-----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, I/fQGtTgkPrMOPF7tz8x0CtWcRnoYGtuWzEpSjMiRkQdquTy5cuQgtZcDBC/6wrn zBBtca9r8Bly4CK5D9QFNQ== 0000083604-99-000018.txt : 19990513 0000083604-99-000018.hdr.sgml : 19990513 ACCESSION NUMBER: 0000083604-99-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 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: SEC FILE NUMBER: 001-01430 FILM NUMBER: 99618705 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 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 MARCH 31, 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 April 30, 1999, the Registrant had 64,507,259 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 March 31 1999 1998 - ----------------------------------------------------------------------- REVENUES $1,068 $1,532 COSTS AND EXPENSES Cost of products sold 925 1,251 Selling, general and administrative expenses 82 93 Depreciation and amortization 57 70 Interest 20 34 - ----------------------------------------------------------------------- 1,084 1,448 - ----------------------------------------------------------------------- EARNINGS Income (loss) before income taxes and cumulative effect of accounting change (16) 84 Taxes on income (credit) (6) 26 - ----------------------------------------------------------------------- Income (loss) before cumulative effect of accounting change (10) 58 Cumulative effect of accounting change - (23) - ----------------------------------------------------------------------- NET INCOME (LOSS) $(10) $35 ======================================================================= EARNINGS PER SHARE Basic: Average shares outstanding 64 73 Income (loss) before cumulative effect of accounting change $(0.15) $0.78 Cumulative effect of accounting change - (0.32) - ---------------------------------------------------------------------- Net income (loss) $(0.15) $0.46 ====================================================================== Diluted: Average shares outstanding 64 74 Income (loss) before cumulative effect of accounting change $(0.15) $0.78 Cumulative effect of accounting change - (0.32) - --------------------------------------------------------------------- Net income (loss) $(0.15) $0.46 ===================================================================== CASH DIVIDENDS PER COMMON SHARE $0.35 $0.35 ===================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements.
2 3 CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) =====================================================================
(millions) March 31 December 31 - --------------------------------------------------------------------- 1999 1998 - --------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 191 $ 94 Receivables, less allowances of $10 (1998 - $14) 846 894 Inventories 545 500 Prepaid expenses and other 118 114 - --------------------------------------------------------------------- Total current assets 1,700 1,602 Unincorporated joint ventures and associated companies 1,510 1,478 Property, plant and equipment 4,271 4,282 Less allowances for depreciation and amortization 2,271 2,258 - --------------------------------------------------------------------- 2,000 2,024 Deferred taxes and other assets 897 1,030 - --------------------------------------------------------------------- Total assets $6,107 $6,134 ===================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, accrued and other liabilities $ 844 $ 929 Short-term borrowings 155 116 Long-term debt 212 196 - -------------------------------------------------------------------- Total current liabilities 1,211 1,241 Long-term debt 1,123 1,035 Postretirement benefits 1,031 1,029 Environmental, deferred taxes and other liabilities 600 635 Stockholders' equity: Common stock 1,533 1,533 Retained earnings 1,189 1,222 Treasury stock, at cost (526) (526) Accumulated other comprehensive income (54) (35) - --------------------------------------------------------------------- Total stockholders' equity 2,142 2,194 - --------------------------------------------------------------------- Contingent liabilities (Note 7) Total liabilities and stockholders' equity $6,107 $6,134 ===================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements.
3 4 CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) =====================================================================
- --------------------------------------------------------------------- Quarters ended March 31 (millions) 1999 1998 - --------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $(10) $ 35 Adjustments to reconcile to net cash used in operating activities: Depreciation and amortization 57 70 Cumulative effect of accounting change - 23 Changes in operating assets and liabilities net of effects of dispositions: Accounts payable, accrued and other liabilities (18) (104) Receivables (21) (17) Inventories (56) - Environmental and restructuring liabilities (9) (12) Other (55) (44) - --------------------------------------------------------------------- Net cash used in operating activities (112) (49) INVESTING ACTIVITIES Capital investments: Operational (26) (28) Strategic (80) (29) Sales of assets - operational restructuring 193 39 - --------------------------------------------------------------------- Net cash provided by (used in) investing activities 87 (18) FINANCING ACTIVITIES Increase in short-term borrowings 41 117 Proceeds from long-term debt 150 100 Reduction of long-term debt (46) (23) Cash dividends paid (23) (26) Stock repurchases and other- net - (124) - --------------------------------------------------------------------- Net cash provided by financing activities 122 44 CASH AND CASH EQUIVALENTS Net increase (decrease) 97 (23) At beginning of period 94 70 - --------------------------------------------------------------------- At end of period $ 191 $ 47 ===================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements.
