SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant / X /
Filed by a Party other than the Registrant /___/
Check the appropriate box:
/___/ Preliminary Proxy Statement
/___/ Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/___/ Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
________________
REYNOLDS METALS COMPANY
(Name of Registrant as Specified In Its Charter)
Board of Directors of Reynolds Metals Company
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
________________
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/___/ Fee computed on table below per Exchange
Act Rules 14a-6(i)(1) and 0-11.
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which transaction applies:
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transaction applies:
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of transaction computed pursuant to
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amount on which the filing fee is
calculated and state how it was
determined):
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transaction:
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/___/ Fee paid previously with preliminary
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/___/ Check box if any part of the fee is
offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for
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previously. Identify the previous
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REYNOLDS METALS COMPANY
6601 West Broad Street
Richmond, Virginia 23230
February 28, 1997
To Our Stockholders:
You are cordially invited to attend the 1997 Annual
Meeting of Stockholders of Reynolds Metals Company on
Wednesday, April 16, 1997, at 10:00 a.m., local time. The
Meeting will be held at the Company's offices, 6601 West
Broad Street, Richmond, Virginia. All holders of record of
the Company's outstanding Common Stock at the close of
business on February 25, 1997 are entitled to vote at the
Annual Meeting.
The formal notice of meeting, proxy statement and form
of proxy which accompany this letter describe in detail the
matters to be acted upon at the Meeting. In addition, I
will present a report on the Company's business operations.
As a Stockholder, your vote is important. We encourage
you to execute and return your proxy promptly whether or not
you plan to attend so that we may have as many shares as
possible represented at the Meeting. Returning your
completed proxy will not prevent you from voting in person
at the Meeting if you wish to do so.
We hope you will be able to attend the Meeting and look
forward to seeing you there. If you plan to attend, please
mark the attendance box on your completed proxy.
Sincerely,
Jeremiah J. Sheehan
Jeremiah J. Sheehan
Chairman of the Board and
Chief Executive Officer
REYNOLDS METALS COMPANY
6601 West Broad Street
Richmond, Virginia 23230
__________
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 16, 1997
__________
To the Holders of Shares of Common Stock:
Reynolds Metals Company will hold its 1997 Annual Meeting of
Stockholders on Wednesday, April 16, 1997, at 10:00 a.m., local
time, at the Company's offices, 6601 West Broad Street, Richmond,
Virginia, for the following purposes:
1. To elect Directors of the Company;
2. To ratify the selection of Ernst & Young
LLP as independent auditors of the Company for the
year 1997; and
3. To transact such other business as may properly
come before the Meeting.
Holders of the Company's Common Stock of record at the close
of business on February 25, 1997 are entitled to vote at the
Meeting.
By order of the Board of Directors,
DONNA C. DABNEY
Secretary
February 28, 1997
REYNOLDS METALS COMPANY
__________
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 16, 1997
__________
PROXY SOLICITATION AND VOTING
This Proxy Statement is furnished to holders of shares of
Common Stock, without par value (the "Common Stock"), of Reynolds
Metals Company (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company
for use at the Annual Meeting of Stockholders to be held on April
16, 1997 and at any adjournments thereof.
Proxies may be solicited by mail, telephone, telegraph or
other electronic means and personal interview. The Company has
retained Morrow & Co., Inc., 909 Third Avenue, New York, New York
10022-4799, to aid in the solicitation of proxies. For this
service, Morrow & Co., Inc. will receive a fee of $11,000, plus
reimbursement of out-of-pocket expenses. Brokers, banks and
other custodians, nominees and fiduciaries will be requested to
forward soliciting material to the beneficial owners of Common
Stock. The Company will bear all costs of the solicitation.
Holders of Common Stock of record at the close of business
on February 25, 1997 are entitled to vote at the Annual Meeting.
On that date, the Company had outstanding and entitled to vote at
the Meeting 72,901,274 shares of Common Stock, each entitled to
one vote. The presence, in person or by proxy, of Stockholders
entitled to cast at least a majority of the votes which all
Stockholders are entitled to cast will constitute a quorum. The
affirmative vote of Stockholders representing a majority of the
votes cast is required for the election of the Nominees (Item 1).
Abstentions will be treated as votes against an item. "Non-
votes" will have no effect on the vote. A "non-vote" occurs when
a nominee holding shares for a beneficial owner votes on certain
matters under discretionary authority or instructions from the
beneficial owner but does not vote on other matters for which the
nominee has not received instructions and may not exercise
discretionary voting authority.
Any Stockholder giving a proxy has the power to revoke it at
any time before its use. If a proxy is properly signed and is
not revoked by the Stockholder, the shares it represents will be
voted at the Annual Meeting in accordance with the instructions
of the Stockholder. Where no instructions are given, such shares
will be voted FOR Items 1 and 2.
Proxy materials will first be mailed to Stockholders on or
about March 10, 1997.
ITEM 1. ELECTION OF DIRECTORS
Information Concerning the Nominees
Effective April 16, 1997, the Board of Directors will
consist of thirteen persons. Unless otherwise instructed on the
proxy, the shares represented by proxies will be voted for the
election of the thirteen Nominees named below as Directors of the
Company for the ensuing year. If any Nominee becomes unavailable
to serve as a Director, the shares represented by such proxies
may be voted for a substitute Nominee designated by the Board of
Directors.
Eleven of the Nominees were elected at the 1996 Annual
Meeting of Stockholders. J. Wilt Wagner was elected by the Board
of Directors effective October 1, 1996. Samuel C. Scott, III was
elected by the Board of Directors effective January 1, 1997.
Richard G. Holder, first elected a Director in 1984, retired from
the Company and the Board of Directors effective October 1, 1996.
William O. Bourke, a Director since 1982, will retire from the
Board of Directors and not stand for reelection.
The following table sets forth the Nominees' names, ages and
principal occupations and additional information about them:
Director
Name-Age-Principal Occupation-Other Information Since
- ----------------------------------------------- -----
PATRICIA C. BARRON (54) 1994
Vice President, Xerox Corporation, a manufacturer
of office systems and equipment, and President,
Engineering Systems Division, Xerox Corporation,
since 1993. President, Office Products Division,
Xerox Corporation, 1992-1993. Director, Quaker
Chemical Corporation and Frontier Corporation.
JOHN R. HALL (64) 1985
Retired. Chairman of the Board, Ashland Inc., a
worldwide energy and chemical company engaged in
petroleum refining and marketing, October 1, 1996
- January 30, 1997. Chairman of the Board and
Chief Executive Officer, Ashland Inc., 1981-1996.
Director, Banc One Corporation, The Canada Life
Assurance Company, CSX Corporation, Humana Inc.,
LaRoche Industries Inc. and UCAR International
Inc.
ROBERT L. HINTZ (66) 1986
Chairman of the Board, R. L. Hintz & Associates, a
management services firm, since 1989. Director,
The Chesapeake Corporation, Scott & Stringfellow,
Inc. and Ashland Coal, Inc.
WILLIAM H. JOYCE (61) 1995
Chairman of the Board and Chief Executive Officer,
Union Carbide Corporation, a manufacturer of
chemicals and plastics, since January 1996.
President and Chief Executive Officer, Union
Carbide Corporation, April 1995-December 1995.
President and Chief Operating Officer, Union
Carbide Corporation, 1993-April 1995. Executive
Vice President, Operations, Union Carbide
Corporation, 1992-1993. Director, CVS Corporation
(f/k/a Melville Corporation).
MYLLE BELL MANGUM (48) 1995
Senior Vice President, Carlson Wagonlit Travel, a
travel services company, and President of its
Business Services and Expense Management Division,
effective March 1997. Executive Vice President,
Strategic Management, Holiday Inn Worldwide, a
subsidiary of Bass PLC engaged in the operation of
hotels worldwide, from 1992 to February 1997.
Director, Scientific-Atlanta, Inc.
D. LARRY MOORE (60) 1995
President and Chief Operating Officer, Honeywell
Inc., a global manufacturer of automation and
control systems, since 1993. Executive Vice
President and Chief Operating Officer for Space
and Aviation, Honeywell Inc., 1990-1993. Mr.
Moore has announced his retirement as President of
Honeywell Inc. effective April 15, 1997.
Director, Honeywell Inc., Rohr Inc. and The Geon
Company.
RANDOLPH N. REYNOLDS (55) 1984
Vice Chairman and Executive Officer of the Company
since October 1996. Vice Chairman of the Board of
the Company, 1994-1996. Executive Vice President,
International of the Company, 1990-1994.
President, Reynolds International, Inc., a
subsidiary of the Company, since 1980, and Chief
Executive Officer of that subsidiary since 1981.
