-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O+GTxS0iPQzC8q0vPQPgP0tMHmJqnZGJ2VK2o6fYRyZqBypVi5191Q7fLE4lXf7P BFV4qNlN0kR1p/4+7fcBDw== 0000083604-95-000021.txt : 19951119 0000083604-95-000021.hdr.sgml : 19951119 ACCESSION NUMBER: 0000083604-95-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REYNOLDS METALS CO CENTRAL INDEX KEY: 0000083604 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 540355135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01430 FILM NUMBER: 95589304 BUSINESS ADDRESS: STREET 1: 6601 W BROAD ST STREET 2: PO BOX 27003 CITY: RICHMOND STATE: VA ZIP: 23261 BUSINESS PHONE: 8042812000 10-Q 1 1 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, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-1430 REYNOLDS METALS COMPANY A Delaware Corporation (I.R.S. Employer Identification No. 54-0355135) 6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-7003 Telephone Number (804) 281-2000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ As of October 31, 1995, the Registrant had 63,587,225 shares of Common Stock, no par value, outstanding and entitled to vote. PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) - ----------------------------------------------------------------------------------------- Reynolds Metals Company
Quarter ended Nine months ended September 30 September 30 - ----------------------------------------------------------------------------------------- (In millions, except per share amounts) 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------- Revenues Net sales $1,841 $1,531 $5,356 $4,240 Equity, interest and other income 4 13 24 25 Gain on sale of asset - 63 - 63 - ----------------------------------------------------------------------------------------- 1,845 1,607 5,380 4,328 - ----------------------------------------------------------------------------------------- Costs and expenses Cost of products sold 1,534 1,372 4,486 3,849 Selling, administrative and general expenses 115 98 335 283 Interest - principally on long-term obligations 42 40 129 114 - ----------------------------------------------------------------------------------------- 1,691 1,510 4,950 4,246 - ----------------------------------------------------------------------------------------- Income before income taxes 154 97 430 82 Taxes on income 42 35 125 29 - ----------------------------------------------------------------------------------------- Net income 112 62 305 53 Preferred stock dividends 9 9 27 25 - ----------------------------------------------------------------------------------------- Net income available to common stockholders $ 103 $ 53 $ 278 $ 28 ========================================================================================= Income per share (Note B) Average shares outstanding 72 62 73 62 Net income $1.56 $0.86 $4.20 $0.45 Cash dividends per common share $0.30 $0.25 $0.85 $0.75 - -----------------------------------------------------------------------------------------
- 2 - 3 CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) - ----------------------------------------------------------------------------------------- Reynolds Metals Company
September 30 December 31 - ------------------------------------------------------------------------------------------ (In millions) 1995 1994 - ------------------------------------------------------------------------------------------ ASSETS Current assets Cash and cash equivalents $187 $308 Short-term investments 61 126 Receivables, less allowances of $21 (1994 - $19) 1,065 962 Inventories 978 873 Prepaid expenses 55 53 - ------------------------------------------------------------------------------------------ Total current assets 2,346 2,322 Unincorporated joint ventures and associated companies 886 856 Property, plant and equipment 6,543 6,308 Less allowances for depreciation and amortization 3,373 3,200 - ------------------------------------------------------------------------------------------ 3,170 3,108 Deferred taxes and other assets 1,174 1,175 - ------------------------------------------------------------------------------------------ Total assets $7,576 $7,461 ========================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable, accrued and other liabilities $1,136 $1,286 Short-term obligations 117 120 Long-term debt 15 18 - ------------------------------------------------------------------------------------------ Total current liabilities 1,268 1,424 Long-term debt 1,907 1,848 Postretirement benefits 1,094 1,145 Environmental, deferred taxes and other liabilities 721 772 Stockholders' equity Preferred stock 505 505 Common stock 941 870 Retained earnings 1,203 980 Cumulative currency translation adjustments (23) (43) Pension liability adjustment (40) (40) - ------------------------------------------------------------------------------------------ Total stockholders' equity 2,586 2,272 - ------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $7,576 $7,461 ==========================================================================================
- 3 - 4 CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) - -------------------------------------------------------------------------------------------- Reynolds Metals Company
