SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1430
REYNOLDS METALS COMPANY
A Delaware Corporation
(I.R.S. Employer Identification No. 54-0355135)
6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-7003
Telephone Number (804) 281-2000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
As of October 31, 1997, the Registrant had 73,908,836 shares of
Common Stock, no par value, outstanding and entitled to vote.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- ------------------------------------------------------------------------------------------
Reynolds Metals Company
Quarters ended Nine months ended
September 30 September 30
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(In millions, except per share amounts) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------
Revenues
Net sales $1,716 $1,751 $5,114 $5,236
Equity, interest and other income 1 6 13 31
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1,717 1,757 5,127 5,267
- -----------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 1,410 1,482 4,233 4,360
Selling, administrative and general expenses 95 106 304 322
Depreciation and amortization 92 92 277 273
Interest 40 39 116 123
Operational restructuring effects - net - - (31) 37
- -----------------------------------------------------------------------------------------
1,637 1,719 4,899 5,115
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Income before income taxes and cumulative
effect of accounting change 80 38 228 152
Taxes on income 25 12 75 49
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Income before cumulative effect of accounting change 55 26 153 103
Cumulative effect of accounting change - - - (15)
- -----------------------------------------------------------------------------------------
Net income 55 26 153 88
Preferred stock dividends - 9 - 27
- -----------------------------------------------------------------------------------------
Net income available to common stockholders $ 55 $ 17 $ 153 $ 61
=========================================================================================
Earnings per share
Average shares outstanding 74 64 73 64
Income before cumulative effect of accounting change $0.74 $0.26 $2.09 $1.19
Cumulative effect of accounting change - - - (0.24)
- -----------------------------------------------------------------------------------------
Net income $0.74 $0.26 $2.09 $0.95
=========================================================================================
Cash dividends per common share $0.35 $0.35 $1.05 $1.05
=========================================================================================
See notes beginning on page 5.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
- ----------------------------------------------------------------------------------------
Reynolds Metals Company
September 30 December 31
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(millions) 1997 1996
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ASSETS
Current assets
Cash and cash equivalents $ 68 $ 38
Receivables, less allowances of $17 (1996 - $18) 1,010 961
Inventories 816 787
Prepaid expenses and other 92 87
- ----------------------------------------------------------------------------------------
Total current assets 1,986 1,873
Unincorporated joint ventures and associated companies 1,371 1,337
Property, plant and equipment 6,503 6,813
Less allowances for depreciation and amortization 3,513 3,576
- ----------------------------------------------------------------------------------------
2,990 3,237
Deferred taxes and other assets 1,009 1,069
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Total assets $7,356 $7,516
========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued and other liabilities $ 980 $1,020
Short-term borrowings 76 217
Long-term debt 127 96
- ----------------------------------------------------------------------------------------
Total current liabilities 1,183 1,333
Long-term debt 1,714 1,793
Postretirement benefits 1,063 1,087
Environmental, deferred taxes and other liabilities 660 669
Stockholders' equity
Common stock 1,521 1,451
Retained earnings 1,296 1,220
Cumulative currency translation adjustments (81) (37)
- ----------------------------------------------------------------------------------------
Total stockholders' equity 2,736 2,634
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $7,356 $7,516
========================================================================================
See notes beginning on page 5.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------------
Reynolds Metals Company
Nine Months Ended
September 30
- --------------------------------------------------------------------------------------
(millions) 1997 1996
- --------------------------------------------------------------------------------------
Operating activities
Net Income $ 153 $ 88
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 277 273
Operational restructuring effects - net (40) 37
Cumulative effect of accounting change - 15
Changes in operating assets and liabilities net of effects of
dispositions:
Accounts payable, accrued and other liabilities 3 (71)
Receivables (161) (7)
Inventories (190) 50
Other 16 (141)
- --------------------------------------------------------------------------------------
Net cash provided by operating activities 58 244
Investing activities
Capital investments:
Operational (103) (135)
Strategic (84) (185)
Proceeds from sales of assets 343 8
Other (5) 5
- --------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 151 (307)
Financing activities
Increase (decrease) in borrowings (principally short-term) (173) 145
Cash dividends paid (73) (94)
Stock issues and other 67 (5)
- --------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (179) 46
Cash and cash equivalents
Net increase (decrease) 30 (17)
At beginning of period 38 39
- --------------------------------------------------------------------------------------
At end of period $ 68 $ 22
======================================================================================
See notes beginning on page 5.
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1997 and 1996
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements are presented in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
the statements include all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation.
Operating results for the interim periods of 1997 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1996. Certain amounts have been
reclassified to conform to the 1997 presentation.
NOTE 2. ACCOUNTING POLICIES
Earnings Per Share
In the first quarter of 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings Per Share." Statement
No. 128 requires a change in the method currently used to
calculate earnings per share (EPS). The change eliminates the
presentation of primary EPS and requires the presentation of
basic EPS. The principal difference between these methods is
that common stock equivalents are not considered in the
computation of basic EPS. The statement also requires the
presentation of diluted EPS. Diluted EPS reflects the potential
dilution that could occur if securities, or other contracts to
issue common stock, were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in
the earnings of the Company. The Company is required to adopt
this statement beginning with its 1997 fourth-quarter and year-
end financial statements, at which time all prior period EPS
presentations will be restated. The adoption will not have a
material impact on EPS amounts reported for the current interim
periods or any prior periods.
Comprehensive Income
In the second quarter of 1997, the Financial Accounting Standards
Board issued Statement No. 130, "Reporting Comprehensive Income,"
which must be adopted in the first quarter of 1998. This
statement establishes standards for reporting and displaying
comprehensive income and its components in the financial
statements. Comprehensive income includes net income and items
of other comprehensive income. For the Company, the components
of other comprehensive income will consist primarily of period-to-
period changes in the balances of the cumulative currency
translation and pension liability adjustments. The balances for
the cumulative currency translation and pension liability
adjustments are currently reflected in the stockholders' equity
section of the balance sheet.