Director, First Union Corporation.
Director
Name-Age-Principal Occupation-Other Information Since
- ----------------------------------------------- -----
JAMES M. RINGLER (51) 1994
President and Chief Executive Officer, Premark
International, Inc., a multinational consumer and
commercial products company, since June 1996.
President and Chief Operating Officer, Premark
International, Inc., 1992-1996. Director, Premark
International, Inc., Thiokol Corporation and Union
Carbide Corporation.
HENRY S. SAVEDGE, JR. (63) 1992
Executive Vice President and Chief Financial
Officer of the Company since 1992. Vice
President, Finance of the Company, 1990-1992.
SAMUEL C. SCOTT, III (52) 1997
Vice President, CPC International Inc., a
worldwide consumer foods, baking and corn refining
company, since 1991, and President-Corn Refining
Business (a division of CPC International Inc.)
since 1989. Director, Motorola, Inc.
JEREMIAH J. SHEEHAN (58) 1994
Chairman of the Board and Chief Executive Officer
of the Company since October 1996. President and
Chief Operating Officer of the Company, 1994-1996.
Executive Vice President, Fabricated Products of
the Company, 1993-1994. Executive Vice President,
Consumer and Packaging Products of the Company,
1990-1993. Director, Union Camp Corporation and
Federal Reserve Bank of Richmond.
J. WILT WAGNER (55) 1996
Vice Chairman and Executive Officer of the Company
since October 1996. Executive Vice President, Raw
Materials, Metals and Industrial Products of the
Company, 1993-1996. Executive Vice President,
Fabricated Industrial Products of the Company,
1992-1993.
JOE B. WYATT (61) 1992
Chancellor, Vanderbilt University since 1982.
Director, Sonat Inc. and Ingram Micro Inc.
Certain Relationships
Randolph N. Reynolds' brother, William G. Reynolds, Jr., is
a Vice President of the Company. The husband of Donna C. Dabney,
Secretary and Assistant General Counsel of the Company, is a
partner of McGuire Woods Battle & Boothe L.L.P., a law firm which
provides legal services to the Company.
Meetings and Committees of the Board
The Board of Directors held eight meetings and two executive
sessions in 1996. The Board has appointed from its members six
standing committees, which met periodically during 1996.
Incumbent Directors' attendance at meetings of the Board and of
standing committees on which they served averaged over 95% during
1996. All incumbent Directors serving in 1996 attended at least
75% of such meetings.
The Executive Committee is composed of W. O. Bourke
(Chairman), R. N. Reynolds, H. S. Savedge, Jr., J. J. Sheehan and
J. W. Wagner. It has the power to act in place of the Board of
Directors during intervals between meetings of the Board. This
committee acted five times by unanimous written consent in 1996.
The Finance Committee is composed of H. S. Savedge, Jr.
(Chairman), P. C. Barron, W. O. Bourke, R. L. Hintz, M. B.
Mangum, R. N. Reynolds, S. C. Scott, III and J. J. Sheehan. Its
principal function is to assist the Board in fulfilling its
oversight responsibilities with respect to the raising and
allocation of capital. It makes recommendations regarding
financings, acquisitions, dispositions, investments and major
capital expenditures. It reviews the Company's capital budget,
the status of capital appropriations from time to time, and the
Company's insurance programs. This committee met twice and acted
once by unanimous written consent in 1996.
The Audit Committee is composed of R. L. Hintz (Chairman),
P. C. Barron, J. R. Hall, D. L. Moore, J. M. Ringler and S. C.
Scott, III. The principal function of the Audit Committee is to
review the system of internal controls which management and the
Board of Directors have established and the audit function of the
Company's independent auditors and its Internal Auditing
Department. The Audit Committee recommends to the Board of
Directors the firm to be engaged by the Company as its
independent auditors. It reviews, among other things, audit
plans and procedures, the Company's financial statements, the
Company's policies with respect to conflicts of interest and the
prohibition of the use of corporate funds or other assets for
improper purposes, changes in accounting policies and the use of
independent auditors for nonaudit services. This committee met
three times in 1996.
The Compensation Committee is composed of J. R. Hall
(Chairman), W. H. Joyce, D. L. Moore, J. M. Ringler and J. B.
Wyatt. The principal functions of the Compensation Committee are
to review and recommend to the Board, or determine, the
compensation paid to the Company's Executive Officers and to
administer designated executive compensation plans of the
Company, including stock option, cash incentive and deferral
plans. See "Report of Compensation Committee on Executive
Compensation". This committee met five times and acted twice by
unanimous written consent in 1996.
The Committee on Directors is composed of J. M. Ringler
(Chairman), P. C. Barron, J. R. Hall, W. H. Joyce and J. B.
Wyatt. The primary function of the Committee on Directors is to
recommend to the Board of Directors persons to be considered for
election to the Board. In making such recommendations, the
Committee on Directors will consider nominations submitted by
Stockholders. Stockholder nominations for the 1998 Annual
Meeting must be submitted in writing in accordance with the
procedures set forth under "General Information - Stockholders'
Proposals and Nominations". The Board of Directors has adopted a
policy under which it will not elect or nominate for election or
reelection to the Board of Directors any person who has attained
age 70. An officer of the Company serving as a member of the
Board of Directors is expected to resign as a Director at the
time he ceases to be an officer, whether due to retirement or
otherwise. In addition, the policy provides that if a
nonemployee Director has a substantial change in principal
employment and/or responsibility, the Director is expected to
resign effective on the last day of the month in which the next
regular meeting of the Board is held, unless before that date the
Board, based on a review and determination by the Committee on
Directors regarding whether the Director's continued service on
the Board is in the Company's best interests, approves the
withdrawal of the resignation. Other functions of the Committee
on Directors include recommending the compensation to be paid to
Directors and evaluating the corporate governance practices
followed by the Board and its standing committees. This
committee met four times and acted twice by unanimous written
consent in 1996.
The Pension Investment Committee is composed of J. B. Wyatt
(Chairman), W. H. Joyce, M. B. Mangum, R. N. Reynolds and J. W.
Wagner. It oversees the financial administration of the assets
of the pension plans of the Company and certain subsidiaries,
including the selection of trustees and investment managers for
the assets of these plans and periodic review of investment
results. It also maintains a comprehensive statement of
investment policy and appoints independent auditors for each
pension plan. This committee met three times in 1996.
Board Compensation and Benefits
Directors who are not employed by the Company or any of its
subsidiaries ("Outside Directors") are paid an annual retainer of
$30,000 for serving as a Director. Outside Directors are paid
$4,000 for serving as chairman of the Audit Committee and
Compensation Committee and $3,000 for chairing other committees.
Outside Directors are also paid $1,000 for each Board and
committee meeting attended, plus expenses reasonably incurred in
connection with Company business.
The Company has a Restricted Stock Plan for Outside
Directors, approved by Stockholders. Under the plan, Outside
Directors are granted 1,000 shares of Common Stock subject to
forfeiture and transfer restrictions ("Restricted Stock") 60 days
after initial election to the Board. The restrictions expire as
to 200 shares of Restricted Stock on the April 1 immediately
following the date of grant (or, if later, the date of the six-
month anniversary of the grant date). Restrictions expire as to
an additional 200 shares on each successive April 1, so that by
the fifth April 1 following the date of grant, restrictions on
all 1,000 shares will have expired, assuming continued service by
the Outside Director throughout the period. The plan provides
for an additional grant of 1,000 shares of Restricted Stock to
each Outside Director on June 1 of the year in which the
restrictions have expired as to all the shares covered by the
Outside Director's previous grant under the plan (assuming the
Outside Director continues to serve as an Outside Director on
such June 1). If an Outside Director ceases to be a member of
the Board because of death or disability or because of a Change
in Control (as defined in the plan) of the Company, restrictions
on 200 shares will lapse immediately, with all other shares as to
which restrictions have not expired being forfeited. If an
Outside Director ceases to be a member of the Board for any other
reason, all shares as to which restrictions have not expired will
be forfeited.
Effective January 1, 1997, the Company terminated its
retirement and death benefit plans for current Outside Directors
and adopted a Stock Plan for Outside Directors (the "Stock
Plan").
The retirement plan provided for an annual retirement
payment equal to the annual retainer that was being paid for
service on the Board at the time the Outside Director retired as
a Director. Payments began when the Outside Director attained
age 65 or, if later, upon retirement as a Director. Payments
continued for the same number of calendar quarters as the person
served as an Outside Director and ceased upon the former Outside
Director's death. The death benefit plan provided for a death
benefit of $50,000 for Outside Directors who served until
attaining age 65. Only Outside Directors who retired or resigned
from the Board of Directors before January 1, 1997 will continue
to be covered by the retirement and death benefit plans.