4 5 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) ===================================================================== - --------------------------------------------------------------------- Quarters ended March 31 1999 1998 - --------------------------------------------------------------------- SHARES (thousands): Common stock Balance at January 1 74,105 73,909 Issued under employee benefit plans - 33 - --------------------------------------------------------------------- Balance at March 31 74,105 73,942 - --------------------------------------------------------------------- Treasury stock Balance at January 1 (9,648) - Purchased and held as Treasury stock - (2,004) - --------------------------------------------------------------------- Balance at March 31 (9,648) (2,004) - --------------------------------------------------------------------- Net common shares outstanding 64,457 71,938 - --------------------------------------------------------------------- DOLLARS (millions): Common stock Balance at January 1 $1,533 $1,521 Issued under employee benefit plans - 2 - --------------------------------------------------------------------- Balance at March 31 $1,533 $1,523 - --------------------------------------------------------------------- Retained earnings Balance at January 1 $1,222 $1,253 Net income (loss) (10) 35 Cash dividends declared for common stock (23) (26) - --------------------------------------------------------------------- Balance at March 31 $1,189 $1,262 - --------------------------------------------------------------------- Treasury stock Balance at January 1 $ (526) $ - Purchased and held as Treasury stock - (126) - --------------------------------------------------------------------- Balance at March 31 $ (526) $ (126) - --------------------------------------------------------------------- Accumulated other comprehensive income (loss) Balance at January 1 $ (35) $ (35) Foreign currency translation adjustments (19) (9) Income taxes - 1 -------------------- Other comprehensive income (loss) (19) (8) - --------------------------------------------------------------------- Balance at March 31 $ (54) $ (43) - --------------------------------------------------------------------- Total stockholders' equity $2,142 $2,616 - --------------------------------------------------------------------- COMPREHENSIVE INCOME (millions): Net income (loss) $ (10) $ 35 Other comprehensive income (loss) (19) (8) - --------------------------------------------------------------------- Comprehensive income (loss) $ (29) $ 27 - --------------------------------------------------------------------- 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 March 31, 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 period of 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. Certain amounts have been reclassified to conform to the 1999 presentation. In the tables, dollars are in millions, except per share and per pound amounts, and shipments are in thousands of metric tons. A metric ton is equivalent to 2,205 pounds. 2. ACCOUNTING POLICIES CUMULATIVE EFFECT OF ACCOUNTING CHANGE In 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities." The SOP requires costs of start-up activities and organization costs to be expensed as incurred. The Company adopted the SOP in the second quarter of 1998 and recognized a charge for the cumulative effect of accounting change of $23 million. First quarter 1998 results have been 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 first quarter 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, 2000. The Company has not determined the impact this statement will have on its financial position or results of operations. 3. OPERATIONAL RESTRUCTURING In the first quarter of 1999, the sale of the Company's Alabama can stock complex was finalized. This sale essentially completed the Company's restructuring activities. 6 7 4. EARNINGS PER SHARE The following reconciles income and average shares for the basic and diluted earnings per share computations for "Income (loss) before cumulative effect of accounting change."
Quarters ended March 31 ------------------------------ 1999 1998 ------------------------------ Income (numerator): Income (loss) before cumulative effect of accounting change $(10) $58 Average shares (denominator): Basic 64,475,000 73,174,000 Effect of dilutive securities: Stock options - 372,000 ------------------------------ Diluted 64,475,000 73,546,000 ------------------------------ Per share amount: Basic $(0.15) $0.78 Diluted $(0.15) $0.78 Antidilutive securities excluded: Stock options 4,977,000 1,484,000
5. FINANCING ARRANGEMENTS In the first quarter of 1999, the Company borrowed $150 million under its credit facilities. The borrowing bears interest at a variable rate (5.3% at March 31, 1999) and requires repayment in a lump sum in 2001. 7 8 6. COMPANY OPERATIONS
Packaging Construction Base and and First Quarter 1999 Materials Consumer Distribution - --------------------------------------------------------------------------- Customer aluminum shipments 212 33 47 Internal aluminum shipments 56 - - - --------------------------------------------------------------------------- Total aluminum shipments 268 33 47 Customer revenues: Aluminum $302 $178 $159 Nonaluminum 75 134 78 Intersegment revenues - aluminum 81 - - - --------------------------------------------------------------------------- Total revenues $458 $312 $237 =========================================================================== Operating income (loss) $ 14 $ 26 $ 8 Interest expense - --------------------------------------------------------------------------- Loss before income taxes =========================================================================== First Quarter 1998 - --------------------------------------------------------------------------- Customer aluminum shipments 145 30 46 Internal aluminum shipments 99 - - - --------------------------------------------------------------------------- Total aluminum shipments 244 30 46 Customer revenues: Aluminum $247 $175 $165 Nonaluminum 115 136 82 Intersegment revenues - aluminum 163 - - - --------------------------------------------------------------------------- Total revenues $525 $311 $247 =========================================================================== Operating income (loss) $ 79 $ 22 $ 8 Interest expense - --------------------------------------------------------------------------- Income before income taxes ===========================================================================
8 9
