SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 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 October 29, 1999, the Registrant had 63,227,478 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 ended Nine months ended
September 30 September 30
- -----------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------
REVENUES $1,209 $1,368 $3,438 $4,479
COSTS AND EXPENSES
Cost of products sold 983 1,109 2,856 3,635
Selling, general and
administrative expenses 85 93 254 282
Depreciation and amortization 62 57 179 193
Interest 19 27 57 94
Merger-related expenses 12 - 12 -
Operational restructuring
effects - net - (315) - (11)
- -----------------------------------------------------------------
1,161 971 3,358 4,193
- -----------------------------------------------------------------
EARNINGS
Income before income taxes,
extraordinary loss and
cumulative effect of
accounting change 48 397 80 286
Taxes on income 12 135 19 89
- -----------------------------------------------------------------
Income before extraordinary
loss and cumulative effect
of accounting change 36 262 61 197
Extraordinary loss - (60) - (63)
Cumulative effect of
accounting change - - - (23)
- -----------------------------------------------------------------
NET INCOME $ 36 $ 202 $ 61 $ 111
==================================================================
EARNINGS PER SHARE
Basic:
Average shares outstanding 63 69 64 72
Income before extraordinary
loss and cumulative effect
of accounting change $0.56 $3.80 $0.95 $2.76
Extraordinary loss - (0.88) - (0.89)
Cumulative effect of
accounting change - - - (0.32)
- -----------------------------------------------------------------
Net income $0.56 $2.92 $0.95 $1.55
==================================================================
Diluted:
Average shares outstanding 63 69 64 72
Income before extraordinary
loss and cumulative effect
of accounting change $0.56 $3.80 $0.95 $2.76
Extraordinary loss - (0.88) - (0.89)
Cumulative effect of
accounting change - - - (0.32)
- -----------------------------------------------------------------
Net income $0.56 $2.92 $0.95 $1.55
==================================================================
CASH DIVIDENDS PER
COMMON SHARE $0.35 $0.35 $1.05 $1.05
==================================================================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
2
3
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
=========================================================================
(millions) September 30 December 31
- ------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 62 $ 94
Receivables, less allowances of $9 (1998 - $14) 666 894
Inventories 530 500
Prepaid expenses and other 110 114
- ------------------------------------------------------------------------
Total current assets 1,368 1,602
Unincorporated joint ventures and associated
companies 1,622 1,478
Property, plant and equipment 4,305 4,282
Less allowances for depreciation and amortization 2,293 2,258
- ------------------------------------------------------------------------
2,012 2,024
Deferred taxes and other assets 966 1,030
- ------------------------------------------------------------------------
Total assets $5,968 $6,134
=========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities $ 809 $ 929
Short-term borrowings 311 116
Long-term debt 138 196
- ------------------------------------------------------------------------
Total current liabilities 1,258 1,241
Long-term debt 1,009 1,035
Postretirement benefits 1,014 1,029
Environmental, deferred taxes and other
liabilities 593 635
Stockholders' equity:
Common stock 1,560 1,533
Retained earnings 1,216 1,222
Treasury stock, at cost (626) (526)
Accumulated other comprehensive income (56) (35)
- ------------------------------------------------------------------------
Total stockholders' equity 2,094 2,194
- ------------------------------------------------------------------------
Contingent liabilities (Note 9)
Total liabilities and stockholders' equity $5,968 $6,134
======================================================================
The accompanying notes to consolidated financial statements are an integral
part of these statements.
3
4
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
=========================================================================
- ------------------------------------------------------------------------
Nine months ended September 30 (millions) 1999 1998
- ------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 61 $ 111
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 179 193
Operational restructuring effects - (11)
Deferred taxes and other (13) 10
Merger-related expenses 12 -
Extraordinary item - 63
Cumulative effect of accounting change - 23
Changes in operating assets and liabilities net
of effects of dispositions:
Accounts payable, accrued and other liabilities (47) (149)
Receivables 105 (49)
Inventories (34) 75
Environmental and restructuring liabilities (34) (42)
Other (56) (63)
- ------------------------------------------------------------------------
Net cash provided by operating activities 173 161
INVESTING ACTIVITIES
Capital investments:
Operational (85) (102)
Strategic (291) (115)
Operational restructuring proceeds 204 1,066
Other (6) (24)
- ------------------------------------------------------------------------
Net cash provided by (used in) investing activities (178) 825
FINANCING ACTIVITIES
Increase in short-term borrowings 197 97
Proceeds from long-term debt 250 250
Reduction of long-term debt (333) (769)
Cash dividends paid (68) (76)
Repurchase of common stock (100) (526)
Stock options exercised 27 11
- ------------------------------------------------------------------------
Net cash used in financing activities (27) (1,013)
CASH AND CASH EQUIVALENTS
Net decrease (32) (27)
At beginning of period 94 70
- ------------------------------------------------------------------------
At end of period $ 62 $ 43
=========================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
4
5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
=========================================================================
- ------------------------------------------------------------------------
Nine months ended September 30 1999 1998
- ------------------------------------------------------------------------
SHARES (thousands):
Common stock
Balance at January 1 74,105 73,909
Issued under employee benefit plans 462 194
- ------------------------------------------------------------------------
Balance at September 30 74,567 74,103
- ------------------------------------------------------------------------
Treasury stock
Balance at January 1 (9,648) -
Purchased and held as treasury stock (1,694) (9,648)
- ------------------------------------------------------------------------
Balance at September 30 (11,342) (9,648)
- ------------------------------------------------------------------------
Net common shares outstanding 63,225 64,455
- ------------------------------------------------------------------------
DOLLARS (millions):
Common stock
Balance at January 1 $1,533 $1,521
Issued under employee benefit plans 27 12
- ------------------------------------------------------------------------
Balance at September 30 $1,560 $1,533
- ------------------------------------------------------------------------