Under the Stock Plan, Outside Directors serving on or after
January 1, 1997 will receive an annual grant of 225 shares of
phantom stock of the Company, plus dividend equivalents based on
the dividends that would have been paid on the phantom stock if
the Outside Director had actually owned shares of Common Stock.
The annual grant will be made in quarterly installments at the
end of each calendar quarter. In addition, the accounts of
current Outside Directors who were covered by the terminated
retirement and death benefit plans described above were credited
as of that date with shares of phantom stock equivalent in value
to their benefits earned under the terminated plans through
December 31, 1996. Payments under the Stock Plan to Outside
Directors will be made upon the Outside Director's retirement,
resignation or death in shares of Common Stock of the Company,
with fractional shares paid in cash. Payments will be made in a
lump sum or in five annual installments, as elected by the
Outside Director.
The Company has a Deferred Compensation Plan for Outside
Directors under which an Outside Director may elect for each year
to defer receipt of all or part of his or her retainer and
meeting fees. The deferred amounts will be paid in cash after
(a) a specified year, (b) the Outside Director ceases to be a
member of the Board of Directors or (c) the Outside Director
reaches age 70, as the Outside Director elects (except that
clause (b) applies in all cases where the deferred amounts are
credited with additional compensation in the form of share
equivalents as described in clause (ii) in the next sentence).
Amounts deferred are credited with additional compensation in the
form (as elected by the Outside Director) of (i) interest at an
annual rate set by the plan committee, whose members are not
eligible to participate in the plan, or (ii) a number of
equivalent shares of common stock, together with dividend
equivalents based on the dividends paid on such equivalent shares
of common stock. Participants have the option to receive payment
in a lump sum or in annual installments over a two- to ten-year
period.
Other Compensation
The Company has a consulting agreement through April 30,
1997 with W. O. Bourke, a Director of the Company and former
Chairman of the Board and Chief Executive Officer of the Company.
The agreement provides for (i) payment of an annual fee of
$100,000, (ii) reimbursement of reasonable travel and other
related business expenses and (iii) making available to Mr.
Bourke office space, secretarial services and a car. For 1996,
Mr. Bourke received $109,297 in consulting fees and personal
benefits.
ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit
Committee, has selected Ernst & Young LLP as independent auditors
to examine and report upon the financial statements of the
Company and its consolidated subsidiaries for the year 1997. The
Board is submitting this matter to Stockholders for their
ratification. Ernst & Young LLP served as the Company's
independent auditors in 1996 and in prior years. If Stockholders
do not ratify the selection of Ernst & Young LLP, the Board will
consider other independent auditors. One or more partners of
Ernst & Young LLP will be present at the Annual Meeting to make a
statement if they desire to do so and to respond to appropriate
questions that may be asked by Stockholders.
The Board of Directors of the Company recommends that
Stockholders vote FOR the ratification of the selection of Ernst
& Young LLP as independent auditors to examine and report upon
the financial statements of the Company and its consolidated
subsidiaries for the year 1997. Shares represented by proxies
will be voted for approval unless instructions to the contrary
are given on the proxy.
ITEM 3. OTHER PROPOSED ACTION
The Board of Directors is not aware that any matters other
than those stated in this Proxy Statement will come before the
Annual Meeting. Should any matters requiring the vote of
Stockholders arise, it is intended that shares represented by
proxies will be voted in accordance with the discretion of the
person or persons holding the proxy.
BENEFICIAL OWNERSHIP OF SECURITIES
Principal Holders
The following table shows Stockholders who were known to the
Company to own beneficially more than five percent of the
Company's Common Stock at February 25, 1997. Under the rules of
the Securities and Exchange Commission ("SEC"), "beneficial
ownership" is deemed to include any shares with respect to which
the person, directly or indirectly, has or shares voting and/or
investment power, whether or not such shares are held for the
person's benefit.
Amount and Nature
of Beneficial
Percent
Title Ownership
of
of Class (Number of Shares)
Class
-------- -----------------
- ------
Wellington Management Company Common Stock 10,063,300<F1>
13.8%
75 State Street
Boston, Massachusetts 02109
Vanguard/Windsor Fund, Inc. Common Stock 6,373,400<F2>
8.7%
100 Vanguard Building
P. O. Box 2600
Malvern, Pennsylvania 19355
<FN>
____________
<F1> As reported in an Amendment No. 5 dated January 24, 1997 to
a
Schedule 13G dated February 10, 1993 filed with the SEC.
Based on the information contained in such filing, of the
shares of Common Stock shown as beneficially owned,
Wellington Management Company, an investment advisor and
parent holding company, has shared voting power with respect
to 322,858 shares, shared dispositive power with respect to
all of the shares, and sole voting and dispositive power
with
respect to none of the shares. The reported shares are
owned
by a variety of investment advisory clients of Wellington
Management Company, including Vanguard/Windsor Fund, Inc.
See footnote (2).
<F2> As reported in an Amendment No. 4 dated February 7, 1997 to
a
Schedule 13G dated February 10, 1993 filed with the SEC.
Based on the information contained in such filing,
Vanguard/Windsor Fund, Inc., an investment company, has sole
voting and shared dispositive power with respect to all of
the reported shares, and shared voting and sole dispositive
power with respect to none of the reported shares.
</FN>
Directors, Nominees and Executive Officers
The following table shows the beneficial ownership (as
defined above), as of February 25, 1997, of the Company's Common
Stock by each Director and Nominee, each of the Executive
Officers named in the Summary Compensation Table, and all current
Directors and Executive Officers of the Company as a group.
Amount and
Nature
of Beneficial
Ownership
(Number of
Shares)
- ---------------------------------------
Sole Shared
Additional
Voting Voting
Common
and/or and/or
Percent Stock
Investment Investment
of Equiva-
Title of Class Power<F1> Power<F2>
Total<F3> Class<F4> Lents<F5>
-------------- -------- --------
- -------- -------- --------
Directors and/or
Nominees:
Patricia C. Barron Common Stock 1,515 ---
1,515 619
William O. Bourke Common Stock 305,600 22,230
327,830 0.5% ---
John R. Hall Common Stock 4,200 ---
4,200 6,295
Robert L. Hintz Common Stock 1,500 ---
1,500 3,380
William H. Joyce Common Stock 3,443 ---
3,443 2,956
Mylle Bell Mangum Common Stock 1,522 ---
1,522 472
D. Larry Moore Common Stock 1,537 ---
1,537 1,216
Randolph N. Reynolds Common Stock 221,348 169,239
390,587 0.5% 629
James M. Ringler Common Stock 1,048 ---
1,048 2,915
Henry S. Savedge, Jr. Common Stock 100,393 4,438
104,831 0.1% 293
Samuel C. Scott, III Common Stock 1,000 ---
1,000 ---
Jeremiah J. Sheehan Common Stock 125,716 903
126,619 0.2% 5,764
J. Wilt Wagner Common Stock 95,000 7,072
102,072 0.1% 3,829
Joe B. Wyatt Common Stock 1,500 ---
1,500 1,765
Other Named
Executive Officers:
Donald T. Cowles Common Stock 88,500 197,780
286,280 0.4% 586
Richard G. Holder <F6> Common Stock 424,137 21,537
445,674 0.6% ---
All Directors and
Executive Officers
as a group (35 persons): Common Stock 1,657,154 1,005,637
2,662,792 3.6% 41,111
<FN>
____________
<F1> Reported in this column are shares held of record
individually or held in the name of a bank, broker or
nominee
for the person's account and other shares with respect to
which Directors, Nominees and Executive Officers (or their
spouses, minor children or other relatives who share their
home) have sole voting and/or investment power, including
shares held as sole trustee or custodian for the benefit of
others. Also included in this column are the following
shares of the Company's Common Stock which may be acquired
within 60 days after February 25, 1997 under the Company's
1987, 1992 and 1996 Nonqualified Stock Option Plans: W. O.
Bourke, 280,000 shares; R. N. Reynolds, 149,000 shares; H.
S.
Savedge, Jr., 92,750 shares; J. J. Sheehan, 121,500 shares;
J. W. Wagner, 95,000 shares; D. T. Cowles, 88,500 shares; R.
G. Holder, 360,000 shares; and all current Directors and
Executive Officers as a group, 1,479,250 shares.
<F2> Reported in this column are shares with respect to which
Directors, Nominees and Executive Officers (or their spouses
or minor children) share voting and/or investment power,
including shares held jointly with others or as co-trustee
for the benefit of others and shares credited as of December
31, 1996 to the accounts of participants under the Company's
Savings and Investment Plan for Salaried Employees and Tax
Reduction Act Stock Ownership Plan for Salaried Employees.
