EXHIBIT 99.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-1430
A. Full title of the plan:
REYNOLDS METALS COMPANY
SAVINGS PLAN
FOR HOURLY EMPLOYEES
B. Name of issuer of the securities held
pursuant to the plan and the address of
its principal executive office:
REYNOLDS METALS COMPANY
6601 West Broad Street
P. O. Box 27003
Richmond, Virginia 23261-7003
REQUIRED INFORMATION
FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
Page No.
Report of Independent Auditors........................... F-1
Audited Financial Statements
Statements of Net Assets Available for
Plan Benefits, with Fund Information.................. F-2
Statement of Changes in Net Assets Available
for Plan Benefits, with Fund Information.............. F-4
Notes to Financial Statements........................... F-5
EXHIBITS
Exhibit A Consent of Independent Auditors
SIGNATURES
The Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, the Plan Committee has duly
caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
REYNOLDS METALS COMPANY
SAVINGS PLAN FOR HOURLY EMPLOYEES
By: Henry S. Savedge, Jr.
Henry S. Savedge, Jr., Chairman
Plan Committee for Hourly Savings Plan
DATE: June 24, 1997
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Reynolds Metals Company
We have audited the accompanying statements of net assets
available for plan benefits of the Reynolds Metals Company
Savings Plan for Hourly Employees as of December 31, 1996
and 1995, and the related statement of changes in net assets
available for plan benefits for the year ended December 31,
1996. These financial statements are the responsibility of
the management of Reynolds Metals Company, the Plan's
sponsor. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for plan benefits of the Plan at December 31, 1996
and 1995, and the changes in its net assets available for
plan benefits for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The Fund Information in the statement of net assets
available for plan benefits and the statement of changes in
net assets available for plan benefits is presented for
purposes of additional analysis rather than to present the
net assets available for plan benefits and changes in net
assets available for plan benefits of each fund. The Fund
Information has been subjected to the auditing procedures
applied in our audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Richmond, Virginia
June 19, 1997
Reynolds Metals Company
Savings Plan for Hourly Employees
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1996
------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------
Reynolds Diversified Balanced Interest Small
Stock Equities Investment Income International Capitalization Loan
Fund Fund Fund Fund Equities Fund Equities Fund Fund Total
------------------------------------------------------------------------------------------------
Assets
Investment in Master Trust $3,061 $16,274 $8,334 $134,757 $1,189 $4,644 $7,744 $176,003
Accrued income 19 - - - - - - 19
------------------------------------------------------------------------------------------------
Total assets 3,080 16,274 8,334 134,757 1,189 4,644 7,744 176,022
------------------------------------------------------------------------------------------------
Liabilities
Accounts payable and other 1 - - 12 - - - 13
------------------------------------------------------------------------------------------------
Total liabilities 1 - - 12 - - - 13
------------------------------------------------------------------------------------------------
Net assets available for
plan benefits $3,079 $16,274 $8,334 $134,745 $1,189 $4,644 $7,744 $176,009
================================================================================================
See accompanying notes.
Reynolds Metals Company
Savings Plan for Hourly Employees
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1995
----------------------------------------------------------------------
Fund Information
-----------------------------------------------------------
Reynolds Diversified Balanced Interest
Stock Equities Investment Income Loan
Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------
Assets
Investments:
Common stock of Reynolds Metals Company $2,463 - - - - $ 2,463
Master trust:
Diversified Equities - $7,317 - - - 7,317
Balanced - - $5,422 - - 5,422
Interest Income - - - $121,449 - 121,449
Cash equivalents 3 - - - - 3
Loans to participants - - - - $4,870 4,870
----------------------------------------------------------------------
Total investments 2,466 7,317 5,422 121,449 4,870 141,524
Contributions receivable 10 28 19 426 - 483
Accrued income 15 - - - - 15
----------------------------------------------------------------------
Total assets 2,491 7,345 5,441 121,875 4,870 142,022
----------------------------------------------------------------------
Liabilities
Accounts payable and other - - - 5 - 5
----------------------------------------------------------------------
Total liabilities - - - 5 - 5
----------------------------------------------------------------------
Interfund receivable (payable) (82) 477 92 (487) - -
----------------------------------------------------------------------
Net assets available for plan benefits $2,409 $7,822 $5,533 $121,383 $4,870 $142,017
======================================================================
See accompanying notes.