Segments
Also in the second quarter of 1997, the Financial Accounting
Standards Board issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This
statement establishes new standards for defining the Company's
segments and disclosing information about them. It requires that
the segments be determined based on the internal structure and
reporting of the Company's operations. The statement must be
adopted for 1998 year-end financial statements. The Company
expects to adopt this statement early, beginning with its 1997
year-end financial statements.
NOTE 3. OPERATIONAL RESTRUCTURING
The Company is conducting a review of all its operations and
businesses. A number of alternatives are being considered
including, among other things, asset sales, spin-offs, and the
forming of strategic alliances to increase scale. Certain
actions, if taken, could affect the Company's results and ongoing
operating performance.
In 1997, the Company has sold the following assets:
- - residential construction products business
- - an aluminum reclamation plant in Virginia
- - aluminum extrusion plants in Virginia and Texas
- - coal properties in Kentucky
- - one-half of its wholly owned interest in a rolling mill and
related assets in Canada
- - an aluminum powder and paste plant in Kentucky
The Company has recognized pre-tax gains of $56 million related
to these 1997 sales. Proceeds from these sales were used to
reduce debt and to temporarily support other investing
activities.
Also in 1997, the Company recorded a pre-tax charge of $25
million for termination benefits applicable to approximately 500
corporate headquarters employees. Another 100 positions are
being reduced through attrition. Most of the cash requirements
relating to the termination benefits are expected to be paid in
1997.
The Company has also signed non-binding letters of intent to sell
the following:
- - two extrusion plants in Canada
- - U.S. recycling operations
- - a rolling mill and related assets in Alabama (with an
estimated after-tax loss in the range of $225 to $250 million, a
substantial portion of which relates to employee termination
costs)
- - a sheet and plate plant in Illinois
These transactions are subject to regulatory and board approvals
(in certain cases), negotiation and execution of definitive
agreements, and other customary closing conditions. The Company
hopes to complete the sales of the Canadian facilities and the
U.S. recycling operations by the first quarter of 1998. The
completion date of the sale of the Alabama facilities is
uncertain due to continuing regulatory review.
NOTE 4. CONTINGENT LIABILITIES
As previously disclosed in the Company's 1996 Form 10-K, the
Company is involved in various worldwide environmental
improvement activities resulting from past operations, including
designation as a potentially responsible party (PRP), with
others, at various Environmental Protection Agency-designated
Superfund sites. The Company has recorded amounts (on an
undiscounted basis) which, in management's best estimate, are
expected to be sufficient to satisfy anticipated costs of known
remediation requirements.
Estimated costs for future environmental compliance and
remediation are necessarily imprecise because of factors such as:
- - continuing evolution of environmental laws and regulatory
requirements
- - availability and application of technology
- - identification of presently unknown remediation requirements
- - cost allocations among PRPs
NOTE 4. CONTINGENT LIABILITIES - - continued
Further, it is not possible to predict the amount or timing of
future costs of environmental remediation that may subsequently
be determined. Based on information presently available, such
future costs are not expected to have a material adverse effect
on the Company's competitive or financial position or its ongoing
results of operations. However, such costs could be material to
results of operations in a future interim or annual reporting
period.
NOTE 5. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS
ALUMINUM COMPANY OF CANADA, LTD.
Financial statements and financial statement schedules for
Canadian Reynolds Metals Company, Ltd. and Reynolds Aluminum
Company of Canada, Ltd. have been omitted because certain
securities registered under the Securities Act of 1933, of which
these entities are obligors (thus subjecting them to reporting
requirements under Section 13 or 15(d) of the Securities Exchange
Act of 1934), are fully and unconditionally guaranteed by
Reynolds Metals Company. Financial information relating to these
companies is presented herein in accordance with Staff Accounting
Bulletin 53 as an addition to the footnotes to the financial
statements of Reynolds Metals Company. Summarized financial
information is as follows:
Canadian Reynolds Metals Company, Ltd.
Quarters Ended Nine Months Ended
September 30 September 30
-----------------------------------------
1997 1996 1997 1996
-----------------------------------------
Net Sales:
Customers $ 69 $ 53 $168 $159
Parent and related companies 161 140 521 463
-----------------------------------------
$230 $193 $689 $622
Cost of products sold 177 172 539 505
Net income $ 31 $ 7 $ 86 $ 59
September 30 December 31
1997 1996
------------------------------
Current assets $ 358 $ 189
Noncurrent assets 1,211 1,225
Current liabilities (113) (50)
Noncurrent liabilities (581) (624)
Reynolds Aluminum Company of Canada, Ltd.
Quarters Ended Nine Months Ended
September 30 September 30
----------------------------------------
1997 1996 1997 1996
----------------------------------------
Net Sales:
Customers $150 $133 $408 $392
Parent and related companies 156 119 491 396
----------------------------------------
$306 $252 $899 $788
Cost of products sold 247 226 728 662
Net income $ 32 $ 8 $ 90 $ 55
NOTE 5. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS
ALUMINUM COMPANY OF CANADA, LTD. -- continued
Reynolds Aluminum Company of Canada, Ltd. -- continued
September 30 December 31
1997 1996
----------------------------------
Current assets $ 386 $ 240
Noncurrent assets 1,307 1,370
Current liabilities (170) (95)
Noncurrent liabilities (625) (656)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements and related footnotes included
in the Company's 1996 Form 10-K along with the consolidated
financial statements and related footnotes included in and
referred to in this report. In the tables, dollars are in
millions, except per share and per pound amounts, and shipments
are in thousands of metric tons. A metric ton is equivalent to
2,205 pounds.
Management's Discussion and Analysis contains forecasts,
projections, estimates, statements of management's plans and
objectives for the Company and other forward-looking statements.
Please refer to the "Risk Factors" section beginning on page 16.
In that section we have summarized factors that could cause
actual results to differ materially from those projected in a
forward-looking statement or affect the extent to which a
particular projection is realized.