Retained earnings
Balance at January 1 $1,222 $1,253
Net income (loss) 61 111
Cash dividends declared for common stock (67) (75)
- ------------------------------------------------------------------------
Balance at September 30 $1,216 $1,289
- ------------------------------------------------------------------------
Treasury stock
Balance at January 1 $ (526) $ -
Purchased and held as treasury stock (100) (526)
- ------------------------------------------------------------------------
Balance at September 30 $ (626) $ (526)
- ------------------------------------------------------------------------
Accumulated other comprehensive income (loss)
Balance at January 1 $ (35) $ (35)
Foreign currency translation adjustments (21) 2
Income taxes - (6)
-------------------------
Other comprehensive income (loss) (21) (4)
- ------------------------------------------------------------------------
Balance at September 30 $ (56) $ (39)
- ------------------------------------------------------------------------
Total stockholders' equity $2,094 $2,257
- ------------------------------------------------------------------------
COMPREHENSIVE INCOME (millions):
Net income (loss) $ 61 $ 111
Other comprehensive income (loss) (21) (4)
- ------------------------------------------------------------------------
Comprehensive income (loss) $ 40 $ 107
- ------------------------------------------------------------------------
Comprehensive income was $39 million for the third quarter of 1999 and $213
million for the third 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 September 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, as amended. 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. MERGER
On August 18, 1999, the Company, Alcoa Inc. (Alcoa) and RLM
Acquisition Corp., a wholly owned subsidiary of Alcoa,
entered into an agreement and plan of merger. Under the
merger agreement, each outstanding share of common stock, no
par value, of the Company will be converted into 1.06 shares
of common stock, par value $1.00 per share, of Alcoa. In
connection with the merger agreement, the Company amended
its shareholder rights plan to render the plan inapplicable
to this transaction. In the third quarter of 1999, the
Company recognized $12 million of merger-related expenses.
Merger-related expenses are principally for investment
banking and legal services and an increase in the expense
accrual for a long-term compensation plan, which varies
based principally on appreciation of the Company's stock
price as compared to the S&P Basic Materials Index.
6
7
3. MERGER- continued
The Boards of Directors of both Alcoa and Reynolds have
approved the proposed merger, which is subject to customary
conditions, including approval by the Company's stockholders
and antitrust clearances. On September 29, 1999, the
Antitrust Division of the Department of Justice issued a
request for additional information and documentary material
(a "second request"). Under the applicable provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
the merger may not be consummated until the expiration of a
statutory waiting period, which expires 20 days after both
the Company and Alcoa substantially comply with the second
request. The Company and Alcoa will also make filings under
the competition laws of Canada and the European Union and
other countries where the companies have significant
operations.
The merger agreement contains certain restrictions on the
conduct of the Company's business before completion of the
merger. For example, the Company has agreed to operate its
business only in the ordinary course, to refrain from taking
certain corporate actions without the consent of Alcoa, and
not to solicit alternative acquisition proposals.
Reference is made to the copy of the merger agreement
incorporated by reference herein as Exhibit 2.
4. OPERATIONAL RESTRUCTURING
In the first quarter of 1999, the final closing of the sale
of the Company's Alabama can stock complex occurred. Early
in the fourth quarter of 1999, the Company announced that it
had agreed in principle to sell its investment in a Canadian
aluminum foil and sheet operation. No gain or loss will be
recognized for this transaction, which is subject to
regulatory and Board approvals, third party consents,
negotiation and execution of definitive agreements and other
customary closing conditions.
In the nine-month period of 1998, the Company sold the
following:
. U.S. recycling operations
. Canadian extrusion facilities
. European rolling mill operations
. an Illinois sheet and plate plant
. North American aluminum beverage can operations
5. EXTRAORDINARY LOSS
The Company had extraordinary losses from debt
extinguishments in the third quarter ($60 million) and the
nine-month period of 1998 ($63 million). These amounts are
net of income tax benefits of $38 million in the third
quarter and $39 million in the nine-month period.
7
8
6. 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 September 30
-----------------------------
1999 1998
-----------------------------
Income (numerator):
Income before extraordinary loss and
cumulative effect of accounting change
(Basic and Diluted) $36 $262
Average shares (denominator):
Basic 63,065,000 69,241,000
Effect of dilutive securities:
Stock options 288,000 84,000
Stock potentially issuable under a
long-term incentive plan 101,000 -
-----------------------------
Diluted 63,454,000 69,325,000
-----------------------------
Per share amount:
Basic $.56 $3.80
Diluted $.56 $3.80
Antidilutive securities excluded:
Stock options 1,301,000 3,955,000
Nine Months ended September 30
--------------------------------
1999 1998
--------------------------------
Income (numerator):
Income before extraordinary loss and
cumulative effect of accounting
change (Basic and Diluted) $61 $197
Average shares (denominator):
Basic 63,888,000 71,474,000
Effect of dilutive securities:
Stock options 173,000 257,000
Stock potentially issuable under
a long-term incentive plan 54,000 -
--------------------------------
Diluted 64,115,000 71,731,000
--------------------------------
Per share amount:
Basic $.95 $2.76
Diluted $.95 $2.76
Antidilutive securities excluded:
Stock options 2,532,000 2,306,000
7. FINANCING ARRANGEMENTS
In the nine months of 1999, the Company:
. borrowed $150 million under its revolving credit
facilities that bear interest at a variable rate (5.8% at
September 30, 1999, based on the London Interbank Offer
Rate) and require repayment in a lump sum in 2001
. 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
. increased available revolving credit facilities by $185
million (with an annual commitment fee of .125% on the
unused portion)
8
9
8. COMPANY OPERATIONS
Certain amounts for the third quarter and nine-month period of 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
===========================================================================
Third Quarter 1999
Customer aluminum shipments 226 36 53
Intersegment aluminum shipments 52 - -
- --------------------------------------------------------------------------
Total aluminum shipments 278 36 53
===========================================================================
Revenues:
Aluminum $357 $199 $176
Nonaluminum 97 156 80
Intersegment revenues - aluminum 78 - -
- --------------------------------------------------------------------------
