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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1430
REYNOLDS METALS COMPANY
A Delaware Corporation
(I.R.S. Employer Identification No. 54-0355135)
6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-7003
Telephone Number (804) 281-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
As of April 30, 1996, the Registrant had 63,670,434 shares of Common Stock, no
par value, outstanding and entitled to vote.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
--------------------
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------------------------
Reynolds Metals Company
Quarter ended March 31
- --------------------------------------------------------------------------------------------------
(In millions, except per share amounts) 1996 1995
- --------------------------------------------------------------------------------------------------
Revenues
Net sales $1,662 $1,651
Equity, interest and other income 13 10
- --------------------------------------------------------------------------------------------------
1,675 1,661
- --------------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 1,380 1,319
Selling, administrative and general expenses 111 104
Provision for depreciation and amortization 80 76
Interest - principally on long-term obligations 42 43
Operational restructuring costs 37 -
- --------------------------------------------------------------------------------------------------
1,650 1,542
- --------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting change 25 119
Taxes on income 8 37
- --------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 17 82
Cumulative effect of accounting change (15) -
- --------------------------------------------------------------------------------------------------
Net income 2 82
Preferred stock dividends 9 9
- --------------------------------------------------------------------------------------------------
Net income (loss) available to common stockholders ($ 7) $ 73
==================================================================================================
Earnings per share
Average shares outstanding 64 72
Income before cumulative effect of accounting change $0.12 $1.13
Cumulative effect of accounting change (0.24) -
- --------------------------------------------------------------------------------------------------
Net income (loss) ($0.12) $1.13
==================================================================================================
Cash dividends per common share $0.35 $0.25
- --------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------------------------
Reynolds Metals Company
March 31 December 31
- --------------------------------------------------------------------------------------------------
(In millions) 1996 1995
- --------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 37 $ 39
Receivables, less allowances of $20 (1995 - $20) 1,066 1,043
Inventories 962 891
Prepaid expenses 49 41
- --------------------------------------------------------------------------------------------------
Total current assets 2,114 2,014
Unincorporated joint ventures and associated companies 1,284 1,286
Property, plant and equipment 6,640 6,600
Less allowances for depreciation and amortization 3,415 3,377
- --------------------------------------------------------------------------------------------------
3,225 3,223
Deferred taxes and other assets 1,221 1,217
- --------------------------------------------------------------------------------------------------
Total assets $7,844 $7,740
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued and other liabilities $1,089 $1,155
Short-term borrowings 308 111
Long-term debt 116 101
- --------------------------------------------------------------------------------------------------
Total current liabilities 1,513 1,367
Long-term debt 1,839 1,853
Postretirement benefits 1,232 1,213
Environmental, deferred taxes and other liabilities 676 690
Stockholders' equity
Preferred stock 505 505
Common stock 942 941
Retained earnings 1,227 1,256
Cumulative currency translation adjustments (27) (22)
Pension liability adjustment (63) (63)
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 2,584 2,617
- --------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $7,844 $7,740
==================================================================================================
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------------------------
Reynolds Metals Company
Three Months Ended
March 31
- --------------------------------------------------------------------------------------------------
(In millions) 1996 1995
- --------------------------------------------------------------------------------------------------
Operating activities
Net income $ 2 $ 82
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization 80 76
Operational restructuring costs 37 -
Cumulative effect of accounting change 15 -
Changes in operating assets and liabilities:
Accounts payable, accrued and other liabilities (56) (109)
Receivables (28) (111)
Inventories (78) (161)
Other (53) (23)
- --------------------------------------------------------------------------------------------------
Net cash used in operating activities ( 81) (246)
Investing activities
Capital investments:
Operational (45) (42)
Strategic (51) (43)
Investments (2) -
Proceeds from sale of assets - 28
Maturities of investments in debt securities - 36
Other investing activities - net 7 5
- --------------------------------------------------------------------------------------------------
Net cash used in investing activities ( 91) ( 16)
Financing activities
Increase in borrowings (principally short-term) 201 17
Cash dividends paid (31) (25)
Net cash provided by (used in) financing activities 170 ( 8)
Cash and cash equivalents
Net decrease ( 2) (270)
At beginning of period 39 308
- --------------------------------------------------------------------------------------------------
At end of period $ 37 $ 38
==================================================================================================
/TABLE
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters Ended March 31, 1996 and 1995
Note A - Basis of presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the interim
period of 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1995.
Note B - Operational Restructuring Costs
In the first quarter of 1996, the Company recorded operational restructuring
costs of $37 million, which relate principally to employee termination costs
associated with the planned closing of the Company's aluminum beverage can
plant located in Houston, Texas. The facility's 1.4-billion-can annual
capacity was determined to be in excess of the Company's domestic customer
needs due to productivity gains within the Company's can-making system and
slower overall growth in the domestic demand for cans. The Company intends to
transfer some equipment to other of its domestic and international can
operations and sell the plant and property.