RESULTS OF OPERATIONS
Net income improved 112% in the third quarter and 74% in the
first nine months of 1997 as compared to the same periods of
1996. The most significant contributor to profit improvement in
both 1997 periods was continued progress in our performance
improvement program. Conversion costs were reduced by $37
million in the third quarter of 1997, bringing the total
conversion cost reduction to $85 million for the first nine
months of this year. This cost reduction, combined with
increased sales volumes in our ongoing businesses and lower
interest and selling, general and administrative expenses, has
more than overcome the impact of weak pricing for fabricated
aluminum products throughout 1997.
Third Quarter Nine Months
1997 1996 1997 1996
---------------------------------
Net income $ 55 $ 6 $ 153 $ 88
Special items included in net income:
LIFO inventory liquidations - 6 - 9
Operational restructuring effects -- net - - 19 (23)
Cumulative effect of accounting change - - - (15)
Earnings per share $0.74 $0.26 $2.09 $0.95
Special items included in earnings per share:
LIFO inventory liquidations - .10 - .15
Operational restructuring effects -- net - - .27 (.36)
Cumulative effect of accounting change - - - (.24)
Operational restructuring effects primarily resulted from:
- - the sale in 1997 of our residential construction products
business, an aluminum reclamation plant, two aluminum extrusion
plants and coal properties resulting in an after-tax gain of $34
million ($.48 per share)
- - an after-tax charge of $15 million ($.21 per share) in 1997
for termination benefits for approximately 500 corporate
headquarters employees
- - an after-tax charge in 1996 principally for employee
termination benefits associated with the closing of a can plant
in Texas
The accounting change resulted from adopting a new accounting
standard in the first quarter of 1996 that required us to
recognize a loss for impaired assets held for sale, principally
undeveloped land.
RESULTS OF OPERATIONS -- continued
SHIPMENTS AND NET SALES
Third Quarter
------------------------------------------
1997 1996
------------------------------------------
Shipments Net Sales Shipments Net Sales
------------------------------------------
Finished Products and Other Sales
Packaging and containers
Aluminum 95 $ 496 88 $ 463
Nonaluminum 152 155
Other aluminum 36 117 44 146
Other nonaluminum 100 127
------------------------------------------
131 865 132 891
------------------------------------------
Production and Processing
Primary aluminum 124 224 109 172
Sheet and plate 100 295 89 278
Extrusions 47 154 49 170
Other aluminum 21 80 41 119
Other nonaluminum 98 121
------------------------------------------
292 851 288 860
------------------------------------------
Total 423 $1,716 420 $1,751
==========================================
Average realized price per pound:
Fabricated aluminum products $1.76 $1.81
Primary aluminum $0.82 $0.72
Nine Months
-------------------------------------------
1997 1996
-------------------------------------------
Shipments Net Sales Shipments Net Sales
-------------------------------------------
Finished Products and Other Sales
Packaging and containers
Aluminum 286 $1,474 267 $ 1,403
Nonaluminum 422 434
Other aluminum 107 342 123 421
Other nonaluminum 298 393
------------------------------------------
393 2,536 390 2,651
------------------------------------------
Production and Processing
Primary aluminum 308 552 290 485
Sheet and plate 295 864 280 875
Extrusions 155 513 152 528
Other aluminum 94 316 123 359
Other nonaluminum 333 338
------------------------------------------
852 2,578 845 2,585
------------------------------------------
Total 1,245 $5,114 1,235 $5,236
==========================================
Average realized price per pound:
Fabricated aluminum products $1.75 $1.81
Primary aluminum $0.81 $0.76
RESULTS OF OPERATIONS -- continued
SHIPMENTS AND NET SALES -- continued
Finished Products and Other Sales
Shipments of aluminum packaging and containers (measured in
metric tons of aluminum) were higher in both periods. Customer
growth and the addition of several soft drink accounts resulted
in improvements in the can business. In addition to cans,
shipments of aluminum packaging and consumer products also
improved in each of the 1997 periods (third quarter -- up 11%,
nine months -- up 8%) due to strong demand.
Net sales of aluminum packaging and containers improved primarily
on the higher volume of shipments for both 1997 periods. Prices
were slightly lower for cans and aluminum packaging and consumer
products in each 1997 period. The reduction in nonaluminum
revenues was due to lower sales of can machinery and tolling
services. This reduction was minimized due to increases in net
sales of printing cylinders and plastic packaging products.
Shipments of other aluminum products dropped because of the sale
of our residential construction products business. A strong
increase in shipments of aluminum distribution products for both
1997 periods (third quarter -- up 12%, nine months -- up 12%)
helped reduce the effect of the sale of the construction products
business. The strength in shipments of aluminum distribution
products represents improved economic conditions and growth in
market share.
Net sales of other aluminum and nonaluminum products were lower
for both 1997 periods because of the sale of our residential
construction products business. Lower net sales of stainless
steel distribution products were also realized in each period due
to declining prices. A major competitive factor in these lower
prices has been imports.
Production and Processing
Primary aluminum shipments fluctuate from period to period
because of variations in internal requirements and changes in
customer demand for value-added foundry ingot, sheet ingot and
billet. Improved prices for primary aluminum in 1997 resulted
from strong demand and a lowering of worldwide aluminum
inventories.
Shipments and net sales of fabricated aluminum products in our
Production and Processing group were affected by the sales of
operations. Specifically, the sales of an aluminum sheet plant
(in connection with the sale of our residential construction
products business), two aluminum extrusion plants and an aluminum
reclamation plant lowered shipments and net sales in the Sheet
and Plate, Extrusions and Other Aluminum categories in both 1997
periods. These asset sales reduced shipments by 22,000 metric
tons and net sales by $50 million in the third quarter of 1997
and 30,000 metric tons and $63 million in the nine months of
1997.
Shipments of fabricated aluminum products from remaining
operations increased 11,000 metric tons (7%) in the third quarter
of 1997 and 19,000 metric tons (4%) in the nine month period of
1997. In the third quarter of 1997, the increases were led by
strong demand for can stock, aluminum plate, European rolled
products, aluminum rod, and products for the transportation
market. In the nine-month period of 1997, shipments increased
for aluminum plate, European rolled products, aluminum rod,
aluminum wheels and other products for the transportation market.