Total revenues $532 $355 $256
===========================================================================
Segment operating income (loss) $ 78 $ 35 $ 11
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
Merger-related expenses
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
Third Quarter 1998
Customer aluminum shipments 172 34 48
Intersegment aluminum shipments 94 - -
- --------------------------------------------------------------------------
Total aluminum shipments 266 34 48
===========================================================================
Revenues:
Aluminum $263 $191 $176
Nonaluminum 85 150 79
Intersegment revenues - aluminum 156 - -
- --------------------------------------------------------------------------
Total revenues $504 $341 $255
===========================================================================
Segment operating income (loss) $ 65 $ 34 $ 13
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
9
10
Transportation Restructuring Other
===========================================================================
Third Quarter 1999
Customer aluminum shipments 17 - 14
Intersegment aluminum shipments - - -
- --------------------------------------------------------------------------
Total aluminum shipments 17 - 14
===========================================================================
Revenues:
Aluminum $ 89 $ - $35
Nonaluminum - - 14
Intersegment revenues - aluminum - - -
- --------------------------------------------------------------------------
Total revenues $ 89 $ - $49
===========================================================================
Segment operating income (loss) $(15) $ - $ 4
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
Merger-related expenses
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
Third Quarter 1998
Customer aluminum shipments 15 88 9
Intersegment aluminum shipments - - -
- --------------------------------------------------------------------------
Total aluminum shipments 15 88 9
===========================================================================
Revenues:
Aluminum $75 $299 $26
Nonaluminum - 1 10
Intersegment revenues - aluminum - - -
- --------------------------------------------------------------------------
Total revenues $75 $300 $36
===========================================================================
Segment operating income (loss) $(7) $ 31 $(1)
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
Total Reconciling
Segments Items Consolidated
===========================================================================
Third Quarter 1999
Customer aluminum shipments 346 - 346
Intersegment aluminum shipments 52 (52) -
- --------------------------------------------------------------------------
Total aluminum shipments 398 (52) 346
===========================================================================
Revenues:
Aluminum $ 856 $ - $ 856
Nonaluminum 347 6 353
Intersegment revenues - aluminum 78 (78) -
- --------------------------------------------------------------------------
Total revenues $1,281 $ (72) $1,209
===========================================================================
Segment operating income (loss) $ 113 $ - $ 113
Inventory accounting adjustments -
Corporate amounts (34)
Operational restructuring effects - net -
Merger-related expenses (12)
- --------------------------------------------------------------------------
Corporate operating income 67
Interest expense (19)
Taxes on income (12)
Extraordinary loss -
Cumulative effect of accounting change -
- --------------------------------------------------------------------------
Net income $ 36
===========================================================================
Third Quarter 1998
Customer aluminum shipments 366 - 366
Intersegment aluminum shipments 94 (94) -
- --------------------------------------------------------------------------
Total aluminum shipments 460 (94) 366
===========================================================================
Revenues:
Aluminum $1,030 $ - $1,030
Nonaluminum 325 13 338
Intersegment revenues - aluminum 156 (156) -
- --------------------------------------------------------------------------
Total revenues $1,511 $(143) $1,368
===========================================================================
Segment operating income (loss) $ 135 $ - $ 135
Inventory accounting adjustments 1
Corporate amounts (27)
Operational restructuring effects - net 315
- --------------------------------------------------------------------------
Corporate operating income 424
Interest expense (27)
Taxes on income (135)
Extraordinary loss (60)
Cumulative effect of accounting change -
- --------------------------------------------------------------------------
Net income $ 202
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
10
11
8. COMPANY OPERATIONS - continued
Packaging Construction
Base and and
Materials Consumer Distribution
===========================================================================
Nine Months ended September 30, 1999
Customer aluminum shipments 653 107 151
Intersegment aluminum shipments 156 - -
- --------------------------------------------------------------------------
Total aluminum shipments 809 107 151
===========================================================================
Revenues:
Aluminum $ 973 $ 583 $505
Nonaluminum 257 438 237
Intersegment revenues - aluminum 225 - -
- --------------------------------------------------------------------------
Total revenues $1,455 $1,021 $742
===========================================================================
Segment operating income (loss) $ 147 $ 103 $ 32
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
Merger-related expenses
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
Nine Months ended September 30, 1998
Customer aluminum shipments 485 101 140
Intersegment aluminum shipments 275 - -
- --------------------------------------------------------------------------
Total aluminum shipments 760 101 140
===========================================================================
Revenues:
Aluminum $ 778 $ 571 $511
Nonaluminum 314 430 242
Intersegment revenues - aluminum 445 - -
- --------------------------------------------------------------------------
Total revenues $1,537 $1,001 $753
===========================================================================
Segment operating income (loss) $ 239 $ 96 $ 29
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
11
12
Transportation Restructuring Other
===========================================================================
Nine Months ended September 30, 1999
Customer aluminum shipments 54 - 44
Intersegment aluminum shipments - - -
- --------------------------------------------------------------------------
Total aluminum shipments 54 - 44
===========================================================================
Revenues:
Aluminum $289 $ - $ 99
Nonaluminum - - 23
Intersegment revenues - aluminum - - -
- --------------------------------------------------------------------------
Total revenues $289 $ - $122
===========================================================================
Segment operating income (loss) $(23) $ - $ 7
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
Merger-related expenses
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
Nine Months ended September 30, 1998