Note C - Cumulative Effect of Accounting Change
In the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of ("SFAS No. 121"). The
Company recognized an after-tax loss of $15 million for the cumulative effect
of adopting SFAS No. 121. The loss was for the impairment of assets held for
sale, principally undeveloped land.
Note D - Earnings per share
In the first quarter of 1996, earnings per share equals net income, minus
dividends on the Company's preferred stock ("PRIDES"), divided by the weighted-
average number of common shares outstanding during the period. In the first
quarter of 1995, earnings per share equals net income divided by the weighted-
average number of common shares and common share equivalents outstanding during
the period. The number of common share equivalents outstanding was based on
the assumed conversion of the PRIDES. For the purpose of this computation, the
conversion rate of 0.93 share of common stock for each share of PRIDES was
based on the average market value of the Company's common stock during the 1995
period ($50.65 per share). Common share equivalents relating to the PRIDES
were not included in the first quarter of 1996 since their effect would have
been anti-dilutive.
Note E - Financing arrangements
In the first quarter of 1996, the Company entered into $400 million of interest
rate swap agreements, which effectively convert a portion of its debt
(principally medium-term notes) from fixed-rate to variable-rate. Under these
agreements, payments are received based on a fixed rate (6.0%) and made based
on a variable rate (5.3% at March 31, 1996). These arrangements mature in
2001. The variable rate is based on the London Interbank Offer Rate.
Note F - Contingent liabilities
As previously disclosed in the Company's annual report on Form 10-K for the
year ended December 31, 1995, the Company is involved in various worldwide
environmental improvement activities resulting from past operations, including
designation as a potentially responsible party, with others, at various EPA
designated Superfund sites. The Company has recorded amounts which, in
management's best estimate, will be sufficient to satisfy anticipated costs of
known remediation requirements. As a result of factors such as the continuing
evolution of environmental laws and regulatory requirements, the availability
and application of technology, the identification of presently unknown
remediation sites and the allocation of costs among potentially responsible
parties, estimated costs for future environmental compliance and remediation
are necessarily imprecise. Based upon information presently available, such
future costs are not expected to have a material adverse effect on the
Company's competitive or financial position or its ongoing results of
operations. However, such costs could be material to future quarterly or
annual results of operations.
Note G - Canadian Reynolds Metals Company, Ltd. and Reynolds Aluminum Company
of Canada, Ltd.
Financial statements and financial statement schedules for Canadian Reynolds
Metals Company, Ltd. and Reynolds Aluminum Company of Canada, Ltd. have been
omitted because certain securities registered under the Securities Act of
1933, of which these entities are obligors (thus subjecting them to reporting
requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934),
are fully and unconditionally guaranteed by Reynolds Metals Company. Financial
information relating to these companies is presented herein in accordance with
Staff Accounting Bulletin 53 as an addition to the footnotes to the financial
statements of Reynolds Metals Company. Summarized financial information is as
follows:
Note G - Canadian Reynolds Metals Company, Ltd. and Reynolds Aluminum Company
of Canada, Ltd.-continued
Canadian Reynolds Metals Company, Ltd.
Quarter ended March 31
--------------------------
1996 1995
--------------------------
Net Sales:
Customers $ 48 $ 42
Parent company 169 200
--------------------------
$217 $242
Cost of products sold 154 167
Net income (loss) $ 37 $ 51
March 31 December 31
1996 1995
----------------------------
Current assets $ 240 $ 112
Noncurrent assets 1,260 1,266
Current liabilities (162) (91)
Noncurrent liabilities (609) (617)
Reynolds Aluminum Company of Canada, Ltd.
Quarter ended March 31
--------------------------
1996 1995
--------------------------
Net Sales:
Customers $117 $113
Parent company 143 179
--------------------------
$260 $292
Cost of products sold 199 215
Net income (loss) $ 32 $ 50
March 31 December 31
1996 1995
---------------------------
Current assets $357 $221
Noncurrent assets 1,403 1,407
Current liabilities (293) (199)
Noncurrent liabilities (637) (632)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------------------------------------------------
INTRODUCTION
- ------------
The following information should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's annual report on Form 10-K for the year ended December 31, 1995,
along with the consolidated financial statements and related 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.
RESULTS OF OPERATIONS
- ---------------------
The Company had net income, before a restructuring charge and the effects
of an accounting change, of $40 million ($.48 per share). Following an after-
tax restructuring charge of $23 million ($.36 per share) and the cumulative
effect of an accounting change of $15 million ($.24 per share), the Company had
net income of $2 million. After deducting preferred stock dividends, the
Company had a net loss per common share of 12 cents. Net income for the first
quarter of 1995 was $82 million ($1.13 per share).