Nine months ended September 30 - -------------------------------------------------------------------------------------------- (In millions) 1995 1994 - -------------------------------------------------------------------------------------------- Operating activities Net income $305 $ 53 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 229 217 Gain on sale of asset - (63) Deferred taxes and other 40 44 Changes in operating assets and liabilities net of effects from acquisitions and dispositions: Accounts payable, accrued and other liabilities (178) 117 Receivables (105) (115) Inventories (95) (88) Other (69) 20 - -------------------------------------------------------------------------------------------- Net cash provided by operating activities 127 185 Investing activities Capital investments (330) (272) Proceeds from sales of assets 30 130 Investments in debt securities - (139) Maturities of investments in debt securities 65 - Other investing activities - net 1 (56) - -------------------------------------------------------------------------------------------- Net cash used in investing activities (234) (337) Financing activities Proceeds from preferred stock issue - 505 Proceeds from long-term obligations 64 - Decrease in short-term borrowings (9) (66) Cash dividends paid (77) (47) Reduction of long-term debt and other financing activities 8 (137) - -------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (14) 255 Cash and cash equivalents Net increase (decrease) (121) 103 At beginning of period 308 19 - -------------------------------------------------------------------------------------------- At end of period $187 $122 ============================================================================================
- 4 - 5 REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Quarters and Nine Months Ended September 30, 1995 and 1994 Note A - 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 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. 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, 1994. Note B - Earnings per share In the third quarter and nine months of 1995, earnings per share equals net income divided by the weighted-average number of common shares and common share equivalents outstanding during the period. The number of common share equivalents outstanding was based on the assumed conversion of the Company's 7% PRIDES(SM), Convertible Preferred Stock ("PRIDES"). In the third quarter and nine months of 1994, earnings per share equals net income, minus PRIDES dividends, divided by the weighted-average number of common shares outstanding during the period. Common share equivalents relating to the PRIDES were not included in the third quarter and nine months of 1994 since their effect would have been anti-dilutive. Note C - Financing Arrangements In the first quarter of 1995, the Company amended its $500 million revolving credit facility to extend the term and lower the cost. The expiration date of the facility was extended from 1999 to 2000. The annual commitment fee on the unused portion of the facility was lowered from .20% to .125%. No amounts were outstanding under the facility at September 30, 1995. Borrowings in the second quarter of 1995 included $22 million of tax-exempt bonds which were issued to finance a portion of the costs of acquiring, constructing and installing sewage and solid waste disposal facilities at the Company's primary aluminum production plant in Massena, N.Y. The bonds, which require a single repayment in 2025, bear interest at a variable rate (4.2% at September 30, 1995). In the third quarter of 1995, the Company issued $32 million of medium term notes. The Company also issued $40 million of medium term notes early in the fourth quarter of 1995. The notes bear interest at an average rate of 6.0% and mature in 1996 and 1997. Also early in the fourth quarter, the Company issued $200 million of commercial paper. The commercial paper bears interest at an average rate of 5.9% and will be classified as short term debt. The proceeds from the borrowings were supplemented with cash and were used early in the fourth quarter to acquire an additional interest (24.95%) in the Becancour primary aluminum facility for approximately $390 million, plus associated working capital. - 5 - 6 Note D - Contingent liabilities As previously disclosed in the Company's annual report on Form 10-K for the year ended December 31, 1994, the Company is involved in various worldwide environmental improvement activities resulting from past operations, including designation as a potentially responsible party, with others, at various EPA designated Superfund sites. The Company has recorded amounts which, in management's best estimate, will be sufficient to satisfy anticipated costs of known remediation requirements. As a result of factors such as the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among potentially responsible parties, estimated costs for future environmental compliance and remediation are necessarily imprecise. Based upon information presently available, such future costs are not expected to have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. However, such costs could be material to future quarterly or annual results of operations. Various suits and claims are pending against the Company. In the opinion of management, after consultation with counsel, disposition of these suits and claims, either individually or in the aggregate, will not have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. No assurance can be given, however, that the disposition of one or more of such suits or claims in a particular reporting period will not be material in relation to the reported results for such period. Note E - Canadian Reynolds Metals Company, Limited Summarized financial information for Canadian Reynolds Metals Company, Limited is as follows:
Quarter ended September 30 Nine Months ended September 30 ---------------------------- -------------------------------- 1995 1994 1995 1994 ---------------------------- -------------------------------- Net Sales: Customers $161 $102 $410 $268 Parent company 125 141 444 371 ---------------------------- -------------------------------- 286 243 854 639 Cost of products sold 215 200 608 568 Net income $44 $15 $153 $21