Shipping levels benefited from favorable economic conditions both
domestically and in most European countries.
RESULTS OF OPERATIONS -- continued
SHIPMENTS AND NET SALES -- continued
Production and Processing -- continued
Net sales of fabricated aluminum products from remaining
operations were up $12 million in the third quarter of 1997 and
decreased $6 million in the nine months of 1997. Lower prices
for most products in each of the 1997 periods reduced the impact
of the higher shipping volumes.
Net sales of other nonaluminum products to customers were lower
because of greater internal consumption of alumina in both
periods of 1997. In the nine-month period of 1997, increased
technology sales helped offset the decline in customer alumina
sales.
EQUITY, INTEREST AND OTHER INCOME
The decline in this category of revenue in both 1997 periods was
due to lower amounts of equity income. Equity income was lower
because of increased competition for can operations in Latin
America and losses relating to the start-up of a Chinese foil and
extrusion operation.
COSTS AND EXPENSES
Cost of products sold decreased in both 1997 periods because of:
- - lower costs for certain purchased materials
- - improved capacity utilization at fabricating facilities
- - divestitures
- - performance improvement programs
These benefits were somewhat offset by:
- - higher costs of aluminum purchases in both 1997 periods
- - higher maintenance costs in the third quarter of 1997 at an
alumina facility
- - higher start-up, operational and research costs in our wheel
plants in both 1997 periods
- - higher costs for labor during the nine-month period of 1997
(because of new contracts entered into in the second quarter of
1996)
Costs in 1996 also benefited from the liquidation of certain last-
in, first-out (LIFO) inventories. The liquidation decreased
costs $10 million in the third quarter of 1996 and $15 million in
the nine-month period of 1996.
Selling, administrative and general expenses were lower in both
1997 periods as a result of savings from the Company's
restructuring efforts.
Interest expense decreased in the nine month period of 1997
because of lower amounts of debt outstanding.
On a quarterly basis, the Company updates the status of all
significant existing or potential environmental issues, develops
or revises estimates of costs to satisfy known remediation
requirements and adjusts its accruals accordingly. Based on
information presently available, such future costs are not
expected to have a material adverse effect on our competitive or
financial position or our ongoing results of operations.
However, it is not possible to predict the amount or timing of
future costs of environmental requirements that may subsequently
be determined. Such costs could be material to future quarterly
or annual results of operations.
RESULTS OF OPERATIONS -- continued
COSTS AND EXPENSES -- continued
Various suits and claims are pending against the Company. In the
opinion of management, after consultation with counsel,
disposition of these suits and claims, either individually or in
the aggregate, will not have a material adverse effect on our
competitive or financial position or our ongoing results of
operations. No assurance can be given, however, that the
disposition of one or more of such suits or claims in a
particular reporting period will not be material in relation to
the reported results for such period.
TAXES ON INCOME
The effective tax rates reflected in the income statement differ
from the U.S. federal statutory rate because of foreign taxes and
the effects of percentage depletion allowances.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
September 30 December 31
1997 1996
----------------------------
Working capital $803 $540
Ratio of current assets to current liabilities 1.7/1 1.4/1
OPERATING ACTIVITIES
Cash from operations was used to fund receivables and
inventories. The increase in receivables reflects higher sales
activity. Inventories increased in anticipation of continuing
strong shipping volumes.
INVESTING ACTIVITIES
Cash provided by investing activities resulted from sales of
assets.
Capital investments totaled $187 million in the first nine months
of 1997. This amount includes $103 million for operating
requirements (replacement equipment, environmental control
projects, etc.). The remainder was for strategic projects
carried forward from 1996, including:
- - the construction of a forged wheel plant in Virginia
- - the expansion and modernization of can, foil and plastic
film plants
- - the modernization of a primary aluminum plant in New York
In the third quarter of 1997, the Company announced plans to
spend approximately $330 million on an expansion of the Worsley
Alumina Refinery in Australia. The expansion will increase the
annual capacity of the facility by 65% to 3.1 million metric
tons. Construction is expected to begin in the fourth quarter of
1997 and completion is expected in the second quarter of 2000.
The Company expects to fund the cost of the project with cash
generated from operations. The Company holds a 56% interest in
this joint venture.
FINANCING ACTIVITIES
Debt was reduced with part of the proceeds from sales of assets.
LIQUIDITY AND CAPITAL RESOURCES -- continued
FINANCING ACTIVITIES -- continued
The Company extended the terms of a $150-million Canadian bank
credit agreement to 2001. The agreement originally was to have
matured in early 1998.
The Company believes its available financial resources, together
with internally generated funds, are sufficient to meet its
present and future business needs. The Company continues to
exceed the financial ratio requirements contained in its
financing arrangements and expects to do so in the future. At
September 30, 1997, $113 million of the Company's $1.65-billion
shelf registration remained available for the issuance of debt
securities.
PORTFOLIO REVIEW
We are conducting a review of all our operations and businesses
with the goals of improving focus and profitability,
strengthening our financial position, and thereby increasing
shareholder value. The results of this review are expected to
improve the quality of earnings in the years ahead during all
parts of the business cycle. Major elements of the review are as
follows:
Restructure
We have decided to stay in our bauxite, alumina, carbon products
and primary aluminum businesses because of their competitive cost
bases. We will keep and grow our distribution, specialty
building products, and aluminum wheel businesses. We have
determined that certain operations would not earn an adequate
return through the business cycle and therefore have decided to
take the following actions:
- - We have exited the residential construction products
business.
- - We have completed the sale of two U.S. extrusion plants and
a U.S. powder and paste plant. We have signed non-binding
letters of intent to sell two Canadian extrusion plants, our U.S.
recycling operations and our sheet and plate plant in Illinois.
We are also evaluating alternatives for our extrusion operations
in Spain.
