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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 001-01430
A. Full title of the plan:
EMPLOYEES SAVINGS PLAN
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 Ernst & Young LLP, 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 Ernst & Young LLP, Independent Auditors
- 2 -
3
SIGNATURES
The Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, Reynolds Metals Company, which
administers the Plan, has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
EMPLOYEES SAVINGS PLAN
By: /s/ F. Robert Newman
--------------------------------
F. Robert Newman
Vice President, Human Resources
Reynolds Metals Company
DATE: June 23, 1999
- 3 -
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 Employees Savings Plan as
of December 31, 1998 and 1997, and the related statement of
changes in net assets available for plan benefits for the
year ended December 31, 1998. 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, 1998
and 1997, and the changes in its net assets available for
plan benefits for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an
opinion on the financial statements taken as a whole. The
Fund Information in the statements 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 Infor-
mation has been subjected to auditing procedures applied
in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
Richmond, Virginia
June 18, 1999
F-1
F-2
Employees Savings Plan
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1998
-------------------------------------------------------
Fund Information
----------------------------------------------
Small
Capi-
Inter- tali-
Diver- Bal- nation- za-
Rey- sified anced Inter- al tion
nolds Equi- Invest- est Equi- Equi-
Stock ties ment Income ties ties Loan
Fund Fund Fund Fund Fund Fund Fund Total
-------------------------------------------------------
ASSETS
Investment in
Master Trust $853 $2,668 $839 $4,677 $197 $525 $301 $10,060
Accrued income 6 - - - - - - 6
Contributions
receivable 5 11 3 3 1 3 - 26
-------------------------------------------------------
Total assets 864 2,679 842 4,680 198 528 301 10,092
LIABILITIES
Accrued expenses - - - 7 - - - 7
Net assets available -------------------------------------------------------
for plan benefits $864 $2,679 $842 $4,673 $198 $528 $301 $10,085
=======================================================
See accompanying notes.
F-2
F-3
Employees Savings Plan
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1997
---------------------------------------------------------
Fund Information
------------------------------------------------
Small
Capi-
Inter- tali-
Diver- Bal- nation- za-
Rey- sified anced Inter- al tion
nolds Equi- Invest- est Equi- Equi-
Stock ties ment Income ties ties Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------
ASSETS
Investment in
Master Trust $1,315 $2,038 $818 $4,676 $175 $637 $438 $10,097
Accrued income 7 - - - - - - 7
Contributions
receivable 5 8 5 7 2 2 - 29
Net assets
available for ---------------------------------------------------------
plan benefits $1,327 $2,046 $823 $4,683 $177 $639 $438 $10,133
=========================================================
See accompanying notes.
F-3
F-4
Employees Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits,
with Fund Information
(Dollars in Thousands)
Year ended December 31, 1998
---------------------------------------------------------
Fund Information
-------------------------------------------------
Small
Capi-
Inter- tali-
Diver- Bal- nation- za-
Rey- sified anced Inter- al tion
nolds Equi- Invest- est Equi- Equi-
Stock ties ment Income ties ties Loan
Fund Fund Fund Fund Fund Fund Fund Total
-----------------------------------------------------------
Additions to
net assets
Net investment
gain (loss) from
Master Trust $ (106) $ 574 $ 91 $ 276 $ 27 $(84) $ 25 $ 803
Contributions:
Employer 18 93 35 102 10 23 - 281
Employee 92 376 166 507 35 126 - 1,302
-----------------------------------------------------------
110 469 201 609 45 149 - 1,583
-----------------------------------------------------------
Total Additions 4 1,043 292 885 72 65 25 2,386
Deductions from
net assets:
Withdrawals by
participants 416 370 157 634 20 53 97 1,747
Assets transferred
to other plans 54 139 84 267 28 51 64 687
-----------------------------------------------------------
Total Deductions 470 509 241 901 48 104 161 2,434
Interfund transfers 3 99 (32) 6 (3) (72) (1) -
-----------------------------------------------------------
Net increase
(decrease) (463) 633 19 (10) 21 (111) (137) (48)
Net assets
available for
plan benefits:
Beginning of year 1,327 2,046 823 4,683 177 639 438 10,133
-----------------------------------------------------------
End of year $ 864 $2,679 $842 $4,673 $198 $528 $301 $10,085
===========================================================
See accompanying notes.