September 30 December 31 1995 1994 -------------- ------------- Current assets $467 $238 Noncurrent assets 989 1,015 Current liabilities (97) (83) Noncurrent liabilities (597) (564)
Note F - Other Information The Financial Accounting Standards Board issued in March, 1995, FAS No. 121 - - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The Company is in the process of evaluating the provisions of this pronouncement and has not made a determination as to the impact, if any, on the Company's financial position and/or results of operations. - 6 - 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included in or referred to in this report. RESULTS OF OPERATIONS The Company earned net income of $112 million ($1.56 per share) and $305 million ($4.20 per share) in the third quarter and nine months of 1995, respectively, compared to net income of $62 million ($0.86 per share) in the third quarter of 1994 and $53 million ($0.45 per share) in the nine months of 1994. Net income in the third quarter and nine months of 1994 included $41 million ($0.66 per share) from the sale of Reynolds Australia Metals, Ltd., which held a 40 percent interest in the Boddington Gold Mine in Western Australia. The Company's results for the third quarter and nine months of 1995 reflect continued strength in overall global demand for aluminum products, improved prices and actions the Company has taken to improve performance such as acquisitions, divestitures, restructurings and cost reduction. Shipments and Revenues Shipments, net sales and revenues per pound for the third quarter and nine months of 1995 and 1994 were as follows (metric tons in thousands and dollars in millions, except per pound amounts): Third Quarter Nine Months 1995 1994 1995 1994 ----------------- ----------------- Aluminum product shipments 428 410 1,246 1,161 Net sales: Aluminum $1,469 $1,182 $4,311 $3,235 Nonaluminum 372 349 1,045 1,005 ------------------ ----------------- Total $1,841 $1,531 $5,356 $4,240 ================== ================= Revenues per pound: Fabricated aluminum products $1.91 $1.51 $1.83 $1.45 Primary aluminum $0.89 $0.74 $0.92 $0.67 The soft landing of the U.S. economy and an economic slowdown in Europe have had an impact on the Company's product mix with a higher portion of shipments being in primary aluminum. Higher aluminum shipments in both 1995 periods reflect higher shipments of primary aluminum, which increased 38% and 21% respectively, in the third quarter and nine months of 1995 over the corresponding 1994 periods. Shipments of fabricated aluminum products declined 4% in the third quarter, primarily due to lower shipments of cans and ends, but rose 4% in the nine month period as a result of higher shipments of cans and ends, can sheet and distributor sheet. Higher shipments of cans and ends and distributor sheet in the nine month period were also attributable to the acquisitions of a can manufacturing facility in the second quarter of 1994 and a metals distribution business in the third quarter of 1994. The increases in net sales for aluminum products in both periods were due to higher prices for most aluminum products and the higher shipping volume. - 7 - 8 RESULTS OF OPERATIONS - continued Shipments and Revenues - continued The increase in nonaluminum sales was due to strong demand and improved prices for alumina and stainless steel. Due to the strength in the alumina market, the Company has restarted the idle capacity at its alumina plant near Corpus Christi, Texas. The increase in sales of stainless steel was also attributable to the acquisition of the metals distribution business mentioned above. For further information concerning shipments and revenues, see the discussion under "Operating Area Analysis". Markets Revenues by principal markets were: Third Quarter Nine Months 1995 1994 1995 1994 ------------- ----------- Packaging and Containers 45% 45% 43% 45% Distributors and Fabricators 13 13 14 13 Automotive and Transportation 13 12 13 11 Building and Construction 13 14 13 13 Electrical 2 3 3 3 Other 14 13 14 15 ------------- ----------- Total 100% 100% 100% 100% ============= =========== Demand was strong in most of the Company's principal markets. Sales to the packaging and containers market improved 19% and 20%, respectively, in the third quarter and nine months of 1995. Sales to this market provided a lower percentage of total revenues in the nine month period due to more substantial gains in sales to other markets. Higher sales were realized in the third quarter and nine month period to the distributors and fabricators market (up 25% and 40%, respectively), the automotive and transportation market (up 32% and 51%, respectively), and the building and construction market (up 12% and 28%, respectively). The increases in revenues to these markets were due primarily to higher prices for most aluminum products. Costs and Expenses The increases in cost of products sold were due to the higher shipping volume and higher costs for purchased materials. Costs were favorably impacted by performance improvement programs and, in the nine month period, higher capacity utilization at aluminum fabricating facilities. Selling, administrative and general expenses increased in both 1995 periods due to the higher level of business activity, but declined slightly as a percent of sales. Interest expense increased in both 1995 periods due to higher rates. In the third quarter of 1995, the Company announced plans to close its can manufacturing facility located in Fulton, New York in the fourth quarter of 1995. The facility's 1-billion-can annual capacity was determined to be in excess of the Company's customer needs at the present time due to other productivity gains, a