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, 1997
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 and the address of
the plan, if different from that of the issuer
named below:
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
2
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
3
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: /s/ F. Robert Newman
-----------------------------------
F. Robert Newman
Vice President, Human Resources
Reynolds Metals Company and
Member, Plan Committee for Hourly
Savings Plan
DATE: June 24, 1998
F-1
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, 1997
and 1996, and the related statement of changes in net assets
available for plan benefits for the year ended December 31,
1997. 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, 1997
and 1996, and the changes in its net assets available for
plan benefits for the year ended December 31, 1997, 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.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
June 19, 1998
F-2
Reynolds Metals Company
Savings Plan for Hourly Employees
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1997
---------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------------
Assets
Investment in Master Trust $7,638 $34,654 $12,428 $139,651 $1,953 $10,108 $9,119 $215,551
Accrued income 43 - - - - - - 43
Contribution receivable 30 125 84 404 23 43 13 722
---------------------------------------------------------------------------------------
Net assets available for plan benefits $7,711 $34,779 $12,512 $140,055 $1,976 $10,151 $9,132 $216,316
=======================================================================================
See accompanying notes.
F-3
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
---------------------------------------------------------------------------
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund 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
---------------------------------------------------------------------------------------
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.
F-4
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, 1997
---------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------------
Additions to net assets:
Net investment gain (loss) from
Master Trust (Note 3): $ (48) $ 6,658 $ 1,945 $ 8,343 $ 23 $ 1,718 $ 730 $ 19,369
Assets received from other plans 80 - - - - - - 80
Contributions:
Employer 366 2,236 800 10,720 264 814 - 15,200
Employee 601 3,759 1,533 12,822 463 1,333 - 20,511
---------------------------------------------------------------------------------------
967 5,995 2,333 23,542 727 2,147 - 35,711
---------------------------------------------------------------------------------------
Total Additions 999 12,653 4,278 31,885 750 3,865 730 55,160
Deductions from net assets:
Withdrawals by participants 295 733 448 12,134 71 234 425 14,340
Assets transferred to other plans - 35 27 398 11 27 15 513
Administrative expenses - - - - - - - -
---------------------------------------------------------------------------------------
Total Deductions 295 768 475 12,532 82 261 440 14,853
Interfund transfers 3,928 6,620 375 (14,043) 119 1,903 1,098 -
---------------------------------------------------------------------------------------
Net increase 4,632 18,505 4,178 5,310 787 5,507 1,388 40,307
Net assets available for plan benefits:
Beginning of year 3,079 16,274 8,334 134,745 1,189 4,644 7,744 176,009
---------------------------------------------------------------------------------------
End of year $7,711 $34,779 $12,512 $140,055 $1,976 $10,151 $9,132 $216,316
=======================================================================================
See accompanying notes.
F-5
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 1997
(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
by reference 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.
F-6
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.
F-7
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, 1997
and 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. Net assets and net investment gains
from the Master Trust are allocated to participating plans
based on the aggregate account balance of individual
participants in each Plan.
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. These are 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. These are no-
load mutual funds held and managed by T. Rowe Price
Associates, Inc.
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 1997 and
1996 was 6.3% and 6.3%, respectively. The current yield on
these contracts at December 31, 1997 was 6.3% (6.4% at
December 31, 1996). 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.
F-8
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
No individual SIC or GIC exceeded 5% of the Master Trust's
assets, except for a SIC with Transamerica Life with a
balance of approximately $39,000.
Cash and cash equivalents of the Master Trust are invested
in a short-term investment fund managed by The Northern
Trust Company.
During 1997 and 1996, certain assets of the Plan were
transferred into other plans and from 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.
Summarized financial fund information of the commingled
accounts within the Master Trust is presented below:
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------------
MASTER TRUST NET
ASSETS-1997
Assets
Accrued Income $ 1,082 $ 1,082
Cash and cash equivalents 2,247 $ 47 $ 11 $ 40,726 $ 6 $ 25 43,062
Contributions receivable 598 195 215 671 79 56 $ 13 1,827
Investments:
Common stock 189,068 - - - - - - 189,068
Investment contracts - - - 195,952 - - - 195,952
Mutual funds - 131,723 46,727 - 10,219 34,639 - 223,308
Loans to participants - - - - - - 19,962 19,962
---------------------------------------------------------------------------------------
Master Trust net assets $192,995 $131,965 $46,953 $237,349 $10,304 $34,720 $19,975 $674,261
=======================================================================================
Portion of Master Trust
allocable to the Plan $ 7,711 $ 34,779 $12,512 $140,055 $ 1,976 $10,151 $ 9,132 $216,316
Percent 4% 26% 26% 59% 19% 29% 46% 32%
F-9
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund 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%
F-10
Reynolds Metals Company
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------------
CHANGES IN MASTER TRUST
ASSETS -1997
Additions:
Contributions from plans $ 11,682 $ 13,182 $ 5,775 $ 28,736 $ 2,090 $ 4,979 $ 66,444
Net realized and unrealized
appreciation (depreciation)
of investments 9,977 29,085 6,564 - 109 6,267 52,002
Interest and dividends 4,107 1,976 1,427 15,552 135 549 $ 1,707 25,453
Assets transferred into
Master Trust 11,809 - - - - - 25 11,834
---------------------------------------------------------------------------------------
37,575 44,243 13,766 44,288 2,334 11,795 1,732 155,733
---------------------------------------------------------------------------------------
Deductions:
Distributions to plans 19,011 7,595 2,787 23,616 800 1,623 1,270 56,702
Administrative expenses - - - - - - - -
---------------------------------------------------------------------------------------
19,011 7,595 2,787 23,616 800 1,623 1,270 56,702
Interfund transfers-net 10,617 6,197 (788) (20,669) 70 4,386 187 -
---------------------------------------------------------------------------------------
Net additions 29,181 42,845 10,191 3 1,604 14,558 649 99,031
Master Trust net assets at
beginning of period 163,814 89,120 36,762 237,346 8,700 20,162 19,326 575,230
---------------------------------------------------------------------------------------
Master Trust net assets at
end of period $192,995 $131,965 $46,953 $237,349 $10,304 $34,720 $19,975 $674,261
=======================================================================================
F-11
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
1997 1996
--------------------
Net assets available for benefits per
the financial statements $216,316 $176,009
Amounts allocated to withdrawn participants 374 172
--------------------
Net assets available for benefits per
the Form 5500 $215,942 $175,837
====================
The following is a reconciliation of benefits paid to
participants per the financial statements to the Form 5500:
December 31
1997
-------------
Benefits paid to participants per the
financial statements $14,340
Add: Amounts allocated on Form 5500 to
withdrawn participants in the current year 374
Less: Amounts allocated on Form 5500 to
withdrawn participants in the prior year (172)
-------------
Benefits paid to participants per the Form
5500 $14,542
=============
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, 1998, 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, 1997.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
June 19, 1998