- - With respect to our rolling operations, we have signed a
letter of intent to sell our Alabama can stock complex (with an
estimated after-tax loss in the range of $225 to $250 million).
We are evaluating a number of alternatives for our European
rolling operations.
- - We formed a 50-50 joint venture to operate and expand our
rolling mill in Quebec, Canada and to operate our coil coating
facility in Ontario, Canada. The rolling mill is a supplier of
finstock to the automotive market and foil to the packaging
market.
- - We have sold an aluminum reclamation plant in Virginia and
our coal properties in Kentucky.
We have not yet reached a decision about our can and packaging
businesses and are continuing to evaluate three options:
- - Spin-off cans and packaging together
- - Spin-off one business or the other
- - Sell a portion of these businesses
PORTFOLIO REVIEW -- continued
Restructure -- continued
Keeping all of these businesses is not an option we are
considering. Similarly, spinning or divesting all of these
businesses will not necessarily be the final outcome.
Reorganize
We have reorganized the Company to streamline our business to
focus on global markets that hold the most promising
opportunities for profitable growth. The result of these changes
was the formation of the following worldwide, market-focused
businesses:
- - Base Materials (consisting of bauxite, alumina, primary
aluminum and carbon operations)
- - Construction and Distribution
- - Transportation
- - Packaging and Consumer
- - Cans
In addition, we have formed a new unit that will focus on
emerging markets, such as China, Russia and India.
Our reorganization has resulted in personnel reductions in
various operational and staff functions at our corporate
headquarters. The number of positions involved is approximately
600, which includes 100 positions that are being reduced through
attrition. As a result, we expect to reduce corporate overhead
costs by approximately $40 million annually.
Strengthen Balance Sheet
In addition to improving our future earnings potential, our
actions will enable us to strengthen our balance sheet. We plan
to use a portion of the anticipated proceeds from asset sales to
reduce debt. This should result in a reduction in our annual
interest expense and an improvement in our debt-to-equity ratio.
We expect to be in an excellent position to fund future growth
and to consider other methods of improving our financial
position, such as stock repurchases, that were not within our
reach before.
We will continue our unrelenting focus on cost and inventory
control. Using 1995 as our base year, our ultimate inventory
reduction goal is $300 million by 1999. We have achieved about
one-half of that goal.
Over the next several years, we are committed to a capital
spending program of $300 million average per year, excluding
acquisitions. For the full year 1997, we expect to spend
approximately $275 million. Approximately 45% of this amount is
for operating requirements. The remainder is for continuing
expenditures for those performance improvement and strategic
investment projects already underway, and the expansion program
at our alumina refinery in Australia. For the full year 1997,
cash generated from operations is expected to exceed cash needed
for capital investments.
Grow
We have begun a strategic planning process designed to establish
future growth programs. There are several excellent investment
opportunities currently available to us. These include the
significant expansion program at our alumina refinery in
Australia that is expected to begin in the fourth quarter of
1997, additional investment in our wheel business, and several
projects in our packaging business. While we have no current
plans to invest in any major greenfield expansions of our
smelting business, there will be opportunities for high-return
cost reduction projects in our smelting operations.
PORTFOLIO REVIEW -- continued
Grow -- continued
In addition to these internal opportunities, we will be looking
for high-return acquisition projects in several of our
businesses. One focus will be to participate in the ongoing
consolidation of the metals distribution industry. Additionally,
we will look for opportunities to grow our packaging business
through U.S. and foreign acquisitions.
Conclusion and Outlook
We expect the results of these actions to contribute to earnings
this year and to have an even greater impact in 1998. We hope to
announce all of our remaining restructuring plans in the near
future. It will then take part of 1998 to complete the
transactions. After our restructuring is complete, we will be
positioned to deliver a higher quality of earnings throughout the
cycle and thereby significantly enhance shareholder value.
RISK FACTORS
This section should be read in conjunction with Part I, Items 1
(Business), 3 (Legal Proceedings) and 7 (Management's Discussion
and Analysis of Financial Condition and Results of Operations) of
the Company's 1996 Form 10-K; Part II, Item 1 (Legal Proceedings)
of the Company's reports on Form 10-Q for the first and second
quarters of 1997; and the preceding portions of this Item.
This report contains (and oral communications made by or on
behalf of the Company may contain) forecasts, projections,
estimates, statements of management's plans and objectives for
the Company and other forward-looking statements(1). The Company's
expectations for the future and related forward-looking
statements are based on a number of assumptions and forecasts as
to world economic growth and other economic indicators (including
rates of inflation, industrial production, housing starts and
light vehicle sales), trends in the Company's key markets, global
aluminum supply and demand conditions, and aluminum ingot prices,
among other items. By their nature, forward-looking statements
involve risk and uncertainty, and various factors could cause the
Company's actual results to differ materially from those
projected in a forward-looking statement or affect the extent to
which a particular projection is realized.
Consensus expectations for 1997 indicate global economic growth
of 3%. The Company is forecasting a 5.5 - 6.5% increase in
global aluminum consumption for the year, with especially strong
transportation and packaging markets. The Company is forecasting
the worldwide supply of aluminum to grow 3-3.5% in 1997. Barring
a recession in any major world economy, the Company expects these
improved conditions in aluminum industry supply/demand
fundamentals to continue for the next several years. The
Company's outlook for growth in aluminum consumption for the
remainder of this decade is an average of 2.5 - 4.0% per year.
The Company expects greater use of aluminum around the world in
automobiles and other light vehicles. The Company also expects
U.S. aluminum beverage can shipments to grow at about 2% per year
(2-3% in 1997) and global shipments to grow 5% annually, with
rapid growth of the aluminum beverage can market in Latin
America, Asia, the Middle East and other developing economies.
_______________________________
(1) Forward-looking statements can be identified generally as those
containing words such as "should", "hope", "forecast",
"project", "estimate", "expect", "anticipate" or "plan" and words
of similar effect.