geographic shift in customer demand and slower overall growth in demand for cans. The Company intends to remove the equipment and sell the plant and property. This action is not expected to have a material impact on revenues, operating results or financial position. - 8 - 9 RESULTS OF OPERATIONS - continued Costs and Expenses - continued On a quarterly basis, the Company updates the status of all significant existing or potential environmental issues, develops or revises estimates of costs to satisfy known remediation requirements and adjusts its accruals accordingly. Based upon information presently available, such future costs are not expected to have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. However, it is not possible to predict the amount or timing of future costs of environmental remediation requirements which may subsequently be determined. Such costs could be material to future quarterly or annual results of operations. On August 29, 1994 and March 30, 1995, the Company received civil investigative demands from the U.S. Department of Justice relating to production of primary aluminum and the pricing of aluminum can stock, respectively. The Company is cooperating with both inquiries and is confident that its conduct has been in compliance with U.S. antitrust laws. Various suits and claims are pending against the Company. In the opinion of management, after consultation with counsel, disposition of these suits and claims, either individually or in the aggregate, will not have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. No assurance can be given, however, that the disposition of one or more of such suits or claims in a particular reporting period will not be material in relation to the reported results for such period. Taxes on Income The effective tax rates reflected in the income statement differ from the U.S. federal statutory rate because of state and foreign taxes and the effects of percentage depletion allowances. Operating Outlook The effects of the soft landing of the U.S. economy and the economic slowdown in Europe are expected to continue in the fourth quarter of 1995, particularly in the transportation and building and construction markets. Growth in demand for the Company's products is expected to continue, but at a slower rate. Shipments of fabricated aluminum products in the fourth quarter of 1995 are not expected to match the strong shipments of the fourth quarter of 1994 which were impacted by buy-ahead purchases, especially for cans. The fourth quarter of 1995 should be favorably impacted by strong consumer products business and the continuing effects from acquisitions and performance improvement efforts. - 9 - 10 OPERATING AREA ANALYSIS (Dollars in millions, metric tons in thousands)
THIRD QUARTER NINE MONTHS ------------------------------- -------------------------------- Net Sales Shipments Net Sales Shipments 1995 1994 1995 1994 1995 1994 1995 1994 ------------------------------- -------------------------------- Finished products and other sales Packaging and containers: Aluminum $479 $422 92 96 $1,391 $1,185 275 269 Nonaluminum 138 132 395 381 Other aluminum 147 122 40 41 445 320 125 110 Other nonaluminum 131 127 388 338 ------------------------------- -------------------------------- 895 803 132 137 2,619 2,224 400 379 ------------------------------- -------------------------------- Production and processing Primary aluminum 212 127 109 79 504 304 248 205 Flat rolled 324 249 96 102 1,013 706 308 305 Extruded and drawn 185 157 46 51 585 442 154 158 Other aluminum 122 105 45 41 373 278 136 114 Other nonaluminum 103 69 262 193 Gold 21 93 ------------------------------- -------------------------------- 946 728 296 273 2,737 2,016 846 782 ------------------------------- -------------------------------- Net sales $1,841 $1,531 428 410 $5,356 $4,240 1,246 1,161 =============================== ================================
Finished Products and Other Sales Shipments were lower in the third quarter of 1995 compared to the third quarter of 1994, due primarily to lower shipments of cans and ends. Shipments increased in the nine month period, resulting from higher shipments of cans and ends and distributor sheet. The increases in aluminum sales were principally due to improved prices for most aluminum products, with some benefit from increased volume in the nine months. The increases in nonaluminum sales were primarily attributable to strong demand and improved prices for stainless steel. Higher shipments of cans and ends, distributor sheet and stainless steel were due to 1994 acquisitions. Production and Processing Higher shipments were realized in both 1995 periods, particularly for primary and recycled aluminum and can sheet. The increases in aluminum sales were due to the higher shipping volume and improved prices for most aluminum products. The increases in nonaluminum sales were due to improved prices for alumina, as well as higher demand which was met by the restart of idle capacity at an alumina facility. There were no gold revenues due to the divestiture of gold operations in 1994 and early 1995. LIQUIDITY AND CAPITAL RESOURCES Working Capital Working capital totaled $1,078 million at September 30, 1995, compared to $898 million at December 31, 1994. The ratio of current assets to current liabilities was 1.9/1 at September 30, 1995, compared to 1.6/1 at December 31, 1994. The increase in working capital primarily reflects the higher level of business activity. In addition, a portion of the increase relates to inventories built up in the first half of 1995, which are taking longer than expected to be utilized due to the soft landing of the U.S. economy. The Company expects to reduce inventories by the end of