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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-01430
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 July 30, 1999, the Registrant had 62,887,628 shares of Common Stock, no
par value, outstanding and entitled to vote.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(millions, except per share amounts)
======================================================================
- ----------------------------------------------------------------------
Quarters Six months
ended ended
June 30 June 30
- ----------------------------------------------------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------
REVENUES $1,161 $1,579 $2,229 $3,111
COSTS AND EXPENSES
Cost of products sold 948 1,275 1,873 2,526
Selling, general and
administrative expenses 87 96 169 189
Depreciation and amortization 60 66 117 136
Interest 18 33 38 67
Operational restructuring effects - 304 - 304
- ----------------------------------------------------------------------
1,113 1,774 2,197 3,222
- ----------------------------------------------------------------------
EARNINGS
Income (loss) before income
taxes, extraordinary
loss and cumulative effect of
accounting change 48 (195) 32 (111)
Taxes on income (credit) 13 (72) 7 (46)
- ----------------------------------------------------------------------
Income (loss) before extraordinary
loss and cumulative effect of
accounting change 35 (123) 25 (65)
Extraordinary loss - (3) - (3)
Cumulative effect of accounting
change - - - (23)
- ----------------------------------------------------------------------
NET INCOME (LOSS) $ 35 $ (126) $ 25 $ (91)
======================================================================
EARNINGS PER SHARE
Basic:
Average shares outstanding 64 72 64 73
Income (loss) before
extraordinary loss and
cumulative effect of
accounting change $0.55 $(1.70) $0.40 $(0.89)
Extraordinary loss - (.04) - (.04)
Cumulative effect of
accounting change - - - (.32)
- ----------------------------------------------------------------------
Net income (loss) $0.55 $(1.74) $0.40 $(1.25)
======================================================================
Diluted:
Average shares outstanding 64 72 64 73
Income (loss) before
extraordinary loss and
cumulative effect of
accounting change $0.55 $(1.70) $0.40 $(0.89)
Extraordinary loss - (.04) - (.04)
Cumulative effect of
accounting change - - - (.32)
- ----------------------------------------------------------------------
Net income (loss) $0.55 $(1.74) $0.40 $(1.25)
======================================================================
CASH DIVIDENDS PER COMMON SHARE $0.35 $0.35 $0.70 $0.70
======================================================================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
2
3
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
======================================================================
(millions) June 30 December 31
- ----------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 39 $ 94
Receivables, less allowances of $9
(1998 - $14) 798 894
Inventories 536 500
Prepaid expenses and other 114 114
- ----------------------------------------------------------------------
Total current assets 1,487 1,602
Unincorporated joint ventures and
associated companies 1,569 1,478
Property, plant and equipment 4,294 4,282
Less allowances for depreciation and
amortization 2,298 2,258
- ----------------------------------------------------------------------
1,996 2,024
Deferred taxes and other assets 909 1,030
- ----------------------------------------------------------------------
Total assets $5,961 $6,134
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other
liabilities $ 774 $ 929
Short-term borrowings 305 116
Long-term debt 112 196
- ----------------------------------------------------------------------
Total current liabilities 1,191 1,241
Long-term debt 1,098 1,035
Postretirement benefits 1,019 1,029
Environmental, deferred taxes and other
liabilities 598 635
Stockholders' equity:
Common stock 1,538 1,533
Retained earnings 1,202 1,222
Treasury stock, at cost (626) (526)
Accumulated other comprehensive income (59) (35)
- ----------------------------------------------------------------------
Total stockholders' equity 2,055 2,194
- ----------------------------------------------------------------------
Contingent liabilities (Note 8)
Total liabilities and stockholders'
equity $5,961 $6,134
======================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
3
4
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
======================================================================
- ----------------------------------------------------------------------
Six months ended June 30 (millions) 1999 1998
- ----------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 25 $ (91)
Adjustments to reconcile to net cash provided by
(used in) operating activities:
Depreciation and amortization 117 136
Operational restructuring effects - 304
Deferred taxes and other (8) (104)
Extraordinary item - 3
Cumulative effect of accounting change - 23
Changes in operating assets and liabilities net
of effects of dispositions:
Accounts payable, accrued and other liabilities (66) (125)
Receivables (25) (15)
Inventories (49) 82
Environmental and restructuring liabilities (25) (24)
Other (32) (70)
- ----------------------------------------------------------------------
Net cash provided by (used in) operating activities (63) 119
INVESTING ACTIVITIES
Capital investments:
Operational (55) (57)
Strategic (165) (72)
Operational restructuring proceeds 204 273
Other (7) (3)
- ----------------------------------------------------------------------
Net cash provided by (used in) investing activities (23) 141
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings 191 (4)
Proceeds from long-term debt 250 100
Reduction of long-term debt (270) (60)
Cash dividends paid (45) (51)
Repurchase of common stock (100) (126)
Stock options exercised 5 11
- ----------------------------------------------------------------------
Net cash provided by (used in) financing activities 31 (130)
CASH AND CASH EQUIVALENTS
Net increase (decrease) (55) 130
At beginning of period 94 70
- ----------------------------------------------------------------------
At end of period $ 39 $ 200
======================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
4
5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
=======================================================================
- -----------------------------------------------------------------------
Six months ended June 30 1999 1998
- -----------------------------------------------------------------------
SHARES (thousands):
Common stock
Balance at January 1 74,105 73,909
Issued under employee benefit plans 78 194
- -----------------------------------------------------------------------
Balance at June 30 74,183 74,103
- -----------------------------------------------------------------------
Treasury stock
Balance at January 1 (9,648) -
Purchased and held as Treasury stock (1,694) (2,009)
- -----------------------------------------------------------------------
Balance at June 30 (11,342) (2,009)
- -----------------------------------------------------------------------
Net common shares outstanding 62,841 72,094
- -----------------------------------------------------------------------
DOLLARS (millions):
Common stock
Balance at January 1 $1,533 $1,521
Issued under employee benefit plans 5 12
- -----------------------------------------------------------------------
Balance at June 30 $1,538 $1,533
- -----------------------------------------------------------------------
Retained earnings
Balance at January 1 $1,222 $1,253
Net income (loss) 25 (91)
Cash dividends declared for common stock (45) (51)
- -----------------------------------------------------------------------
Balance at June 30 $1,202 $1,111
- -----------------------------------------------------------------------
Treasury stock
Balance at January 1 $ (526) $ -
Purchased and held as Treasury stock (100) (126)
- -----------------------------------------------------------------------
Balance at June 30 $ (626) $ (126)
- -----------------------------------------------------------------------
Accumulated other comprehensive income (loss)
Balance at January 1 $ (35) $ (35)
Foreign currency translation adjustments (25) (9)
Income taxes 1 (6)
-----------------------
Other comprehensive income (loss) (24) (15)
- -----------------------------------------------------------------------
Balance at June 30 $ (59) $ (50)
- -----------------------------------------------------------------------
Total stockholders' equity $2,055 $2,468
- -----------------------------------------------------------------------
COMPREHENSIVE INCOME (millions):
Net income (loss) $ 25 $ (91)
Other comprehensive income (loss) (24) (15)
- -----------------------------------------------------------------------
Comprehensive income (loss) $ 1 $ (106)
- -----------------------------------------------------------------------
Comprehensive income (loss) was income of $30 million for the second
quarter of 1999 and a loss of $133 million in the second quarter of 1998.
The accompanying notes to consolidated financial statements are an
integral part of these statements.
5
6
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Quarters Ended June 30, 1999 and 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared 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, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the interim
periods of 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. 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,
1998. Certain amounts have been reclassified to conform to the 1999
presentation. 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.
2. ACCOUNTING POLICIES
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." The SOP requires costs
of start-up activities and organization costs to be expensed as incurred. The
Company adopted the SOP in the second quarter of 1998 and recognized a charge
for the cumulative effect of accounting change of $23 million. First quarter
1998 results were retroactively restated to reflect this accounting change.