RISK FACTORS -- continued
Economic and/or market conditions other than as forecast by the
Company in the preceding paragraph, particularly in the U.S.,
Japan and Germany (which are large consumers of aluminum) and in
Latin America, could cause the Company's actual results to differ
materially from those projected in a forward-looking statement or
affect the extent to which a particular projection is realized.
The following factors also could affect the Company's results:
- - Primary aluminum is an internationally traded commodity.
The price of primary aluminum is subject to worldwide market
forces of supply and demand and other influences. Prices can be
volatile. The Company's use of contractual arrangements
including fixed-price sales contracts, fixed-price supply
contracts, and forward, futures and option contracts, reduces its
exposure to this volatility but does not eliminate it.
- - The markets for most aluminum products are highly
competitive. Certain of the Company's competitors are larger
than the Company in terms of total assets and operations and have
greater financial resources. Certain foreign governments are
involved in the operation and/or ownership of certain competitors
and may be motivated by political, as well as economic
considerations. In addition, aluminum competes with other
materials, such as steel, vinyl, plastics and glass, among
others, for various applications in the Company's key markets.
Unanticipated actions or developments by or affecting the
Company's competitors and/or the willingness of customers to
accept substitutions for the products sold by the Company could
affect results.
- - The Company spends substantial capital and operating amounts
relating to ongoing compliance with environmental laws. In
addition, the Company is involved in remedial investigations and
actions in connection with past disposal of wastes. Estimating
future environmental compliance and remediation costs is
imprecise due to the continuing evolution of environmental laws
and regulatory requirements and uncertainties about their
application to the Company's operations, the availability and
application of technology, the identification of currently
unknown remediation sites, and the allocation of costs among
potentially responsible parties.
- - Unanticipated material legal proceedings or investigations,
or the disposition of those currently pending against the Company
other than as anticipated by management and counsel, could affect
the Company's results.
- - Changes in the costs of power, resins, caustic soda, green
coke and other raw materials can affect results. The Company's
contract with the Bonneville Power Administration for the
period October 1996 - September 2001 provides fixed rates for
electrical power provided to the Company's Washington and
Oregon primary aluminum production plants. These rates have
been approved by federal regulatory authorities but have been
appealed in court by a third party. If the appeal is successful,
it is possible that higher electricity costs might result.
- - The Company's key transportation market is cyclical, and
sales to that market in particular can be influenced by economic
conditions.
- - A strike at a customer facility or a significant downturn in
the business of a key customer supplied by the Company could
affect the Company's results.
RISK FACTORS -- continued
- - The Company is conducting a portfolio review of all its
operations and businesses. The Company is considering
alternatives that include, among other things, asset sales, spin-
offs and formation of strategic alliances. In connection with
the portfolio review, the Company has announced the signing of a
letter of intent for the sale of its Sheffield, Alabama rolling
mill and related assets, its Canadian extrusion plants in
Richmond Hill, Ontario and Ste. Therese, Quebec, its U.S.
recycling operations and its sheet and plate plant in Illinois.
These pending transactions are subject to certain conditions,
including due diligence reviews by the purchasers, negotiation of
definitive agreements and obtaining regulatory approvals and
third party consents. As a result, the transactions may or may
not be completed as contemplated. In addition, the Company is
evaluating a number of alternatives for its European rolling
operations and its extrusion operations in Spain. Whether and
when these transactions will be completed is not certain. The
Company is considering three options with respect to its can and
packaging businesses: (1) spin off the two businesses together;
(2) spin off one business or the other; or (3) sell a portion of
the two businesses. The timing, nature and magnitude of the
option that will be chosen are not certain and could affect the
Company's results and ongoing operating performance.
In addition to the factors referred to above, the Company is
exposed to general financial, political, economic and business
risks in connection with its worldwide operations. The Company
continues to evaluate and manage its operations in a manner to
mitigate the effects from exposure to such risks. In general,
the Company's expectations for the future are based on the
assumption that conditions relating to costs, currency values,
competition and the legal, regulatory, financial, political and
business environments in the economies and markets in which the
Company operates will not change significantly overall.
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
(a) Recent Sales of Unregistered Securities
Under the Registrant's Stock Plan for Outside Directors
(the "Plan"), 66.278 phantom shares, in the aggregate, were
granted to the Registrant's nine outside Directors on July
1, 1997, based on an average price of $71.3125 per share.
These phantom shares represent dividend equivalents paid on
phantom shares previously granted under the Plan. 506.25
phantom shares, in the aggregate, were granted to the nine
outside Directors on September 30, 1997, based on an average
price of $70.50 per share. These phantom shares represent
the second quarterly installment of each outside Director's
annual grant under the Plan.
To the extent that these grants constitute sales of
equity securities, the Registrant issued these phantom
shares in reliance on the exemption provided by Section 4(2)
of the Securities Act of 1933, as amended, taking into
account the nature of the Plan, the number of outside
Directors participating in the Plan, the sophistication of
the outside Directors and their access to the kind of
information that a registration statement would provide.
A description of the Plan is contained in the
Registrant's Form 10-Q for the first quarter of 1997 in Part
II, Item 2, subparagraph (b), under the caption "Recent
Sales of Unregistered Securities".
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the
third quarter of 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
REYNOLDS METALS COMPANY
By Allen M. Earehart
Allen M. Earehart
Vice President, Controller
(Chief Accounting Officer)
DATE: November 12, 1997
INDEX TO EXHIBITS
EXHIBIT 2 - None
EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended
EXHIBIT 3.2 - By-Laws, as amended
EXHIBIT 4.1 - Restated Certificate of
Incorporation. See EXHIBIT 3.1.
EXHIBIT 4.2 - By-Laws. See EXHIBIT 3.2.
* EXHIBIT 4.3 - Indenture dated as of April 1, 1989 (the
"Indenture") between Reynolds Metals
Company and The Bank of New York, as
Trustee, relating to Debt Securities.