Reynolds Metals Company
Savings Plan for Hourly Employees
Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
Year Ended December 31, 1996
------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------
Reynolds Diversified Balanced Interest Small
Stock Equities Investment Income International Capitalization Loan
Fund Fund Fund Fund Equities Fund Equities Fund Fund Total
------------------------------------------------------------------------------------------------
Additions to net assets:
Net investment gain
(loss) from Master
Trust (Note 3): $ 88 $2,285 $998 $7,752 $ 61 $ 366 $ 494 $12,044
Contributions:
Employer 240 953 467 10,050 76 210 - 11,996
Employee 506 2,055 1,128 14,978 160 414 - 19,241
------------------------------------------------------------------------------------------------
746 3,008 1,595 25,028 236 624 - 31,237
------------------------------------------------------------------------------------------------
Total Additions 834 5,293 2,593 32,780 297 990 494 43,281
Deductions from net assets:
Withdrawals by participants 60 301 177 6,071 17 29 151 6,806
Assets transferred to other plans 74 144 115 2,085 18 13 8 2,457
Administrative expenses - - - 26 - - - 26
------------------------------------------------------------------------------------------------
Total Deductions 134 445 292 8,182 35 42 159 9,289
Interfund transfers (30) 3,604 500 (11,236) 927 3,696 2,539 -
------------------------------------------------------------------------------------------------
Net increase 670 8,452 2,801 13,362 1,189 4,644 2,874 33,992
Net assets available for
plan benefits:
Beginning of year 2,409 7,822 5,533 121,383 - - 4,870 142,017
------------------------------------------------------------------------------------------------
End of year $3,079 $16,274 $8,334 $134,745 $1,189 $4,644 $7,744 $176,009
================================================================================================
See accompanying notes.
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 1996
(Dollars in Thousands)
1. Significant Accounting Policies
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
The accounting records of the Reynolds Metals Company
Savings Plan for Hourly Employees ("Plan") are maintained on
the accrual basis. All securities transactions are recorded
as of the trade date.
Investments in Reynolds Metals Company Common Stock (stated
at fair value) are valued at the last reported sales price
on the last business day of the year. Investments in mutual
funds are measured by quoted market prices and are reported
at aggregate fair value at year-end. Guaranteed Investment
contracts with insurance companies are reported at "contract
value," which equals cost plus accrued income. Structured
investment contracts are reported at fair value, which in
the case of structured investment contracts equals contract
value.
2. Summary of Significant Plan Provisions
Reynolds Metals Company (the "Company") established the Plan
effective January 1, 1986, covering hourly employees of the
Company and certain of its subsidiaries (each an "Employer")
who are in a bargaining unit covered by a labor agreement
that incorporates the Plan by reference. The Plan is a defined
contribution plan under the Employee Retirement Income
Security Act of 1974 ("ERISA") and qualifies as a "cash or
deferred" arrangement under Section 401(k) of the Internal
Revenue Code. A complete description of the Plan is
contained in the Summary Plan Description and in the Plan
document, copies of which are available from the Company.
Hourly employees who are in a bargaining unit covered by a
collective bargaining agreement that incorporates
the Plan will become eligible to participate
in the Plan on the later of (a) 30 days after
beginning their employment with an Employer or (b) the
date on which the collective bargaining agreement under
which they are covered first incorporates the Plan by
reference. Plan participation is voluntary.
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
2. Summary of Significant Plan Provisions (continued)
Each collective bargaining agreement that incorporates the
Plan by reference provides that participants may elect to
make payroll contributions to the Plan in specified amounts
ranging from 1% to 12% of compensation in 1% increments.
Each such collective bargaining agreement may also provide
for the following types of contributions:
(a) Company Matching Contributions: At certain bargaining
units, the applicable Employer will, subject to certain
limitations, contribute to the Plan on behalf of each
eligible participant, a fixed percentage of a portion
of the payroll contributions by the participant.
(b) Negotiated Deferral Contributions: At certain
bargaining units, the applicable Employer will
make a contribution to a participant's account based on
the number of hours worked by each active employee
participating in the Plan.
(c) Additional Voluntary Contributions:
Eligible employees who receive a profit sharing
award, gainsharing payment or other designated type of
lump sum payment may contribute between 10%
and 50% of the award and/or payment (in 10%
increments) to the Plan. Such contributions are not
matched by the Company or any other Employer.
Participants may elect to make their contributions on a
before or after tax basis or a combination thereof.