ACCOUNTING FOR THE COSTS OF DEVELOPING OR OBTAINING INTERNAL-USE SOFTWARE
In the first quarter of 1999, the Company adopted the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants'
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The SOP requires qualifying
computer software costs incurred in connection with obtaining or developing
software for internal use to be capitalized. In prior years, the Company
capitalized costs of purchased software and expensed internal costs of
developing software. The effect of adopting this SOP was not material to
interim 1999 results, and is not expected to be material for the full year.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes new accounting and reporting standards for derivative
instruments and hedging activities. The Company must adopt this statement by
January 1, 2001. The Company has not determined the impact this statement
will have on its financial position or results of operations.
3. OPERATIONAL RESTRUCTURING
In the first quarter of 1999, the final closing of the sale of the Company's
Alabama can stock complex occurred. This sale essentially completed the
Company's restructuring activities.
In the first half of 1998, the Company sold the following:
o U.S. recycling operations
o Canadian extrusion facilities
o European rolling mill operations
o an Illinois sheet and plate plant
6
7
4. EXTRAORDINARY LOSS
In the second quarter of 1998, the Company had an extraordinary loss of $3
million (net of income tax benefit of $1 million) resulting from debt
extinguishments.
5. EARNINGS PER SHARE
The following is a reconciliation of income and average shares for the basic
and diluted earnings per share computations for "Income (loss) before
extraordinary loss and cumulative effect of accounting change."
Quarters ended June 30
----------------------------
1999 1998
----------------------------
Income (numerator):
Income (loss) before extraordinary loss and
cumulative effect of accounting change
(Basic and Diluted) $35 $(123)
Average shares (denominator):
Basic 64,141,000 72,056,000
Effect of dilutive securities:
Stock options 208,000 -
Stock potentially issuable under a long-term
incentive plan 62,000 -
----------------------------
Diluted 64,411,000 72,056,000
----------------------------
Per share amount:
Basic $.55 $(1.70)
Diluted $.55 $(1.70)
Antidilutive securities excluded:
Stock options 2,177,000 5,411,000
Six Months ended June 30
----------------------------
1999 1998
----------------------------
Income (numerator):
Income (loss) before extraordinary loss and
cumulative effect of accounting change
(Basic and Diluted) $25 $(65)
Average shares (denominator):
Basic 64,307,000 72,612,000
Effect of dilutive securities:
Stock options 116,000 -
Stock potentially issuable under a long-
term incentive plan 31,000 -
----------------------------
Diluted 64,454,000 72,612,000
----------------------------
Per share amount:
Basic $.40 $(0.89)
Diluted $.40 $(0.89)
Antidilutive securities excluded:
Stock options 3,148,000 5,493,000
7
8
6. FINANCING ARRANGEMENTS
In the first half of 1999, the Company:
o borrowed $150 million under its credit facilities that bear interest at
a variable rate (5.4% at June 30, 1999, based on the London Interbank
Offer Rate) and require repayment in a lump sum in 2001.
o issued $100 million of medium-term notes (at a fixed rate of 7%) which
require annual principal repayments of $20 million between 2005 and
2009.
8
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7. COMPANY OPERATIONS
Certain amounts for the second quarter and six months ended 1998 have been
reclassified to conform to the 1999 presentation. The principal
reclassification was to move corporate amounts from the Other category to
reconciling items.
Packaging Construction
Base and and
Materials Consumer Distribution
============================================================================
Second Quarter 1999
Customer aluminum shipments 215 38 51
Intersegment aluminum
shipments 48 - -
- ---------------------------------------------------------------------------
Total aluminum shipments 263 38 51
===========================================================================
Revenues:
Aluminum $314 $206 $170
Nonaluminum 85 148 79
Intersegment revenues -
aluminum 66 - -
- ---------------------------------------------------------------------------
Total revenues $465 $354 $249
===========================================================================
Segment operating income
(loss) $ 55 $ 42 $ 13
Inventory accounting
adjustments
Corporate amounts
- ---------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- ---------------------------------------------------------------------------
Net income
===========================================================================
Second Quarter 1998
Customer aluminum shipments 168 37 46
Intersegment aluminum
shipments 82 - -
- ---------------------------------------------------------------------------
Total aluminum shipments 250 37 46
===========================================================================
Revenues:
Aluminum $268 $205 $170
Nonaluminum 114 144 81
Intersegment revenues -
aluminum 126 - -
- ---------------------------------------------------------------------------
Total revenues $508 $349 $251
===========================================================================
Segment operating income
(loss) $ 95 $ 40 $ 8
Inventory accounting
adjustments
Corporate amounts
Operational restructuring
effects - net
- ---------------------------------------------------------------------------
Corporate operating income
(loss)
Interest expense
Taxes on income
Extraordinary loss
- ---------------------------------------------------------------------------
Net income (loss)
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
9
10
Transportation Restructuring Other
============================================================================
Second Quarter 1999
Customer aluminum shipments 20 - 16
Intersegment aluminum
shipments - - -
- ---------------------------------------------------------------------------
Total aluminum shipments 20 - 16
============================================================================
Revenues:
Aluminum $106 $ - $39
Nonaluminum - - 8
Intersegment revenues - - - -
aluminum
- ---------------------------------------------------------------------------
Total revenues $106 $ - $47
============================================================================
Segment operating income
(loss) $ (6) $ - $ -
Inventory accounting
adjustments
Corporate amounts
- ---------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- ---------------------------------------------------------------------------
Net income
============================================================================
Second Quarter 1998
Customer aluminum shipments 15 103 9
Intersegment aluminum shipments - 2 -
- ---------------------------------------------------------------------------
Total aluminum shipments 15 105 9
============================================================================
Revenues:
Aluminum $80 $461 $25
Nonaluminum - 4 11
Intersegment revenues - - 5 -
aluminum
- ---------------------------------------------------------------------------
Total revenues $80 $470 $36
============================================================================
Segment operating income (loss) $(7) $ 42 $ 1
Inventory accounting
adjustments
Corporate amounts
Operational restructuring
effects - net
- ---------------------------------------------------------------------------
Corporate operating income
(loss)
Interest expense
Taxes on income
Extraordinary loss
- ---------------------------------------------------------------------------
Net income (loss)
============================================================================
Total Reconciling
Segments Items Consolidated
============================================================================
Second Quarter 1999
Customer aluminum shipments 340 - 340
Intersegment aluminum
shipments 48 (48) -
- ---------------------------------------------------------------------------
Total aluminum shipments 388 (48) 340
============================================================================
Revenues:
Aluminum $ 835 $ - $ 835
Nonaluminum 320 6 326
Intersegment revenues -
aluminum 66 (66) -
- ---------------------------------------------------------------------------
Total revenues $1,221 $ (60) $1,161
============================================================================
Segment operating income
(loss) $ 104 $ - $ 104
Inventory accounting
adjustments (4)
Corporate amounts (34)
- ---------------------------------------------------------------------------
Corporate operating income 66
Interest expense (18)
Taxes on income (13)
- ---------------------------------------------------------------------------
Net income $ 35
============================================================================
Second Quarter 1998
Customer aluminum shipments 378 - 378
Intersegment aluminum
shipments 84 (84) -
- ---------------------------------------------------------------------------
Total aluminum shipments 462 (84) 378
============================================================================
Revenues:
Aluminum $1,209 $ - $1,209
Nonaluminum 354 16 370
Intersegment revenues -
aluminum 131 (131) -
- ---------------------------------------------------------------------------
Total revenues $1,694 $ (115) $1,579
============================================================================
Segment operating income
(loss) $ 179 $ - $ 179
Inventory accounting
adjustments 1
Corporate amounts (38)
Operational restructuring
effects - net (304)
- ---------------------------------------------------------------------------
Corporate operating income
(loss) (162)
Interest expense (33)
Taxes on income 72
Extraordinary loss (3)
- ---------------------------------------------------------------------------
Net income (loss) $ (126)
============================================================================
10
11
7. COMPANY OPERATIONS - continued
Packaging Construction
Base and and
Materials Consumer Distribution
=============================================================================
Six Months ended June 30, 1999
Customer aluminum shipments 427 71 98
Intersegment aluminum shipments 104 - -
- -----------------------------------------------------------------------------
Total aluminum shipments 531 71 98
=============================================================================
Revenues:
Aluminum $ 616 $384 $329
Nonaluminum 160 282 157
Intersegment revenues - aluminum 147 - -
- ----------------------------------------------------------------------------
Total revenues $ 923 $666 $486
