technology
- allocation of costs among potentially responsible parties
. Reynolds has investments and activities in various emerging markets,
including China and Brazil. While emerging markets offer strong growth
potential, they also present a higher degree of risk than more developed
markets. In addition to the business risks inherent in developing and
servicing new markets, economic conditions may be more volatile, legal
systems less developed and predictable, and the possibility of various
types of adverse government action more pronounced.
. Unanticipated material legal proceedings or investigations, or the
disposition of those currently pending against Reynolds other than as
anticipated by management and counsel, could have a material adverse effect on
its results of operations for a particular reporting period.
. Changes in the costs or availability of supply of power, resins, caustic
soda, green coke and other raw materials can materially affect results.
Substantial increases in power costs, particularly in the Pacific Northwest,
may adversely affect Reynolds' primary aluminum production plants which
require reliable, low-cost power.
. Operating factors such as supply disruptions, the failure of equipment or
processes to meet specifications, failure to achieve operating improvements in
the Transportation global business unit, changes in operating conditions, and
weather could materially affect results.
. Changes in laws and regulations, both U.S. and foreign, or their
interpretation and application, including changes in tax laws and their
interpretation and application, could affect Reynolds' results.
. A number of Reynolds' operations are cyclical and can be influenced by
economic conditions.
. A failure to complete and successfully start up major capital projects,
such as the ongoing expansion of the Worsley Alumina Refinery (by reason of
construction delays or disputes, labor unrest or otherwise), as scheduled and
within budget or a failure to launch successfully new growth or strategic
business programs, such as the engine cradle program where Reynolds is
experiencing higher than anticipated costs, could affect Reynolds' results.
. A strike at a customer facility or a significant downturn in the business
of a key customer supplied by Reynolds could affect Reynolds' results.
18
<PAGE> 19
RISK FACTORS - continued
- ------------
. Reynolds' proposed merger with Alcoa Inc. is subject to certain
conditions, including antitrust clearance. As discussed under "Merger" in
this Item 2, on September 29, 1999, the Antitrust Division issued a request
for additional information and documentary material (a "second request"). On
February 11, 2000, both Reynolds and Alcoa announced that they believed that
they were in substantial compliance with the second request. They also
advised the Department of Justice that they would not close the merger before
March 31, 2000, in order to provide the Department sufficient time to review
the transaction. The agreement not to close the merger has been extended to
May 2000. In addition, the European Commission has until no later than May
10, 2000, to complete its investigation and to make a final determination with
respect to the merger. Reynolds and Alcoa have also made filings under the
competition laws of Canada, Australia and certain other countries where the
companies have significant operations. Reynolds and Alcoa have been advised
that the Canadian Competition Bureau has classified this merger as "very
complex." Its review is expected to be completed by May 24, 2000. The
Australian review process is also expected to be completed by the end of May
2000. It is possible that regulatory authorities may not approve the merger,
impose conditions on the combined operations or require divestitures as a
condition to approving the merger. While Reynolds is working promptly toward
completion of the merger, no assurances can be given as to whether regulatory
delays will be encountered or regulatory conditions to the merger imposed, or
the possible effects of such delays or conditions.
In addition to the factors referred to above, Reynolds is exposed to general
financial, political, economic and business risks in connection with its
worldwide operations. Reynolds continues to evaluate and manage its
operations in a manner to mitigate the effects from exposure to such
risks. In general, Reynolds' 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 worldwide economies and markets in which Reynolds
operates will not change significantly overall.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Forward, futures, option and swap contracts are designated to manage risks
resulting from fluctuations in the aluminum, natural gas, foreign
currency and debt markets. Contracts used to manage risks in these
markets are not material.
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, on August 11, 1999, eight class action complaints on
behalf of stockholders of Reynolds were filed in the Delaware Court of
Chancery against Reynolds and certain present and former members of its board
of directors. These actions were styled Tozour Energy Systems Retirement Plan
v. Sheehan, et al.; Lisa v. Reynolds Metals Company, et al.; Yassin v.