F-4
F-5
Employees Savings Plan
Notes to Financial Statements
(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 Employees Savings Plan ("Plan") are maintained
on the accrual basis. All securities transactions are recorded as of the
trade date.
Investments in Reynolds Metals Company 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 such contracts equals contract value.
2. Summary of Significant Plan Provisions
Reynolds Metals Company ("the Company") established the Plan effective
January 1, 1990, covering all eligible employees of the Company and designated
subsidiaries (each an "Employer") who elect to contribute. 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.
Plan participation is available to eligible employees on the later of (a) 30
days after beginning their employment with an Employer, or (b) the date at
which their Employer adopts the Plan. Plan participation is voluntary.
F-5
F-6
Employees Savings Plan
Notes to Financial Statements (continued)
2. Summary of Significant Plan Provisions (continued)
A participant may elect to make payroll contributions to the Plan in specified
amounts ranging from 1% to 12% of compensation in 1% increments. At certain
locations, the Employer will contribute to the Plan on behalf of each
participant a fixed percentage of a portion of the payroll contributions made
by the participant.
Eligible employees who receive a profit-sharing award, gainsharing payment or
other designated type of lump sum payment are also allowed to 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 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 in order 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 an intent to do so, the Company has the right
under the Plan document to discontinue contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
The Company is the Plan administrator and bears the related costs, except for
investment-related and trustee fees, which are paid by the Plan.
F-6
F-7
Employees Savings Plan
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments
All of the investments of the Plan as of December 31, 1998 and 1997 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 (losses) from the Master
Trust are allocated to participating plans based on the aggregate account
balances of individual participants in each plan.
Substantially all the assets held in the Balanced Investment Fund and the
Diversified Equities Fund are invested in the Vanguard STAR Fund and the
Vanguard Institutional Index 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 a fixed rate 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 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 1998 and 1997 was approximately 6.3%
and 6.3%, respectively. The current yield on these contracts at
December 31, 1998 was 6.3% (6.3% at December 31, 1997). 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.
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 $41,000 at
December 31, 1998 ($39,000 at December 31, 1997).
F-7
F-8
Employees Savings Plan
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Cash and cash equivalents of the Master Trust are invested in a short-term
investment fund managed by The Northern Trust Company.
During 1998 and 1997, 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
Capi-
Inter- tali-
Diver- Bal- nation- za-
Rey- sified anced Inter- al tion
nolds Equi- Invest- est Equi- Equi-
Stock ties ment Income ties ties Loan
Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------------------------------------------
MASTER TRUST NET
ASSETS-1998
ASSETS
Accrued
income $ 854 $ 854
Cash and
cash equi-
valents 2,398 $ 59,906 62,304
Contribu-
tions re-
ceivable 1,021 $ 527 $ 135 292 $ 25 $ 124 2,124
Investments:
Common
stock 152,493 - - - - 152,493
Investments
contracts - - - 168,462 - - 168,462
Mutual funds - 166,851 49,190 - 10,833 24,101 250,975
Loans to
partici-
pants - - - - - - $16,812 16,812
--------------------------------------------------------------------
Total
assets 156,766 167,378 49,325 228,660 10,858 24,225 16,812 654,024
LIABILITIES
Accrued
expenses - - - 326 - - - 326
--------------------------------------------------------------------
Master
Trust net
assets $156,766 $167,378 $49,325 $228,334 $10,858 $24,225 $16,812 $653,698
====================================================================
Portion of
Master Trust
allocable to