First Quarter 1999 Transportation Restructuring Other - --------------------------------------------------------------------------- Customer aluminum shipments 17 - 14 Internal aluminum shipments - - - - --------------------------------------------------------------------------- Total aluminum shipments 17 - 14 Customer revenues: Aluminum $94 - $ 37 Nonaluminum - - 11 Intersegment revenues - aluminum - - - - --------------------------------------------------------------------------- Total revenues $94 - $ 48 =========================================================================== Operating income (loss) $(2) - $(44) Interest expense - --------------------------------------------------------------------------- Loss before income taxes =========================================================================== First Quarter 1998 - --------------------------------------------------------------------------- Customer aluminum shipments 16 116 9 Internal aluminum shipments - 2 - - --------------------------------------------------------------------------- Total aluminum shipments 16 118 9 Customer revenues: Aluminum $87 $477 $ 29 Nonaluminum - 5 14 Intersegment revenues - aluminum - 7 - - --------------------------------------------------------------------------- Total revenues $87 $489 $ 43 =========================================================================== Operating income (loss) $ - $ 38 $(32) Interest expense - --------------------------------------------------------------------------- Income before income taxes ===========================================================================
Reconciling First Quarter 1999 Items Consolidated - --------------------------------------------------------------------------- Customer aluminum shipments - 323 Internal aluminum shipments (56) - - --------------------------------------------------------------------------- Total aluminum shipments (56) 323 Customer revenues: Aluminum $ - $ 770 Nonaluminum - 298 Intersegment revenues - aluminum (81) - - --------------------------------------------------------------------------- Total revenues $ (81) $1,068 =========================================================================== Operating income (loss) $ 2 $ 4 Interest expense 20 - --------------------------------------------------------------------------- Loss before income taxes $ (16) =========================================================================== First Quarter 1998 - --------------------------------------------------------------------------- Customer aluminum shipments - 362 Internal aluminum shipments (101) - - --------------------------------------------------------------------------- Total aluminum shipments (101) 362 Customer revenues: Aluminum $ - $1,180 Nonaluminum - 352 Intersegment revenues - aluminum (170) - - --------------------------------------------------------------------------- Total revenues $(170) $1,532 =========================================================================== Operating income (loss) $ 3 $ 118 Interest expense 34 - --------------------------------------------------------------------------- Income before income taxes $ 84 ===========================================================================
RECONCILING ITEMS Reconciling items for operating income (loss) consist of the elimination of unrealized profits on sales between global business units. 7. CONTINGENT LIABILITIES As previously disclosed in the Company's 1998 Form 10-K, the Company is involved in various worldwide environmental improvement activities resulting from past operations, including designation as a potentially responsible party (PRP), with others, at various Environmental Protection Agency-designated Superfund sites. The Company has recorded amounts (on an undiscounted basis) which, in management's best estimate, will be sufficient to satisfy anticipated costs of known remediation requirements. Estimated costs for future environmental compliance and remediation are necessarily imprecise because of factors such as: - - 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 or its ongoing results of operations. However, such costs could be material to results of operations in a future interim or annual reporting period. 9 10 8. 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 entities 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 Metals Company. 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 Metals Company. Summarized financial information is as follows: 10 11 8. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM COMPANY OF CANADA, LTD. - continued Canadian Reynolds Metals Company, Ltd.
Quarters ended March 31 ------------------------ 1999 1998 ------------------------ Net Sales: Customers $ 110 $ 93 Parent and related companies 100 131 ------------------------ $ 210 $ 224 Cost of products sold 196 185 Net income $ 6 $ 28
March 31 December 31 1999 1998 -------------------------- Current assets $ 304 $ 155 Noncurrent assets 1,202 1,206 Current liabilities (98) (100) Noncurrent liabilities (530) (379)
Reynolds Aluminum Company of Canada, Ltd.
Quarters ended March 31 ------------------------ 1999 1998 ------------------------ Net Sales: Customers $ 110 $ 119 Parent and related companies 100 125 ------------------------ $ 210 $ 244 Cost of products sold 195 201 Net income $ 7 $ 29
March 31 December 31 1999 1998 -------------------------- Current assets $ 296 $ 186 Noncurrent assets 1,217 1,228 Current liabilities (99) (103) Noncurrent liabilities (540) (389)
11 12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the consolidated financial statements and related footnotes included in the Company's 1998 Form 10-K along with the consolidated financial statements and related footnotes included in and referred to in this report. In the tables, dollars are in millions, except per share and per pound amounts, and shipments are in thousands of metric tons. A metric ton is equivalent to 2,205 pounds. Management's Discussion and Analysis contains forecasts, projections, estimates, statements of management's plans, objectives and strategies for the Company and other forward-looking statements. Please refer to the "Risk Factors" section beginning on page 19, 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. RESULTS OF OPERATIONS - --------------------- Extremely low primary aluminum prices adversely affected results in the first quarter of 1999. During the quarter, aluminum prices reached an all- time low adjusted for inflation and a five-year low on a nominal basis. Our average realized price for primary aluminum of $0.64 per pound in the 1999 first quarter was down 17% compared to $0.77 per pound in the 1998 first quarter. The impact of lower prices was partially offset by lower material and conversion costs, lower interest and SG&A expenses, and higher shipments from ongoing operations, especially value-added primary aluminum products. In addition, our results include foreign currency related losses and charges, principally in Brazil, of $12 million.