Customer aluminum shipments 46 307 27
Intersegment aluminum shipments - 4 -
- --------------------------------------------------------------------------
Total aluminum shipments 46 311 27
===========================================================================
Revenues:
Aluminum $242 $1,236 $ 81
Nonaluminum - 10 22
Intersegment revenues - aluminum - 12 -
- --------------------------------------------------------------------------
Total revenues $242 $1,258 $103
===========================================================================
Segment operating income (loss) $(14) $ 111 $ 1
Inventory accounting adjustments
Corporate amounts
Operational restructuring effects - net
- --------------------------------------------------------------------------
Corporate operating income
Interest expense
Taxes on income
Extraordinary loss
Cumulative effect of accounting change
- --------------------------------------------------------------------------
Net income
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
Total Reconciling
Segments Items Consolidated
===========================================================================
Nine Months ended September 30, 1999
Customer aluminum shipments 1,009 - 1,009
Intersegment aluminum shipments 156 (156) -
- --------------------------------------------------------------------------
Total aluminum shipments 1,165 (156) 1,009
===========================================================================
Revenues:
Aluminum $2,449 - $2,449
Nonaluminum 955 34 989
Intersegment revenues - aluminum 225 (225) -
- --------------------------------------------------------------------------
Total revenues $3,629 $ (191) $3,438
===========================================================================
Segment operating income (loss) $ 266 $ - $ 266
Inventory accounting adjustments (2)
Corporate amounts (115)
Operational restructuring effects - net -
Merger-related expenses (12)
- --------------------------------------------------------------------------
Corporate operating income 137
Interest expense (57)
Taxes on income (19)
Extraordinary loss -
Cumulative effect of accounting change -
- --------------------------------------------------------------------------
Net income $ 61
===========================================================================
Nine Months ended September 30, 1998
Customer aluminum shipments 1,106 - 1,106
Intersegment aluminum shipments 279 (279) -
- --------------------------------------------------------------------------
Total aluminum shipments 1,385 (279) 1,106
===========================================================================
Revenues:
Aluminum $3,419 $ - $3,419
Nonaluminum 1,018 42 1,060
Intersegment revenues - aluminum 457 (457) -
- --------------------------------------------------------------------------
Total revenues $4,894 $(415) $4,479
===========================================================================
Segment operating income (loss) $ 462 $ - $ 462
Inventory accounting adjustments 5
Corporate amounts (98)
Operational restructuring effects - net 11
- --------------------------------------------------------------------------
Corporate operating income 380
Interest expense (94)
Taxes on income (89)
Extraordinary loss (63)
Cumulative effect of accounting change (23)
- --------------------------------------------------------------------------
Net income $ 111
===========================================================================
The reconciling amounts for nonaluminum revenues relate to corporate
activities.
12
13
9. CONTINGENT LIABILITIES
As previously disclosed in the Company's 1998 Form 10-K, as
amended, 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:
. continuing evolution of environmental laws and
regulatory requirements
. availability and application of technology
. identification of presently unknown remediation
requirements
. 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.
10. 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 Nine Months Ended
September 30 September 30
---------------- -------------------
1999 1998 1999 1998
---------------- -------------------
Net Sales:
Customers $143 $ 78 $385 $261
Parent and related companies 89 119 273 368
---------------- -------------------
$232 $197 $658 $629
Cost of products sold 193 178 578 539
Net income $ 27 $ 12 $ 42 $ 61
September 30 December 31
1999 1998
------------------------------------
Current assets $ 322 $ 155
Noncurrent assets 1,183 1,206
Current liabilities (115) (100)
Noncurrent liabilities (472) (379)
13
14
10. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM COMPANY
OF CANADA, LTD. - continued
Reynolds Aluminum Company of Canada, Ltd.
Quarters Ended Nine Months Ended
September 30 September 30
---------------- -------------------
1999 1998 1999 1998
---------------- -------------------
Net Sales:
Customers $143 $ 98 $385 $329
Parent and related companies 89 121 273 360
---------------- -------------------
$232 $219 $658 $689
Cost of products sold 193 199 578 594
Net income $ 28 $ 12 $ 43 $ 59
September 30 December 31
1999 1998
------------------------------------
Current assets $ 304 $ 186
Noncurrent assets 1,198 1,228
Current liabilities (106) (103)
Noncurrent liabilities (481) (389)
14
15
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, as amended, 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 23, 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.
MERGER
- ------
On August 18, 1999, the Company, Alcoa Inc. (Alcoa) and RLM
Acquisition Corp., a wholly owned subsidiary of Alcoa, entered
into an agreement and plan of merger. Under the merger
agreement, each outstanding share of common stock, no par value,
of the Company will be converted into 1.06 shares of common
stock, par value $1.00 per share, of Alcoa. In connection with
the merger agreement, the Company amended its shareholder rights
plan to render the plan inapplicable to this transaction. In the
third quarter of 1999, the Company recognized $12 million of
merger-related expenses. Merger-related expenses are principally
for investment banking and legal services and an increase in the
expense accrual for a long-term compensation plan, which varies
based principally on appreciation of the Company's stock price as
compared to the S&P Basic Materials Index. The Company expects
total merger-related expenses to be at least $25 million.
The Boards of Directors of both Alcoa and Reynolds have approved
the proposed merger, which is subject to customary conditions,
including approval by the Company's stockholders and antitrust
clearances. On September 29, 1999, the Antitrust Division of the
Department of Justice issued a request for additional information
and documentary material (a "second request"). Under the
applicable provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, the merger may not be consummated until
the expiration of a statutory waiting period, which expires 20
days after both the Company and Alcoa substantially comply with
the second request. The Company and Alcoa will also make filings
under the competition laws of Canada and the European Union and
other countries where the companies have significant operations.
The Company hopes to complete the merger in the first quarter of
next year. However, no assurances can be made that the merger
will be completed by then.