Reynolds Metals Company, et al.; Weinfeld v. Sheehan, et al.; Bader & Yakaitis
Profit Sharing Plan and Trust v. Sheehan, et al.; Rand v. Sheehan, et al.;
Grill v. Sheehan, et al.; and Randolph Capital Management, Inc. v. Sheehan, et
al. The complaints were filed after Alcoa announced its proposal to acquire
Reynolds. The plaintiff in each action alleged, among other things, that the
directors of Reynolds failed to negotiate with Alcoa before Alcoa's
announcement; that they were breaching their fiduciary duties by failing to
explore offers for the purchase of Reynolds or to engage in meaningful
discussions with interested parties such as Alcoa; that they were attempting
to entrench themselves in their positions at Reynolds through misuse of
Reynolds' shareholder rights plan; and that they were attempting to deprive
the plaintiffs of the true value of their investment in Reynolds. The
plaintiff in each action sought injunctive relief requiring the directors of
Reynolds to give due consideration to any proposed business combination, to
resolve any conflicts in favor of Reynolds' public stockholders, and to
refrain from consummating any business combination without conducting an
auction or other process to obtain the highest possible price for Reynolds.
The complaints also sought unspecified damages and awards of fees and costs.
On February 11, 2000, Reynolds' stockholders approved the merger agreement
between Reynolds and Alcoa. On April 3, 2000, the Delaware Court of Chancery
entered orders of dismissal, without prejudice, dismissing all of the above-
described actions.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Recent Sales of Unregistered Securities
STOCK PLAN FOR OUTSIDE DIRECTORS. Under Reynolds' Stock Plan for Outside
Directors (the "Stock Plan"), 91.825 phantom shares, in the aggregate,
were granted to Reynolds' nine outside Directors on January 3, 2000, based
on an average price of $75.969 per share. These phantom shares
represented dividend equivalents paid on phantom shares previously granted
under the Stock Plan. 756.250 phantom shares, in the aggregate, were
granted to the nine outside Directors on March 31, 2000, based on an
average price of $67.844 per share. These phantom shares represented a
quarterly installment of each outside Director's annual grant under the
Stock Plan.
To the extent that these grants constitute sales of equity securities,
Reynolds 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 Stock Plan is contained in Reynolds' 1999 Form 10-K
in Part II, Item 5, under the caption "Sale of Unregistered Securities."
LONG-TERM PERFORMANCE SHARE PLAN. Under Reynolds' Long-Term Performance
Share Plan (the "Plan"), executive officers and other key employees of
Reynolds and its subsidiaries and affiliates who are designated by the
Compensation Committee of Reynolds' Board of Directors are granted
performance share units for a designated cycle (generally four years,
although an initial two-year cycle was also established for 1998-99). The
units may be earned (or not) based on Reynolds' total shareholder return
(i.e., stock price appreciation plus dividends reinvested quarterly)
relative to the Standard & Poor's Basic Materials Index. A threshold
payment is made if Reynolds matches the 40th percentile of the group,
while target is payable at the 60th percentile and a maximum award of 150%
is payable at the 80th percentile. After the end of each performance
cycle, each participant will be entitled to receive an award for that
cycle only to the extent the performance goals
20
<PAGE> 21
established for that cycle have been met. Half of the award will be
payable in cash; the other half will be in the form of phantom stock.
Participants may voluntarily defer receipt of up to 85% of the cash
portion, which may be deferred into an interest account or, subject to
the terms of the Plan, a phantom stock account. The phantom stock
(including all deferred awards) will not be paid out until the year
following termination of employment or, in the case of a change in
control of Reynolds, immediately following the change in control, and
will be paid in shares of common stock.
On January 1, 2000, 61,945.052 phantom shares, in the aggregate, were
credited to the accounts of the executive officers and other key employees
participating in the Plan, based on an average stock price calculated in
accordance with the Plan of $72.49 per share. These phantom shares
represented awards under the Plan for the two-year cycle January 1, 1998
through December 31, 1999.
To the extent that these awards constitute sales of equity securities,
Reynolds 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 Plan, the Plan's restriction on the payout of
the phantom stock until after the participants' termination of employment,
the number of executive officers and other key employees participating in
the Plan, the sophistication of such participants and their access to the
kind of information that a registration statement would provide.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As previously reported in Reynolds' 1999 Form 10-K in Part I, Item 4, a
special meeting of Reynolds' stockholders was held on February 11, 2000. The
stockholders approved and adopted the Agreement and Plan of Merger, dated as
of August 18, 1999, among Alcoa Inc., RLM Acquisition Corp. and Reynolds, and
approved the transactions contemplated thereby. At December 29, 1999, the
record date for the special meeting, 63,463,257 shares of common stock were
outstanding and entitled to vote at the meeting. The number of votes cast for
and against, and the number of abstentions, as applicable, were as set forth
below. No other matter was voted upon at the meeting.