First Quarter ------------------------------ 1999 1998 ------------------------------ RESULTS Net income (loss) before special items $ (10) $ 58 Cumulative effect of accounting change (see Note 2) - (23) ------------------------------ Net income (loss) $ (10) $ 35 ============================== EARNINGS PER SHARE - BASIC Net income (loss) before special items $(0.15) $ 0.78 Cumulative effect of accounting change - (0.32) ------------------------------ Net income (loss) $(0.15) $0.46 ==============================
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 12 13 RESULTS OF OPERATIONS - continued - --------------------- GLOBAL BUSINESS UNITS - continued BASE MATERIALS
First Quarter -------------------------------- 1999 1998 -------------------------------- Aluminum shipments: Customer 212 145 Internal 56 99 -------------------------------- Total 268 244 ================================ Revenues: Customer - aluminum $302 $247 - nonaluminum 75 115 Internal - aluminum 81 163 -------------------------------- Total $458 $525 ================================ Operating income $ 14 $ 79 ================================
Our base materials business is fundamentally very strong. The increase in customer aluminum shipments in the first quarter of 1999 reflects strong demand for our value-added products (foundry and sheet ingot, billet and rod), which made up 72% of the primary aluminum shipments in the first quarter. 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 first quarter of 1999 were significantly affected by lower prices for primary aluminum. Nonaluminum revenues were lower because of: - - significantly lower prices for alumina - approximately 20% to 25% lower than the first quarter of 1998 - - lower customer shipments of alumina and carbon products due to weaker demand and greater internal use resulting from our restart of idled primary aluminum capacity in 1998 The most significant factor affecting operating profit in the first quarter of 1999 was lower prices for primary aluminum products. We were able to offset some of the decline with higher shipments of primary aluminum products, improved capacity utilization, and lower material and conversion costs. PACKAGING AND CONSUMER
First Quarter -------------------------------- 1999 1998 -------------------------------- Customer aluminum shipments 33 30 Revenues: Customer - aluminum $178 $175 - nonaluminum 134 136 ----------------------------- Total $312 $311 ============================= Operating income $ 26 $ 22 =============================
Customer aluminum shipments and revenues were higher in the first quarter of 1999 because of strong demand for consumer foil products in domestic and foreign markets. Prices were lower because of competition. Operating income was higher because of the higher shipping volume and lower material and conversion costs. 13 14 RESULTS OF OPERATIONS - continued - --------------------- GLOBAL BUSINESS UNITS - continued PACKAGING AND CONSUMER - continued We have established a new manufacturing facility in Brazil that will produce foodservice packaging and consumer products. We will focus initially on the Brazilian market with plans to expand throughout South America. CONSTRUCTION AND DISTRIBUTION
First Quarter ----------------------------- 1999 1998 ----------------------------- Customer aluminum shipments 47 46 Revenues: Customer - aluminum $159 $165 - nonaluminum 78 82 ----------------------------- Total $237 $247 ============================= Operating income $ 8 $ 8 =============================
Shipments increased in the first quarter of 1999 because of strong demand for most distribution products. Revenues decreased because of lower prices for most products. The decline in prices for aluminum products reflected the general global weakening of aluminum prices. Prices for stainless steel products were lower due to global supply/demand imbalances and lower material costs. Operating income remained flat. The benefits of increased volume and lower material costs were offset by lower prices and the continuing absorption of the cost of our market expansions in southeast Europe and China. Our outlook is for continued strong activity levels for distribution products, especially in the transportation and kitchen equipment markets. For construction products, we are cautiously optimistic about signs of strengthening in the depressed markets of Asia and Latin America. TRANSPORTATION
First Quarter ----------------------------- 1999 1998 ----------------------------- Customer aluminum shipments 17 16 Customer revenues $94 $87 Operating loss (2) - =============================
Shipments and revenues were higher in the first quarter 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. 14 15 RESULTS OF OPERATIONS - continued - --------------------- GLOBAL BUSINESS UNITS - continued TRANSPORTATION - continued Operating profit was lower because of non-recurring start-up costs relating to an engine cradle program at our Indiana automotive structures plant (see below). This effect was partially offset by lower material costs, improved shipping volume and capacity utilization in wheel and heat exchanger operations, and significant operating improvements at our Beloit, Wisconsin wheel plant. The Company and an automobile manufacturer are pioneering the first, mass- produced, high-volume, all-aluminum engine cradle. The engine cradle offers significant weight savings, reduces noise and vibration, and provides important safety features. We have incurred high start-up costs because of the complexity of the production process and our acceleration of the timetable to begin production. No other manufacturer has yet produced this particular component, so we expect to maintain a competitive advantage. RESTRUCTURING As of December 31, 1998, the only assets remaining in this category related to the Alabama can stock complex. We finalized the sale of the Alabama can stock complex at the end of the first quarter of 1999. As a result, no revenues or operating results are included in the Restructuring category in 1999. OTHER The decline in operating profit in the first quarter of 1999 was due to foreign currency related losses and charges, principally in Brazil. For additional information concerning the global business units, see Note 6 to the consolidated financial statements. INTEREST EXPENSE Interest expense decreased in the first quarter of 1999 compared to the first quarter of 1998 due to lower amounts of debt outstanding. 