<F3> Each Director, Nominee and Executive Officer disclaims
beneficial ownership of all securities which are not held
for
his or her benefit. Each of W. O. Bourke, J. R. Hall, R. N.
Reynolds, J. J. Sheehan and R. G. Holder also disclaims
beneficial ownership of the following shares of Common Stock
of the Company held by his wife: Mrs. W. O. Bourke, 400
shares; Mrs. J. R. Hall, 200 shares; Mrs. R. N. Reynolds,
1,894 shares; Mrs. J. J. Sheehan, 4,216 shares; and Mrs. R.
G. Holder (as trustee and co-trustee of trusts for the
benefit of her daughters), 19,474 shares. An Executive
Officer not named in the table disclaims beneficial
ownership
of 140 shares held by his wife as custodian for the benefit
of a son. Another Executive Officer not named in the table
disclaims beneficial ownership of 164 shares of Common Stock
held by his wife. All disclaimed shares are included in the
table.
<F4> Unless otherwise indicated, beneficial ownership of any
named
individual does not exceed 0.1% of the outstanding shares.
Shares of Common Stock which can be acquired within 60 days
after February 25, 1997 through the exercise of stock
options
by a Director or Executive Officer named in the table are
deemed outstanding for the purpose of computing the
percentage of outstanding Common Stock owned by such
Director
or Executive Officer, but are not deemed outstanding for the
purpose of computing the percentage of Common Stock owned by
any other Director or Executive Officer.
<F5> Reported in this column are equivalent shares of common
stock
credited as of December 31, 1996 (except as otherwise noted)
to the accounts of (i) Outside Directors and Nominees under
a
deferred compensation plan and a stock plan (as of January
1,
1997); and (ii) Executive Officers under variable
compensation and salary deferral plans and an excess benefit
plan.
<F6> Mr. Holder retired as Chairman of the Board and Chief
Executive Officer of the Company effective October 1, 1996.
</FN>
Stock Ownership Guidelines
The Company has established Stock Ownership Guidelines for
Outside Directors under which each Outside Director is expected
to own at least 1,500 shares of Company Common Stock (or its
equivalent, including equivalent shares of common stock under a
deferred compensation plan and a stock plan). No specific period
of time is established within which the minimum level must be
reached. The Board of Directors believes it appropriate that the
Committee on Directors consider an Outside Director's failure to
make reasonable progress toward meeting the minimum level in
weighing the Outside Director's renomination to the Board. At the
present time, all Outside Directors have met the goal or are, in
the judgment of the Committee on Directors, making reasonable
progress toward meeting it.
For information on Stock Ownership Guidelines for Officers,
see "Report of Compensation Committee on Executive Compensation -
- - Stock Ownership Guidelines".
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Stockholders
Reynolds Metals Company
The Compensation Committee of the Board of Directors (the
"Committee") has general oversight responsibilities for
compensation paid to Executive Officers.
The Company's executive compensation program is designed to
help the Company become the premier supplier and recycler of
aluminum and other products in the global markets it serves by
(i) building and retaining a management team with exceptional
abilities and (ii) focusing management's attention, energy and
skill on achieving short-term business goals, securing profitable
growth and building stockholder value. The key elements of the
program are base salary, variable compensation in the form of
annual awards, and stock option awards. Variable compensation is
highly leveraged against performance, with lower or no payments
as performance drops below preestablished goals and relatively
higher payments for superior performance. The higher the
executive grade level, the greater the proportion of compensation
contingent on the accomplishment of business objectives.
The Committee meets regularly with management and
periodically with an independent compensation consultant to
review the Company's executive compensation program. In its
review, the Committee compares the total compensation of the
Company's Executive Officers to that of a comparison group of
companies. The comparison group currently consists of 28
comparably sized, capital intensive companies about which the
Company's independent consultant has comprehensive compensation
data. The group includes four of the companies in the aluminum,
metals and containers industry peer group against which the
Company's stockholder return is measured in the Performance
Graphs on page 15. Differences in size within the comparison
group are adjusted by regression analysis based on sales levels.
The Committee believes the comparison group, which is a more
varied selection of companies than the industry peer group, is a
representative sample of types of companies which are the
Company's most direct competitors for executive talent. The
Company targets individual components of executive compensation
against the comparison group but has no specific target for total
compensation.
Deductibility of Compensation. The Committee reviews, with
the assistance of appropriate corporate personnel, the impact of
changes in regulatory requirements on executive compensation.
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), limits the deductibility by the Company of certain
compensation in excess of $1 million paid to the Company's Chief
Executive Officer and the other four most highly compensated
Executive Officers. The Company's Performance Incentive Plan
("PIP") is administered so that variable compensation paid under
that plan should qualify for deductibility. Likewise, stock
option awards under the Company's nonqualified stock option plans
should qualify as performance-based compensation not subject to
the $1 million cap. All compensation paid to Executive Officers
for 1996 was fully deductible, and the Company anticipates that
substantially all future compensation paid to Executive Officers
should also be fully deductible.
Salaries. The Company pays salaries to Executive Officers
which are targeted to be at the size-adjusted median for the
comparison group. Each year management recommends to the
Committee the salaries of all Executive Officers other than the
Chief Executive Officer. The Committee makes its own assessment
of the Chief Executive Officer's salary. In its review, the
Committee considers the Executive Officer's job responsibilities
and performance, experience, the business outlook for the
Company, the general state of the economy and pay practices of
the comparison group, including salary data provided by the
Company's independent compensation consultant. Based on its
review, the Committee makes recommendations to the Board as it
deems appropriate.
For 1996, salaries paid to Executive Officers as a group
were approximately 9% above the size-adjusted median for the
comparison group. As a group, the Company's Executive Officers
had considerably more time in their respective positions than
their counterparts at the comparison companies.
Variable Compensation. Under the PIP, the Company pays
Executive Officers and other key employees awards which vary in
amount from year to year, or are not paid at all, based on
performance. Except as noted below under "Stock Ownership
Guidelines", all awards are payable in cash. The Committee
establishes threshold, target and maximum award levels under the
PIP to reward performance based on corporate, business unit and
individual goals.
Special provisions apply each year to awards to participants
who are designated by the Committee as "Top Executives" for that
calendar year. "Top Executives" will include the Company's Chief
Executive Officer and any other Executive Officer of the Company
who may be reasonably likely to be subject to the limitations
imposed by Section 162(m) of the Code. Within 90 days of the
beginning of each calendar year, the Committee establishes (i)
one or more objective performance goals that must be reached for
a Top Executive to receive an award under the PIP and (ii) the
amount of the award to be paid if the goals are achieved. The
Committee may reduce (or not pay) awards, but may not increase
them. Performance goals may be based on net earnings, stock
price, profit before taxes, return on equity, return on capital,
return on assets, total return to stockholders, earnings per
share or debt rating. To allow the Committee some discretion to
reward achievement of less objective but still important goals,
the Company maintains a Supplemental Incentive Plan covering Top
Executives. Under the supplemental plan, the Committee
establishes annual performance goals different from and
independent of the objective performance goals under the PIP.
The Committee establishes a performance threshold that must be
reached before any award may be paid under the supplemental plan
and maximum awards that can be paid under the supplemental plan.
No awards are payable under the supplemental plan unless the
Company achieves that performance threshold. Payments under the
supplemental plan do not qualify as "performance-based
compensation" under Section 162(m) of the Code.
For 1996, the principal determining factor in setting
variable compensation levels under the PIP was return on equity.
In the first quarter of 1996, the Committee approved a range of
variable compensation payments that would follow from achievement
of varying levels of return. The Company failed to achieve the
threshold level of return. While other business goals were
accomplished, most notably a substantial improvement in inventory
levels, the Committee accepted management's recommendation that,
based on overall corporate performance, no payments should be
made for 1996 under either the PIP or the supplemental plan.
Stock Options. The Company maintains a nonqualified stock
option plan, under which the Committee grants annually to
Executive Officers and other key employees options to purchase
Common Stock of the Company. The options provide a long-term
incentive to build the Company's businesses and align
management's objectives with Stockholders' interests by rewarding
management only when stockholder value is created. All options
are exercisable no earlier than one year or later than ten years
from the date of grant at an exercise price equal to the fair
market value of the underlying Common Stock on the date of grant.
Except for required adjustments to reflect changes in the
Company's capital structure, such as stock splits, the Company
has never adjusted the price nor amended the financial terms of
outstanding options. As a result, Executive Officers cannot
benefit from stock price appreciation unless Stockholders also
benefit. The ten-year Performance Graph on page 15, which
compares the Company's stockholder return over the last ten years
with that of the S&P 500 Stock Index and an aluminum, metals and
containers industry peer group, corresponds to the maximum term
of the stock options.