The restructuring charge relates principally to employee termination costs
associated with the planned closing of an aluminum beverage can plant located
in Houston, Texas. The accounting change resulted from adopting a new
accounting standard (SFAS No. 121) covering impaired assets held for sale,
principally undeveloped land.
The Company is experiencing what it believes is a short-term softness in
the overall global aluminum market, primarily attributable to a protracted soft
landing in the U.S. economy and continued weakness in Europe and other areas.
The economic situation has caused end users to continue liquidating excess
inventories, and these conditions have resulted in lower realized prices for
primary aluminum. Other factors affecting first quarter results include higher
costs for certain raw materials, particularly in the production of alumina, and
severe winter weather conditions, which resulted in facility curtailments and
lower volumes, particularly in the distribution and construction products
businesses.
OPERATING AREA ANALYSIS
- -----------------------
Shipments and Net Sales
- -----------------------
First Quarter 1996 First Quarter 1995
---------------------------------------------------
Shipments Net Sales Shipments Net Sales
---------------------------------------------------
Finished Products and Other Sales
Packaging and containers
Aluminum 83 $438 82 $402
Nonaluminum 130 123
Other aluminum 38 133 44 151
Other nonaluminum 127 128
---------------------------------------------------
121 828 126 804
---------------------------------------------------
Production and Processing
Primary aluminum 81 142 61 133
Sheet and plate 91 292 106 330
Extrusions 51 178 56 195
Other aluminum 39 113 43 123
Other nonaluminum 109 66
---------------------------------------------------
262 834 266 847
---------------------------------------------------
Total 383 $1,662 392 $1,651
===================================================
Average realized price per pound:
Fabricated aluminum products $1.83 $1.73
Primary aluminum $0.80 $0.99
SHIPMENTS AND NET SALES
- -----------------------
Finished Products and Other Sales
- ---------------------------------
Aluminum packaging and container shipments were slightly higher in the
first quarter of 1996 due primarily to higher shipments of laminated aluminum
foil attributable to the acquisition in the second quarter of 1995 of a
laminated aluminum products plant. The decrease in other aluminum shipments
was due principally to severe winter weather conditions, which adversely
affected the Company's construction products and distribution businesses.
The increase in net sales was due principally to higher prices for cans
and ends and certain foil products and higher nonaluminum sales. The increase
in nonaluminum sales was mostly attributable to the acquisition of a flexible
packaging manufacturing operation in the fourth quarter of 1995. These
increases were somewhat offset by the lower shipping volumes, particularly for
the Company's construction products and distribution businesses.
Production and Processing
- -------------------------
Primary aluminum shipments fluctuate from period to period because of
variations in internal requirements and changes in customer demand for
value-added foundry ingot and billet. The acquisition of an additional 25%
interest in the Becancour, Quebec primary aluminum production facility in the
fourth quarter of 1995 contributed to the increase in primary aluminum
shipments in the first quarter of 1996, in addition to providing primary
aluminum for use in the Company's fabricating operations. The decrease in
average realized prices for primary aluminum was attributable to weak economic
conditions and the continuing excess inventory liquidation process.
SHIPMENTS AND NET SALES - continued
- -----------------------------------
Production and Processing - continued
- -------------------------------------
The decrease in shipments for the other product groups in this operating
area was also attributable to the economic and inventory situations described
under "Results of Operations" as well as the severe winter weather. These
conditions generally affected most markets served by this operating area.
The increase in nonaluminum sales was due to strong demand for alumina and
carbon products. The strong demand for alumina was met with the return to full
production during late 1995 of the Company's Texas alumina refinery.
Costs and Expenses
- ------------------
The increase in cost of products sold was due to higher costs for
purchased materials, particularly in the production of alumina, and lower
capacity utilization at aluminum fabricating facilities. Costs were favorably
impacted by performance improvement programs and lower outside purchases of
primary aluminum due to the acquisition of an additional 25% interest in
the Becancour, Quebec primary aluminum production facility in the fourth
quarter of 1995.
Selling, administrative and general expenses increased due to a higher
level of advertising.
In the first quarter of 1996, the Company recorded operational
restructuring costs of $37 million which relate principally to employee
termination costs associated with the planned closing of an aluminum beverage
can plant located in Houston, Texas. The Company's strategy for its U.S. can
business is to aggressively reduce costs and increase production efficiencies
through modernization programs and new technologies. The closing of the
Houston facility will provide the Company with annual cost savings of
approximately $18 million. The facility's 1.4-billion-can annual capacity was
determined to be in excess of the Company's domestic customer needs due to
productivity gains within the Company's can-making system and slower overall
growth in the domestic demand for cans. As a result of improved efficiencies
system-wide, the Company will maintain its current annual worldwide aluminum
beverage can production capacity. Operations at the facility will cease in
early 1997, at which time the Company intends to transfer some equipment to its
other domestic and international can operations and sell the plant and
property.