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. 15 16 RESULTS OF OPERATIONS - continued - --------------------- YEAR 2000 READINESS DISCLOSURE - continued 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 substantially completed preparation of our critical, date-sensitive computer systems, processes and interfacing software for the year 2000. Our preparation included five phases: (1) inventory, (2) planning, (3) conversion, (4) pre-installation testing and (5) installation. We measure progress on remediation projects as a percentage of actual staff hours expended to staff hours projected. As of March 31, 1999, our overall remediation efforts were approximately 98% complete; remediation of information systems was approximately 99% complete while remediation of non- information systems (e.g., manufacturing and mechanical systems) was approximately 96% complete. We continue to monitor our computer and software vendors' readiness statements to assure that readiness changes in their products do not negatively affect our systems. QUALITY ASSURANCE In addition to completing our year 2000 remediation project, we are validating our remediation efforts with post-installation testing of certain critical computer systems. We also expect to respond to and initiate requests to test with certain suppliers, customers and government agencies after they ready their systems. CONTINGENCY PLANNING An ongoing key aspect of the Company's contingency planning for the year 2000 focuses on assessment of the business impact on the Company resulting from the possible failure of our suppliers to provide needed products and services. We are assessing the year 2000 readiness of all our 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. We have surveyed over 2,000 suppliers and rated them low, medium or high risk in their progress toward being ready for the year 2000. Critical suppliers rated as high risk are receiving our immediate attention for contingency planning or other measures such as identifying additional sources of supply for critical materials. As of March 31, 1999, we were on schedule with our third party evaluation, having completed approximately 45% of the projected total effort that we currently estimate will be needed. Early in the fourth quarter of 1999, we plan to have ranked our critical suppliers as low risk, identified additional sources of supply or developed other contingency plans with respect to those critical suppliers who are not ranked as low risk. We will continue monitoring these suppliers into the year 2000. In addition, we are responding to customer inquiries regarding our year 2000 program and our progress in addressing the issue. We also expect to evaluate the year 2000 readiness of certain of our largest customers. We have not determined the potential costs of business disruptions from supplier or customer non- performance. The Company currently has in place operating procedures and business continuity plans at its operating locations for responding to unusual, disruptive situations such as power shortages, failures by major suppliers and natural disasters. These existing procedures and plans provide a solid foundation for addressing many year 2000 issues. As unique risks are identified and deemed sufficiently likely to occur, we will make necessary adaptations or additions to our existing procedures and plans. 16 17 RESULTS OF OPERATIONS - continued - --------------------- YEAR 2000 READINESS DISCLOSURE - continued CONTINGENCY PLANNING - continued Contingency planning and monitoring to determine realistic year 2000 issues beyond those already addressed will continue throughout the year. Several reasonably likely worst case scenarios involve shortages or unanticipated outages of energy requirements. Our operations, particularly in the Base Materials business, require significant quantities of energy. Curtailments or disruptions of energy supplies would result in full or partial shutdowns of these operations until energy availability could be restored. In addition, an unanticipated loss of energy supply could result in damage to production equipment. We continue to assess these and other business disruption risks. COSTS The total cost of our Year 2000 remediation project is currently expected to be approximately $22 million. As of March 31, 1999, we had incurred approximately $20 million, which includes labor, equipment and license costs. Our cost projections include approximate costs for post- installation testing and contingency planning. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- WORKING CAPITAL
March 31 December 31 1999 1998 ------------------------- Working capital $489 $361 Ratio of current assets to current liabilities 1.4/1 1.3/1
The increase in working capital was due principally to higher cash and cash equivalents. The cash was received from the sale of assets late in the first quarter of 1999. OPERATING ACTIVITIES Cash used in operating activities in the first quarter of 1999 was supplemented with funds from financing activities. We used these funds principally to increase inventories in anticipation of improved shipping levels in the second quarter of 1999. INVESTING ACTIVITIES Capital investments totaled $106 million in the first quarter of 1999. This amount includes $26 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: - - expansion of the Worsley Alumina Refinery in Australia - - modernization of U.S. foil plants - - acquisition of a producer of flexographic separations and plates for the packaging industry in Canada - - establishment of a foodservice packaging and consumer products subsidiary in Brazil - - expansion of a plant in Europe that will produce composite architectural products - - construction of a new, larger metals distribution center in Seattle to replace the current leased facility - - expansion of a forged wheel plant in Virginia (completed in February 1999) - - expansion and modification of an automotive structures plant in Indiana Capital investments planned for 1999 (approximately $450 million) are primarily for those strategic projects now under way and continuing operating requirements. We expect to fund these capital investments primarily with cash provided by operating activities. While the projected 1999 capital investments do not include amounts for acquisitions, we will evaluate opportunities that arise. We do have small packaging and consumer acquisitions in process or under review. 