Stock options are currently the Company's sole incentive
tied to long-term performance. The size of the option award
granted to each Executive Officer is generally based on a stock
option grant schedule, approved by the Committee, which allocates
shares authorized for stock options to eligible employees based
on salary grade and long-term incentive compensation data
provided by the Company's independent compensation consultant.
The schedule is used as a guide for what a typical award might be
for each eligible employee, including each Executive Officer,
while actual awards may vary based on the experience,
achievements and anticipated future contributions to the Company
of each individual. (The number of options and shares currently
held by an optionee is not a factor in determining individual
grants.) Excluding the special performance-based stock option
grant to Mr. Sheehan described under "Chief Executive Officer
Compensation", stock option awards to Executive Officers in 1996
averaged approximately 7% below the size-adjusted median for the
comparison group. In approving the schedule and the size of the
awards for 1996, the Committee's decisions were based on its own
judgment exercised within the framework described above, rather
than on any particular corporate performance measure.
Chief Executive Officer Compensation. Compensation for the
Company's Chief Executive Officer is established in accordance
with the executive compensation philosophy and policies described
above.
The Board of Directors meets after the close of each year in
executive session to review the performance of the Company
generally, senior management as a group and the Chief Executive
Officer individually. The Chairman of the Committee acts as
"lead director" for this executive session.
The Chief Executive Officer's salary level is generally the
result of: (i) the salary grade level assigned to his position,
which takes into account knowledge and level of responsibility;
(ii) time in his current position and individual performance;
(iii) salary data provided by the Company's independent
compensation consultant; and (iv) salary budget guidelines for
the year which take into account the business outlook for the
Company. By design, the Chief Executive Officer's salary should
be at the size-adjusted median for the comparison group,
consistent with the Company's executive compensation philosophy.
Mr. Holder received a salary increase in 1996 that was
designed to bring his salary into a competitive range and to
reflect his relative seniority in the position of Chief Executive
Officer. His salary, which had been approximately 12% below the
size-adjusted median for the comparison group for 1995, was
approximately 7% above the median for 1996.
Mr. Sheehan received a salary increase January 1, 1996
designed to bring him nearer the competitive range for his
position as President and Chief Operating Officer (although his
salary remained approximately 8% below the median). He
subsequently received a second increase at the time of his
promotion to Chief Executive Officer, at which time his salary
was approximately 21% below the size-adjusted median for chief
executive officers in the comparison group.
Neither Mr. Holder nor Mr. Sheehan received any variable
compensation for 1996.
The Committee approved regular stock option grants to Mr.
Holder and Mr. Sheehan of 65,000 shares and 35,000 shares,
respectively, which were consistent with the scheduled amounts
for their respective salary grade levels as Chief Executive
Officer and Chief Operating Officer. In addition, shortly after
the election of Mr. Sheehan as Chief Executive Officer, the
Committee approved a special performance-based stock option grant
to him covering 150,000 shares of Common Stock, at a price of
$53.50 per share. The option becomes exercisable only if the
closing price of Common Stock equals or exceeds $80.25 per share
for 30 consecutive calendar days on or before September 30, 1999.
If this condition is satisfied, the option may be exercised any
time between August 30, 1997 and March 31, 2000. The purpose of
the grant was to make it clear that management's focus will
continue to be on improving the Company's overall performance,
with meaningful rewards for appropriate value-creating actions.
The option was intended to provide Mr. Sheehan, as the new Chief
Executive Officer, with a powerful incentive to build stockholder
value.
Stock Ownership Guidelines. The Company has established
Stock Ownership Guidelines for Officers which apply to all
Executive Officers. Under the Guidelines, the following
individuals are expected to own at least the indicated amount of
Company Common Stock (or its equivalent, including equivalent
shares of common stock under variable compensation and salary
deferral plans): the Chief Executive Officer--three times
salary; any Vice Chairman of the Board and any Executive Vice
President--two times salary; and any other officer or senior
manager of the Company subject to the Guidelines--one times
salary. No specific period of time is established within which
the minimum level must be reached, although each individual
subject to the Guidelines is expected to meet the applicable
minimum stock ownership level as soon as reasonably practicable.
To facilitate compliance with the Guidelines, the PIP provides
that if a participant in the PIP who is subject to the Guidelines
does not meet the applicable minimum stock ownership level as of
year-end, the next award to the participant under the PIP will
be paid part in cash and part in stock (up to one-half the value
of the
award but not to exceed the participant's annual rate of base
salary in
effect at the time of the award).
COMPENSATION COMMITTEE
John R. Hall, Chairman
William H. Joyce
D. Larry Moore
James M. Ringler
Joe B. Wyatt
February 21, 1997
Richmond, Virginia
PERFORMANCE GRAPHS
Following are two line graphs comparing the cumulative total
stockholder return on the Company's Common Stock with the
cumulative total returns of the S&P 500 Stock Index and a peer
group consisting of a composite of the following S&P published
indices: (1) the Aluminum Industry (Alcoa, Alcan and the
Company); (2) the Metals Industry (ASARCO, Amax<F1>, Cypress
Minerals, Inco, Phelps Dodge and Freeport-McMoRan Copper &
Gold<F2>); and (3) the Containers Industry (Ball Corporation and
Crown, Cork & Seal).
The first graph compares the returns over a five-year
period; the second compares the returns over a ten-year period,
which corresponds to the maximum term of the stock options
granted to Executive Officers during 1996. See "Executive
Compensation - Stock Option Grants in 1996". The returns of each
component company in the peer group were weighted according to
the respective company's stock market capitalization. The graphs
assume that the value of the investment in the Company's Common
Stock and each index was $100 on December 31, 1991 and December
31, 1986, respectively, and that all dividends were reinvested.
Since December 31, 1991, the cumulative total stockholder return
on the Company's Common Stock was 16%; since December 31, 1986,
the return was 263%.
_______________
<F1> Amax was deleted from the published Metals Industry Index
effective upon the merger of Amax with Cyprus Minerals in 1993.
<F2> Freeport-McMoRan Copper & Gold Inc. was added to the
published
Metals Industry Index in 1995.
COMPARISON OF CUMULATIVE TOTAL RETURN
COMPANY, S&P 500, AND PEER GROUP COMPARISONS
[PERFORMANCE GRAPH]
1991 1992 1993 1994 1995
1996
- -----------------------------------------------------------------
- --------
Company $100 $100 $ 87 $ 96 $114
$116
S&P 500 $100 $108 $118 $120 $165
$203
Aluminum, Metals &
Containers Industry $100 $107 $114 $133 $154
$172
COMPARISON OF CUMULATIVE TOTAL RETURN
COMPANY, S&P 500, AND PEER GROUP COMPARISONS
[PERFORMANCE GRAPH]
1986 1987 1988 1989 1990 1991
1992 1993 1994 1995 1996
- -----------------------------------------------------------------
- -----------------------------------
Company $100 $241 $277 $286 $314 $312
$312 $273 $301 $357 $363
S&P 500 $100 $105 $123 $162 $157 $204
$220 $242 $245 $337 $415
Aluminum, Metals &
Containers Industry $100 $154 $195 $230 $213 $247
$266 $281 $328 $381 $426
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for each of the last three
fiscal years the total annual and long-term compensation of the
Company's current Chief Executive Officer, its former Chief
Executive Officer who retired effective October 1, 1996, and its
other four most highly compensated Executive Officers who were
serving as Executive Officers at December 31, 1996:
Annual
Long-Term
Compensation
Compensation
- -------------------------------- ---------------
Awards
Other --------------- All
Annual Securities Other
Compen- Underlying Compen-
Name and Salary
Bonus sation Options/SARs sation
Principal Position Year ($)
($)<F1> ($)<F2> (#)<F3> ($)<F4>
- ----------------------------- ---- --------
- ------ ------- --------------- --------
Jeremiah J. Sheehan,
Chairman of the Board and 1996 $508,750 $
- -0- $2,148 185,000 shs.<F5> $59,709
Chief Executive Officer, 1995 423,750
510,000 494 30,000 shs. 20,284
Reynolds Metals Company 1994 348,750
205,000 375 30,000 shs. 23,718
Richard G. Holder,
Retired Chairman of the Board 1996 $637,500 $
- -0- $9,794 65,000 shs. $116,442
and Chief Executive Officer, 1995 700,000
975,000 738 65,000 shs. 100,199
Reynolds Metals Company 1994 575,000
400,000 3,858 65,000 shs. 25,056
Randolph N. Reynolds,
Vice Chairman 1996 $412,500 $
- -0- $44,883 25,000 shs. $44,800
and Executive Officer, 1995 383,333
425,000 -0- 25,000 shs. 17,675
Reynolds Metals Company; 1994 347,083
160,000 3,038 25,000 shs. 16,713
President and Chief Executive
Officer, Reynolds International, Inc.