The merger agreement contains certain restrictions on the conduct
of the Company's business before completion of the merger. For
example, the Company has agreed to operate its business only in
the ordinary course, to refrain from taking certain corporate
actions without the consent of Alcoa, and not to solicit
alternative acquisition proposals.
Reference is made to the copy of the merger agreement
incorporated by reference herein as Exhibit 2.
RESULTS OF OPERATIONS
- ---------------------
Net income was $36 million for the third quarter of 1999 and $61
million for the nine months of 1999 compared with net income of
$202 million for the third quarter of 1998 and $111 million for
the nine months of 1998. Net income for the third quarter and
nine months of 1999 included after-tax merger-related expenses of
$9 million. In addition to the extraordinary loss and cumulative
effect of accounting change shown in the table below, the third
quarter and nine months of 1998 included non-recurring, after-tax
income of $201 million and $5 million, respectively, for
operational restructuring. For additional information concerning
the operational restructuring charges, see Note 4 to the
consolidated financial statements.
15
16
RESULTS OF OPERATIONS - continued
- ---------------------
Third Quarter Nine Months
--------------- --------------
1999 1998 1999 1998
--------------- --------------
RESULTS
Income before extraordinary
loss and cumulative effect
of accounting change $ 36 $ 262 $ 61 $ 197
Extraordinary loss (see Note 5) - (60) - (63)
Cumulative effect of accounting
change (see Note 2) - - - (23)
--------------- --------------
Net income $ 36 $ 202 $ 61 $ 111
=============== ==============
EARNINGS PER SHARE - BASIC
Income before extraordinary
loss and cumulative effect
of accounting change $0.56 $3.80 $0.95 $2.76
Extraordinary loss - (.88) - (.89)
Cumulative effect of
accounting change - - - (.32)
-------------------------------
Net income $0.56 $2.92 $0.95 $1.55
===============================
AVERAGE REALIZED PRICE PER POUND
Primary aluminum $0.71 $0.70 $0.68 $0.73
Our profit before tax from operations for the third quarter of
1999 was down $22 million compared to the third quarter of 1998.
This decrease was attributable principally to the following
factors:
. lower aluminum pricing in fabricated aluminum products of
$14 million
. loss of income on sold operations of $31 million
. weaker results in our Transportation unit
. a $7 million non-cash charge for foreign currency
translation of a Canadian deferred tax liability
On the positive side, gains in sales volumes across all global
business units, particularly Base Materials and Packaging and
Consumer, improved profit before taxes. Quarter-over-quarter
improvement in interest expense was $8 million, and SG&A expenses
from our ongoing operations were $4 million lower.
For the nine-month period, our profit before tax from operations
of $92 million was $183 million lower than we experienced for the
same period in 1998. Included in the results are three items
that had a negative impact:
. $143 million of lower aluminum pricing
. $111 million from the loss of income on sold operations
. $40 million of non-cash charges for foreign currency
translation relating to a Canadian deferred tax liability and
our investment in can operations in Brazil
Contributing $57 million to the favorable ongoing operating
results were higher sales volumes and lower conversion costs
primarily in our Base Materials unit, and lower SG&A expenses.
Year-over-year improvement for the nine-month period in interest
expense was $37 million.
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:
. Base Materials - alumina, carbon products, primary aluminum
ingot and billet, and electrical rod
. Packaging and Consumer - aluminum and plastic packaging and
consumer products; printing products
. Construction and Distribution - architectural construction
products and the distribution of a wide variety of aluminum and
stainless steel products
. Transportation - aluminum wheels, heat exchangers and
automotive structures
16
17
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
Base Materials
Third Quarter Nine Months
----------------- -----------------
1999 1998 1999 1998
----------------- -----------------
Aluminum shipments:
Customer 226 172 653 485
Internal 52 94 156 275
----------------- -----------------
Total 278 266 809 760
================= =================
Revenues:
Customer - aluminum $357 $263 $ 973 $ 778
- nonaluminum 97 85 257 314
Internal - aluminum 78 156 225 445
----------------- -----------------
Total $532 $504 $1,455 $1,537
================= =================
Operating income $ 78 $ 65 $ 147 $ 239
================= =================
The increase in customer aluminum shipments in the third quarter
and nine months of 1999 reflects strong demand for our value-
added products (foundry and sheet ingot, billet and rod), which
made up approximately 73% 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.
In addition to reflecting the changes in shipping volume,
aluminum revenues in the nine-month period of 1999 were
significantly affected by lower prices for primary aluminum.
Nonaluminum revenues were higher in the third quarter of 1999
because of higher prices for alumina. For the nine-month period
of 1999, nonaluminum revenues were lower because prices for
alumina were lower than those realized in the nine-month period
of 1998. Customer shipments of alumina were also lower due to
greater internal use resulting from our restart of idled primary
aluminum capacity in 1998.
Operating income improved in the third quarter of 1999 because of
higher prices for aluminum and alumina, higher shipments of
primary aluminum products, improved capacity utilization and
lower conversion costs. Operating income for the nine-month
period of 1999 was significantly impacted by lower prices for
most products. We were able to offset some of this decline with
higher shipments of primary aluminum, 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.
17
18
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
PACKAGING AND CONSUMER
Third Quarter Nine Months
--------------- ---------------
1999 1998 1999 1998
--------------- ---------------
Customer aluminum shipments 36 34 107 101
Revenues:
Customer - aluminum $199 $191 $ 583 $ 571
- nonaluminum 156 150 438 430
--------------- ---------------
Total $355 $341 $1,021 $1,001
=============== ===============
Operating income $ 35 $ 34 $ 103 $ 96
=============== ===============
Shipments and revenues were higher in the third quarter and nine
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 lower selling prices.
The increases in operating income in both periods reflect the
higher shipping volumes, lower conversion costs and lower costs
for aluminum raw materials. These benefits were somewhat offset
by the effects of lower selling prices. Raw material costs for
plastic products were higher in the third quarter of 1999 but
were lower in the nine-month period of 1999.