On a quarterly basis, the Company updates the status of all significant
existing or potential environmental issues, develops or revises estimates of
costs to satisfy known remediation requirements and adjusts its accruals
accordingly. Based upon information presently available, such future costs are
not expected to have a material adverse effect on the company's competitive or
financial position or its ongoing results of operations. However, it is not
possible to predict the amount or timing of future costs of environmental
requirements which may subsequently be determined. Such costs could be
material to future quarterly or annual results of operations.
Various suits and claims are pending against the Company. In the opinion
of management, after consultation with counsel, disposition of these suits and
claims, either individually or in the aggregate, will not have a material
adverse effect on the Company's competitive or financial position or its
ongoing results of operations. No assurance can be given, however, that the
disposition of one or more of such suits or claims in a particular reporting
period will not be material in relation to the reported results for such
period.
Taxes on Income
- ---------------
The effective tax rates reflected in the income statement differ from the
U.S. federal statutory rate because of state and foreign taxes and the effects
of percentage depletion allowances.
SHIPMENTS AND NET SALES - continued
- -----------------------------------
Cumulative Effect of Accounting Change
- --------------------------------------
In the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of ("SFAS No. 121"). The
Company recognized an after-tax loss of $15 million for the cumulative effect
of adopting SFAS No. 121. The loss was for the impairment of assets held for
sale, principally undeveloped land.
Operating Outlook
- -----------------
The Company continues to remain optimistic regarding favorable, long-term
aluminum industry fundamentals. The Company expects momentum to build as 1996
progresses, based on the Company's projections of world economic growth of 3%
and growth in world aluminum consumption of 3.5% to 4%. This will be fueled
by market strength in the U.S., Latin America and Asia. The Company expects
1996 to close out on a positive note, with a much stronger second half.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working Capital
- ---------------
Working capital totaled $601 million at March 31, 1996, compared to $647
million at December 31, 1995. The ratio of current assets to current
liabilities was 1.4/1 at March 31, 1996, compared to 1.5/1 at December 31,
1995.
Operating Activities
- --------------------
In the first quarter of 1996, cash generated from operations was
supplemented with short-term borrowings principally to reduce accounts payable,
accrued and other liabilities and to finance an increase in inventories.
Inventories increased in anticipation of higher shipping volumes in the second
quarter of 1996.
Investing Activities
- --------------------
Capital investments of $98 million in the first quarter of 1996 included
$45 million for operating requirements (i.e., replacement equipment, capital
maintenance, environmental control projects, etc.). The remainder was for
continuing performance improvement and strategic investment projects including
the modernization of aluminum can and end facilities; expansions at foil and
plastic film facilities; quality improvements at a can sheet facility in
Alabama; and the modification and equipping of a purchased facility in
Wisconsin to produce aluminum wheels.
Financing Activities
- --------------------
Cash provided by financing activities in the first quarter of 1996 was
used to fund operating and investing activities. The principal source of funds
was from the issuance of $165 million of commercial paper at a weighted-average
rate of 5.5%.
In the first quarter of 1996, the Company entered into $400 million of
interest rate swap agreements which effectively convert a portion of its debt
(principally medium-term notes) from fixed-rate to variable-rate. Under these
agreements, payments are received based on a fixed rate (6.0%) and made based
on a variable rate (5.3% at March 31, 1996). These arrangements mature in
2001. The variable rate is based on the London Interbank Offer Rate.
LIQUIDITY AND CAPITAL RESOURCES - continued
- -------------------------------------------
Financial Outlook
- -----------------
Capital investments in 1996 are expected to total $500 million.
Approximately 47% of this amount will be for operating requirements. The
remainder will be for continuing expenditures for those performance
improvement and strategic investment projects underway and an interest in a
Chinese joint venture as discussed below. Capital investments in 1996 are
expected to be funded with cash generated from operations, supplemented with
short-term borrowings as needed. These short-term borrowings are expected to
be repaid later in the year as economic and business conditions improve.
Early in the second quarter of 1996, the Company announced that a wholly
owned subsidiary had acquired an interest in a joint venture in China that
produces aluminum foil and extrusions. The operation, Bohai Aluminium
Industries, Ltd., includes a large, aluminum fabricating facility that was
built in the mid-1980's and expanded later that decade. The facility will
manufacture aluminum foil, primarily for the food, pharmaceutical and tobacco
industries, and extrusions for the automotive and building products markets.