============================================================================
Segment operating income (loss) $ 69 $ 68 $ 21
Inventory accounting adjustments
Corporate amounts
- ----------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- ----------------------------------------------------------------------------
Net income
============================================================================
Six Months ended June 30, 1998
Customer aluminum shipments 313 67 92
Intersegment aluminum shipments 181 - -
- ----------------------------------------------------------------------------
Total aluminum shipments 494 67 92
============================================================================
Revenues:
Aluminum $ 515 $380 $335
Nonaluminum 229 280 163
Intersegment revenues - aluminum 289 - -
- ----------------------------------------------------------------------------
Total revenues $1,033 $660 $498
============================================================================
Segment operating income (loss) $ 174 $ 62 $ 16
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects
- net
- ----------------------------------------------------------------------------
Corporate operating income (loss)
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting
change
- ----------------------------------------------------------------------------
Net income (loss)
============================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
11
Transportation Restructuring Other
============================================================================
Six Months ended June 30, 1999
Customer aluminum shipments 37 - 30
Intersegment aluminum shipments - - -
- ----------------------------------------------------------------------------
Total aluminum shipments 37 - 30
============================================================================
Revenues:
Aluminum $200 $ - $64
Nonaluminum - - 9
Intersegment revenues -
aluminum - - -
- ----------------------------------------------------------------------------
Total revenues $200 $ - $73
============================================================================
Segment operating income (loss) $ (8) $ - $ 3
Inventory accounting
adjustments
Corporate amounts
- ----------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
- ----------------------------------------------------------------------------
Net income
============================================================================
Six Months ended June 30, 1998
Customer aluminum shipments 31 219 18
Intersegment aluminum shipments - 4 -
- ----------------------------------------------------------------------------
Total aluminum shipments 31 223 18
============================================================================
Revenues:
Aluminum $167 $937 $55
Nonaluminum - 9 12
Intersegment revenues -
aluminum - 12 -
- ----------------------------------------------------------------------------
Total revenues $167 $958 $67
============================================================================
Segment operating income (loss) $ (7) $ 80 $ 2
Inventory accounting
adjustments
Corporate amounts
Operational restructuring
effects - net
- ----------------------------------------------------------------------------
Corporate operating income
(loss)
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting
change
- ----------------------------------------------------------------------------
Net income (loss)
============================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
Total Reconciling
Segments Items Consolidated
============================================================================
[S] [C] [C] [C]
Six Months ended June 30, 1999
Customer aluminum shipments 663 - 663
Intersegment aluminum shipments 104 (104) -
- ----------------------------------------------------------------------------
Total aluminum shipments 767 (104) 663
============================================================================
Revenues:
Aluminum $1,593 $ - $1,593
Nonaluminum 608 28 636
Intersegment revenues -
aluminum 147 (147) -
- ----------------------------------------------------------------------------
Total revenues $2,348 $(119) $2,229
============================================================================
Segment operating income (loss) $ 153 $ - $ 153
Inventory accounting
adjustments (2)
Corporate amounts (81)
- ----------------------------------------------------------------------------
Corporate operating income 70
Interest expense (38)
Taxes on income (7)
- ----------------------------------------------------------------------------
Net income $ 25
============================================================================
Six Months ended June 30, 1998
Customer aluminum shipments 740 - 740
Intersegment aluminum shipments 185 (185) -
- ----------------------------------------------------------------------------
Total aluminum shipments 925 (185) 740
============================================================================
Revenues:
Aluminum $2,389 $ - $2,389
Nonaluminum 693 29 722
Intersegment revenues -
aluminum 301 (301) -
- ----------------------------------------------------------------------------
Total revenues $3,383 $(272) $3,111
============================================================================
Segment operating income (loss) $ 327 $ - $ 327
Inventory accounting
adjustments 4
Corporate amounts (71)
Operational restructuring
effects - net (304)
- ----------------------------------------------------------------------------
Corporate operating income
(loss) (44)
Interest expense (67)
Taxes on income 46
Extraordinary loss (3)
Cumulative effect of accounting
change (23)
- ----------------------------------------------------------------------------
Net income (loss) $ (91)
============================================================================
[/TABLE]
12
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8. CONTINGENT LIABILITIES
As previously disclosed in the Company's 1998 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, will 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:
o continuing evolution of environmental laws and regulatory requirements
o availability and application of technology
o identification of presently unknown remediation requirements
o cost allocations among PRPs
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.
However, such costs could be material to results of operations in a future
interim or annual reporting period.
9. 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 wholly owned subsidiaries of Reynolds Metals Company
(Reynolds) 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. 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. Summarized financial information is as follows:
Canadian Reynolds Metals Company, Ltd.
Quarters Ended June 30 Six Months Ended June 30
------------------------ --------------------------
1999 1998 1999 1998
------------------------ --------------------------
Net Sales:
Customers $132 $ 90 $242 $183
Parent and related companies 84 118 184 249
------------------------ --------------------------
$216 $208 $426 $432
Cost of products sold 189 176 385 361
Net income $ 9 $ 21 $ 15 $ 49
June 30 December 31
1999 1998
--------------------------------
Current assets $ 345 $ 155
Noncurrent assets 1,196 1,206
Current liabilities (121) (100)
Noncurrent liabilities (531) (379)
13
14
9. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM
COMPANY OF CANADA, LTD. - continued
Reynolds Aluminum Company of Canada, Ltd.
Quarters Ended June 30 Six Months Ended June 30
------------------------ --------------------------
1999 1998 1999 1998
------------------------ --------------------------
Net Sales:
Customers $132 $112 $242 $231
Parent and related companies 84 114 184 239
------------------------ --------------------------
$216 $226 $426 $470
Cost of products sold 190 194 385 395
Net income $ 8 $ 18 $ 15 $ 47
June 30 December 31
1999 1998
-----------------------------
Current assets $ 334 $ 186
Noncurrent assets 1,212 1,228
Current liabilities (121) (103)
Noncurrent liabilities (538) (389)
14
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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 1998 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,
objectives and strategies for the Company and other forward-
looking statements. Please refer to the "Risk Factors" section
beginning on page 22, where 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.
RECENT DEVELOPMENTS
- -------------------
By letter dated August 11, 1999, Alcoa Inc. made an
unsolicited offer to acquire all outstanding shares of
Reynolds in a transaction in which approximately half of the
shares would be exchanged for $65 cash and the remaining
half of the shares would be exchanged for the equivalent
value in Alcoa shares (or 0.9784 of a share of Alcoa.).
Alcoa also indicated that it would be willing to permit all
Reynolds stockholders to exchange all of their Reynolds
shares for Alcoa shares, if the Board of Reynolds or
Reynolds' stockholders found an all stock transaction to be
desirable.
At a special meeting held on August 15, 1999 to
consider the Alcoa offer, the Reynolds' Board of Directors
unanimously determined that the consideration offered by
Alcoa was inadequate for Reynolds stockholders. In reaching
its determination, the Board considered, among other things,
the opinion of Reynolds' financial advisor, Merrill Lynch &
Co. The Board also unanimously determined that Reynolds,
with the assistance of Merrill Lynch, should explore all
alternatives to maximize shareholder value, including the
sale of the company.
On August 16, 1999, Alcoa announced that it would
commence a cash tender offer during the week for all
outstanding shares of Reynolds at $65 per share. Alcoa also
stated that it would file during the week preliminary
consent solicitation materials to solicit written consent
to, among other things, remove the current Board of Reynolds
and elect an independent slate of directors that would
redeem Reynolds' rights plan and take certain other steps
that would facilitate a sale of the company.
RESULTS OF OPERATIONS
- ---------------------
Net income was $35 million for the second quarter of 1999 and $25
million for the six months of 1999 compared with net losses of
$126 million for the second quarter of 1998 and $91 million for
the six months of 1998. In addition to the extraordinary loss
and cumulative effect of accounting change shown in the table
below, the second quarter and six months of 1998 included non-
recurring, after-tax charges of $196 million for operational
restructuring. For additional information concerning the
operational restructuring charges, see Note 3 to the consolidated
financial statements.