17 18 LIQUIDITY AND CAPITAL RESOURCES - continued - ------------------------------- FINANCING ACTIVITIES The significant financing activities for the first quarter of 1999 were borrowings of $150 million under our revolving credit facilities (see Note 5). We used the proceeds to supplement cash used in operating activities. Early in the second quarter of 1999, we repaid approximately $130 million of short-term borrowings with available cash. PORTFOLIO REVIEW In the first quarter of 1999, we completed the sale of our can stock complex in Alabama. With this sale, our restructuring is essentially complete. OUTLOOK Our outlook for the second quarter of 1999 is a significant improvement from the first quarter. While we expect pricing pressures to cause results to be below the second quarter of 1998, the recent strengthening of the aluminum market should serve to enhance our anticipated performance improvement. For the year, we expect to benefit from increased sales of our packaging and consumer products. 18 19 RISK FACTORS - ------------ This section should be read in conjunction with Part I, Items 1(Business) and 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of the Company's 1998 Form 10-K and the preceding portions of this Item. This report contains (and oral communications made by or on behalf of the Company may contain) forecasts, projections, estimates, statements of management's plans, objectives and strategies for the Company and other forward-looking statements. 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 is cautiously optimistic about the demand for aluminum for 1999. There are signs that the economies in Asia are beginning to recover. The economic situation in South America is also improving. The Company's outlook is for an increase in global primary aluminum consumption for 1999 of 2%. If the global economy completes its recovery in 2000 to 2001, we expect global aluminum consumption to grow by approximately 5% per year. Economic and/or market conditions other than those forecasted by the Company in the preceding paragraph could cause the Company's actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. The Company's outlook for 1999 and beyond could be jeopardized by a further delay of economic recovery in Asia and Brazil, as well as in other emerging markets. 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. _______________________ [FN] Forward-looking statements can be identified generally as those containing words such as "should," "will," "will likely result," "hope," "forecast," "outlook," "project," "estimate," "expect," "anticipate," or "plan" and words of similar effect. 19 20 RISK FACTORS - continued - ------------ - - 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. - - 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. 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 - identification of currently unknown remediation sites - 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 affect the Company's results. - - Changes in the costs of power, resins, caustic soda, green coke and other raw materials can affect results. - - 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, as scheduled and within budget or a failure to launch successfully new growth or strategic business programs, such as the engine cradle program, could affect the Company's results. - - The Company's results may be adversely affected if it fails to meet its year 2000 readiness goals. While the Company believes it has prepared substantially all of its information and non-information systems for the advent of the year 2000, a failure to locate and correct all relevant computer codes could result in disruptions of Company operations, some of which may be significant. Also, there can be no guarantee that other companies with which the Company does business will be converted on a timely basis or their failure to be year 2000 compliant will not have an adverse effect on the Company. - - 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. 20 21 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. 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. 21 22 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"), 113 phantom shares, in the aggregate, were granted to the Registrant's nine outside Directors on January 4, 1999, based on an average price of $52.5625 per share. These phantom shares represent dividend equivalents paid on phantom shares previously granted under the Plan. 506 phantom shares, in the aggregate, were granted to the nine outside Directors on March 31, 1999, based on an average price of $48.7188 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 1998 Form 10-K 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 first quarter of 1999, the Registrant filed two Current Reports on Form 8-K with the Commission, both of which reported matters under Item 5: (1) A Form 8-K dated March 3, 1999, discussing the Registrant's expected earnings for the first quarter of 1999; and (2) A Form 8-K dated March 8, 1999, reporting that the Registrant's Board of Directors had approved amendments to the Registrant's shareholder rights plan. In addition, on April 1, 1999, the Registrant filed a Current Report on Form 8-K dated March 31, 1999, reporting that it had completed the sale of its Alloys can stock complex in Alabama and its aluminum extrusion plant in Irurzun, Spain. 