CONSTRUCTION AND DISTRIBUTION
Third Quarter Nine Months
--------------- ---------------
1999 1998 1999 1998
--------------- ---------------
Customer aluminum shipments 53 48 151 140
Revenues:
Customer - aluminum $176 $176 $505 $511
- nonaluminum 80 79 237 242
--------------- ---------------
Total $256 $255 $742 $753
=============== ===============
Operating income $ 11 $ 13 $ 32 $ 29
=============== ===============
Shipments increased in the third quarter and nine 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 Asia and Latin America.
Revenues were adversely affected in both periods because of lower
prices for most products. The decline in prices for aluminum
products reflects lower material costs. Prices for stainless
steel products were lower due to global supply/demand imbalances
and lower material costs.
Operating income was negatively affected in both periods by lower
selling prices and margins. These effects were more than offset
in the nine-month period of 1999 by lower conversion costs and
expenses.
18
19
RESULTS OF OPERATIONS - continued
- ---------------------
GLOBAL BUSINESS UNITS - continued
TRANSPORTATION
Third Quarter Nine Months
--------------- ---------------
1999 1998 1999 1998
--------------- ---------------
Customer aluminum shipments 17 15 54 46
Customer revenues $89 $75 $289 $242
Operating loss (15) (7) (23) (14)
Shipments and revenues were higher in the third quarter and nine
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. Shipments
and revenues in the third quarter of 1998 were adversely affected
by a strike at a major customer.
Operating losses were greater because of start-up costs relating
to an engine cradle program at our Indiana automotive structures
plant (see below) and higher conversion costs in wheel
operations. These effects were partially offset by lower
material costs, improved shipping volume and capacity utilization
in wheel and heat exchanger operations, and 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.
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. Early in the fourth quarter of
1999, the Company announced that it had agreed in principle to
sell its investment in a Canadian aluminum foil and sheet
operation included in this category. The transaction is subject
to regulatory and Board approvals, third party consents,
negotiation and execution of definitive agreements and other
customary closing conditions. No gain or loss will be recognized
for this transaction which is expected to close in the first
quarter of 2000.
RECONCILING ITEMS
The increases in corporate expenses in both 1999 periods were due
to foreign currency related losses and charges, principally in
Brazil and Canada.
For additional information concerning the global business units,
see Note 8 to the consolidated financial statements.
INTEREST EXPENSE
Interest expense decreased in both 1999 periods because of:
. lower amounts of debt outstanding
. lower average interest rates due to extinguishing higher
cost debt
. higher amounts for capitalized interest
19
20
RESULTS OF OPERATIONS - continued
- ---------------------
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:
. foreign taxes at different rates
. the effects of percentage depletion allowances
. 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.
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 completed preparation of our critical, date-sensitive
computer systems, processes and interfacing software which
include both our information systems and our non-information
systems (e.g., manufacturing and mechanical systems) for the year
2000. Our preparation included five phases: (1) inventory, (2)
planning, (3) conversion, (4) pre-installation testing and (5)
installation. 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
We have substantially completed validation of our remediation
efforts with additional post-installation testing of certain
critical computer systems. We have also tested the exchange of
data with certain suppliers, customers and government agencies.
Some additional quality assurance review and testing will
continue through year end based upon ongoing monitoring of status
information from customers and suppliers. Most computer software
package providers continue to monitor test results from their
customers as part of their quality assurance programs. We
anticipate that software package providers will continue to send
us updates in the fourth quarter and into 2000 if needed. We
will perform quality assurance testing on these updates.
20
21
RESULTS OF OPERATIONS - continued
- ---------------------
YEAR 2000 READINESS DISCLOSURE - continued
CONTINGENCY PLANNING
A 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 1,500
suppliers and have completed the process of rating them low,
medium or high risk in their progress toward being ready for the
year 2000. Critical suppliers rated as high risk received
primary attention for contingency planning or other measures such
as identifying additional sources of supply for critical
materials. In addition, we have nearly completed our plan to have
identified additional sources of supply or to develop 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.
As of September 30, 1999, we were on schedule with our third
party evaluations, having completed approximately 98% of the
projected total effort that we currently estimate will be needed.
We have completed year 2000 readiness evaluations of our largest
customers, none of which are material to our operations as a
whole. In addition, we will continue to respond to customer
inquiries regarding our year 2000 program and our progress in
addressing the issue.
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 are making
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 for the
remainder of the year and into the first quarter of 2000.
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.
COSTS
The total cost of our year 2000 remediation project is currently
expected to be approximately $22 million. As of September 30,
1999, we had incurred approximately $21 million, which includes
labor, equipment and license costs. We have not determined the
potential costs of business disruptions from supplier or customer
non-performance.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
WORKING CAPITAL
September 30 December 31
1999 1998
-------------- -------------
Working capital $110 $361
Ratio of current assets to current liabilities 1.1/1 1.3/1
The decline in working capital was due in part to the sale of
$125 million of accounts receivable under a non-recourse
facility. After completing substantially all of our Portfolio
Review process, we are able to operate with lower levels of
working capital.
OPERATING ACTIVITIES
Net cash provided by operating activities in the nine-month
period of 1999 was used to fund investing activities. It
includes the proceeds from the sale of accounts receivable.