Our pre-tax results for the second quarter and six months of 1999
were adversely affected by:
o lower realized aluminum pricing ($47 million in the second
quarter and $127 million in the six month period compared to the
1998 periods) which primarily affected the Base Materials global
business unit
o loss of income from sold operations was $42 million in the
second quarter and $80 million in the six month period compared
to the 1998 periods (these amounts include $17 million in the
second quarter of 1998 and $37 million in the six months of
1998 for the ceasing of depreciation of assets held for sale)
We offset a portion of the shortfall with increased shipping
volume in our Base Materials and Packaging and Consumer
businesses, lower conversion costs, and lower interest and SG&A
expenses. These benefits improved pre-tax results by $42 million
in the second quarter and $71 million in the six month period
compared to the 1998 periods. In addition, our results for the
six months of 1999 include foreign currency related losses and
charges, principally in Brazil, of $12 million that we recognized
in the first quarter of 1999.
15
16
RESULTS OF OPERATIONS - continued
- ---------------------
Second Quarter Six Months
---------------- ---------------
1999 1998 1999 1998
---------------- ---------------
RESULTS
Income (loss) before extraordinary
loss and cumulative effect of
accounting change $ 35 $ (123) $ 25 $ (65)
Extraordinary loss (see Note 4) - (3) - (3)
Cumulative effect of accounting change
(see Note 2) - - - (23)
---------------- ---------------
Net income (loss) $ 35 $ (126) $ 25 $ (91)
================ ===============
EARNINGS PER SHARE - BASIC
Income (loss) before extraordinary
loss and cumulative effect of
accounting change $0.55 $(1.70) $0.40 $(0.89)
Extraordinary loss - (.04) - (.04)
Cumulative effect of accounting change - - - (.32)
---------------- ----------------
Net income (loss) $0.55 $(1.74) $0.40 $(1.25)
================ ================
AVERAGE REALIZED PRICE PER POUND
Primary aluminum $0.67 $ 0.73 $0.66 $ 0.75
Fabricated aluminum products $1.89 $ 2.04 $1.90 $ 1.99
GLOBAL BUSINESS UNITS
The Company is organized into four market-based, global business
units. The four global business units and their principal products are as
follows:
o Base Materials - alumina, carbon products, primary aluminum
ingot and billet, and electrical rod
o Packaging and Consumer - aluminum and plastic packaging and
consumer products; printing products
o Construction and Distribution - architectural construction
products and the distribution of a wide variety of aluminum and
stainless steel products
o Transportation - aluminum wheels, heat exchangers and
automotive structures
BASE MATERIALS
Second Quarter Six Months
------------------ -----------------
1999 1998 1999 1998
------------------ -----------------
Aluminum shipments:
Customer 215 168 427 313
Internal 48 82 104 181
------------------ -----------------
Total 263 250 531 494
================== =================
Revenues:
Customer - aluminum $314 $268 $616 $ 515
- nonaluminum 85 114 160 229
Internal - aluminum 66 126 147 289
------------------ -----------------
Total $465 $508 $923 $1,033
================== =================
Operating income $ 55 $ 95 $ 69 $ 174
================== =================
The increase in customer aluminum shipments in the second quarter
and six months of 1999 reflects strong demand for our value-added
products (foundry and sheet ingot, billet and rod), which made up
approximately 75% of the primary aluminum shipments in these
periods. Our available supply to meet customer demand has
increased because we no longer need to supply downstream
fabricating operations that have been sold, and we restarted
idled capacity in 1998.
16
17
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS
In addition to reflecting the changes in shipping volume,
aluminum revenues in the second quarter and six months of 1999
were significantly affected by lower prices for primary aluminum.
Nonaluminum revenues were lower because of:
o significantly lower prices for alumina - approximately 10%
to 15% lower than the second quarter and six months of 1998
o lower prices for carbon products
o lower customer shipments of alumina and carbon products due
to weaker demand and greater internal use resulting from our
restart of idled primary aluminum capacity in 1998
The most significant factor affecting operating profit in the
second quarter and six months of 1999 was lower prices for most
products. We were able to offset some of this decline with
higher shipments of primary aluminum products, improved capacity
utilization, and lower material and conversion costs.
Bonneville Power Administration ("BPA") supplies electricity to
our smelters at Longview, Washington and Troutdale, Oregon. The
current contract with BPA expires in October 2001. BPA has
proposed reducing the amount of power supplied to the smelters by
one-third and pricing the power on a formula under which charges
would vary with world aluminum prices. Assuming "average" world
aluminum prices (with the basis for determining what is "average"
yet to be settled), the rate charged to Reynolds for the period
2001-2006 would increase by 13% over what we currently pay. We
would also have to find other sources for the balance of our
power needs. The BPA proposal is subject to full consideration
in a rate case, in which we can present arguments to improve the
offered rate, and other parties can challenge both the quantity
of power being provided to the Reynolds smelters and the rates at
which it is to be provided. We expect to participate actively in
the resolution of this issue and to continue assessing alternate
power sources for the two smelters.
We have a 10% equity interest in the Aluminum Smelter Company of
Nigeria. The smelter has closed indefinitely due to a lack of
working capital. The closing has no material effect on our
operations or financial position.
PACKAGING AND CONSUMER
Second Quarter Six Months
---------------- ---------------
1999 1998 1999 1998
---------------- ---------------
Customer aluminum shipments 38 37 71 67
Revenues:
Customer - aluminum $206 $205 $384 $380
- nonaluminum 148 144 282 280
---------------- ---------------
Total $354 $349 $666 $660
================ ===============
Operating income $ 42 $ 40 $ 68 $ 62
================ ===============
Shipments and revenues were higher in the second quarter and six
months of 1999 because of strong demand for most products,
despite declining demand in the tobacco market. The volume
impact on revenues was partly offset by pricing pressures in our
flexible packaging operations. Operating income was higher in
the second quarter and six months of 1999 because of the higher
shipping volume and lower conversion costs.
17
18
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
CONSTRUCTION AND DISTRIBUTION
Second Quarter Six Months
---------------- ---------------
1999 1998 1999 1998
---------------- ---------------
Customer aluminum shipments 51 46 98 92
Revenues:
Customer - aluminum $170 $170 $329 $335
- nonaluminum 79 81 157 163
---------------- ---------------
Total $249 $251 $486 $498
================ ===============
Operating income $ 13 $ 8 $ 21 $ 16
================ ===============
Shipments increased in the second quarter and six months of 1999
because of strong demand for most distribution products.
Shipments of construction products reflected weak conditions in
several markets outside the U.S., such as Germany and Southeast
Asia. Excluding Southeast Asia, sales of our aluminum composite
material, Reynobond, were ahead of last year and were
particularly strong in Europe and Latin America.
Revenues decreased because of lower prices for most products.
The decline in prices for aluminum products reflects the general
global weakening of aluminum prices from those realized in 1998.
Prices for stainless steel products were lower due to global
supply/demand imbalances and lower material costs.
The substantial increase in operating income reflects the
benefits of increased volume and margins. Conversion
costs and expenses were lower except for the effect of start-up
of construction operations in Europe and China. The effects of
lower prices were offset by lower material costs.
TRANSPORTATION
Second Quarter Six Months
---------------- ---------------
1999 1998 1999 1998
---------------- ---------------
Customer aluminum shipments 20 15 37 31
Customer revenues $106 $80 $200 $167
Operating income (6) (7) (8) (7)
================ ===============
Shipments and revenues were higher in the second quarter and six
months of 1999 because of strong demand for cast and forged
aluminum wheels. Our available supply increased due to improved
capacity utilization and the completion of the expansion of our
Virginia forged aluminum wheel plant in February 1999.
Operating profit was lower because of non-recurring start-up
costs relating to an engine cradle program at our Indiana
automotive structures plant (see below). This effect was
partially offset by lower material costs, improved shipping
volume and capacity utilization in wheel and heat exchanger
operations, and significant operating improvements at our Beloit,
Wisconsin wheel plant.