J. Wilt Wagner,
Vice Chairman 1996 $363,750 $
- -0- $1,357 20,000 shs. $49,189
and Executive Officer, 1995 325,000
350,000 1,007 22,500 shs. 38,293
Reynolds Metals Company 1994 265,000
145,000 527 22,500 shs. 10,951
Henry S. Savedge, Jr.,
Executive Vice President 1996 $347,500 $
- -0- $ -0- 20,000 shs. $67,149
and Chief Financial Officer, 1995 325,000
350,000 -0- 20,000 shs. 40,505
Reynolds Metals Company 1994 265,000
145,000 -0- 22,500 shs. 10,951
Donald T. Cowles,
Vice President and Reynolds 1996 $305,000 $
- -0- $1,294 14,000 shs. $16,897
Aluminum Supply Company 1995 290,000
300,000 661 18,000 shs. 11,700
Division General Manager, 1994 240,000
120,000 -0- 20,000 shs. 8,700
Reynolds Metals Company
<FN>
____________
<F1> Amounts shown in this column are cash awards granted under
the Company's Performance Incentive Plan.
<F2> Reported in this column are amounts reimbursed to the named
Executive Officers for the payment of taxes and, in the case
of Mr. Reynolds, perquisites of $44,832, including $11,593
for use of corporate aircraft and $22,632 for spouse's
travel.
<F3> Option awards were granted under the Company's 1992 and 1996
Nonqualified Stock Option Plans. See the section below
entitled "Stock Option Grants in 1996". None of the options
has stock appreciation rights attached.
<F4> Amounts shown in this column for 1996 include the following:
(a) Company contributions to the Company's Savings and
Investment Plan for Salaried Employees (the "Savings Plan")
in the amount of $4,501 for J. J. Sheehan; $4,500 for R. G.
Holder; $4,500 for R. N. Reynolds; $4,503 for J. W. Wagner;
$4,503 for H. S. Savedge, Jr.; and $4,500 for D. T. Cowles.
(b) Amounts credited as Company contributions under the
Company's Benefit Restoration Plan for the Savings Plan in
the amount of $10,764 for J. J. Sheehan; $14,625 for R. G.
Holder; $7,875 for R. N. Reynolds; $6,414 for J. W. Wagner;
$5,928 for H. S. Savedge, Jr.; and $4,650 for D. T. Cowles.
(c) Amounts paid under the Company's Financial
Counseling
Assistance Plan for Officers in the amount of $8,380 for J.
J. Sheehan; $4,050 for R. G. Holder; $9,750 for R. N.
Reynolds; $3,824 for J. W. Wagner; $3,400 for H. S. Savedge,
Jr.; and $3,000 for D. T. Cowles.
(d) The present value costs of the Company's
contribution
toward 1996 premiums for split-dollar life insurance, above
the term coverage level provided generally to salaried
employees, in the amount of $36,064 for J. J. Sheehan;
$93,267 for R. G. Holder; $22,675 for R. N. Reynolds;
$34,448
for J. W. Wagner; $53,318 for H. S. Savedge, Jr.; and $4,441
for D. T. Cowles. The Company pays all premiums in excess
of
what the covered executive pays and retains a collateral
interest equal to this amount, which it will recover when
the
insured executive reaches age 65 (or, if later, after 15
policy years). The covered executive owns the policy and
pays
premiums equal to the cost of individual term insurance.
(e) The dollar value of above-market interest earned in
1996 on deferred compensation under the Company's New
Management Incentive Deferral Plan in the amount of $2,219
for R. G. Holder; $321 for J. W. Wagner; $765 for H. S.
Savedge, Jr.; and $306 for D. T. Cowles.
<F5> The stock options granted to Mr. Sheehan in 1996 include a
regular grant covering 35,000 shares and a special
performance-based stock option grant covering 150,000 shares
awarded upon his election as Chief Executive Officer. See
"Stock Option Grants in 1996" and "Report of Compensation
Committee on Executive Compensation -- Chief Executive
Officer Compensation".
</FN>
Stock Option Grants in 1996
The following table sets forth information with respect to
stock options granted by the Company to each of the six named
Executive Officers during 1996 and the grant-date present value
of such options. The grant-date present value is a theoretical
value which is not necessarily indicative of the ultimate value
of the options to the Executive Officers. Ultimately, value is
dependent on the amount, if any, by which the market price of the
Common Stock at any point in time exceeds the exercise price.
(See footnote (4) to the table.)
Individual Grants
- ----------------------------------------------------
% of
Number of Total
Securities Options Exercise
Underlying Granted to or Base
Grant-Date
Options Employees Price Per
Expiration Present
Name Granted<F1> in 1996<F2> Share<F3>
Date Value<F4>
---- ---------- ---------- ---------
- ---------- -------------
J. J. Sheehan 35,000 3.9% $55.375
5/17/2006 $ 593,950
150,000 16.7 53.500
3/31/2000 1,759,500
R. G. Holder 65,000 7.2 55.375
5/17/2006 1,103,050
R. N. Reynolds 25,000 2.8 55.375
5/17/2006 424,250
J. W. Wagner 20,000 2.2 55.375
5/17/2006 339,400
H. S. Savedge, Jr. 20,000 2.2 55.375
5/17/2006 339,400
D. T. Cowles 14,000 1.6 55.375
5/17/2006 237,580
<FN>
____________
<F1> Stock options were granted in 1996 under the Company's
Stockholder-approved 1992 Nonqualified Stock Option Plan and
1996 Nonqualified Stock Option Plan (the "Stock Option
Plans"). Regular stock option grants were made to optionees
on May 17, 1996. A special performance-based stock option
grant was made to J. J. Sheehan on August 30, 1996,
effective
upon his assuming the position of Chief Executive Officer on
October 1, 1996. All options were granted at an exercise
price equal to the fair market value of the underlying
Common
Stock on the date of grant. Each option entitles the
optionee to purchase one share of Common Stock from the
Company. None of the options has stock appreciation rights
attached.
Each regular stock option is exercisable no earlier than one
year or later than ten years from the date of grant. The
regular stock options granted in 1996 will become
exercisable
on May 17, 1997. The performance-based options granted to
Mr. Sheehan in 1996 become exercisable only if the closing
price of the Common Stock equals or exceeds $80.25 per share
for 30 consecutive calendar days on or before September 30,
1999. If this condition is satisfied, the options may be
exercised any time between August 30, 1997 and March 31,
2000.
If there is a Change in Control (as defined in the Stock
Option Plans) of the Company, the Stock Option Plans provide
that all options already granted under them will become
immediately exercisable thirty days after the Change in
Control occurs, unless the Compensation Committee determines
that the Change in Control presents no material risk of loss
of options to any optionee and directs that exercisability
not be accelerated. To the extent necessary to preserve the
exemption from short-swing profit liability under Section
16(b) of the Securities Exchange Act of 1934, the date as of
which options first become exercisable by optionees who are
Executive Officers or Directors may not be accelerated to
occur earlier than six months from the date of the
respective
grant.
<F2> In 1996, 454 persons were granted options under the Stock
Option Plans. The grants covered an aggregate of 900,000
shares of Common Stock, which constituted approximately 36%
of the shares available for options under the Stock Option
Plans.
<F3> The exercise price may be paid by the optionee in cash, in
shares of Common Stock valued at fair market value on the
date of exercise, in a combination of such stock or cash, or
by use of the Company's broker-assisted or cashless exercise
stock option financing program. Under the financing
program,
a brokerage firm makes a loan to the optionee for the
payment
of the option exercise price and all applicable withholding
taxes. The optionee may repay the loan by selling the
purchased shares immediately through the brokerage firm, or
the loan may remain outstanding until the shares are later
sold or the optionee otherwise repays the loan.
<F4> As permitted by SEC rules, the Black-Scholes method of
option
valuation has been used to determine grant-date present
value. The assumptions used in the Black-Scholes option
valuation calculation for the regular stock options and the
performance-based stock options, respectively, were: (i) a
risk-free interest rate of 6.9% and 6.5%; (ii) a dividend
yield of 2.6% and 2.1%; (iii) a volatility factor of the
expected market price of the Common Stock of .278 and .262;
(iv) an option term of six years and three years; and (v) an
option exercise price of $55.375 per share and $53.50 per
share. The assumptions used should not be considered
indicators of future dividend policy or stock price
appreciation.