<TABLE>
<CAPTION>
<S> <C>
Number of Votes Cast "For" 41,335,471
Number of Votes Cast "Against" 457,861
Number of Abstentions 5,609,245
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
During the first quarter of 2000, Reynolds filed four Current Reports on
Form 8-K with the Commission, all of which reported matters under Item 5:
(1) A Form 8-K dated January 18, 2000, containing unaudited pro
forma condensed consolidated financial statements relating to the
proposed merger of Reynolds with Alcoa Inc.;
(2) A Form 8-K dated January 19, 2000, containing a copy of a press
release issued that date by Reynolds announcing its 1999 fourth
quarter and year-end results;
(3) A Form 8-K dated February 14, 2000, containing copies of press
releases issued on February 11, 2000 by Reynolds and Alcoa Inc.
concerning their proposed merger; and
21
<PAGE> 22
(4) A Form 8-K dated March 21, 2000, containing a copy of a press
release issued on March 20, 2000 by Reynolds and Alcoa Inc.
announcing that they had agreed to provide the Department of Justice
additional time to review their proposed merger.
22
<PAGE> 23
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
Senior Vice President and Controller
(Chief Accounting Officer)
DATE: April 28, 2000
23
<PAGE> 24
INDEX TO EXHIBITS
(Attached herewith are Exhibits 27 and 99)
* EXHIBIT 2 - Agreement and Plan of Merger among Alcoa
Inc., RLM Acquisition Corp. and Reynolds
Metals Company dated as of August 18,
1999. (File No. 001-01430, Form 8-K
dated August 19, 1999, EXHIBIT 99.1)
* EXHIBIT 3.1 - Restated Certificate of Incorporation,
as amended. (File No. 001-01430, 1999
Form 10-K Report, EXHIBIT 3.1)
* EXHIBIT 3.2 - By-laws, as amended. (File No. 001-01430,
1998 Form 10-K Report, 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 - Form of Common Stock Certificate.
(Registration Statement No. 333-79203 on
Form S-8, dated May 24, 1999, EXHIBIT
4.2)
* EXHIBIT 4.4 - 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. 001-01430, Form 10-Q Report
for the Quarter ended March 31, 1989,
EXHIBIT 4(c))
* EXHIBIT 4.5 - Amendment No. 1 dated as of November 1,
1991 to the Indenture. (File No. 001-
01430, 1991 Form 10-K Report, EXHIBIT
4.4)
* EXHIBIT 4.6 - Amended and Restated Rights Agreement
dated as of March 8, 1999 (the "Rights
Agreement") between Reynolds Metals
Company and ChaseMellon Shareholder
Services, L.L.C. (File No. 001-01430,
Form 8-K Report dated March 8, 1999,
EXHIBIT 4.1)
* EXHIBIT 4.7 - First Amendment dated August 20, 1999
to the Rights Agreement. (File No.
001-01430, Form 8-A/A (Amendment No. 2 to
Registration Statement on Form 8-A,
pertaining to Preferred Stock Purchase
Rights) dated August 19, 1999, EXHIBIT 1)
* 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. 001-01430, 1991 Form 10-
K Report, EXHIBIT 4.15)
_______________________
* Incorporated by reference.
24
<PAGE> 25
* EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 001-01430, 1991 Form 10-
K Report, EXHIBIT 4.16)
* EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003.