The Company and an automobile manufacturer are pioneering the
first, mass-produced, high-volume, all-aluminum engine cradle.
The engine cradle offers significant weight savings, reduces
noise and vibration, and provides important safety features. We
have incurred high start-up costs because of the complexity of
the production process and our acceleration of the timetable to
begin production. No other manufacturer has yet produced this
particular component, so we expect to maintain a competitive
advantage.
18
19
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
RESTRUCTURING
The final closing of the sale of the Alabama can stock complex
occurred at the end of the first quarter of 1999. The Company
had signed a definitive sales agreement in December 1998 covering
the disposition of the complex and agreed to operate it on behalf
of the buyer for a management fee until all administrative
aspects of the transaction could be completed. As a result, no
revenues or operating results are included in the Restructuring
category in 1999.
OTHER
The Other category consists principally of operations in emerging
markets, European extrusion operations and investments in Canada,
Latin America and Saudi Arabia.
RECONCILING ITEMS
The increase in corporate expenses in the six months of 1999 was
due to foreign currency related losses and charges, principally
in Brazil.
For additional information concerning the global business units,
see Note 7 to the consolidated financial statements.
INTEREST EXPENSE
Interest expense decreased in both 1999 periods because of:
o lower amounts of debt outstanding
o lower average interest rates due to extinguishing higher
cost debt
o higher amounts for capitalized interest
TAXES ON INCOME
The effective tax rates reflected in the income statement differ
from the U.S. federal statutory rate principally because of the
following:
o foreign taxes at different rates
o the effects of percentage depletion allowances
o credits and other tax benefits
YEAR 2000 READINESS DISCLOSURE
ISSUE
The year 2000 issue results from computer programs and systems
that rely on two digits rather than four to define the applicable
year. Such systems may treat a date using "00" as the year 1900
rather than the year 2000. As a result, computer systems could
fail to operate or make miscalculations, causing disruption of
business operations.
Left unrepaired, many of the Company's systems, including
information and computer systems and automated equipment, could
be affected by the year 2000 issue. Failure to adequately
address the issue could result in, among other things, the
temporary inability to manufacture products, process
transactions, send invoices, and/or engage in normal business
activities. We do not believe the products we sell require
remediation to address the year 2000 issue since they do not
depend on the calendar function in the electronic components.
GOAL
The Company has a formal program to address and resolve potential
exposure associated with information and non-information
technology systems arising from the year 2000 issue. Our goal is
that none of the Company's critical business operations or
computer processes we share with our suppliers and customers will
be substantially impaired by the advent of the year 2000.
19
20
RESULTS OF OPERATIONS - continued
- ---------------------
YEAR 2000 READINESS DISCLOSURE - continued
GOAL - continued
Our program is led by our Year 2000 Program Management Office,
which recommends processes and tools for year 2000 remediation to
the Company's business units and monitors progress. The Program
Management Office consolidates progress information into monthly
status reports for review by management, the Company's internal
auditors and the Board of Directors. The Audit Committee of the
Board of Directors is also given periodic briefings on progress
and plans from the Program Management Office.
YEAR 2000 REMEDIATION PROJECT
We have substantially completed preparation of our critical, date-
sensitive computer systems, processes and interfacing software
for the year 2000. Our preparation included five phases: (1)
inventory, (2) planning, (3) conversion, (4) pre-installation
testing and (5) installation. We measure progress on remediation
projects as a percentage of actual staff hours expended to
staff hours projected. As of June 30, 1999, remediation of both our
information systems and our non-information systems (e.g.,
manufacturing and mechanical systems) was approximately 99%
complete. We continue to monitor our computer and software
vendors' readiness statements to assure that readiness changes in
their products do not negatively affect our systems.
QUALITY ASSURANCE
In addition to completing our year 2000 remediation project, we
are validating our remediation efforts with post-installation
testing of certain critical computer systems. During the
remainder of 1999, we also expect to respond to and initiate
requests to test with certain suppliers, customers and government
agencies after they ready their systems.
CONTINGENCY PLANNING
An ongoing key aspect of the Company's contingency planning for
the year 2000 focuses on assessment of the business impact on the
Company resulting from the possible failure of our suppliers to
provide needed products and services. We have surveyed those
suppliers who are deemed to be critical to each of our operating
locations, even though the products or services they provide may
not be material to the Company's business as a whole, to assess
their year 2000 readiness. We are currently monitoring over
1,800 suppliers and are rating them low, medium or high risk in
their progress toward being ready for the year 2000. Critical
suppliers rated as high risk are receiving our immediate
attention for contingency planning or other measures such as
identifying additional sources of supply for critical materials.
As of June 30, 1999, we were on schedule with our third party
evaluation, having completed approximately 64% of the projected
total effort that we currently estimate will be needed. Early in
the fourth quarter of 1999, we plan to have identified additional
sources of supply or developed other contingency plans with
respect to those critical suppliers who are not ranked as low
risk. We will continue monitoring these suppliers into the year
2000. In addition, we are responding to customer inquiries
regarding our year 2000 program and our progress in addressing
the issue. We also are evaluating the year 2000 readiness of
certain of our largest customers, none of which are material to
our operations as a whole. We have not determined the potential
costs of business disruptions from supplier or customer non-
performance.
The Company currently has in place operating procedures and
business continuity plans at its operating locations for
responding to unusual, disruptive situations such as power
shortages, failures by major suppliers and natural disasters.
These existing procedures and plans provide a solid foundation
for addressing many year 2000 issues. As unique risks are
identified and deemed sufficiently likely to occur, we will make
necessary adaptations or additions to our existing procedures and
plans.
Contingency planning and monitoring to determine realistic year
2000 issues beyond those already addressed will continue
throughout the year. Several reasonably likely worst case
scenarios involve shortages or unanticipated outages of energy
requirements. Our operations, particularly in the Base Materials
business, require significant quantities of energy. Curtailments
or disruptions of energy supplies would result in full or partial
shutdowns of these operations until energy availability could be
restored. In addition, an unanticipated loss of energy supply
could result in damage to production equipment. We continue to
assess these and other business disruption risks.
20
21
RESULTS OF OPERATIONS - continued
- ---------------------
YEAR 2000 READINESS DISCLOSURE - continued
COSTS
The total cost of our Year 2000 remediation project is currently
expected to be approximately $22 million. As of June 30, 1999,
we had incurred approximately $21 million, which includes labor,
equipment and license costs. Our cost projections include
approximate costs for post-installation testing and contingency
planning.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
WORKING CAPITAL
June 30 December 31
1999 1998
----------- -------------
Working capital $296 $361
Ratio of current assets
to current liabilities 1.2/1 1.3/1
OPERATING ACTIVITIES
Cash from operating activities in the six months of 1999 was used
principally to fund accounts payable, accrued and other
liabilities and to increase inventories in anticipation of
improved shipping levels.
INVESTING ACTIVITIES
Capital investments totaled $220 million in the first half of
1999. This amount includes $55 million for operating
requirements (replacement equipment, environmental control
projects, etc.). The remainder was for strategic projects
(performance improvements, investments, etc.) principally carried
forward from 1998, including:
o expanding the Worsley Alumina Refinery in Australia
o modernizing U.S. foil plants
o acquiring two producers of flexographic separations and
plates for the packaging industry in the U.S. and Canada
o establishing a foodservice packaging and consumer products
subsidiary in Brazil
o expanding a plant in Europe that will produce composite
architectural products
o opening new metals distribution centers
o expanding a forged wheel plant in Virginia (completed in
February 1999)
o expanding and modifying an automotive structures plant in
Indiana
Total capital investments excluding acquisitions planned for 1999
(approximately $450 million) are primarily for those strategic
projects now under way and continuing operating requirements.
We expect to fund these capital investments primarily with
cash provided by operating activities supplemented with funds
from financing activities. While the projected 1999 capital
investments do not include amounts for acquisitions, we will
evaluate opportunities that arise.
Part of the proceeds from operational restructuring was used to
repurchase common stock.