The Company believes its available financial resources, together with
internally generated funds, are sufficient to meet its business needs at the
present time and for the foreseeable future. The Company continues to exceed
the financial ratio requirements contained in its financing arrangements and
expects to do so for the foreseeable future. At March 31, 1996, $150 million
of the Company's $1.65 billion shelf registration remained available for the
issuance of debt securities.
RISK FACTORS
- ------------
This section should be read in conjunction with Part I, Items 1
(Business), 3 (Legal Proceedings) and 7 (Management's Discussion and Analysis
of Financial Condition and Results of Operations) of the Company's annual
report on Form 10-K for the year ended December 31, 1995 and Part II, Item 1
(Legal Proceedings) of this report.
This report contains, and oral communications made by or on behalf of the
Company may contain, forecasts, projections, estimates, statements of
management's plans and objectives for the Company and other forward-looking
statements. The Company's expectations for the future and related
forward-looking statements are based on a number of assumptions and forecasts
as to world economic growth and other economic indicators (including
rates of inflation, industrial production, housing starts and light vehicle
sales), trends in the Company's key markets, global aluminum supply and demand
conditions, and aluminum ingot prices, among other things. By their nature,
forward-looking statements involve risk and uncertainty, and various factors
could cause the Company's actual results to differ from those projected in a
forward-looking statement or affect the extent to which a particular projection
is realized.
As 1996 progresses, the Company expects market conditions to improve based
on its projections of world economic growth of just over 3%, and world aluminum
consumption growth of 3.5% - 4%. The Company expects this growth to be fueled
by anticipated market strength in the U.S., Latin America and Asia, with an
expected recovery in Japan and growth of approximately 10% in other parts
of Asia. After the current liquidation of excess inventories by customers ends,
and barring a recession in any major world economy, the Company expects
improved conditions in aluminum industry supply/demand fundamentals to continue
for the next several years. The Company's outlook for growth in aluminum
consumption for the remainder of this decade is an average of 4% per year. The
Company expects greater use of aluminum around the world in automobiles and
other light vehicles; a slowing in the growth in U.S. aluminum beverage can
shipments to about 2% per year and a 5% annual increase in global
RISK FACTORS - continued
- ------------------------
shipments, with rapid growth of the aluminum beverage can market in Latin
America, Asia, the Middle East, and other developing economies; and increased
use of aluminum in the building and construction markets, particularly in
Eastern Europe and the Commonwealth of Independent States and as a result of
new construction projects in emerging markets.
Economic and/or market conditions other than as forecast by the Company in
the preceding paragraph, particularly in the U.S., Japan and Germany (which are
large consumers of aluminum) and in South America, could cause the Company's
actual results to differ from those projected in a forward-looking statement or
affect the extent to which a particular projection is realized.
The following factors also could affect the Company's results:
- - Primary aluminum is an internationally traded commodity. The price of
primary aluminum is subject to worldwide market forces of supply and
demand and other influences. Prices can be volatile. The Company's
strategy of being a vertically integrated producer of value-added aluminum
products, and its use of contractual arrangements including fixed-price
sales contracts, fixed-price supply contracts, and forward, futures and
option contracts, reduces its exposure to this volatility but does not
eliminate it.
- - The markets for most aluminum products are highly competitive. Certain of
the Company's competitors are larger than the Company in terms of total
assets and operations and have greater financial resources. Certain
foreign governments are involved in the operation and/or ownership of
certain competitors, and may be motivated by political as well as economic
considerations. In addition, aluminum competes with other materials, such
as steel, vinyl, plastics and glass, among others, for various
applications in the Company's key markets. Unanticipated actions or
developments by the Company's competitors and/or the willingness of
customers to accept substitutions for the products sold by the Company
could affect results.
- - The Company spends substantial capital and operating amounts relating to
ongoing compliance with environmental laws. In addition, the Company is
involved in remedial investigations and actions in connection with past
disposal of wastes. Estimating future environmental compliance and
remediation costs is imprecise due to the continuing evolution of
environmental laws and regulatory requirements, the availability and
application of technology, the identification of currently unknown
remediation sites, and the allocation of costs among potentially
responsible parties.
- - Unanticipated material legal proceedings or investigations, or the
disposition of those currently pending against the Company other than as
anticipated by management and counsel, could affect the Company's results.
- - Changes in the costs of power, resins, caustic soda, green coke and other
raw materials can affect results. A new five-year contract with the
Bonneville Power Administration for the period October 1996 - September
2001 would provide a fixed rate for electrical power that is 16% less than
rates now in effect for the Company's Longview, Washington and
Troutdale, Oregon primary aluminum production plants. The new contract is
subject to regulatory review and approval and is critical to the
competitive position of those two smelters.