(File No. 001-01430, 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) ("RACC"), as amended. (File
No. 001-01430, 1995 Form 10-K Report,
EXHIBIT 4.13)
* EXHIBIT 4.14 - By-Laws of RACC, as amended. (File No. 001-
01430, 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. 001-
01430, Form 10-Q Report for the Quarter
ended September 30, 1997, EXHIBIT 4.15)
* EXHIBIT 4.16 - By-Laws of CRM, as amended. (File No. 001-
01430, Form 10-Q Report for the Quarter
ended September 30, 1997, EXHIBIT 4.16)
* EXHIBIT 4.17 - Indenture dated as of April 1, 1993
among RACC, Reynolds Metals Company and
The Bank of New York, as Trustee. (File
No. 001-01430, Form 8-K Report dated
July 14, 1993, EXHIBIT 4(a))
* EXHIBIT 4.18 - First Supplemental Indenture, dated as of
December 18, 1995 among RACC, Reynolds
Metals Company, CRM and The Bank of New
York, as Trustee. (File No. 001-01430,
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. 001-01430,
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 - Amendment and Restatement of Reynolds
Metals Company Performance Incentive
Plan, as adopted and executed May 21,
1999. (File No. 001-01430, Form 10-Q
Report for the Quarter ended June 30,
1999, EXHIBIT 10.3)
______________________
* Incorporated by reference.
= Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
25
<PAGE> 26
=* EXHIBIT 10.4 - Amendment and Restatement of
Supplemental Death Benefit Plan for
Officers, as adopted and executed April
26, 1999. (File No. 001-01430, Form 10-Q
Report for the Quarter ended June 30,
1999, EXHIBIT 10.5)
=* EXHIBIT 10.5 - Financial Counseling Assistance Plan for
Officers. (File No. 001-01430, 1987
Form 10-K Report, EXHIBIT 10.11)
=* EXHIBIT 10.6 - Management Incentive Deferral Plan.
(File No. 001-01430, 1987 Form 10-K
Report, EXHIBIT 10.12)
=* EXHIBIT 10.7 - Amendment and Restatement of Deferred
Compensation Plan for Outside Directors,
as adopted and executed April 28, 1999.
(File No. 001-01430, Form 10-Q Report
for the Quarter ended June 30, 1999,
EXHIBIT 10.8)
=* EXHIBIT 10.8 - Form of Indemnification Agreement for
Directors and Officers. (File No. 001-
01430, 1998 Form 10-K Report, EXHIBIT
10.9)
=* EXHIBIT 10.9 - Form of Executive Severance Agreement, as
amended, between Reynolds Metals Company
and key executive personnel, including
each of the individuals listed in Item
4A of this report. (File No. 001-01430,
Form 10-Q Report for the Quarter ended
September 30, 1999, EXHIBIT 10.9)
=* EXHIBIT 10.10 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective May 20, 1988. (File No. 001-
01430, Form 10-Q Report for the Quarter
ended June 30, 1988, EXHIBIT 19(a))
=* EXHIBIT 10.11 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective October 21, 1988. (File No.
001-01430, Form 10-Q Report for the
Quarter ended September 30, 1988,
EXHIBIT 19(a))
=* EXHIBIT 10.12 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective January 1, 1987. (File No.
001-01430, 1988 Form 10-K Report,
EXHIBIT 10.22)
=* EXHIBIT 10.13 - 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. 001-01430, 1989 Form 10-K
Report, EXHIBIT 10.24)
=* EXHIBIT 10.14 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective January 18, 1991. (File No.
001-01430, 1990 Form 10-K Report,
EXHIBIT 10.26)
_______________________
* Incorporated by reference.
= Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
26
<PAGE> 27
=* EXHIBIT 10.15 - Form of Stock Option Agreement, as approved
April 22, 1992 by the Compensation
Committee of the Company's Board of
Directors. (File No. 001-01430, Form 10-
Q Report for the Quarter ended March 31,
1992, EXHIBIT 28(a))
=* EXHIBIT 10.16 - Amendment and Restatement of Reynolds
Metals Company Restricted Stock Plan for
Outside Directors, as adopted and
executed April 28, 1999 (File No. 001-
01430, Form 10-Q Report for the Quarter
ended June 30, 1999, EXHIBIT 10.17)
=* EXHIBIT 10.17 - Amendment and Restatement of Reynolds
Metals Company New Management Incentive
Deferral Plan, as adopted and executed
April 28, 1999 (File No. 001-01430, Form
10-Q Report for the Quarter ended June
30, 1999, EXHIBIT 10.18)
=* EXHIBIT 10.18 - Amendment and Restatement of Reynolds
Metals Company Salary Deferral Plan for
Executives, as adopted and executed
April 28, 1999. (File No. 001-01430,
Form 10-Q Report for the Quarter ended
June 30, 1999, EXHIBIT 10.19)
=* EXHIBIT 10.19 - Amendment and Restatement of Reynolds
Metals Company Supplemental Long-Term
Disability Plan for Executives, as
adopted and executed April 26, 1999.