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended March 31, 1989,
EXHIBIT 4(c))
* EXHIBIT 4.4 - Amendment No. 1 dated as of November 1, 1991 to
the Indenture. (File No. 1-1430, 1991
Form 10-K Report, EXHIBIT 4.4)
* EXHIBIT 4.5 - Rights Agreement dated as of November 23, 1987
(the "Rights Agreement") between
Reynolds Metals Company and The Chase
Manhattan Bank, N.A. (File No. 1-1430,
Registration Statement on Form 8-A dated
November 23, 1987, pertaining to
Preferred Stock Purchase Rights, EXHIBIT
1)
* EXHIBIT 4.6 - Amendment No. 1 dated as of December 19, 1991 to
the Rights Agreement. (File No. 1-1430,
1991 Form 10-K Report, EXHIBIT 4.11)
* EXHIBIT 4.7 - Form of 9-3/8% Debenture due June 15, 1999. (File
No. 1-1430, Form 8-K Report dated June
6, 1989, EXHIBIT 4)
* EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.3)
* EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.4)
* EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term Note.
(File No. 1-1430, 1991 Form 10-K Report,
EXHIBIT 4.15)
* EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 1-1430, 1991 Form 10-K
Report, EXHIBIT 4.16)
* EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003. (File
No. 1-1430, Form 8-K Report dated August
16, 1991, Exhibit 4(a))
_______________________
*Incorporated by reference.
* EXHIBIT 4.13 - Articles of Continuance of Societe d'Aluminium
Reynolds du Canada, Ltee/Reynolds
Aluminum Company of Canada, Ltd.
(formerly known as Canadian Reynolds
Metals Company, Limited -- Societe
Canadienne de Metaux Reynolds, Limitee)
("REYCAN"), as amended. (File No. 1-
1430, 1995 Form 10-K Report, EXHIBIT
4.13)
* EXHIBIT 4.14 - By-Laws of REYCAN, as amended. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended March 31, 1997, EXHIBIT 4.14)
EXHIBIT 4.15 - Articles of Incorporation of Societe Canadienne
de Metaux Reynolds, Ltee/Canadian
Reynolds Metals Company, Ltd. ("CRM"),
as amended
EXHIBIT 4.16 - By-Laws of CRM, as amended
* EXHIBIT 4.17 - Indenture dated as of April 1, 1993 among REYCAN,
Reynolds Metals Company and The Bank of
New York, as Trustee. (File No. 1-1430,
Form 8-K Report dated July 14, 1993,
EXHIBIT 4(a))
* EXHIBIT 4.18 - First Supplemental Indenture, dated as of
December 18, 1995 among REYCAN, Reynolds
Metals Company, CRM and The Bank of New
York, as Trustee. (File No. 1-1430,
1995 Form 10-K Report, EXHIBIT 4.18)
* EXHIBIT 4.19 - Form of 6-5/8% Guaranteed Amortizing Note due July
15, 2002. (File No. 1-1430, Form 8-K
Report dated July 14, 1993, EXHIBIT
4(d))
* EXHIBIT 10.1 - Reynolds Metals Company 1987 Nonqualified Stock
Option Plan. (Registration Statement
No. 33-13822 on Form S-8, dated April
28, 1987, EXHIBIT 28.1)
* EXHIBIT 10.2 - Reynolds Metals Company 1992 Nonqualified Stock
Option Plan. (Registration Statement
No. 33-44400 on Form S-8, dated December
9, 1991, EXHIBIT 28.1)
* EXHIBIT 10.3 - Reynolds Metals Company Performance Incentive
Plan, as amended and restated effective
January 1, 1996. (File No. 1-1430, Form
10-Q Report for the Quarter Ended March
31, 1995, EXHIBIT 10.4)
* EXHIBIT 10.4 - Agreement dated December 9, 1987 between Reynolds
Metals Company and Jeremiah J. Sheehan.
(File No. 1-1430, 1987 Form 10-K Report,
EXHIBIT 10.9)
* EXHIBIT 10.5 - Supplemental Death Benefit Plan for
Officers. (File No. 1-1430, 1986 Form
10-K Report, EXHIBIT 10.8)
* EXHIBIT 10.6 - Financial Counseling Assistance Plan for Officers.
(File No. 1-1430, 1987 Form 10-K Report,
EXHIBIT 10.11)
_______________________
*Incorporated by reference.
* EXHIBIT 10.7 - Management Incentive Deferral Plan.
(File No. 1-1430, 1987 Form 10-K Report,
EXHIBIT 10.12)
* EXHIBIT 10.8 - Deferred Compensation Plan for Outside Directors
as Amended and Restated Effective
December 1, 1993. (File No. 1-1430,
1993 Form 10-K Report, EXHIBIT 10.12)
* EXHIBIT 10.9 - Form of Indemnification Agreement for Directors
and Officers. (File No. 1-1430, Form 8-
K Report dated April 29, 1987, EXHIBIT
28.3)
* EXHIBIT 10.10 - Form of Executive Severance Agreement between
Reynolds Metals Company and key
executive personnel, including each of
the current executive officers (other
than Donna C. Dabney) listed in Item 4A
of the Reynolds Metals Company 1996 Form
10-K Report. (File No. 1-1430, 1987
Form 10-K Report, EXHIBIT 10.18)
* EXHIBIT 10.11 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
May 20, 1988. (File No. 1-1430, Form 10-
Q Report for the Quarter Ended June 30,
1988, EXHIBIT 19(a))
* EXHIBIT 10.12 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
October 21, 1988. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
September 30, 1988, EXHIBIT 19(a))
* EXHIBIT 10.13 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
January 1, 1987. (File No. 1-1430, 1988
Form 10-K Report, EXHIBIT 10.22)
* EXHIBIT 10.14 - Form of Stock Option and Stock Appreciation
Right Agreement, as approved February
16, 1990 by the Compensation Committee
of the Company's Board of Directors.