21
22
INVESTING ACTIVITIES
Capital investments totaled $376 million in the nine-month period
of 1999. This amount includes $85 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:
. expanding the Worsley Alumina Refinery in Australia
. modernizing U.S. foil plants
. acquiring two producers of flexographic separations and
plates for the packaging industry in the U.S. and one in Canada
and a U.S. manufacturer of microwaveable containers for the food
service industry
. establishing a foodservice packaging and consumer products
subsidiary in Brazil
. expanding a plant in Europe that will produce composite
architectural products
. acquiring and opening new metals distribution centers
. expanding a forged wheel plant in Virginia (completed in the
first quarter of 1999)
. expanding and modifying an automotive structures plant in
Indiana (completed in the second quarter of 1999)
Total capital investments planned for 1999 (approximately $440
million) are primarily for those strategic projects now under way
and continuing operating requirements. We expect to fund the
capital investments remaining in 1999 primarily with cash
provided by operating activities supplemented with funds from
financing activities.
Part of the proceeds from operational restructuring was used to
repurchase common stock.
FINANCING ACTIVITIES
In the nine months of 1999, the Company:
. increased short-term borrowings by $197 million
. borrowed $150 million under our revolving credit facilities
and increased available revolving credit facilities by $185
million (see Note 7)
. issued $100 million of medium-term notes (see Note 7),
reducing to $13 million the amount of debt securities available
for issuance under our shelf registration
. increased the authorization to issue commercial paper from
$350 million to $500 million
. repurchased common stock with part of the proceeds from
sales of assets (see the Consolidated Statement of Changes in
Stockholders' Equity)
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 and to make other scheduled debt
payments.
22
23
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, as amended, 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<F1>.
The Company's expectations for the future and related forward-
looking statements are based on a number of assumptions and
forecasts, including:
. world economic growth and other economic indicators
(including rates of inflation, industrial production, housing
starts and light vehicle sales)
. trends in the Company's key markets
. global aluminum supply and demand conditions
. 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 remains optimistic about the demand for aluminum for
the remainder of 1999 and 2000. A strong recovery in Asia
(excluding Japan) and most of Western Europe coupled with
continued strong demand in North America should result in global
aluminum consumption growing by at least 3% in 1999. These
economic recoveries set the stage for aluminum consumption to
resume the forecast long-term trend growth rate of 4% to 5% per
year in 2000 and 2001.
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 following factors also could affect the Company's results:
. Primary aluminum is an internationally traded commodity.
The price of primary aluminum is subject to worldwide market
forces of supply and demand and other influences. Prices can be
volatile. 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.
. 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.
[FN]
________________________
<F1>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," "scheduled," or "plan" and words of similar effect.
</FN>
23
24
RISK FACTORS - continued
- ------------
. 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
. 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.
. 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.
. 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.
. A number of the Company's operations are cyclical and can be
influenced by economic conditions.
. A failure to complete the Company's major capital projects,
such as expansion of the Worsley Alumina Refinery (by reason of
construction delays or disputes, labor unrest or otherwise), as
scheduled and within budget or a failure to successfully launch
new growth or strategic business programs, such as the engine
cradle program where we are still experiencing excess start-up
costs, could affect the Company's results.
. The Company's results may be adversely affected if it fails
to address successfully the year 2000 issue. While the Company
believes it has prepared 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 entities with which the
Company does business will convert their computer applications on
a timely basis and no assurance given that their failure to be
year 2000 compliant will not have an adverse effect on the
Company.
. 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.
. The Company's proposed merger with Alcoa Inc. is subject to
certain conditions, including approval by the Company's
stockholders and antitrust clearance. As discussed under
"Merger" in this Item 2, the Antitrust Division of the
Department of Justice has issued a second request, and under
the applicable provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, the merger with Alcoa may not be
consummated until expiration of a statutory waiting period
which expires 20 days after both the Company and Alcoa
substantially comply with the second request. The Company and
Alcoa will also make filings under the competition laws of
Canada and the European Union and other countries where the
companies have significant operations. It is possible that
regulatory authorities may impose conditions on the combined
operations or require divestitures as a condition to approving
the merger. While the Company is working promptly toward
completion of the merger, no assurances can be given as to
whether regulatory delays will be encountered or regulatory
conditions to the merger imposed, or the possible effects of
such delays or conditions.
24
25
RISK FACTORS - continued
- ------------
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.
25
26
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 2. CHANGES IN SECURITIES
(a) Recent Sales of Unregistered Securities
Under the Registrant's Stock Plan for Outside Directors (the
"Plan"), 106 phantom shares, in the aggregate, were granted
to the Registrant's nine outside Directors on July 1, 1999,
based on an average price of $59.6250 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 September 30, 1999, based on an average
price of $60.00 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
During the third quarter of 1999, the Registrant filed two
Current Reports on Form 8-K with the Commission, each of
which reported matters under Item 5:
(1) A Form 8-K filed July 20, 1999, reporting that the
Registrant had improved its segment reporting by
removing corporate amounts from the Other category
and presenting them as separate reconciling items.
Filed with the report were 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.
(2) A Form 8-K filed August 19, 1999, reporting
that the Registrant, Alcoa Inc. and RLM
Acquisition Corp. had entered into an agreement
and plan of merger.
In addition, on October 20, 1999, the Registrant
filed a Current Report on Form 8-K reporting under
Item 5 that it was filing with the report an
unaudited pro forma statement of income for the year
ended December 31, 1998 relating to the
Registrant's sale of its North American aluminum
beverage can operations.