(File No. 001-01430, Form 10-Q Report
for the Quarter ended June 30, 1999,
EXHIBIT 10.20)
=* EXHIBIT 10.20 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective August 19, 1994. (File No.
001-01430, Form 10-Q Report for the
Quarter ended September 30, 1994,
EXHIBIT 10.34)
=* EXHIBIT 10.21 - Amendment to Reynolds Metals Company
1992 Nonqualified Stock Option Plan
effective August 19, 1994. (File No.
001-01430, Form 10-Q Report for the
Quarter ended September 30, 1994,
EXHIBIT 10.35)
=* EXHIBIT 10.22 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Trustee Pays Premiums).
(File No. 001-01430, Form 10-Q Report
for the Quarter ended June 30, 1995,
EXHIBIT 10.34)
=* EXHIBIT 10.23 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Employee Pays Premium).
(File No. 001-01430, Form 10-Q Report
for the Quarter ended June 30, 1995,
EXHIBIT 10.35)
=* EXHIBIT 10.24 - Form of Split Dollar Life Insurance Agreement
(Employee Owner, Employee Pays Premium).
(File No. 001-01430, Form 10-Q Report
for the Quarter ended June 30, 1995,
EXHIBIT 10.36)
- -----------------
* Incorporated by reference.
= Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
27
<PAGE> 28
=* EXHIBIT 10.25 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Third Party Pays
Premiums). (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1995, EXHIBIT 10.37)
=* EXHIBIT 10.26 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Employee Pays
Premiums). (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1995, EXHIBIT 10.38)
=* EXHIBIT 10.27 - Amendment and Restatement of Reynolds
Metals Company 1996 Nonqualified Stock
Option Plan, as adopted and executed
April 15, 1999. (File No. 001-01430,
Form 10-Q Report for the Quarter ended
June 30, 1999, EXHIBIT 10.28)
=* EXHIBIT 10.28 - 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 10.29 - Form of Stock Option Agreement, as approved
May 17, 1996 by the Compensation
Committee of the Company's Board of
Directors. (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1996, EXHIBIT 10.41)
=* EXHIBIT 10.30 - 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. 001-
01430, Form 10-Q Report for the Quarter
ended June 30, 1996, EXHIBIT 10.42)
=* EXHIBIT 10.31 - Reynolds Metals Company Supplemental
Incentive Plan. (File No. 001-01430,
1996 Form 10-K Report, EXHIBIT 10.40)
=* EXHIBIT 10.32 - Amendment and Restatement of Reynolds
Metals Company Stock Plan for Outside
Directors, as adopted and executed April
28, 1999. (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1999, EXHIBIT 10.34)
=* EXHIBIT 10.33 - Amendment and Restatement of Reynolds
Metals Company Long-Term Performance
Share Plan, as adopted and executed
April 26, 1999. (File No. 001-01430,
Form 10-Q Report for the Quarter ended
June 30, 1999, EXHIBIT 10.37)
=* EXHIBIT 10.34 - Reynolds Metals Company 1999
Nonqualified Stock Option Plan
(Registration Statement No. 333-79203 on
Form S-8, dated May 24, 1999, EXHIBIT
4.5)
- -------------
* Incorporated by reference.
= Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
28
<PAGE> 29
=* EXHIBIT 10.35 - Form of Stock Option Agreement, as
approved May 21, 1999 by the Compensation
Committee of the Company's Board of
Directors. (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1999, EXHIBIT 10.40)
=* EXHIBIT 10.36 Form of Three Party Stock Option
Agreement, as approved May 21, 1999 by the
Compensation Committee of the Company's
Board of Directors. (File No. 001-
01430, Form 10-Q Report for the Quarter
ended June 30, 1999, EXHIBIT 10.41)
EXHIBIT 11 - Omitted; see Item 8 for 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
EXHIBIT 99 - Description of Reynolds Metals Company
Capital Stock
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.
- --------------
* Incorporated by reference.
= Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Reynolds Metals
Company Condensed Balance Sheet (Unaudited) for March 31, 2000 and Consolidated
Statement of Income (Unaudited) for the three months ended March 31, 2000 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 54
<SECURITIES> 0
<RECEIVABLES> 722
<ALLOWANCES> 9
<INVENTORY> 586
<CURRENT-ASSETS> 1424
<PP&E> 4335
<DEPRECIATION> 2343
<TOTAL-ASSETS> 6039
<CURRENT-LIABILITIES> 1122
<BONDS> 1150
0
0
<COMMON> 1588
<OTHER-SE> 616
<TOTAL-LIABILITY-AND-EQUITY> 6039
<SALES> 1319
<TOTAL-REVENUES> 1319
<CGS> 1047
<TOTAL-COSTS> 1047
<OTHER-EXPENSES> 61
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 98
<INCOME-TAX> 27
<INCOME-CONTINUING> 71
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71
<EPS-BASIC> 1.11
<EPS-DILUTED> 1.10
</TABLE>
Exhibit 99
DESCRIPTION OF REYNOLDS METALS COMPANY CAPITAL STOCK
The Company is authorized by its Restated Certificate of
Incorporation to issue a total of 221,000,000 shares of capital
stock, consisting of (i) 200,000,000 shares of common stock,
without par value (the "Common Stock"), (ii) 20,000,000 shares of
preferred stock, without par value (the "Preferred Stock"), and
(iii) 1,000,000 shares of second preferred stock, $100 par value
(the "Second Preferred Stock"). Shares of Preferred Stock and
Second Preferred Stock are issuable in one or more series, each
with such designations, preferences, rights, qualifications,
limitations and restrictions as the Board of Directors of the
Company may determine in resolutions providing for their
issuance.
As of April 27, 2000, there were issued, outstanding and
entitled to vote 63,681,199 shares of Common Stock. No shares of
Preferred Stock or Second Preferred Stock are currently
outstanding, although the Board of Directors has adopted
resolutions authorizing the issuance of up to 2,000,000 shares of
a Series A Junior Participating Preferred Stock, without par
value, issuable upon the occurrence of certain events as
described below in the section entitled "Common Stock - Preferred
Stock Purchase Rights."
COMMON STOCK
DIVIDEND RIGHTS AND RESTRICTIONS ON PAYMENT OF DIVIDENDS.
Holders of Common Stock are entitled to receive dividends, when
and as declared by the Board of Directors, subject to
restrictions which may be imposed by (i) resolutions providing
for the issuance of series of Preferred Stock or Second Preferred
Stock; and (ii) certain credit agreements of the Company, as
described below. Dividends on Preferred Stock and Second
Preferred Stock may be cumulative, and no payments or
distributions (except in Common Stock or other junior stock) may
be made on Common Stock, nor may any Common Stock be acquired by
the Company, unless all past and current dividends on Preferred
Stock and Second Preferred Stock have been paid or provided for.
Under certain of the Company's credit agreements, the Company may
not declare or pay dividends on, make any payment on account of,
or set apart assets for a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition
of, any shares of capital stock of the Company, nor may the
Company make any other distribution in respect thereof, if
specified events of default (including payment defaults and
events relating to bankruptcy, insolvency or reorganization) have
occurred and are continuing. No such events of default have
occurred.
VOTING RIGHTS. Holders of Common Stock are entitled to one
vote for each share held of record and are not entitled to
cumulate votes for the election of directors. As a consequence,
holders of more than 50% of the shares of Common Stock voting for
the election of directors can elect all of the directors if they
so choose; in such event, the holders of the remaining shares of
Common Stock would not be able to elect any directors. Holders
of Common Stock have voting powers on all matters requiring
approval of stockholders, other than certain matters subject to
the voting rights of holders of the Company's Preferred Stock and
Second Preferred Stock to the
<PAGE> 2
extent provided in the applicable resolutions authorizing their
issuance or otherwise under Delaware law.
LIQUIDATION RIGHTS. In the event of liquidation,
dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in the assets of the Company
remaining after payment or provision for payment of all the
Company's debts and other liabilities and after the holders of
any outstanding series of Preferred Stock and Second Preferred
Stock have been paid the full preferential amounts due them. Any
preferential rights to be accorded holders of Preferred Stock and
Second Preferred Stock will be set forth in resolutions of the
Board of Directors authorizing issuance of any series.