the year. - 10 - 11 LIQUIDITY AND CAPITAL RESOURCES - continued Operating Activities In the first nine months of 1995, cash provided by operations was supplemented with cash on hand to fund investing activities. Investing Activities Capital investments for continuing performance improvement and strategic investment projects totaled approximately $190 million in the first nine months of 1995 and included amounts for the modernization of a primary aluminum production plant in New York; the modernization and expansion of can manufacturing facilities (including participation in the construction of can plants in South America as discussed below); expansions at foil and plastic film facilities; modification and equipping of a new wheel facility; equipment upgrades at a number of other facilities; and two acquisitions and a major project as discussed below. Capital investments for this period also included approximately $140 million for operating requirements (i.e., replacement equipment, capital maintenance, environmental control projects, etc.). The Company is participating in the construction of several new can plants in South America through a 42.5%-owned Brazilian affiliate. The affiliate completed construction of a second can plant in Brazil in the second quarter of 1995 and a can plant in Chile in the third quarter of 1995. A can plant in Argentina is scheduled for completion in the fourth quarter of 1995 and a third can plant in Brazil is expected to be completed in 1996. In addition to the South American can plants, construction has begun on a 27.5%-owned can plant in Saudi Arabia which is expected to be completed in early 1997. In the second quarter of 1995, the Company acquired a foil plant located in Louisville, Ky. The facility laminates aluminum foil onto paper and primarily serves the flexible packaging needs of the tobacco and pharmaceutical industries. The facility complements the Company's current product and customer mix, and further strengthens the Company's ability to serve customers in this market. Also in the second quarter of 1995, the Company acquired an engraving company that serves the flexographic and lithographic printers that supply the packaging and publication industries in the U.S., Canada and Mexico. The acquired company operates facilities in Texas, Louisiana and Washington which manufacture printing plates. The acquisition will strengthen the Company's operation that manufactures printing cylinders and engravings for the rotogravure, flexographic and lithographic printing industries. A three-year, $75 million modernization is underway at the Company's can sheet facility in Alabama. The project will include two new furnaces, as well as improvements to existing equipment. The modernization will allow for enhanced overall product quality and will reduce costs. In the first quarter of 1995, the Company sold its remaining gold mining assets in Australia for $28 million. The sale is not expected to have a material effect on the Company's ongoing results of operations. - 11 - 12 LIQUIDITY AND CAPITAL RESOURCES - continued Financing Activities In the first quarter of 1995, the Company amended its $500 million revolving credit facility to extend the term and lower the cost. The expiration date of the facility was extended from 1999 to 2000. The annual commitment fee on the unused portion of the facility was lowered from .20% to .125%. No amounts were outstanding under the facility at September 30, 1995. Borrowings in the second quarter of 1995 included $22 million of tax- exempt bonds which were issued to finance a portion of the costs of acquiring, constructing and installing sewage and solid waste disposal facilities at the Company's primary aluminum production plant in Massena, N.Y. The bonds, which require a single repayment in 2025, bear interest at a variable rate (4.2% at September 30, 1995). The Company issued $32 million of medium-term notes in the third quarter of 1995 and an additional $40 million of medium-term notes early in the fourth quarter of 1995. The notes bear interest at an average rate of 6.0% and mature in 1996 and 1997. Also early in the fourth quarter, the Company issued $200 million of commercial paper. The commercial paper bears interest at an average rate of 5.9% and will be classified as short- term debt. The proceeds from the borrowings were supplemented with cash on hand and were used early in the fourth quarter to acquire an additional interest (24.95%) in the Becancour, Quebec primary aluminum production facility for approximately $390 million, plus associated working capital (see "Financial Outlook"). In the second quarter of 1995, the Company increased the quarterly dividend on its common stock by 5 cents to 30 cents a share. The dividend was increased in view of the Company's improved performance and outlook for the future. In the first half of 1995, the Company contributed 906,000 shares of common stock, valued at approximately $45 million, to its pension plans. This completes the contribution of three million shares of common stock to the Company's pension plans which were the subject of a registration statement filed in 1993. Financial Outlook Capital investments in 1995 are expected to total approximately $850 million. Of this amount, approximately $660 million is expected to be spent in continuing expenditures for those performance improvement and strategic investment projects that are underway and the acquisition of an additional interest in the Becancour primary aluminum production facility (as discussed below). In addition, approximately $190 million is expected to be spent for operating requirements. These investments will be funded primarily with cash generated from operations, a portion of the