RISK FACTORS - continued
- ------------------------
- - The Company's principal labor contracts with the United Steelworkers of
America and the Aluminum, Brick and Glass Workers International Union,
respectively, will expire by their terms in May 1996. In the event of a
strike at one or more Company facilities, production could be affected at
struck facilities and at non-struck facilities supplied by them. In
addition, the terms of the new union contracts, or failure to enter into
new contracts in timely fashion, could affect labor costs.
- - The Company's key transportation and building and construction markets are
cyclical, and sales to those markets in particular can be influenced by
economic conditions.
In addition to the factors referred to above, the Company is exposed to
general financial, political, economic and business risks in connection with
its worldwide operations. The Company continues to evaluate and manage its
operations in a manner to mitigate the effects from exposure to such risks. In
general, the Company's expectations for the future are based on the assumption
that conditions relating to costs, currency values, competition and the legal,
regulatory, financial, political and business environments in the economies and
markets in which the Company operates will not change significantly overall.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
-----------------
As previously reported in the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995, a private lawsuit styled Hammons v. Alcan
Aluminum Corp. et al. was filed in the Superior Court of California for the
County of Los Angeles on March 5, 1996 against the Registrant and other
aluminum producers. The original complaint sought estimated damages of
approximately $13 billion. In subsequently filed court documents, the
plaintiff's attorney has indicated that damages should have been sought
covering a two-year period (in an estimated amount of approximately $26
billion) rather than a one-year period as in the original complaint. The
Registrant is confident that its conduct has been in compliance with the
antitrust laws.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Annual Meeting of Stockholders of the Registrant was held on April 17,
1996. The stockholders (i) elected the thirteen nominees named in the
Registrant's proxy statement to serve as Directors, (ii) approved an amendment
to the Registrant's Performance Incentive Plan, (iii) approved the Registrant's
1996 Nonqualified Stock Option Plan, and (iv) ratified the selection of Ernst &
Young LLP as independent auditors of the Registrant for 1996. The number of
votes cast for, against or withheld, and the number of abstentions, as
applicable, with respect to each of the foregoing matters were as set forth
below. There were no broker nonvotes with respect to any of the foregoing
matters. No other matters were voted upon at the meeting.
(i) Election of Directors
Number Of Votes Number Of Votes
Name Cast "For" Withheld
---------------------- --------------- ---------------
Patricia C. Barron 62,349,180 475,835
William O. Bourke 62,314,757 510,258
John R. Hall 62,350,590 474,425
Robert L. Hintz 62,348,608 476,407
Richard G. Holder 62,323,892 501,123
William H. Joyce 62,352,842 472,173
Mylle Bell Mangum 62,352,740 472,275
D. Larry Moore 62,352,107 472,908
Randolph N. Reynolds 62,351,073 473,942
James M. Ringler 62,351,709 473,306
Henry S. Savedge, Jr. 62,354,295 470,720
Jeremiah J. Sheehan 62,350,879 474,136
Joe B. Wyatt 62,357,655 467,360
(ii) Approval of Amendment to Performance Incentive Plan
Number of Votes Cast "For" 59,859,529
Number of Votes Cast "Against" 2,604,984
Number of Abstentions 360,402
(iii) Approval of 1996 Nonqualified Stock Option Plan
Number of Votes Cast "For" 50,691,761
Number of Votes Cast "Against" 11,719,629
Number of Abstentions 414,600
(iv) Ratification of Selection of Ernst & Young LLP as Independent
Auditors
Number of Votes Cast "For" 62,491,251
Number of Votes Cast "Against" 175,909
Number of Abstentions 157,855
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 first
quarter of 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REYNOLDS METALS COMPANY
By Allen M. Earehart
Allen M. Earehart
Vice President, Controller
(Principal Accounting Officer)
DATE: May 14, 1996
INDEX TO EXHIBITS
EXHIBIT 2 - None
* EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended
to the date hereof. (Registration Statement No.
333-00929 on Form S-8, dated February 14, 1996,
EXHIBIT 4.1)
EXHIBIT 3.2 - By-Laws, as amended to the date hereof
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.
* EXHIBIT 4.13 - Articles of Continuance of Societe d'Aluminium
Reynolds du Canada, Ltee/Reynolds Aluminum
Company of Canada, Ltd. (formerly known as
Canadian Reynolds Metals Company, Limited --
Societe Canadienne de Metaux Reynolds, Limitee)
("REYCAN"), as amended to the date hereof. (File
No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.13)
* EXHIBIT 4.14 - By-Laws of REYCAN, as amended to the date
hereof. (File No. 1-1430, 1995 Form 10-K Report,
EXHIBIT 4.14)
* EXHIBIT 4.15 - Articles of Incorporation of Societe Canadienne de
Metaux Reynolds, Ltee/Canadian Reynolds Metals
Company, Ltd. ("CRM"), as amended to the date
hereof. (File No. 1-1430, 1995 Form 10-K Report,
EXHIBIT 4.15)
* EXHIBIT 4.16 - By-Laws of CRM, as amended to the date hereof.