PREEMPTIVE RIGHTS; ASSESSABILITY. Holders of Common Stock
have no preemptive or conversion rights and there are no
redemption or sinking fund provisions applicable thereto. The
outstanding shares of Common Stock are fully paid and non-
assessable.
TRANSFER AGENT AND REGISTRAR. The transfer agent and
registrar for the Common Stock is ChaseMellon Shareholder
Services, L.L.C., 450 West 33rd Street, 15th Floor, New York, New
York 10001.
PREFERRED STOCK PURCHASE RIGHTS. On November 21, 1997, the
Board of Directors of the Company declared a dividend
distribution of one Preferred Stock Purchase Right (individually
a "Right", and collectively the "Rights") for each outstanding
share of Common Stock to stockholders of record at the close of
business on December 1, 1997. The description and terms of the
Rights are set forth in an Amended and Restated Rights Agreement,
dated as of March 8, 1999, as amended by the First Amendment
dated August 20, 1999 (as amended, the "Rights Agreement"),
between the Company and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent.
The Rights are exercisable only if a person or group buys
15% or more of the Company's Common Stock, or announces a tender
offer for 15% or more of the outstanding Common Stock. Each
Right will entitle a holder to buy one-hundredth of a share of
the Company's Series A Junior Participating Preferred Stock at an
exercise price of $300, subject to adjustment in certain
circumstances.
If a person or group acquires 15% or more of the Common
Stock, each Right would permit its holder to buy Common Stock
having a market value equal to two times the exercise price of
the Right. In addition, if at any time after the Rights become
exercisable, the Company is acquired in a merger, or if there is
a sale or transfer of 50% or more of its assets or earning power,
each Right would permit its holder to buy common stock of the
acquiring company having a market value equal to two times the
exercise price of the Right.
The Rights, which do not have voting privileges, expire on
December 1, 2007. The Board of Directors of the Company may
redeem the Rights before expiration, under certain circumstances,
for $0.01 per Right (the "Redemption Price").
2
<PAGE> 3
For so long as the Rights are redeemable, the Rights
Agreement may be amended from time to time by the Company in its
sole discretion. After the Rights have ceased to be redeemable,
the Company may not adopt any amendment that adversely affects
the interests of any holder of a Right, cause the Rights
Agreement to be amendable other than in accordance with this
sentence, or cause the Rights again to become redeemable.
Notwithstanding the foregoing, the Company may not under any
circumstances change the Redemption Price of the Rights.
On August 18, 1999, the Company, Alcoa Inc. ("Alcoa"), and
RLM Acquisition Corp., a wholly owned subsidiary of Alcoa,
entered into an agreement and plan of merger (the "Merger
Agreement"). Under the Merger Agreement, each outstanding share
of Company Common Stock would be converted into 1.06 shares of
Alcoa common stock and the Company would become wholly owned by
Alcoa. Completion of the merger is subject to customary closing
conditions, including antitrust clearances. On August 20, 1999,
the Company amended the Rights Agreement to render it
inapplicable to the transaction contemplated by the Merger
Agreement.
DELAWARE GENERAL CORPORATION LAW SECTION 203
The Company is subject to the provisions of Section 203 of
the General Corporation Law of the State of Delaware ("DGCL
Section 203"), the "business combination" statute. In general,
the statute prohibits a public Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i)
prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced
(excluding certain shares described in DGCL Section 203), or
(iii) on or after such date, the business combination is approved
by the board of directors of the corporation and authorized at an
annual or special meeting of stockholders and by the affirmative
vote of at least two-thirds of the outstanding voting stock that
is not owned by the "interested stockholder". "Business
combination" is defined to include mergers, asset sales and
certain other transactions resulting in a financial benefit to a
stockholder. An "interested stockholder" is defined generally as
a person who, together with affiliates and associates, owns (or,
within the prior three years, did own) 15% or more of a
corporation's voting stock. The Company's Restated Certificate
of Incorporation does not exclude the Company from the
restrictions imposed under DGCL Section 203. Thus, such statute
could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to the
Company and, accordingly, may discourage attempts to acquire the
Company.
The Company's Board of Directors has approved the Merger
Agreement for the purpose of exempting the proposed merger with
Alcoa from the operation of DGCL Section 203.
3