22 23 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, Controller (Chief Accounting Officer) DATE: May 12, 1999 23 24 INDEX TO EXHIBITS (Attached herewith is Exhibit 99) EXHIBIT 2 - None * EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended. (File No. 001-01430, 1998 Form 10-K Report, EXHIBIT 3.1) * EXHIBIT 3.2 - By-laws, as amended. (File No. 001-01430, 1998 Form 10-K Report, EXHIBIT 3.2) EXHIBIT 4.1 - Restated Certificate of Incorporation. See EXHIBIT 3.1. EXHIBIT 4.2 - By-Laws. See EXHIBIT 3.2. * EXHIBIT 4.3 - 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 4.4 - 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 4.5 - Rights Agreement dated as of March 8, 1999 between Reynolds Metals Company and ChaseMellon Shareholder Services, L.L.C. (File No. 001-01430, Form 8-K Report dated March 8, 1999, pertaining to Preferred Stock Purchase Rights, EXHIBIT 4.1) * EXHIBIT 4.6 - Form of 9-3/8% Debenture due June 15, 1999. (File No. 001-01430, Form 8-K Report dated June 6, 1989, EXHIBIT 4) * EXHIBIT 4.7 - Form of Fixed Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.3) * EXHIBIT 4.8 - Form of Floating Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.4) * EXHIBIT 4.9 - Form of Book-Entry Fixed Rate Medium-Term Note. (File No. 001-01430, 1991 Form 10-K Report, EXHIBIT 4.15) * EXHIBIT 4.10 - Form of Book-Entry Floating Rate Medium-Term Note. (File No. 001-01430, 1991 Form 10-K Report, EXHIBIT 4.16) * EXHIBIT 4.11 - Form of 9% Debenture due August 15, 2003. (File No. 001-01430, Form 8-K Report dated August 16, 1991, Exhibit 4(a)) * EXHIBIT 4.12 - Articles of Continuance of Societe d'Aluminium Reynolds du Canada, Ltee/Reynolds Aluminum Company of Canada, Ltd. (formerly known as Canadian Reynolds Metals Company, Limited -- Societe Canadienne de Metaux Reynolds, Limitee) ("RACC"), as amended. (File No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.13) ______________________ * Incorporated by reference. 24 25 * EXHIBIT 4.13 - By-Laws of RACC, as amended. (File No. 001-01430, Form 10-Q Report for the Quarter Ended March 31, 1997, EXHIBIT 4.14) * EXHIBIT 4.14 - Articles of Incorporation of Societe Canadienne de Metaux Reynolds, Ltee/Canadian Reynolds Metals Company, Ltd. ("CRM"), as amended. (File No. 001-01430, Form 10- Q Report for the Quarter Ended September 30, 1997, EXHIBIT 4.15) * EXHIBIT 4.15 - By-Laws of CRM, as amended. (File No. 001-01430, Form 10-Q Report for the Quarter Ended September 30, 1997, EXHIBIT 4.16) * EXHIBIT 4.16 - Indenture dated as of April 1, 1993 among RACC, Reynolds Metals Company and The Bank of New York, as Trustee. (File No. 001- 01430, Form 8-K Report dated July 14, 1993, EXHIBIT 4(a)) * EXHIBIT 4.17 - First Supplemental Indenture, dated as of December 18, 1995 among RACC, Reynolds Metals Company, CRM and The Bank of New York, as Trustee. (File No. 001-01430, 1995 Form 10-K Report, EXHIBIT 4.18) * EXHIBIT 4.18 - Form of 6-5/8% Guaranteed Amortizing Note due July 15, 2002. (File No. 001- 01430, Form 8-K Report dated July 14, 1993, EXHIBIT 4(d)) +* EXHIBIT 10.1 - Reynolds Metals Company 1987 Nonqualified Stock Option Plan. (Registration Statement No. 33-13822 on Form S-8, dated April 28, 1987, EXHIBIT 28.1) +* EXHIBIT 10.2 - Reynolds Metals Company 1992 Nonqualified Stock Option Plan. (Registration Statement No. 33-44400 on Form S-8, dated December 9, 1991, EXHIBIT 28.1) +* EXHIBIT 10.3 - Reynolds Metals Company Performance Incentive Plan, as amended and restated effective January 1, 1996. (File No. 001- 01430, Form 10-Q Report for the Quarter Ended March 31, 1995, EXHIBIT 10.4) +* EXHIBIT 10.4 - Agreement dated December 9, 1987 between Reynolds Metals Company and Jeremiah J. Sheehan. (File No. 001-01430, 1987 Form 10-K Report, EXHIBIT 10.9) +* EXHIBIT 10.5 - Supplemental Death Benefit Plan for Officers. (File No. 001-01430, 1986 Form 10-K Report, EXHIBIT 10.8) +* EXHIBIT 10.6 - Financial Counseling Assistance Plan for Officers. (File No. 001-01430, 1987 Form 10-K Report, EXHIBIT 10.11) +* EXHIBIT 10.7 - Management Incentive Deferral Plan. (File No. 001-01430, 1987 Form 10-K Report, EXHIBIT 10.12) _______________________ * 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. 25 26 +* EXHIBIT 10.8 - Deferred Compensation Plan for Outside Directors as Amended and Restated Effective December 1, 1993. (File No. 001-01430, 1993 Form 10-K Report, EXHIBIT 10.12) +* EXHIBIT 10.9 - Form of Indemnification Agreement for Directors and Officers. (File No. 001-01430, 1998 Form 10-K Report, EXHIBIT 10.9) +* EXHIBIT 10.10 - Form of Executive Severance Agreement as amended between Reynolds Metals Company and key executive personnel, including each of the individuals listed in Item 4A of the 1998 Form 10-K Report. (File No. 001-01430, 1997 Form 10-K Report, EXHIBIT 10.10) +* EXHIBIT 10.11 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective May 20, 1988. (File No. 001-01430, Form 10-Q Report for the Quarter Ended June 30, 1988, EXHIBIT 19(a)) +* EXHIBIT 10.12 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective October 21, 1988. (File No. 001-01430, Form 10-Q Report for the Quarter Ended September 30, 1988, EXHIBIT 19(a)) +* EXHIBIT 10.13 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective January 1, 1987. (File No. 001-01430, 1988 Form 10-K Report, EXHIBIT 10.22) +* EXHIBIT 10.14 - Form of Stock Option and Stock Appreciation Right Agreement, as approved February 16, 1990 by the Compensation Committee of the Company's Board of Directors. (File No. 001- 01430, 1989 Form 10-K Report, EXHIBIT 10.24) +* EXHIBIT 10.15 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective January 18, 1991. (File No. 001-01430, 1990 Form 10-K Report, EXHIBIT 10.26) +* EXHIBIT 10.16 - Form of Stock Option Agreement, as approved April 22, 1992 by the Compensation Committee of the Company's Board of Directors. (File No. 001-01430, Form 10-Q Report for the Quarter Ended March 31, 1992, EXHIBIT 28(a)) +* EXHIBIT 10.17 - 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 10.18 - Reynolds Metals Company New Management Incentive Deferral Plan. (File No. 001- 01430, Form 10-Q Report for the Quarter Ended June 30, 1994, EXHIBIT 10.30) _______________________ * 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. 26 27 +* EXHIBIT 10.19 - Reynolds Metals Company Salary Deferral Plan for Executives. (File No. 001- 01430, Form 10-Q Report for the Quarter Ended June 30, 1994, EXHIBIT 10.31) +* EXHIBIT 10.20 - Reynolds Metals Company Supplemental Long Term Disability Plan for Executives. (File No. 001-01430, Form 10-Q Report for the Quarter Ended June 30, 1994, EXHIBIT 10.32) +* EXHIBIT 10.21 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 001-01430, Form 10-Q Report for the Quarter Ended September 30, 1994, EXHIBIT 10.34) +* EXHIBIT 10.22 - Amendment to Reynolds Metals Company 1992 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 001-01430, Form 10-Q Report for the Quarter Ended September 30, 1994, EXHIBIT 10.35) +* EXHIBIT 10.23 - Amendment to Reynolds Metals Company New Management Incentive Deferral Plan effective January 1, 1995. (File No. 001-01430, 1994 Form 10-K Report, EXHIBIT 10.36) +* EXHIBIT 10.24 - 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 10.25 - 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 10.26 - Form of Split Dollar Life Insurance Agreement (Employee Owner, Employee Pays Premium). (File No. 001-01430, Form 10-Q Report for the Quarter Ended June 30, 1995, EXHIBIT 10.36) +* EXHIBIT 10.27 - 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 10.28 - 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 10.29 - Reynolds Metals Company 1996 Nonqualified Stock Option Plan. (Registration Statement No. 333-03947 on Form S-8, dated May 17, 1996, EXHIBIT 4.6) +* EXHIBIT 10.30 - 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) ____________________________ * 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. 