(File No. 1-1430, 1995 Form 10-K Report, EXHIBIT
4.16)
* EXHIBIT 4.17 - Indenture dated as of April 1, 1993 among REYCAN,
Reynolds Metals Company and The Bank of New
York, as Trustee. (File No. 1-1430, Form 8-K
Report dated July 14, 1993, EXHIBIT 4(a))
* EXHIBIT 4.18 - First Supplemental Indenture, dated as of December
18, 1995 among REYCAN, Reynolds Metals Company,
CRM and The Bank of New York, as Trustee. (File
No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.18)
* EXHIBIT 4.19 - Form of 6-5/8% Guaranteed Amortizing Note due
July 15, 2002. (File No. 1-1430, Form 8-K Report
dated July 14, 1993, EXHIBIT 4(d))
* EXHIBIT 10.1 - Reynolds Metals Company 1982 Nonqualified Stock
Option Plan, as amended through May 17, 1985.
(File No. 1-1430, 1985 Form 10-K Report, EXHIBIT
10.2)
* EXHIBIT 10.2 - Reynolds Metals Company 1987 Nonqualified Stock
Option Plan. (Registration Statement No. 33-13822
on Form S-8, dated April 28, 1987, EXHIBIT 28.1)
* EXHIBIT 10.3 - Reynolds Metals Company 1992 Nonqualified Stock
Option Plan. (Registration Statement No. 33-44400
on Form S-8, dated December 9, 1991, EXHIBIT 28.1)
* EXHIBIT 10.4 - Reynolds Metals Company Performance Incentive
Plan, as amended and restated effective January 1,
1996. (File No. 1-1430, Form 10-Q Report for the
Quarter Ended March 31, 1995, EXHIBIT 10.4)
* EXHIBIT 10.5 - Agreement dated December 9, 1987 between
Reynolds Metals Company and Jeremiah J. Sheehan.
(File No. 1-1430, 1987 Form 10-K Report, EXHIBIT
10.9)
_______________________
*Incorporated by reference.
* EXHIBIT 10.6 - Supplemental Death Benefit Plan for Officers.
(File No. 1-1430, 1986 Form 10-K Report, EXHIBIT
10.8)
* EXHIBIT 10.7 - Financial Counseling Assistance Plan for
Officers. (File No. 1-1430, 1987 Form 10-K
Report, EXHIBIT 10.11)
* EXHIBIT 10.8 - Management Incentive Deferral Plan. (File No.
1-1430, 1987 Form 10-K Report, EXHIBIT 10.12)
* EXHIBIT 10.9 - Deferred Compensation Plan for Outside
Directors as Amended and Restated Effective
December 1, 1993. (File No. 1-1430, 1993
Form 10-K Report, EXHIBIT 10.12)
* EXHIBIT 10.10 - Retirement Plan for Outside Directors.
(File No. 1-1430, 1986 Form 10-K Report, EXHIBIT
10.10)
* EXHIBIT 10.11 - Death Benefit Plan for Outside Directors.
(File No. 1-1430, 1986 Form 10-K Report, EXHIBIT
10.11)
* EXHIBIT 10.12 - Form of Indemnification Agreement for
Directors and Officers. (File No. 1-1430, Form
8-K Report dated April 29, 1987, EXHIBIT
28.3)
* EXHIBIT 10.13 - Form of Executive Severance Agreement
between Reynolds Metals Company and key executive
personnel, including each of the individuals
listed in Item 4A of the Reynolds Metals
Company 1995 Form 10-K Report. (File No. 1-1430,
1987 Form 10-K Report, EXHIBIT 10.18)
* EXHIBIT 10.14 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective May 20,
1988. (File No. 1-1430, Form 10-Q Report
for the Quarter Ended June 30, 1988, EXHIBIT
19(a))
* EXHIBIT 10.15 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective October
21, 1988. (File No. 1-1430, Form 10-Q Report for
the Quarter Ended September 30, 1988, EXHIBIT
19(a))
* EXHIBIT 10.16 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
January 1, 1987. (File No. 1-1430, 1988 Form
10-K Report, EXHIBIT 10.22)
* EXHIBIT 10.17 - Form of Stock Option and Stock Appreciation
Right Agreement, as approved February 16, 1990 by
the Compensation Committee of the Company's Board
of Directors. (File No. 1-1430, 1989 Form
10-K Report, EXHIBIT 10.24)
* EXHIBIT 10.18 - Amendment to Reynolds Metals Company 1982
Nonqualified Stock Option Plan effective
January 18, 1991. (File No. 1-1430, 1990 Form
10-K Report, EXHIBIT 10.25)
____________________________
* Incorporated by reference.