The Black-Scholes formula, a complex mathematical formula
used to value publicly-traded options, does not take into
account, and the values shown in the table were not adjusted
for, two important aspects of options awarded under the
Stock
Option Plans. First, the formula assumes that a liquid
market exists for the options; however, options awarded
under
the Stock Option Plans may not be transferred. Second, it
assumes that the options may be exercised immediately;
however, options awarded under the Stock Option Plans may
not
be exercised earlier than one year from the date of grant.
The values shown are provided solely to comply with SEC
rules. The options had no immediate value on the date of
grant and will have no value until one year after the grant
and then only to the extent that the market price of the
Common Stock exceeds the exercise price and, in the case of
the performance-based stock options, only if the performance
conditions are satisfied.
On February 27, 1997, the closing price of the Company's
Common Stock as reported on the New York Stock Exchange
Composite Transactions Tape was $62.75 per share.
</FN>
Aggregated Option Exercises in 1996 and
Option Values at December 31, 1996
The table below sets forth information with respect to
options exercised by each of the six named Executive Officers
during 1996 and the number and value of unexercised options held
at the end of 1996:
Number of
Securities
Value of
Underlying
Unexercised
Unexercised
In-the-Money
Options at
Options at
Number of December 31, 1996
December 31, 1996
Shares -----------------
------------------
Acquired Value Exercisable/
Exercisable/
Name on Exercise Realized<F1> Unexercisable
Unexercisable<F2>
---- ----------- ----------- -----------------
- ---------------------
J. J. Sheehan -0- -0- 121,500 / 185,000
$ 744,250 /$466,250
R. G. Holder 9,626 $306,876 390,000 / 65,000
2,996,875 / 65,000
R. N. Reynolds -0- -0- 149,000 / 25,000
847,500 / 25,000
J. W. Wagner -0- -0- 95,000 / 20,000
625,188 / 20,000
H. S. Savedge, Jr. -0- -0- 92,750 / 20,000
639,250 / 20,000
D. T. Cowles -0- -0- 88,500 / 14,000
680,875 / 14,000
<FN>
____________
<F1> Based on the difference between the option exercise price
and
the closing price of the Company's Common Stock on the date
of exercise as reported on the New York Stock Exchange
Composite Transactions Tape.
<F2> Based on the difference between the option exercise price
and
the closing price of $56.375 per share of the Company's
Common Stock on December 31, 1996 as reported on the New
York
Stock Exchange Composite Transactions Tape.
</FN>
Pension Plan Table
The following table sets forth the total estimated annual
benefits payable under the Company's defined benefit pension
plan, called the New Retirement Program for Salaried Employees
(the "New Retirement Program"), and benefit restoration plans
upon retirement to persons in specified final average earnings
and years-of-benefit-service classifications. The amounts shown
are based on the Social Security Act in effect for retirement in
1997. Such amounts are not necessarily indicative of amounts
that are or may actually become payable.
Years of Benefit Service at
Retirement <F1>
- -----------------------------------------------------------------
- ---------------------
Final Average
Earnings 5 10 15 20 25
30 35 40
- -------------
$ 150,000 $ 12,704 $ 25,409 $ 38,113 $ 50,818 $
63,522 $ 70,226 $ 76,931 $ 83,635
300,000 26,204 52,409 78,613 104,818
131,022 145,226 159,431 173,635
450,000 39,704 79,409 119,113 158,818
198,522 220,226 241,931 263,635
600,000 53,204 106,409 159,613 212,818
266,022 295,226 324,431 353,635
750,000 66,704 133,409 200,113 266,818
333,522 370,226 406,931 443,635
900,000 80,204 160,409 240,613 320,818
401,022 445,226 489,431 533,635
1,050,000 93,704 187,409 281,113 374,818
468,522 520,226 571,931 623,635
1,200,000 107,204 214,409 321,613 428,818
536,022 595,226 654,431 713,635
1,350,000 120,704 241,409 362,113 482,818
603,522 670,226 736,931 803,635
1,500,000 134,204 268,409 402,613 536,818
671,022 745,226 819,431 893,635
<FN>
____________
<F1> Benefits are computed as if paid on the basis of a straight
life annuity, assuming retirement at age 65.
</FN>
The table below sets forth information relating to the New
Retirement Program with respect to the six Executive Officers
named in the Summary Compensation Table, assuming retirement (and
eligibility for retirement) at January 1, 1997:
Final Average Years of Benefit
Earnings Service Completed
-------- -----------------
J. J. Sheehan<F1> $557,000 9
R. G. Holder<F2> 980,000 38
R. N. Reynolds 511,000 28
J. W. Wagner 406,000 33
H. S. Savedge, Jr. 402,000 37
D. T. Cowles 352,000 18
<FN>
____________
<F1> The Company has agreed to pay J. J. Sheehan (a) certain
early
retirement benefits equivalent to those he would have
received from a prior employer, if his employment with the
Company is involuntarily terminated before age 65, and (b)
upon his death, surviving spouse benefits equal to one-half
of any amounts payable under clause (a).
<F2> R. G. Holder retired from the Company effective October 1,
1996.
</FN>
The New Retirement Program provides participants an annual
benefit upon retirement determined under a formula which takes
into account final average earnings, years of benefit service (as
defined in the New Retirement Program), and Social Security
benefits. For purposes of the New Retirement Program, a
participant's final average earnings include base salary in
effect, plus profit sharing and bonus awards, in the five
consecutive calendar years for which the average is highest
during the fifteen calendar years preceding retirement. (See the
Summary Compensation Table for salary and bonus information for
the six named Executive Officers for the years 1994-1996.)
Benefits calculated under the formula are reduced by an amount
based on both (a) the primary Social Security benefit estimated
to be payable upon retirement or, if later, at age 65 and (b)
years of benefit service. Regulations issued in 1991 to
implement the Tax Reform Act of 1986 and subsequent legislation
may require the Company to change the benefit formula from time
to time. Benefits payable under the New Retirement Program are
directly offset by benefits payable to participants from the
Company's Retirement Program for Salaried Employees, which was
terminated effective August 22, 1983.
The Internal Revenue Code and the Tax Reform Act of 1986
limit compensation that may be taken into account to calculate
benefits and the actual benefits payable under tax-qualified
defined benefit plans. The Company has nonqualified benefit
restoration plans providing for the payment from general funds of
amounts otherwise payable under the New Retirement Program but
for these limitations.
Certain Arrangements
The Company has entered into severance agreements with key
executives designated by the Compensation Committee, including
the Executive Officers named in the Summary Compensation Table.
Each agreement provides that termination compensation will be
paid if the executive's employment is terminated without Cause
(as defined in the agreement) by the Company or terminated by the
executive in certain circumstances, in either case within two
years after a Change in Control (as defined in the agreement).
Termination compensation includes (a) a cash payment equal to
three times the sum of (i) annual base salary at the time of
termination plus (ii) the highest cash variable compensation
award paid to the executive for any previous year, (b) a cash
settlement of stock options granted under the Company's stock
option plans but not yet exercisable at the date of termination,
and (c) a cash payment to give retirement benefits equal to those
payable had the executive (i) been vested (if not already vested
at the time of termination) and (ii) worked for the Company three
additional years. In addition, each agreement provides for
continuation of medical, life and disability benefits for three
years, ownership of the car assigned to the executive at the time
of termination and making the executive whole for any applicable
excise taxes as a result of payment of the termination
compensation.
The Company has a New Management Incentive Deferral Plan
(the "New Deferral Plan") under which Executive Officers
(including the named Executive Officers) and other key employees
who are recommended by the Chief Executive Officer may defer
receipt of up to 85% of variable compensation, if any, otherwise
payable under the Company's Performance Incentive Plan and
Supplemental Incentive Plan for services performed each year.
Deferred compensation is credited with additional income in the
form of (i) interest computed at a rate determined by the
Compensation Committee for that year's deferrals or (ii) in
certain cases, a number of equivalent shares of common stock of
the Company. Deferrals must be for a period of at least five
years, except in the case of retirement. Payments will be made
in a lump sum or in 5 or 10 annual installments, as elected by
the participant. The New Deferral Plan allows the Compensation
Committee to accelerate payments to all participants if it
determines that (i) a major challenge to the control of the
Company exists or (ii) other extraordinary circumstances make
such acceleration in the best interest of the Company.
The Company also maintains a Management Incentive Deferral
Plan (the "Deferral Plan"). The Deferral Plan is essentially
identical to the New Deferral Plan except that the Deferral Plan
(i) provides for deferrals of up to 50% of variable compensation,
(ii) applies only to variable compensation deferred under the
Performance Incentive Plan, and (iii) permits payments in either
a lump sum or in 5, 10, 15 or 20 annual installments, as the
participant elects. As a result of adoption of the New Deferral
Plan, no further deferrals are being made under the Deferral
Plan, although amounts already deferred will continue to accrue
interest and will be paid out under the terms of the Deferral
Plan.