remaining proceeds from the Company's preferred stock issued in early 1994, and external financing. Early in the fourth quarter of 1995, the Company purchased an additional interest (24.95%) in the Becancour primary aluminum production facility for approximately $390 million, plus associated working capital. The transaction increases the Company's ownership in the Becancour facility to 50 percent and its worldwide primary aluminum capacity to 1.09 million metric tons. The acquisition will reduce the Company's dependence on outside purchases of primary aluminum and provide the Company with low-cost primary aluminum to support the continuing strong demand for fabricated aluminum products. The Company expects that the debt issued for this acquisition will be repaid by the end of 1997. The Company believes its available financial resources, together with internally generated funds, are sufficient to meet its business needs at the present time and for the foreseeable future. The Company continues to exceed the financial ratio requirements contained in its financing arrangements and expects to do so for the foreseeable future. After the issuance of medium-term notes in the third quarter and early in the fourth quarter of 1995, $150 million of the Company's $1.65 billion shelf registration remained available for the issuance of debt securities. - 12 - 13 LIQUIDITY AND CAPITAL RESOURCES - continued Financial Outlook - continued Rates for electricity charged by the Bonneville Power Administration ("BPA"), which serves the Company's Troutdale, Oregon and Longview, Washington primary aluminum production plants, have been settled through October, 1996, with a four percent increase over the prior rate. The Company and BPA have entered into a new five-year contract that would supersede the existing power contract for the period October, 1996 - September, 2001 (when the existing contract was due to expire). The new contract establishes a fixed rate, which is 16% less than rates now applicable under the existing contract, that would apply for the entire term of the new contract. This contract is, however, subject to review and approval both in BPA's currently pending rate case and in a subsequent review process conducted by the Federal Energy Regulatory Commission. Further, as part of a BPA rate decision, the contract is subject to appeal in the courts by third parties. Should the new contract be rejected in any of these processes, the Company could continue service under the existing contract, renegotiate with BPA, or contract for competitive power supplies from third parties. OTHER INFORMATION The Financial Accounting Standards Board issued in March, 1995, FAS No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of. The Company is in the process of evaluating the provisions of this pronouncement and has not made a determination as to the impact, if any, on the Company's financial position and/or results of operations. - 13 - 14 PART II - OTHER INFORMATION 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 1995, the Registrant filed with the Commission a Current Report on Form 8-K dated September 15, 1995 reporting under Item 5 that it had agreed to purchase an additional 24.95 percent interest in the Becancour, Quebec, Canada, primary aluminum production plant from Societe Generale de Financement du Quebec, an agency of the Government of Quebec. - 14 - 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REYNOLDS METALS COMPANY By Allen M. Earehart Allen M. Earehart Vice President, Controller (Principal Accounting Officer) DATE: November 13, 1995 - 15 - 16 INDEX TO EXHIBITS EXHIBIT 2 - None * EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended to the date hereof. (File No. 1-1430, 1994 Form 10-K Report, EXHIBIT 3.1) * EXHIBIT 3.2 - By-Laws, as amended to the date hereof. (File No. 1- 1430, Form 10-Q Report for the Quarter Ended June 30, 1995, 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 - Indenture dated as of April 1, 1989 (the "Indenture") between Reynolds Metals Company and The Bank of New York, as Trustee, relating to Debt Securities. (File No. 1-1430, Form 10-Q Report for the Quarter Ended March 31, 1989, EXHIBIT 4(c)) * EXHIBIT 4.4 - Amendment No. 1 dated as of November 1, 1991 to the Indenture. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.4) * EXHIBIT 4.5 - Rights Agreement dated as of November 23, 1987 (the "Rights Agreement") between Reynolds Metals Company and The Chase Manhattan Bank, N.A. (File No. 1- 1430, Registration Statement on Form 8-A dated November 23, 1987, pertaining to Preferred Stock Purchase Rights, EXHIBIT 1) * EXHIBIT 4.6 - Amendment No. 1 dated as of December 19, 1991 to the Rights Agreement. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.11) * EXHIBIT 4.7 - Form of 9-3/8% Debenture due June 15, 1999. (File No. 1-1430, Form 8-K Report dated June 6, 1989, EXHIBIT 4) * EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.3) * EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.4) * EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term Note. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.15) * EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term Note. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.16) * EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003. (File No. 1-1430, Form 8-K Report dated August 16, 1991, Exhibit 4(a)) ____________________________ * Incorporated by reference. - 16 - 17 * EXHIBIT 4.13 - Articles of Continuance of Canadian Reynolds Metals Company, Limited -- Societe Canadienne de Metaux Reynolds, Limitee ("CRM"), as amended to the date hereof. (Registration Statement No. 33-59168 on Form S-3, dated March 5, 1993, EXHIBIT 4.1) * EXHIBIT 4.14 - By-Laws of CRM, as amended to the date hereof. (File No. 1-1430, Form 10-Q Report for the Quarter Ended September 30, 1993, EXHIBIT 4.19) * EXHIBIT 4.15 - Indenture dated as of April 1, 1993 among CRM, Reynolds Metals Company and The Bank of New York, as Trustee. (File No. 1-1430, Form 8-K Report dated July 14, 1993, EXHIBIT 4(a)) * EXHIBIT 4.16 - Form of 6-5/8% Guaranteed Amortizing Note due July 15, 2002. (File No. 1-1430, Form 8-K Report dated July 14, 1993, EXHIBIT 4(d)) * EXHIBIT 10.1 - Reynolds Metals Company 1982 Nonqualified Stock Option Plan, as amended through May 17, 1985. (File No. 1-1430, 1985 Form 10-K Report, EXHIBIT 10.2) * EXHIBIT 10.2 - 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 10.3 - 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 10.4 - Reynolds Metals Company Performance Incentive Plan, as amended and restated effective January 1, 1996. (File No. 1-1430, Form 10-Q Report for the Quarter Ended March 31, 1995, EXHIBIT 10.4) * EXHIBIT 10.5 - Agreement dated December 9, 1987 between Reynolds Metals Company and Jeremiah J. Sheehan. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.9) * EXHIBIT 10.6 - Supplemental Death Benefit Plan for Officers. (File No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.8) * EXHIBIT 10.7 - Financial Counseling Assistance Plan for Officers. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.11) * EXHIBIT 10.8 - Management Incentive Deferral Plan. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.12) * EXHIBIT 10.9 - Deferred Compensation Plan for Outside Directors as Amended and Restated Effective December 1, 1993. (File No. 1-1430, 1993 Form 10-K Report, EXHIBIT 10.12) * EXHIBIT 10.10 - Retirement Plan for Outside Directors. (File No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.10) ____________________________ * Incorporated by reference. - 17 - 18 * EXHIBIT 10.11 - Death Benefit Plan for Outside Directors. (File No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.11) * EXHIBIT 10.12 - Form of Indemnification Agreement for Directors and Officers. (File No. 1-1430, Form 8-K Report dated April 29, 1987, EXHIBIT 28.3) * EXHIBIT 10.13 - Form of Executive Severance Agreement between Reynolds Metals Company and key executive personnel, including each of the individuals listed in Item 4A of the Reynolds Metals Company 1994 Form 10-K Report, Paul S. Hayden, John F. Rudin and F. Robert Newman. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.18) * EXHIBIT 10.14 - Amendment to Reynolds Metals Company 1987 Non- qualified Stock Option Plan effective May 20, 1988. (File No. 1-1430, Form 10-Q Report for the Quarter Ended June 30, 1988, EXHIBIT 19(a)) * EXHIBIT 10.15 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective October 21, 1988. (File No. 1-1430, Form 10-Q Report for the Quarter Ended September 30, 1988, EXHIBIT 19(a)) * EXHIBIT 10.16 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective January 1, 1987. (File No. 1-1430, 1988 Form 10-K Report, EXHIBIT 10.22) * EXHIBIT 10.17 - Form of Stock Option and Stock Appreciation Right Agreement, as approved February 16, 1990 by the Compensation Committee of the Company's Board of Directors. (File No. 1-1430, 1989 Form 10-K Report, EXHIBIT 10.24) * EXHIBIT 10.18 - Amendment to Reynolds Metals Company 1982 Nonqualified Stock Option Plan effective January 18, 1991. (File No. 1-1430, 1990 Form 10-K Report, EXHIBIT 10.25) * EXHIBIT 10.19 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective January 18, 1991. (File No. 1-1430, 1990 Form 10-K Report, EXHIBIT 10.26) * EXHIBIT 10.20 - Letter Agreement dated January 18, 1991 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, 1990 Form 10-K Report, EXHIBIT 10.29) * EXHIBIT 10.21 - Form of Stock Option Agreement, as approved April 22, 1992 by the Compensation Committee of the Company's Board of Directors. (File No. 1-1430, Form 10-Q Report for the Quarter Ended March 31, 1992, EXHIBIT 28(a)) * EXHIBIT 10.22 - Consulting Agreement dated May 1, 1992 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, Form 10-Q Report for the Quarter Ended March 31, 1992, EXHIBIT 28(b)) ____________________________ * Incorporated by reference. - 18 - 19 * EXHIBIT 10.23 - Renewal dated February 18, 1994 of Consulting Agreement dated May 1, 1992 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, 1993 Form 10-K Report, EXHIBIT 10.28) * EXHIBIT 10.24 - Reynolds Metals Company Restricted Stock Plan for Outside Directors. (Registration Statement No. 33- 53851 on Form S-8, dated May 27, 1994, EXHIBIT 4.6) * EXHIBIT 10.25 - Reynolds Metals Company New Management Incentive Deferral Plan. (File No. 1-1430, Form 10-Q Report for the Quarter Ended June 30, 1994, EXHIBIT 10.30) * EXHIBIT 10.26 - Reynolds Metals Company Salary Deferral Plan for Executives. (File No. 1-1430, Form 10-Q Report for the Quarter Ended June 30, 1994, EXHIBIT 10.31) * EXHIBIT 10.27 - Reynolds Metals Company Supplemental Long Term Disability Plan for Executives. (File No. 1-1430, Form 10-Q Report for the Quarter Ended June 30, 1994, EXHIBIT 10.32) * EXHIBIT 10.28 - Amendment to Reynolds Metals Company 1982 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 1-1430, Form 10-Q Report for the Quarter Ended September 30, 1994, EXHIBIT 10.33) * EXHIBIT 10.29 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 1-1430, Form 10-Q Report for the Quarter Ended September 30, 1994, EXHIBIT 10.34) * EXHIBIT 10.30 - Amendment to Reynolds Metals Company 1992 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 1-1430, Form 10-Q Report for the Quarter Ended September 30, 1994, EXHIBIT 10.35) * EXHIBIT 10.31 - Amendment to Reynolds Metals Company New Management Incentive Deferral Plan effective January 1, 1995. (File No. 1-1430, 1994 Form 10-K Report, EXHIBIT 