Employer contributions (matching and negotiated deferral)
are made on a "pretax" basis. Highly compensated
participants may be required to reduce the amount of
"pretax" contributions made to or held by the Plan on their
behalf to permit the Plan to satisfy the nondiscrimination
requirements of Section 401(k) of the Internal Revenue Code.
Participants are fully vested in their account balances.
Withdrawals and distributions are handled in accordance with
the Plan provisions and are subject to certain regulatory
restrictions. The trustee holds all of the Plan's
investment assets and executes transactions therein.
Although it has not expressed any intent to do so, the
Company has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan subject
to the provisions of ERISA and subject to the terms of any
applicable collective bargaining agreement.
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
2. Summary of Significant Plan Provisions (continued)
The Company is the Plan administrator and bears the related
costs, except for investment-related and trustee fees, which
are paid by the Plan.
3. Commingled Master Trust Investments
All of the investments of the Plan as of December 31, 1996
were held in a Master Trust under a Master Trust Agreement
between Reynolds Metals Company and The Northern Trust
Company, as trustee, and are commingled with the assets of
three other savings plans of the Company and one of its
subsidiaries.
All of the assets invested in the Interest Income Fund,
Diversified Equities Fund and Balanced Investment Fund as of
December 31, 1995 were held in a Master Trust established
under a Master Trust Agreement between Reynolds Metals
Company and The Chase Manhattan Bank, N.A., as trustee, and
were commingled with the assets of three other savings plans
of the Company and certain of its subsidiaries.
Substantially all the assets held in the Diversified
Equities Fund and the Balanced Investment Fund are invested
in the Vanguard Institutional Index Fund, and the Vanguard
STAR Fund, respectively, no-load mutual funds held and
managed by The Vanguard Group of Investment Companies.
Substantially all of the assets held in the International
Equities Fund and the Small Capitalization Equities Fund are
invested in the T. Rowe Price Foreign Equity Fund and the T.
Rowe Price Small-Cap Value Fund, respectively, no-load
mutual funds held and managed by T. Rowe Price Associates,
Inc.
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
The assets of the Interest Income Fund generally are
invested in guaranteed investment contracts ("GICs") at
fixed rates of return and structured investment contracts
("SICs") with various insurance companies and banks.
SICs represent high grade investments held in the name
of the Master Trust in conjunction with a corresponding
contract with the issuer of the SIC to provide a
fixed or variable rate of return (based on investment
experience and reset quarterly) on the cost of
the investment. GICs and SICs generally provide for the full
repayment of principal and interest. Upon the occurrence
of certain events (including layoffs by the Company or its
applicable affiliates), however, market value of the GIC or
SIC, if lower than its book value, may be repaid (a "Market
Value Adjustment"). Currently, in the opinion of the
Company, the likelihood of a material loss to the Plan as a
result of such a Market Value Adjustment is remote. The
annual rate of return on these contracts during 1996 and
1995 was 6.3% and 7.0%, respectively. The current yield on
these contracts at December 31, 1996 was 6.4% (6.4% at
December 31, 1995). Interest is credited to participants'
accounts on the dollar-weighted average (blended rate)
basis. The fair value of the Plan's GICs approximates
contract value.
During 1996 certain assets of the Plan were transferred into
other plans of the Company as a result of employee
transfers. There was no effect on any participant's
accounts as a result of the transfer.