* EXHIBIT 10.19 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
January 18, 1991. (File No. 1-1430, 1990
Form 10-K Report, EXHIBIT 10.26)
* EXHIBIT 10.20 - Letter Agreement dated January 18, 1991 between
Reynolds Metals Company and William O. Bourke.
(File No. 1-1430, 1990 Form 10-K Report, EXHIBIT
10.27)
* EXHIBIT 10.21 - Form of Stock Option Agreement, as approved
April 22, 1992 by the Compensation Committee of
the Company's Board of Directors. (File No.
1-1430, Form 10-Q Report for the Quarter Ended
March 31, 1992, EXHIBIT 28(a))
* EXHIBIT 10.22 - Consulting Agreement dated May 1, 1992
between Reynolds Metals Company and William O.
Bourke. (File No. 1-1430, Form 10-Q Report for
the Quarter Ended March 31, 1992, EXHIBIT 28(b))
* EXHIBIT 10.23 - Renewal dated February 18, 1994 of Consulting
Agreement dated May 1, 1992 between Reynolds
Metals Company and William O. Bourke. (File No.
1-1430, 1993 Form 10-K Report, EXHIBIT 10.28)
* EXHIBIT 10.24 - Reynolds Metals Company Restricted Stock Plan for
Outside Directors. (Registration Statement No.
33-53851 on Form S-8, dated May 27, 1994, EXHIBIT
4.6)
* EXHIBIT 10.25 - Reynolds Metals Company New Management Incentive
Deferral Plan. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30, 1994,
EXHIBIT 10.30)
* EXHIBIT 10.26 - Reynolds Metals Company Salary Deferral
Plan for Executives. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30, 1994,
EXHIBIT 10.31)
* EXHIBIT 10.27 - Reynolds Metals Company Supplemental Long Term
Disability Plan for Executives. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended June 30,
1994, EXHIBIT 10.32)
* EXHIBIT 10.28 - Amendment to Reynolds Metals Company 1982
Nonqualified Stock Option Plan effective
August 19, 1994. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended September 30, 1994,
EXHIBIT 10.33)
* EXHIBIT 10.29 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
August 19, 1994. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended September 30, 1994,
EXHIBIT 10.34)
* EXHIBIT 10.30 - Amendment to Reynolds Metals Company 1992
Nonqualified Stock Option Plan effective
August 19, 1994. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended September 30, 1994,
EXHIBIT 10.35)
____________________________
* Incorporated by reference.
* EXHIBIT 10.31 - Amendment to Reynolds Metals Company New
Management Incentive Deferral Plan effective
January 1, 1995. (File No. 1-1430, 1994
Form 10-K Report, EXHIBIT 10.36)
* EXHIBIT 10.32 - Amendment to Reynolds Metals Company New
Management Incentive Deferral Plan effective
January 1, 1995 through December 31, 1996.
(File No. 1-1430, 1994 Form 10-K Report, EXHIBIT
10.37)
* EXHIBIT 10.33 - Amendment to Reynolds Metals Company Salary
Deferral Plan for Executives effective January 1,
1995 through December 31, 1996. (File No.
1-1430, 1994 Form 10-K Report, EXHIBIT 10.38)
* EXHIBIT 10.34 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Trustee Pays Premiums). (File
No. 1-1430, Form 10-Q Report for the Quarter
Ended June 30, 1995, EXHIBIT 10.34)
* EXHIBIT 10.35 - Form of Split Dollar Life Insurance
Agreement (Trustee Owner, Employee Pays Premium).
(File No. 1-1430, Form 10-Q Report for the
Quarter Ended June 30, 1995, EXHIBIT 10.35)
* EXHIBIT 10.36 - Form of Split Dollar Life Insurance Agreement
(Employee Owner, Employee Pays Premium). (File
No. 1-1430, Form 10-Q Report for the Quarter
Ended June 30, 1995, EXHIBIT 10.36)
* EXHIBIT 10.37 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Third Party Pays Premiums).
(File No. 1-1430, Form 10-Q Report for the
Quarter Ended June 30, 1995, EXHIBIT 10.37)
* EXHIBIT 10.38 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Employee Pays Premiums).
(File No. 1-1430, Form 10-Q Report for the
Quarter Ended June 30, 1995, EXHIBIT 10.38)
EXHIBIT 11 - Computation of Earnings Per Share
EXHIBIT 15 - None
EXHIBIT 18 - None
EXHIBIT 19 - None
____________________________
* Incorporated by reference.
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.