10.36) * EXHIBIT 10.32 - Amendment to Reynolds Metals Company New Management Incentive Deferral Plan effective January 1, 1995 through December 31, 1996. (File No. 1-1430, 1994 Form 10-K Report, EXHIBIT 10.37) * EXHIBIT 10.33 - Amendment to Reynolds Metals Company Salary Deferral Plan for Executives effective January 1, 1995 through December 31, 1996. (File No. 1-1430, 1994 Form 10-K Report, EXHIBIT 10.38) * EXHIBIT 10.34 - Form of Split Dollar Life Insurance Agreement (Trustee Owner, Trustee Pays Premiums). (File No. 1- 1430, Form 10-Q Report for the Quarter Ended June 30, 1995, EXHIBIT 10.34) * EXHIBIT 10.35 - Form of Split Dollar Life Insurance Agreement (Trustee Owner, Employee Pays Premium). (File No. 1- 1430, Form 10-Q Report for the Quarter Ended June 30, 1995, EXHIBIT 10.35) ____________________________ * Incorporated by reference. - 19 - 20 * EXHIBIT 10.36 - Form of Split Dollar Life Insurance Agreement (Employee Owner, Employee Pays Premium). (File No. 1-1430, Form 10-Q Report for the Quarter Ended June 30, 1995, EXHIBIT 10.36) * EXHIBIT 10.37 - Form of Split Dollar Life Insurance Agreement (Third Party Owner, Third Party Pays Premiums). (File No. 1-1430, Form 10-Q Report for the Quarter Ended June 30, 1995, EXHIBIT 10.37) * EXHIBIT 10.38 - Form of Split Dollar Life Insurance Agreement (Third Party Owner, Employee Pays Premiums). (File No. 1- 1430, Form 10-Q Report for the Quarter Ended June 30, 1995, EXHIBIT 10.38) EXHIBIT 11 - 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 Pursuant to Item 601 of Regulation S-K, certain instruments with respect to long-term debt of Reynolds Metals Company (the "Registrant") and its consolidated subsidiaries are omitted because such debt does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of any such instrument to the Commission upon request. F:\BFH\SEC\10Q\FORM10Q.395 - 20 - EX-11 2 EXHIBIT 11 REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In millions, except per share data) EARNINGS PER SHARE In the third quarter and nine months of 1995, earnings per share equals net income divided by the weighted-average number of common shares and common share equivalents outstanding during the period. The number of common share equivalents outstanding was based on the assumed conversion of the Company's preferred stock ("PRIDES"). For the purpose of this computation, the conversion rate was based on the average market value of the Company's common stock during the period. In the third quarter and nine months of 1994, earnings per share equals net income, minus PRIDES dividends, divided by the weighted-average number of common shares outstanding during the period. Common share equivalents relating to the PRIDES were not included in the third quarter or nine months of 1994 since their effect would have been anti-dilutive.
QUARTERS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------- -------------------------- 1995 1994 1995 1994 ---------------------- -------------------------- Weighted-average shares outstanding: Common shares 63,463,000 62,018,000 62,870,000 61,650,000 Common share equivalents 9,020,000 - 9,719,000 - ------------------------ ------------------------- Total 72,483,000 62,018,000 72,589,000 61,650,000 ======================== ========================= Net income (loss) $112 $62 $305 $53 Less preferred stock dividends - 9 - 25 ------------------------ ------------------------- $112 $53 $305 $28 ======================== ========================= Earnings per share $1.56 $0.86 $4.20 $0.45 ======================== ========================= Conversion rate 0.82 - 0.88 - Average market value of common stock $60.37 - $53.48 -
EARNINGS PER SHARE (FULLY DILUTED): Earnings per share (fully diluted) equals net income divided by the weighted-average number of common shares and common share equivalents outstanding during the period. The number of common share equivalents outstanding was based on the maximum potential issuance of common shares upon conversion of PRIDES, which is one share of common for each share of PRIDES. This computation was made for presentation purposes only since its effect was not material in 1995 and was anti-dilutive in 1994. The difference between the number of common share equivalents for the nine months ended September 30, 1995 and 1994 is due to the PRIDES having been issued on January 25, 1994.
QUARTERS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------- ------------------------- 1995 1994 1995 1994 ------------------------- ------------------------- Weighted-average shares outstanding: Common shares 63,463,000 62,018,000 62,870,000 61,650,000 Common share equivalents 11,000,000 11,000,000 11,000,000 10,022,000 ------------------------- ------------------------- Total 74,463,000 73,018,000 73,870,000 71,672,000 ========================= ========================= Net income (loss) $112 $62 $305 $53 ========================= ========================= Earnings per share (fully diluted) $1.51 $0.85 $4.13 $0.74 ========================= =========================
EX-27 3
5 This schedule contains summary financial information extracted from the Reynolds Metals Company Condensed Consolidated Balance Sheet (Unaudited) for September 30, 1995 and Consolidated Statement of Income (Unaudited) for the Nine Months ended September 30, 1995 and is qualified in its entirety by reference to such financial statements. 1000000 9-MOS DEC-31-1995 SEP-30-1995 187 61 1086 21 978 2346 6543 3373 7576 1268 1907 941 0 505 1140 7576 5356 5380 4486 4486 335 0 129 430 125 305 0 0 0 305 4.20 0 This amount represents total receivables, since trade receivables are not broken out separately at interim dates, in accordance with S-X 10-01(2).
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