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Summarized financial fund information of the commingled
accounts within the Master Trust is presented below:
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
Reynolds Diversified Balanced Interest Small
Stock Equities Investment Income International Capitalization Loan
Fund Fund Fund Fund Equities Fund Equities Fund Fund Total
------------------------------------------------------------------------------------------------
MASTER TRUST
NET ASSETS-1996
Assets
Accrued Income $ 997 - - - - - - $ 997
Cash and cash equivalents 2,213 $ 48 $ 3 $17,070 $ 4 $ 3 - 19,341
Contributions receivable 259 209 183 143 56 166 - 1,016
Investments:
Common stock 160,346 - - - - - - 160,346
Investment contracts - - - 220,145 - - - 220,145
Mutual funds - 88,863 36,576 - 8,640 19,993 - 154,072
Loans to participants - - - - - - $19,326 19,326
------------------------------------------------------------------------------------------------
Total assets 163,815 89,120 36,762 237,358 8,700 20,162 19,326 575,243
Liabilities
Accounts payable 1 - - 12 - - - 13
------------------------------------------------------------------------------------------------
Master Trust net assets $163,814 $89,120 $36,762 $237,346 $8,700 $20,162 $19,326 $575,230
================================================================================================
Portion of Master Trust
allocable to the Plan $3,079 $16,274 $8,334 $134,745 $1,189 $ 4,644 $7,744 $176,009
Percent 2% 18% 23% 57% 14% 23% 40% 31%
MASTER TRUST
NET ASSETS-1995
Assets
Cash and cash equivalents - - - $ 23,907 - - - $ 23,907
Contributions receivable - $ 510 $ 112 448 - - - 1,070
Investments:
Investment contracts - - - 101,160 - - - 101,160
Mutual funds - 7,572 5,547 - - - - 13,119
------------------------------------------------------------------------------------------------
Total assets - 8,082 5,659 125,515 - - - 139,256
Liabilities
Accounts payable - - - 480 - - - 480
------------------------------------------------------------------------------------------------
Master Trust net assets - $8,082 $5,659 $125,035 - - - $138,776
================================================================================================
Portion of Master Trust
allocable to the Plan - $7,822 $5,533 $121,383 - - - $134,728
Percent - 97% 98% 97% - - - 97%
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Reynolds Diversified Balanced Interest Small
Stock Equities Investment Income International Capitalization Loan
Fund Fund Fund Fund Equities Fund Equities Fund Fund Total
------------------------------------------------------------------------------------------------
CHANGES IN MASTER TRUST
ASSETS - 1996
Additions:
Contributions from plans $ 12,532 $ 9,542 $ 5,183 $31,537 $ 1,255 $2,654 - $ 62,703
Net realized and unrealized
appreciation (depreciation)
of investments 893 13,648 3,493 - 593 1,973 - 20,600
Interest and dividends 4,022 1,636 1,203 13,662 172 754 $ 1,451 22,900
Assets transferred into
Master Trust 160,852 52,275 20,342 95,414 2,771 6,689 15,543 353,886
------------------------------------------------------------------------------------------------
178,299 77,101 30,221 140,613 4,791 12,070 16,994 460,089
Deductions:
Distributions to plans 6,753 2,885 1,246 11,722 165 301 514 23,586
Administrative expenses - - - 49 - - - 49
------------------------------------------------------------------------------------------------
6,753 2,885 1,246 11,771 165 301 514 23,635
Interfund transfers-net (7,732) 6,822 2,128 (16,531) 4,074 8,393 2,846 -
------------------------------------------------------------------------------------------------
Net additions 163,814 81,038 31,103 112,311 8,700 20,162 19,326 436,454
Master Trust net assets at
beginning of period - 8,082 5,659 125,035 - - - 138,776
------------------------------------------------------------------------------------------------
Master Trust net assets at
end of period $163,814 $89,120 $36,762 $237,346 $8,700 $20,162 $19,326 $575,230
================================================================================================
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
4. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available
for benefits per the financial statements to the Form 5500:
December 31
1996 1995
--------------------
Net assets available for benefits per the
financial statements $176,009 $142,017
Amounts allocated to withdrawn participants 172 930
--------------------
Net assets available for benefits per
the Form 5500 $175,837 $141,087
====================
The following is a reconciliation of benefits paid to
participants per the financial statements to the Form 5500:
December 31
1996
---------------
Benefits paid to participants per the
financial statements $6,806
Add: Amounts allocated on Form 5500 to
withdrawn participants in the current year 172
Less: Amounts allocated on form 5500 to
withdrawn participants in the prior year (930)
---------------
Benefits paid to participants per the Form 5500 $6,048
===============
5. Income Tax Status
The Internal Revenue Service has determined that the Plan
qualifies under Section 401(a) of the Internal Revenue Code
(the "Code"). As long as the Plan continues to be
qualified, under Federal income tax laws and regulations
participants will not be taxed on employer contributions or
investment earnings allocated to their account.
Participants will normally be subject to tax thereon at such
time as they receive distributions from the Plan. As long
as the Plan continues to be qualified, the Plan will not be
taxed on its dividend and interest income or any capital
gains realized by it or any unrealized appreciation of
investments.
INDEX TO EXHIBITS
Exhibit A Consent of Independent Auditors
EXHIBIT A
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-66032) pertaining to the Reynolds
Metals Company Savings Plan for Hourly Employees and in the
related Prospectus of our report dated June 19, 1997, with
respect to the financial statements of the Reynolds Metals
Company Savings Plan for Hourly Employees included in this Annual
Report (Form 11-K) for the year ended December 31, 1996.
Ernst & Young LLP
Richmond, Virginia
June 19, 1997