(File No. 1-1430, 1989 Form 10-K Report,
EXHIBIT 10.24)
* EXHIBIT 10.15 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
January 18, 1991. (File No. 1-1430,
1990 Form 10-K Report, EXHIBIT 10.26)
* EXHIBIT 10.16 - Form of Stock Option Agreement, as approved
April 22, 1992 by the Compensation
Committee of the Company's Board of
Directors. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended March 31,
1992, EXHIBIT 28(a))
* EXHIBIT 10.17 - Reynolds Metals Company Restricted Stock Plan for
Outside Directors. (Registration
Statement No. 33-53851 on Form S-8,
dated May 27, 1994, EXHIBIT 4.6)
* EXHIBIT 10.18 - Reynolds Metals Company New Management Incentive
Deferral Plan. (File No. 1-1430, Form
10-Q Report for the Quarter Ended June
30, 1994, EXHIBIT 10.30)
____________________________
* Incorporated by reference.
* EXHIBIT 10.19 - Reynolds Metals Company Salary Deferral Plan for
Executives. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1994, EXHIBIT 10.31)
* EXHIBIT 10.20 - Reynolds Metals Company Supplemental Long Term
Disability Plan for Executives. (File
No. 1-1430, Form 10-Q Report for the
Quarter Ended June 30, 1994, EXHIBIT
10.32)
* EXHIBIT 10.21 - Amendment to Reynolds Metals Company 1987
Nonqualified Stock Option Plan effective
August 19, 1994. (File No. 1-1430, Form
10-Q Report for the Quarter Ended
September 30, 1994, EXHIBIT 10.34)
* EXHIBIT 10.22 - Amendment to Reynolds Metals Company 1992
Nonqualified Stock Option Plan effective
August 19, 1994. (File No. 1-1430, Form
10-Q Report for the Quarter Ended
September 30, 1994, EXHIBIT 10.35)
* EXHIBIT 10.23 - Amendment to Reynolds Metals Company New
Management Incentive Deferral Plan
effective January 1, 1995. (File No. 1-
1430, 1994 Form 10-K Report, EXHIBIT
10.36)
* EXHIBIT 10.24 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Trustee Pays Premiums).
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1995, EXHIBIT
10.34)
* EXHIBIT 10.25 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Employee Pays Premium).
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1995, EXHIBIT
10.35)
* EXHIBIT 10.26 - Form of Split Dollar Life Insurance Agreement
(Employee Owner, Employee Pays Premium).
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1995, EXHIBIT
10.36)
* EXHIBIT 10.27 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Third Party Pays
Premiums). (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1995, EXHIBIT 10.37)
* EXHIBIT 10.28 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Employee Pays
Premiums). (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1995, EXHIBIT 10.38)
* EXHIBIT 10.29 - Reynolds Metals Company 1996 Nonqualified Stock
Option Plan. (Registration Statement
No. 333-03947 on Form S-8, dated May 17,
1996, EXHIBIT 4.6)
* EXHIBIT 10.30 - Amendment to Reynolds Metals Company 1992
Nonqualified Stock Option Plan effective
January 1, 1993. (Registration
Statement No. 333-03947 on Form S-8,
dated May 17, 1996, EXHIBIT 99)
____________________________
* Incorporated by reference.
* EXHIBIT 10.31 - Form of Stock Option Agreement, as approved May
17, 1996 by the Compensation Committee
of the Company's Board of Directors.
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1996, EXHIBIT
10.41)
* EXHIBIT 10.32 - Form of Three Party Stock Option Agreement, as
approved May 17, 1996 by the
Compensation Committee of the Company's
Board of Directors. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
June 30, 1996, EXHIBIT 10.42)
* EXHIBIT 10.33 - Stock Option Agreement dated August 30, 1996
between Reynolds Metals Company and
Jeremiah J. Sheehan. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
September 30, 1996, EXHIBIT 10.43)
* EXHIBIT 10.34 - Amendment to Deferred Compensation Plan for
Outside Directors effective August 15,
1996. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended September
30, 1996, EXHIBIT 10.44)
* EXHIBIT 10.35 - Amendment to Reynolds Metals Company New
Management Incentive Deferral Plan
effective January 1, 1996. (File No. 1-
1430, 1996 Form 10-K Report, EXHIBIT
10.38)
* EXHIBIT 10.36 - Amendment to Reynolds Metals Company Performance
Incentive Plan effective January 1,
1996. (File No. 1-1430, 1996 Form 10-K
Report, EXHIBIT 10.39)
* EXHIBIT 10.37 - Reynolds Metals Company Supplemental Incentive
Plan. (File No. 1-1430, 1996 Form 10-K
Report, EXHIBIT 10.40)
* EXHIBIT 10.38 - Reynolds Metals Company Stock Plan for Outside
Directors. (File No. 1-1430, 1996 Form
10-K Report, EXHIBIT 10.41)
* EXHIBIT 10.39 - Special Executive Severance Package for Certain
Employees who Terminate Employment
between January 1, 1997 and June 30,
1998, as approved by the Compensation
Committee of the Company's Board of
Directors on January 17, 1997. (File
No. 1-1430, 1996 Form 10-K Report,
EXHIBIT 10.42)
* EXHIBIT 10.40 - Special Award Program for Certain Executives or
Key Employees, as approved by the
Compensation Committee of the Company's
Board of Directors on January 17, 1997.
(File No. 1-1430, 1996 Form 10-K Report,
EXHIBIT 10.43)
EXHIBIT 11 - Omitted. See Part I, Item 1 for computation of
earnings per share
EXHIBIT 15 - None
EXHIBIT 18 - None
EXHIBIT 19 - None
____________________________
* Incorporated by reference.
EXHIBIT 22 - None
EXHIBIT 23 - None
EXHIBIT 24 - None
EXHIBIT 27 - Financial Data Schedule
Pursuant to Item 601 of Regulation S-K, certain instruments
with respect to long-term debt of Reynolds Metals Company (the
"Registrant") and its consolidated subsidiaries are omitted
because such debt does not exceed 10 percent of the total assets
of the Registrant and its subsidiaries on a consolidated basis.
The Registrant agrees to furnish a copy of any such instrument to
the Commission upon request.