The Company also has a Salary Deferral Plan for Executives
(the "Salary Deferral Plan"). Under the Salary Deferral Plan,
eligible employees whose annual base salary exceeds the
compensation that can be taken into account for qualified pension
plan purposes under the Internal Revenue Code may irrevocably
elect to defer a specified percentage of each year's base salary
to the extent the salary exceeds the statutory limit. Deferrals
may be in 5% increments, up to a maximum of 90% of salary in
excess of the statutory limit. Deferred amounts are credited
with phantom earnings equal to what would be earned if the
deferred amounts were actually invested in any of the investment
funds available under the Company's Savings and Investment Plan
for Salaried Employees. Deferrals are not paid out until the
participant terminates employment and are paid in cash. Payments
will begin in the first, second, third or fourth January
following the year in which the participant terminates employment
and may be in the form of either a lump sum or five annual
installments, in each case as the participant elects. The Salary
Deferral Plan also allows the Compensation Committee to
accelerate payments to all participants if it determines that (i)
a major challenge to the control of the Company exists or (ii)
other extraordinary circumstances make such acceleration in the
best interest of the Company.
As described in footnote (1) to the table in the section
entitled "Stock Option Grants in 1996", the Stock Option Plans
provide that under certain circumstances the exercisability of
stock options granted to optionees may be accelerated in the
event of a Change in Control of the Company.
GENERAL INFORMATION
Annual Report
The Annual Report of the Company containing audited
financial statements for the year 1996 is being mailed to each
Stockholder with this Proxy Statement.
Stockholders' Proposals and Nominations
Stockholders may present proposals which are proper subjects
for consideration at the 1998 Annual Meeting of Stockholders to
the Company for inclusion in its proxy materials relating to that
meeting. These proposals should be submitted in writing as
specified by SEC rules to: Reynolds Metals Company, 6601 West
Broad Street, P.O. Box 27003, Richmond, Virginia 23261-7003,
Attention: Secretary. They must be received by October 31, 1997
in order to be included in the proxy materials for the 1998
Annual Meeting.
Stockholder nominations for Directors will be considered by
the Committee on Directors if submitted in writing to the
Committee on Directors, c/o Secretary, Reynolds Metals Company,
6601 West Broad Street, P.O. Box 27003, Richmond, Virginia 23261-
7003. Nominations must include the information specified in
clauses (ii) through (v) in the following paragraph.
The Company's By-Laws require that Stockholders furnish
written notice to the Company of any business to be conducted at
an annual meeting which is not included in the Company's proxy
materials or is not brought before the meeting by or at the
direction of the Board of Directors or the officer presiding over
the meeting. Such notice must contain the following information:
(i) a full description of each item of business proposed to be
brought before the meeting; (ii) the name and address of the
person proposing such business (or nominating a Nominee for
Director); (iii) the class and number of shares held of record,
held beneficially and represented by proxy by such person as of
the record date for the meeting (if publicly available) and as of
the date of such notice; (iv) if any item of such business
involves a nomination for Director, all information regarding
each such Nominee that would be required to be set forth in a
definitive proxy statement filed with the SEC under SEC rules,
and the written consent of each such Nominee; and (v) all other
information that would be required to be filed with the SEC if,
with respect to such business, the person were a participant in a
solicitation subject to Section 14 of the Securities Exchange Act
of 1934. Notice of business to be brought before the 1998 Annual
Meeting must be received by the Secretary of the Company at the
above address not later than January 24, 1998.
A copy of the By-Law provisions referred to above may be
obtained, without charge, upon written request to the Secretary.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and SEC
regulations require the Company's Directors and Executive
Officers and beneficial owners of more than ten percent of any
class of the Company's equity securities (together, "reporting
persons") to file with the SEC reports of ownership of such
securities on Form 3 and changes in ownership on Forms 4 and 5.
The Company undertakes to file such forms for its Directors and
Executive Officers under powers of attorney given to designated
attorneys-in-fact. SEC rules require reporting persons to
furnish the Company with copies of all Section 16(a) reports they
file.
To the Company's knowledge, no reporting person failed to
file on a timely basis reports required by Section 16(a) during
1996 or prior fiscal years, except that the Form 4 filed by the
Company for the month of April 1996 for C. S. Thomas, timely
reporting Mr. Thomas' exercise of an option for shares of Common
Stock in a cashless exercise transaction, omitted to report the
simultaneous disposition of the shares. Upon discovery of the
omission, the Company promptly filed an amended Form 4 reflecting
the disposition.
DONNA C. DABNEY
Secretary
February 28, 1997
Richmond, Virginia
Notice of
Annual Meeting
of Stockholders
April 16, 1997
and
Proxy Statement
(Reynolds logo)
APPENDIX A
REYNOLDS METALS COMPANY
Proxy Solicited by the Board of Directors
for Annual Meeting of Stockholders
April 16, 1997
The undersigned appoints Jeremiah J. Sheehan, D. Michael
Jones and Donna C. Dabney, and each of them, proxies, with full
power of substitution, to vote the shares of Common Stock of
Reynolds Metals Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Company to be held
at the Company's offices, 6601 West Broad Street, Richmond,
Virginia, on Wednesday, April 16, 1997 at 10:00 A.M. (local
time), and at any adjournments thereof. The undersigned hereby
confer(s) upon the proxies and each of them authority to vote for
a substitute Nominee or substitute Nominees designated by the
Board of Directors with respect to the election of Directors if
any Nominee is unavailable to serve for any reason if elected.
For participants in the Company's Savings and Investment
Plan for Salaried Employees, Tax Reduction Act Stock Ownership
Plan for Salaried Employees, Savings Plan for Hourly Employees
and/or Employees Savings Plan, this card also provides voting
instructions to the respective trustees under such plans for the
undersigned's allocable portion, if any, of the total number of
shares of Common Stock of the Company held by such plans as
indicated on the reverse side. (Note: The number of plan shares
indicated on the reverse side may not be the same as the number
of shares shown on the undersigned's last account statement(s)
from the plans due to the use of different valuation dates and/or
accounting methods.) These voting instructions are solicited and
will be carried out in accordance with the applicable provisions
of such plans.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE SHARES REPRESENTED HEREBY WILL BE VOTED IN
ACCORDANCE WITH ANY CHOICE SPECIFIED BY THE STOCKHOLDER; WHERE
THERE IS NO CHOICE, SUCH SHARES WILL BE VOTED IN FAVOR OF ITEMS 1
AND 2.
(continued and to be SIGNED on the Reverse Side)
- -----------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your
votes as indicated
___
in this example
/ X /
___
The Board of Directors recommends a vote FOR Items 1 and 2.
Item 1 - Election of Directors:
FOR all Nominees - Patricia C. Barron, John
Nominees WITHHOLD R. Hall, Robert L. Hintz, William H.
(except as AUTHORITY Joyce, Mylle Bell Mangum, D. Larry
withheld to Vote Moore, Randolph N. Reynolds, James M.
in the for all Ringler, Henry S. Savedge, Jr.,
space Nominees Samuel C. Scott, III, Jeremiah J.
provided) Sheehan, J. Wilt Wagner, Joe B. Wyatt
___ ___
/___/ /___/ (To withhold authority to vote for
any individual Nominee, write that
Nominee's name in the space provided
below.)
_____________________________________
Item 2 Item 3
Ratification of In their discretion the proxies
Selection of Ernst & are authorized to vote upon such
Young LLP as Independent other matters as may properly come
Auditors before the Annual Meeting.
FOR AGAINST ABSTAIN
___ ___ ___
/___/ /___/ /___/
___
I WILL ATTEND THE ANNUAL MEETING
/___/
Signature __________________ Signature _____________
Date_________
Please mark, date and sign as your name appears above and return
in the enclosed envelope. If signing as attorney, executor,
administrator, trustee, guardian or in another representative
capacity, please give your full title as such.
- -----------------------------------------------------------------
FOLD AND DETACH HERE
Dear Stockholder:
Enclosed are materials relating to the Company's 1997 Annual
Meeting of Stockholders. The Notice of the Annual Meeting and
Proxy Statement describe the formal business to be transacted at
the Meeting.
Your vote is important to us. Whether or not you expect to
attend the Annual Meeting, please complete, sign and return
promptly the attached proxy card in the accompanying envelope,
which requires no postage if mailed in the United States.
If you plan to attend the Annual Meeting, please mark the
attendance box on the proxy card.
REYNOLDS METALS COMPANY