FINANCING ACTIVITIES
In the first half of 1999, the Company:
o increased short-term borrowings by $191 million
o borrowed $150 million under our revolving credit facilities
(see Note 6)
o issued $100 million of medium-term notes (see Note 6),
reducing to $13 million the amount of debt securities available
for issuance under our shelf registration
21
22
LIQUIDITY AND CAPITAL RESOURCES - continued
- -------------------------------
FINANCING ACTIVITIES - continued
o repurchased common stock with part of the proceeds from
sales of assets (see the Consolidated Statement of Changes in
Stockholders' Equity)
o filed a shelf registration statement with the Securities and
Exchange Commission to register an additional $150 million of
unsecured debt securities (which has not yet been declared
effective)
We used the proceeds from the borrowings to repay at maturity
$100 million of 9 3/8% debentures, to reduce borrowings under our
revolving credit facilities, to make other scheduled debt
payments and to supplementally fund operating and investing
activities.
PORTFOLIO REVIEW
In the first quarter of 1999, the final closing of the sale of
our can stock complex in Alabama occurred. This essentially
completed our restructuring activities.
RISK FACTORS
- ------------
This section should be read in conjunction with Part I, Item 1
(Business), Item 3 (Legal Proceedings) and Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of
Operations) of the Company's 1998 Form 10-K 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, objectives and
strategies for the Company and other forward-looking statements<FN1>.
The Company's expectations for the future and related forward-
looking statements are based on a number of assumptions and
forecasts, including:
o world economic growth and other economic indicators
(including rates of inflation, industrial production, housing
starts and light vehicle sales)
o trends in the Company's key markets
o global aluminum supply and demand conditions
o primary aluminum prices
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.
The Company is cautiously optimistic about the demand for
aluminum for 1999. There are signs that the economies in Asia
are beginning to recover. The economic situation in South
America is also improving. The Company's outlook is for an
increase in global primary aluminum consumption for 1999 of 2% to
3%. If the global economy completes its recovery in 2000 to
2001, we expect global aluminum consumption to grow by
approximately 4% to 5% per year.
Economic and/or market conditions other than those forecasted by
the Company in the preceding paragraph 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 Company's outlook for
1999 and beyond could be jeopardized by a further delay of
economic recovery in Asia and South America.
[FN]
________________________
<FN1> Forward-looking statements can be identified generally as those
containing words such as "should," "will," "will likely result,"
"hope," "forecast," "outlook," "project," "estimate," "expect,"
"anticipate," or "plan" and words of similar effect.
</FN>
22
23
RISK FACTORS - continued
- ------------
The following factors also could affect the Company's results:
o 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. Because primary aluminum makes up a significant
portion of the Company's shipments, changes in aluminum pricing
have a rapid effect on the Company's operating results. 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 price
volatility but does not eliminate it.
o 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, plastics and glass, among others, for
various applications in the Company's key markets. Plastic
products compete with similar products made by the Company's
competitors, as well as with products made of glass, aluminum,
steel, paper, wood and ceramics, among others. 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.
o 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. The
identification of additional material remediation sites in the
future (that are presently unknown) at which the Company may be
named as a potentially responsible party could have a material
adverse effect on the Company's results of operations in a future
interim or annual reporting period. Moreover, estimating future
environmental compliance and remediation costs is imprecise due
to:
- continuing evolution of environmental laws and
regulatory requirements and uncertainties about
their application to the Company's operations
- availability and application of technology
- allocation of costs among potentially responsible parties
o The Company has investments and activities in various
emerging markets, including Russia, China, India and Brazil.
While emerging markets offer strong growth potential, they also
present a higher degree of risk than more developed markets. In
addition to the business risks inherent in developing and
servicing new markets, economic conditions may be more volatile,
legal systems less developed and predictable, and the possibility
of various types of adverse government action more pronounced.
o 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 have a
material adverse effect on the Company's results of operations
for a particular reporting period.
o Changes in the costs or availability of supply of power,
resins, caustic soda, green coke and other raw materials can
materially affect results. Substantial increases in power costs,
particularly in the Pacific Northwest, may adversely affect the
Company's primary aluminum production plants which require
reliable, low-cost power.
o A number of the Company's operations are cyclical and can be
influenced by economic conditions.
o A failure to complete the Company's major capital projects,
such as expansion of the Worsley Alumina Refinery, as scheduled
and within budget or a failure to launch successfully new growth
or strategic business programs, such as the engine cradle
program, could affect the Company's results.
23
24
RISK FACTORS - continued
- ------------
o The Company's results may be adversely affected if it fails
to meet its year 2000 readiness goals. While the Company
believes it has prepared substantially all of its information and
non-information systems for the advent of the year 2000, a
failure to locate and correct all relevant computer codes could
result in disruptions of Company operations, some of which may be
significant. Also, there can be no guarantee that other
companies with which the Company does business will be converted
on a timely basis or their failure to be year 2000 compliant will
not have an adverse effect on the Company.
o 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.
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 worldwide economies and markets in which the Company
operates will not change significantly overall.
24
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Forward, futures, option and swap contracts are designated to
manage market risks resulting from fluctuations in the aluminum,
natural gas, foreign currency and debt markets. Contracts used
to manage risks in these markets are not material.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Following the August 11, 1999 offer by Alcoa Inc. to acquire
the Registrant, seven putative class actions on behalf of
stockholders of the Registrant were filed in the Delaware
Court of Chancery against the Registrant and certain present
and former directors of the Registrant. The plaintiffs in
those actions allege, among other things, that the director
defendants have breached their fiduciary duties owed to the
plaintiffs and other stockholders of the Registrant by
failing to explore offers for the purchase of the Registrant
or to engage in meaningful discussions with interested
parties such as Alcoa; that they have attempted to deprive
the plaintiffs of the true value of their investment in the
Registrant; that they have failed to exercise ordinary care
and diligence in the exercise of their fiduciary
obligations; that they have attempted to entrench themselves
in office; and that they have prevented the Registrant's
stockholders from obtaining a fair price for their shares.
The plaintiffs seek to enjoin a merger or other business
combination of the Registrant with a third party unless
pursuant to a procedure such as an auction to obtain the
highest possible price for the Registrant. The plaintiffs
also seek the entry of an order directing the director
defendants, among other things, to carry out their fiduciary
duties to the plaintiffs, to maximize shareholder value, to
undertake an appropriate evaluation of the Registrant's net
worth as a merger/acquisition candidate, to "create an
active auction" for the Registrant, and to ensure that any
conflicts of interest between the director defendants and
their fiduciary obligation to maximize shareholder value are
resolved in the best interests of the Registrant's public
stockholders. In one of the actions, the plaintiffs also
seek the entry of an order directing the director defendants
not to use the Registrant's shareholder rights plan or other
defensive measures to impede any bona fide offers for the
Registrant. In addition, the plaintiffs seek damages in an
unspecified amount, costs and disbursements, including
attorneys' fees, and such other relief as the Delaware Court
of Chancery deems appropriate.
ITEM 2. CHANGES IN SECURITIES
(a) Recent Sales of Unregistered Securities
Under the Registrant's Stock Plan for Outside Directors (the
"Plan"), 126 phantom shares, in the aggregate, were granted
to the Registrant's nine outside Directors on April 1, 1999,
based on an average price of $48.4688 per share. These
phantom shares represent dividend equivalents paid on
phantom shares previously granted under the Plan. 756
phantom shares, in the aggregate, were granted to the nine
outside Directors on June 30, 1999, based on an average
price of $59.7813 per share. These phantom shares represent
a 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-K for the year ended December 31, 1998 in Part II,
Item 5 under the caption "Sale of Unregistered Securities".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Registrant was held on
May 20, 1999. The stockholders (i) elected the eleven nominees
named in the Registrant's proxy statement to serve as Directors,
(ii) approved the Reynolds Metals Company 1999 Nonqualified Stock
Option Plan, (iii) approved the amended Reynolds Metals Company
Performance
25
26
Incentive Plan, (iv) ratified the selection of Ernst
& Young LLP as independent auditors of the Registrant for 1999,
(v) defeated a stockholder proposal requesting endorsement of the
CERES Principles, which provide standards for environmental
performance and reporting, (vi) defeated a stockholder proposal
related to global warming which requested the Registrant to make
a report to stockholders by August 1999 on the greenhouse gas
emissions from the Company's operations, and (vii) defeated a
stockholder proposal requesting that the Registrant retain an
investment banking firm to explore strategic alternatives for
maximizing shareholder value. The number of votes cast for,
against or withheld, the number of abstentions, and the number of
broker non-votes, as applicable, with respect to each matter were
as set forth below. No other matters were voted upon at the
meeting.