the Plan $ 864 $ 2,679 $842 $ 4,673 $ 198 $ 528 $ 301 $ 10,085
Percent 1% 2% 2% 2% 2% 2% 2% 2%
F-8
F-9
Employees Savings Plan
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Small
Capi-
Inter- tali-
Diver- Bal- nation- za-
Rey- sified anced Inter- al tion
nolds Equi- Invest- est Equi- Equi-
Stock ties ment Income ties ties Loan
Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------------------------------------------
MASTER TRUST
NET ASSETS-1997
ASSETS
Accrued
income $ 1,082 $ 1,082
Cash and
cash equi-
valents 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
Investments
contracts - - - 195,952 - - - 195,952
Mutual
funds - 131,723 46,727 - 10,219 34,639 - 223,308
Loans to
partici-
pants - - - - - - 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 $ 1,327 $ 2,046 $ 823 $ 4,683 $ 177 $ 639 $ 438 $ 10,133
Percent 1% 2% 2% 2% 2% 2% 2% 2%
F-9
F-10
Employees Savings Plan
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
Small
Capi-
Inter- tali-
Diver- Bal- nation- za-
Rey- sified anced Inter- al tion
nolds Equi- Invest- est Equi- Equi-
Stock ties ment Income ties ties Loan
Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------------------------------------------
CHANGES IN
MASTER TRUST
NET ASSETS-1998
Additions:
Contri-
butions
from
plans $ 10,304 $ 14,637 $ 5,513 $ 22,443 $ 1,635 $ 4,890 $ 59,422
Net rea-
lized and
unrealized
appreci-
ation
(depre-
ciation)
of invest-
ments (21,074) 34,080 3,896 - 1,237 (4,655) 13,484
Interest
and divi-
dends 4,201 2,129 1,533 14,282 228 403 $ 1,577 24,353
-------------------------------------------------------------------
(6,569) 50,846 10,942 36,725 3,100 638 1,577 97,259
-------------------------------------------------------------------
Deductions:
Distri-
butions
to plans 25,115 22,837 7,644 53,358 1,297 3,760 3,811 117,822
Admini-
strative
expenses - - - - - - - -
-------------------------------------------------------------------
25,115 22,837 7,644 53,358 1,297 3,760 3,811 117,822
Interfund
transfers
-net (4,545) 7,404 (926) 7,618 (1,249) (7,373) (929) -
-------------------------------------------------------------------
Net additions
(deduc-
tions) (36,229) 35,413 2,372 (9,015) 554 (10,495) (3,163) (20,563)
Master Trust
net assets
at begin-
ning of
period 192,995 131,965 46,953 237,349 10,304 34,720 19,975 674,261
-------------------------------------------------------------------
Master Trust
net assets
at end of
period $156,766 $167,378 $49,325 $228,334 $10,858 $24,225 $16,812 $653,698
===================================================================
F-10
F-11
Employees Savings Plan
Notes to Financial Statements (continued)
4. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for plan benefits
per the financial statements to the Form 5500:
December 31,
1998 1997
------------------
Net assets available for plan benefits per the
financial statements $10,085 $10,133
Amounts allocated to withdrawn participants - (13)
------------------
Net assets available for plan benefits per the
Form 5500 $10,085 $10,120
==================
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year ended
December 31,
1998
------------
Benefits paid to participants per the financial
statements $1,747
Add: Amounts allocated on Form 5500 to withdrawn
participants in the current year -
Less: Amounts allocated on Form 5500 to withdrawn
participants in the prior year (13)
------------
Benefits paid to participants per the Form 5500 $1,734
============
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated February 20, 1996, stating that the Plan is qualified under Section
401(a) of the Internal Revenue Code (the "Code") and, therefore, the related
trust is exempt from taxation. Once qualified, the Plan is required to
operate in conformity with the Code to maintain its qualification. The
Company has indicated that it will take the necessary steps, if any, to
maintain the Plan's qualified status.
F-11
INDEX TO EXHIBITS
Exhibit A Consent of Ernst & Young LLP, Independent Auditors
EXHIBIT A
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-53847) pertaining to the Employees
Savings Plan and in the related Prospectus of our report dated
June 18, 1999, with respect to the financial statements of the
Employees Savings Plan included in this Annual Report (Form 11-K)
for the year ended December 31, 1998.
/s/ Ernst & Young LLP
Richmond, Virginia
June 18, 1999