26
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
REYNOLDS METALS COMPANY
By ALLEN M. EAREHART
------------------------
Allen M. Earehart
Senior Vice President and Controller
(Chief Accounting Officer)
DATE: November 12, 1999
27
i
INDEX TO EXHIBITS
(Attached herewith are Exhibits 10.9 and 27)
* EXHIBIT 2 - Agreement and Plan of Merger among Alcoa
Inc., RLM Acquisition Corp. and Reynolds
Metals Company dated as of August 18,
1999. (File No. 001-01430, Form 8-K
Report dated August 19, 1999, EXHIBIT
99.1)
* 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 - Amended and Restated Rights Agreement
dated as of March 8, 1999 (the "Rights
Agreement") between Reynolds Metals
Company and ChaseMellon Shareholder
Services, L.L.C. (File No. 001-01430,
Form 8-K Report dated March 8, 1999,
EXHIBIT 4.1)
* EXHIBIT 4.7 - First Amendment dated August 20, 1999 to the
Rights Agreement. (File No. 001-01430,
Form 8-A/A (Amendment No. 2 to
Registration Statement on Form 8-A,
pertaining to Preferred Stock Purchase
Rights) dated August 19, 1999, EXHIBIT
1)
* EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.3)
* EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.4)
* EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term
Note. (File No. 001-01430, 1991 Form 10-
K Report, EXHIBIT 4.15)
______________________
* Incorporated by reference.
i
ii
* EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 001-01430, 1991 Form 10-
K Report, EXHIBIT 4.16)
* EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003.
(File No. 001-01430, Form 8-K Report
dated August 16, 1991, Exhibit 4(a))
* EXHIBIT 4.13 - Articles of Continuance of Societe
d'Aluminium Reynolds du Canada,
Ltee/Reynolds Aluminum Company of
Canada, Ltd. (formerly known as Canadian
Reynolds Metals Company, Limited --
Societe Canadienne de Metaux Reynolds,
Limitee) ("RACC"), as amended. (File
No. 001-01430, 1995 Form 10-K Report,
EXHIBIT 4.13)
* EXHIBIT 4.14 - 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 4.15 - 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 4.16 - 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 4.17 - 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 4.18 - 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 4.19 - 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. (File No. 001-01430, Form 10-Q
Report for the Quarter ended June 30,
1999, EXHIBIT 10.3)
_______________________
* 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.
ii
iii
=* EXHIBIT 10.4 - Amendment and Restatement of
Supplemental Death Benefit Plan for
Officers, as adopted and executed April
26, 1999. (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1999, EXHIBIT 10.5)
=* EXHIBIT 10.5 - Financial Counseling Assistance Plan for
Officers. (File No. 001-01430, 1987
Form 10-K Report, EXHIBIT 10.11)
=* EXHIBIT 10.6 - Management Incentive Deferral Plan.
(File No. 001-01430, 1987 Form 10-K
Report, EXHIBIT 10.12)
=* EXHIBIT 10.7 - Amendment and Restatement of Deferred
Compensation Plan for Outside Directors,
as adopted and executed April 28, 1999.
(File No. 001-01430, Form 10-Q Report
for the Quarter ended June 30, 1999,
EXHIBIT 10.8)
=* EXHIBIT 10.8 - Form of Indemnification Agreement for
Directors and Officers. (File No. 001-
01430, 1998 Form 10-K Report, EXHIBIT
10.9)
= EXHIBIT 10.9 - 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 10.10 - 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 10.11 - 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 10.12 - 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 10.13 - 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 10.14 - 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)
_______________________
* 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.
iii
iv
=* EXHIBIT 10.15 - 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 10.16 - Amendment and Restatement of Reynolds
Metals Company Restricted Stock Plan for
Outside Directors, as adopted and
executed April 28, 1999. (File No. 001-
01430, Form 10-Q report for the Quarter
ended June 30, 1999, EXHIBIT 10.17)
=* EXHIBIT 10.17 - Amendment and Restatement of Reynolds
Metals Company New Management Incentive
Deferral Plan, as adopted and executed
April 28, 1999. (File No. 001-01430,
Form 10-Q Report for the Quarter ended
June 30, 1999, EXHBIT 10.18)
=* EXHIBIT 10.18 - Amendment and Restatement of Reynolds
Metals Company Salary Deferral Plan for
Executives, as adopted and executed
April 28, 1999. (File N0. 001-01430,
Form 10-Q Report for the Quarter ended
June 30, 1999, Exhibit 10.19)
=* EXHIBIT 10.19 - Amendment and Restatement of Reynolds
Metals Company Supplemental Long-Term
Disability Plan for Executives, as
adopted and executed April 26, 1999.
(File No. 001-1430, Form 10-Q Report for
the Quarter Ended June 30, 1999, EXHIBIT
10.20)
=* EXHIBIT 10.20 - 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 10.21 - 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 10.22 - 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 10.23 - 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 10.24 - 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)
____________________________
* 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.
iv
v
=* EXHIBIT 10.25 - 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 10.26 - 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 10.27 - Amendment and Restatement of Reynolds
Metals Company 1996 Nonqualified Stock
Option Plan, as adopted and executed
April 15, 1999. (File No. 001-01430,
Form 10-Q Report for the Quarter ended
June 30, 1999, EXHIBIT 10.28)
=* EXHIBIT 10.28 - 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 10.29 - 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)
=* EXHIBIT 10.30 - 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 10.31 - Reynolds Metals Company Supplemental
Incentive Plan. (File No. 001-01430,
1996 Form 10-K Report, EXHIBIT 10.40)
=* EXHIBIT 10.32 - Amendment and Restatement of Reynolds
Metals Company Stock Plan for Outside
Directors, as adopted and executed April
28, 1999. (File No. 001-01430, Form 10-
Q Report for the Quarter ended June 30,
1999, EXHIBIT 10.34)
=* EXHIBIT 10.33 - Amendment and Restatement of Reynolds
Metals Company Long-Term Performance
Share Plan, as adopted and executed
April 26, 1999. (File No. 001-01430,
Form 10-Q Report for the Quarter Ended
June 30, 1999, EXHIBIT 10.37)
* EXHIBIT 10.34 - 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)
____________________________
* 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.
v
vi
=* EXHIBIT 10.35 - 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 10.36 - Form of Stock Option Agreement, as approved
May 21, 1999 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,
1999, EXHIBIT 10.40)
=* EXHIBIT 10.37 - Form of Three Party Stock Option Agreement,
as approved May 21, 1999 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, 1999, Exhibit 10.41)
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.
= Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
vi