(i) Election of Directors
Number Of Votes Number Of Votes
Name Cast "For" Withheld
--------------------- ----------------- -----------------
Patricia C. Barron 45,774,488 11,272,376
John R. Hall 45,768,628 11,277,236
Robert L. Hintz 45,758,967 11,286,897
William H. Joyce 45,777,065 11,268,799
Mylle Bell Mangum 45,766,699 11,279,165
D. Larry Moore 45,773,007 11,272,857
Randolph N. Reynolds 47,206,350 9,839,514
James M. Ringler 45,773,741 11,272,123
Samuel C. Scott, III 45,781,170 11,264,694
Jeremiah J. Sheehan 47,184,026 9,861,838
Joe B. Wyatt 45,767,272 11,278,592
(ii) Adoption of Reynolds Metals Company 1999 Nonqualified
Stock Option Plan
Number of Votes Cast "For" 42,479,646
Number of Votes Cast "Against" 11,799,667
Number of Abstentions 2,766,551
(iii) Approval of amended Reynolds Metals Company Performance
Incentive Plan
Number of Votes Cast "For" 50,081,745
Number of Votes Cast "Against" 4,203,770
Number of Abstentions 2,760,348
(iv) Ratification of Selection of Ernst & Young LLP as
Independent Auditors
Number of Votes Cast "For" 54,130,539
Number of Votes Cast "Against" 262,989
Number of Abstentions 2,652,335
(v) Stockholder Proposal Relating to the CERES Principles
Number of Votes Cast "Against" 42,453,645
Number of Votes Cast "For" 3,908,409
Number of Abstentions 5,735,632
Number of Broker Non-Votes 4,948,178
26
27
(vi) Stockholder Proposal Relating to Global Warming
Number of Votes Cast "Against" 43,519,803
Number of Votes Cast "For" 3,284,475
Number of Abstentions 5,293,409
Number of Broker Non-Votes 4,948,177
(vii) Stockholder Proposal to Retain an Investment
Banking Firm to Explore Alternatives for
Maximizing Shareholder Value
Number of Votes Cast "Against" 49,078,059
Number of Votes Cast "For" 7,967,805
ITEM 5. OTHER INFORMATION
On August 11, 1999, Alcoa Inc. made an unsolicited
offer to acquire all outstanding shares of Reynolds in a
transaction in which approximately half of the shares would
be exchanged for $65 cash and the remaining half of the
shares would be exchanged for the equivalent value in Alcoa
shares (or 0.9784 of a share of Alcoa.). On August 16,
1999, Alcoa announced that it would commence a cash tender
offer during the week for all outstanding shares of Reynolds
at $65 per share and that it would file preliminary consent
solicitation materials to solicit written consent, to among
other things, remove the current Board of Reynolds and elect
an independent slate of directors. For a discussion of these
matters, see "Recent Developments" under Part I, Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
During the second quarter of 1999, the Registrant
filed three Current Reports on Form 8-K
with the Commission, each of which reported matters
under Item 5:
(1) A Form 8-K filed April 1, 1999, reporting that the
Registrant had completed the sale of its Alloys can stock complex
in Alabama and its aluminum extrusion plant in Irurzun, Spain;
(2) A Form 8-K filed May 28, 1999, containing the remarks given
by Jeremiah J. Sheehan, Chairman of the Board and Chief Executive
Officer of the Registrant, at the Registrant's annual meeting of
stockholders held on May 20, 1999; and
(3) A Form 8-K filed June 1, 1999, reporting that at a meeting
of the Non-Ferrous Metals Analysts of New York, Mr. Sheehan had
provided a status report on the strategic planning and analysis
process the Registrant has undertaken involving management, the
Registrant's Board of Directors, and the Registrant's investment
bankers and containing excerpts from Mr. Sheehan's remarks.
27
28
In addition, on July 20, 1999, the Registrant filed
a Current Report on Form 8-K reporting that it had
improved its segment reporting by removing corporate
amounts from the Other category and presenting them
as separate reconciling items. Filed with the
report are reclassified segment disclosures related
to the Registrant's financial reports for the
quarters ended March 31, 1999 and 1998, other
interim periods of 1998, and the fiscal years ended
December 31, 1998, 1997 and 1996.
28
29
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 /s/ Allen M. Earehart
-------------------------
Allen M. Earehart
Senior Vice President, Controller
(Chief Accounting Officer)
DATE: August 16, 1999
29
INDEX TO EXHIBITS
(Attached herewith are Exhibits 10.3, 10.5, 10.8, 10.10, 10.17,
10.18, 10.19, 10.20, 10.28, 10.34, 10.37, 10.40, 10.41, 27)
EXHIBIT 2 - None
* EXHIBIT 3.1 - Restated Certificate of Incorporation,
as amended. (File No. 001-01430, 1998
Form 10-K Report, EXHIBIT 3.1)
* EXHIBIT 3.2 - By-laws, as amended. (File No. 001-01430,
1998 Form 10-K Report, EXHIBIT 3.2)
EXHIBIT 4.1 - Restated Certificate
of Incorporation. See EXHIBIT 3.1.
EXHIBIT 4.2 - By-Laws. See EXHIBIT 3.2.
* EXHIBIT 4.3 - Form of Common Stock Certificate.
(Registration Statement No. 333-79203 on
Form S-8, dated May 24, 1999, EXHIBIT
4.2)
* EXHIBIT 4.4 - 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. 001-01430, Form 10-Q Report
for the Quarter Ended March 31, 1989,
EXHIBIT 4(c))
* EXHIBIT 4.5 - Amendment No. 1 dated as of November 1,
1991 to the Indenture. (File No. 001-
01430, 1991 Form 10-K Report, EXHIBIT
4.4)
* EXHIBIT 4.6 - Rights Agreement dated as of March 8,
1999 between Reynolds Metals Company and
ChaseMellon Shareholder Services, L.L.C.
(File No. 001-01430, Form 8-K Report
dated March 8, 1999, pertaining to
Preferred Stock Purchase Rights, EXHIBIT
4.1)
* EXHIBIT 4.7 - Form of Fixed Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.3)
* EXHIBIT 4.8 - Form of Floating Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.4)
* EXHIBIT 4.9 - Form of Book-Entry Fixed Rate Medium-Term
Note. (File No. 001-01430, 1991 Form 10-
K Report, EXHIBIT 4.15)
* EXHIBIT 4.10 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 001-01430, 1991 Form 10-
K Report, EXHIBIT 4.16)
* EXHIBIT 4.11 - Form of 9% Debenture due August 15, 2003.
(File No. 001-01430, Form 8-K Report
dated August 16, 1991, Exhibit 4(a))
______________________
* Incorporated by reference.
* EXHIBIT 4.12 - 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) ("RACC"), as amended. (File
No. 1-1430, 1995 Form 10-K Report,
EXHIBIT 4.13)
* EXHIBIT 4.13 - By-Laws of RACC, as amended. (File No. 001-
01430, Form 10-Q Report for the Quarter
Ended March 31, 1997, EXHIBIT 4.14)
* EXHIBIT 4.14 - Articles of Incorporation of Societe
Canadienne de Metaux Reynolds,
Ltee/Canadian Reynolds Metals Company,
Ltd. ("CRM"), as amended. (File No. 001-
01430, Form 10-Q Report for the Quarter
Ended September 30, 1997, EXHIBIT 4.15)
* EXHIBIT 4.15 - By-Laws of CRM, as amended. (File No. 001-
01430, Form 10-Q Report for the Quarter
Ended September 30, 1997, EXHIBIT 4.16)
* EXHIBIT 4.16 - Indenture dated as of April 1, 1993
among RACC, Reynolds Metals Company and
The Bank of New York, as Trustee. (File
No. 001-01430, Form 8-K Report dated
July 14, 1993, EXHIBIT 4(a))
* EXHIBIT 4.17 - First Supplemental Indenture, dated as of
December 18, 1995 among RACC, Reynolds
Metals Company, CRM and The Bank of New
York, as Trustee. (File No. 001-01430,
1995 Form 10-K Report, EXHIBIT 4.18)
* EXHIBIT 4.18 - Form of 6-5/8% Guaranteed Amortizing Note due
July 15, 2002. (File No. 001-01430,
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 - Amendment and Restatement of Reynolds
Metals Company Performance Incentive
Plan, as adopted and executed May 21,
1999.
=* EXHIBIT 10.4 - Agreement dated December 9, 1987 between
Reynolds Metals Company and Jeremiah J.
Sheehan. (File No. 001-01430, 1987 Form
10-K Report, EXHIBIT 10.9)
EXHIBIT 10.5 - Amendment and Restatement of
Supplemental Death Benefit Plan for
Officers, as adopted and executed April
26, 1999.
=* EXHIBIT 10.6 - Financial Counseling Assistance Plan for
Officers. (File No. 001-01430, 1987
Form 10-K Report, EXHIBIT 10.11)
_______________________
* Incorporated by reference.
= Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 601 of
Regulation S-K.
=* EXHIBIT 10.7 - Management Incentive Deferral Plan.
(File No. 001-01430, 1987 Form 10-K
Report, EXHIBIT 10.12)
EXHIBIT 10.8 - Amendment and Restatement of Deferred
Compensation Plan for Outside Directors,
as adopted and executed April 28, 1999.
=* EXHIBIT 10.9 - Form of Indemnification Agreement for
Directors and Officers. (File No. 001-
01430, 1998 Form 10-K Report, EXHIBIT
10.9)
EXHIBIT 10.10 - Form of Executive Severance Agreement, as
amended, between Reynolds Metals Company
and key executive personnel, including
each of the individuals listed in Item
4A of the 1998 Form 10-K Report.
=* EXHIBIT 10.11 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective May 20, 1988. (File No. 001-
01430, 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.
001-01430, 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.
001-01430, 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. 001-01430, 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.
001-01430, 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. 001-01430, Form 10-
Q Report for the Quarter Ended March 31,
1992, EXHIBIT 28(a))
EXHIBIT 10.17 - Amendment and Restatement of Reynolds
Metals Company Restricted Stock Plan for
Outside Directors, as adopted and
executed April 28, 1999.
EXHIBIT 10.18 - Amendment and Restatement of Reynolds
Metals Company New Management Incentive
Deferral Plan, as adopted and executed
April 28, 1999.
_______________________
* Incorporated by reference.
= Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 601 of
Regulation S-K.
EXHIBIT 10.19 - Amendment and Restatement of Reynolds
Metals Company Salary Deferral Plan for
Executives, as adopted and executed
April 28, 1999.
EXHIBIT 10.20 - Amendment and Restatement of Reynolds
Metals Company Supplemental Long-Term
Disability Plan for Executives, as
adopted and executed April 26, 1999.
=* EXHIBIT 10.21 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective August 19, 1994. (File No.
001-01430, 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.
001-01430, Form 10-Q Report for the
Quarter Ended September 30, 1994,
EXHIBIT 10.35)
=* EXHIBIT 10.23 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Trustee Pays Premiums).
(File No. 001-01430, Form 10-Q Report
for the Quarter Ended June 30, 1995,
EXHIBIT 10.34)
=* EXHIBIT 10.24 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Employee Pays Premium).
(File No. 001-01430, Form 10-Q Report
for the Quarter Ended June 30, 1995,
EXHIBIT 10.35)
=* EXHIBIT 10.25 - Form of Split Dollar Life Insurance Agreement
(Employee Owner, Employee Pays Premium).
(File No. 001-01430, Form 10-Q Report
for the Quarter Ended June 30, 1995,
EXHIBIT 10.36)
=* EXHIBIT 10.26 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Third Party Pays
Premiums). (File No. 001-01430, Form 10-
Q Report for the Quarter Ended June 30,
1995, EXHIBIT 10.37)
=* EXHIBIT 10.27 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Employee Pays
Premiums). (File No. 001-01430, Form 10-
Q Report for the Quarter Ended June 30,
1995, EXHIBIT 10.38)
EXHIBIT 10.28 - Amendment and Restatement of Reynolds
Metals Company 1996 Nonqualified Stock
Option Plan, as adopted and executed
April 15, 1999.
=* EXHIBIT 10.29 - 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)
=* EXHIBIT 10.30 - Form of Stock Option Agreement, as approved
May 17, 1996 by the Compensation
Committee of the Company's Board of
Directors. (File No. 001-01430, Form 10-
Q Report for the Quarter Ended June 30,
1996, EXHIBIT 10.41)
____________________________
* Incorporated by reference.
= Management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant to
Item 601 of Regulation S-K.
=* EXHIBIT 10.31 - 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. 001-
01430, Form 10-Q Report for the Quarter
Ended June 30, 1996, EXHIBIT 10.42)
=* EXHIBIT 10.32 - Stock Option Agreement dated August 30, 1996
between Reynolds Metals Company and
Jeremiah J. Sheehan. (File No. 001-
01430, Form 10-Q Report for the Quarter
Ended September 30, 1996, EXHIBIT 10.43)
=* EXHIBIT 10.33 - Reynolds Metals Company Supplemental
Incentive Plan. (File No. 001-01430,
1996 Form 10-K Report, EXHIBIT 10.40)
EXHIBIT 10.34 - Amendment and Reinstatement of Reynolds
Metals Company Stock Plan for Outside
Directors, as adopted and executed April
28, 1999.
=* EXHIBIT 10.35 - Special Executive Severance Package for
Certain Employees who Terminate
Employment between January 1, 1997 and
June 30, 1999, (or, if earlier, the date
of completion of employment related
actions related to the Company's
portfolio review process, as designated
by the Company's Chief Executive
Officer), approved by the Compensation
Committee of the Company's Board of
Directors on January 17, 1997 and
extended on May 15, 1998. (File No. 001-
01430, 1996 Form 10-K Report, EXHIBIT
10.42)
=* EXHIBIT 10.36 - 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. 001-01430, 1996
Form 10-K Report, EXHIBIT 10.43)
EXHIBIT 10.37 - Amendment and Restatement of Reynolds
Metals Company Long-Term Performance
Share Plan, as adopted and executed
April 26, 1999.
* EXHIBIT 10.38 - Asset Purchase Agreement by and among Ball
Corporation, Ball Metal Beverage
Container Corp. and Reynolds Metals
Company dated as of April 22, 1998.
(File No. 001-01430, Form 10-Q Report
for the Quarter Ended June 30, 1998,
EXHIBIT 2)
=* EXHIBIT 10.39 - Reynolds Metals Company 1999
Nonqualified Stock Option Plan.
(Registration Statement No. 333-79203 on
Form S-8, dated May 24, 1999, EXHIBIT
4.5)
EXHIBIT 10.40 - Form of Stock Option Agreement, as approved
May 21, 1999 by the Compensation
Committee of the Company's Board of
Directors.
EXHIBIT 10.41 - Form of Three Party Stock Option Agreement,
as approved May 21, 1999 by the
Compensation Committee of the Company's
Board of Directors.
____________________________
* Incorporated by reference.
= Management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant to
Item 601 of Regulation S-K.
EXHIBIT 11 - Omitted; see Part I, Item 1 for
computation of earnings per share.
EXHIBIT 15 - None
EXHIBIT 18 - None
EXHIBIT 19 - None
EXHIBIT 22 - None
EXHIBIT 23 - None
EXHIBIT 24 - None
EXHIBIT 27 - Financial Data Schedule
* EXHIBIT 99 - Description of Reynolds Metals Company
Capital Stock. (File No. 001-01430,
Form 10-Q Report for the Quarter Ended
March 31, 1999, EXHIBIT 99)
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 ten 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.
____________________________
* Incorporated by reference.