27 28 +* EXHIBIT 10.31 - 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 10.32 - 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 10.33 - Stock Option Agreement dated August 30, 1996 between Reynolds Metals Company and Jeremiah J. Sheehan. (File No. 001-01430, Form 10-Q Report for the Quarter Ended September 30, 1996, EXHIBIT 10.43) +* EXHIBIT 10.34 - Amendment to Deferred Compensation Plan for Outside Directors effective August 15, 1996. (File No. 001-01430, Form 10-Q Report for the Quarter Ended September 30, 1996, EXHIBIT 10.44) +* EXHIBIT 10.35 - Amendment to Reynolds Metals Company New Management Incentive Deferral Plan effective January 1, 1996. (File No. 001-01430, 1996 Form 10-K Report, EXHIBIT 10.38) +* EXHIBIT 10.36 - Amendment to Reynolds Metals Company Performance Incentive Plan effective January 1, 1996. (File No. 001-01430, 1996 Form 10- K Report, EXHIBIT 10.39) +* EXHIBIT 10.37 - Reynolds Metals Company Supplemental Incentive Plan. (File No. 001-01430, 1996 Form 10-K Report, EXHIBIT 10.40) +* EXHIBIT 10.38 - Reynolds Metals Company Stock Plan for Outside Directors. (File No. 001-01430, 1996 Form 10-K Report, EXHIBIT 10.41) +* EXHIBIT 10.39 - Special Executive Severance Package for Certain Employees who Terminate Employment between January 1, 1997 and June 30, 1999, (or, if earlier, the date of completion of employment related actions related to the Company's portfolio review process, as designated by the Company's Chief Executive Officer), approved by the Compensation Committee of the Company's Board of Directors on January 17, 1997 and extended on May 15, 1998. (File No. 001-01430, 1996 Form 10-K Report, EXHIBIT 10.42) +* EXHIBIT 10.40 - Special Award Program for Certain Executives or Key Employees, as approved by the Compensation Committee of the Company's Board of Directors on January 17, 1997. (File No. 001- 01430, 1996 Form 10-K Report, EXHIBIT 10.43) ____________________________ * 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. 28 29 +* EXHIBIT 10.41 - Amendment to Reynolds Metals Company 1996 Nonqualified Stock Option Plan effective December 1, 1997. (File No. 001-01430, 1997 Form 10-K Report, EXHIBIT 10.41) +* EXHIBIT 10.42 - Amendment to Reynolds Metals Company Restricted Stock Plan for Outside Directors effective December 1, 1997. (File No. 001-01430, 1997 Form 10-K Report, EXHIBIT 10.42) +* EXHIBIT 10.43 - Reynolds Metals Company Long-Term Performance Share Plan. (File No. 001-01430, Form 10-Q Report for the Quarter Ended June 30, 1998, EXHIBIT 10.43) * EXHIBIT 10.44 - Asset Purchase Agreement by and among Ball Corporation, Ball Metal Beverage Container Corp. and Reynolds Metals Company dated as of April 22, 1998. (File No. 001-01430, Form 10-Q Report for the Quarter Ended June 30, 1998, EXHIBIT 2) +* EXHIBIT 10.45 - Amendment to Reynolds Metals Company Restricted Stock Plan for Outside Directors effective January 1, 1999. (File No. 001-01430, 1998 Form 10-K Report, EXHIBIT 10.45) +* EXHIBIT 10.46 - Amendment to Reynolds Metals Company Stock Plan for Outside Directors effective January 1, 1999. (File No. 001-01430, 1998 Form 10-K Report, EXHIBIT 10.46) 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 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. 29 EX-27 2
5 This schedule contains summary information extracted from the Reynolds Metals Company Condensed Balance Sheet (Unaudited) for March 31, 1999 and Consolidated Statement of Income (Unaudited) for the Quarter ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 1,000,000 3-MOS DEC-31-1999 MAR-31-1999 191 0 856 10 545 1700 4271 2271 6107 1211 1123 0 0 1533 609 6107 1068 1068 925 925 57 0 20 (16) (6) (10) 0 0 0 (10) (.15) (.15) This amount represents total receivables, since trade receivables are not broken out separately at interim dates, in accordance with S-X 10-01(2).
EX-99 3 Exhibit 99 DESCRIPTION OF REYNOLDS METALS COMPANY CAPITAL STOCK The Company is authorized by its Restated Certificate of Incorporation to issue a total of 221,000,000 shares of capital stock, consisting of (i) 200,000,000 shares of common stock, without par value (the "Common Stock"), (ii) 20,000,000 shares of preferred stock, without par value (the "Preferred Stock"), and (iii) 1,000,000 shares of second preferred stock, $100 par value (the "Second Preferred Stock"). Shares of Preferred Stock and Second Preferred Stock are issuable in one or more series, each with such designations, preferences, rights, qualifications, limitations and restrictions as the Board of Directors of the Company may determine in resolutions providing for their issuance. As of April 30, 1999, there were issued, outstanding and entitled to vote 64,507,259 shares of Common Stock. No shares of Preferred Stock or Second Preferred Stock are currently outstanding, although the Board of Directors has adopted resolutions authorizing the issuance of up to 2,000,000 shares of a Series A Junior Participating Preferred Stock, without par value, issuable upon the occurrence of certain events as described below in the section entitled "Common Stock - Preferred Stock Purchase Rights." COMMON STOCK DIVIDEND RIGHTS AND RESTRICTIONS ON PAYMENT OF DIVIDENDS. Holders of Common Stock are entitled to receive dividends, when and as declared by the Board of Directors, subject to restrictions which may be imposed by (i) resolutions providing for the issuance of series of Preferred Stock or Second Preferred Stock; and (ii) certain credit agreements of the Company, as described below. Dividends on Preferred Stock and Second Preferred Stock may be cumulative, and no payments or distributions (except in Common Stock or other junior stock) may be made on Common Stock, nor may any Common Stock be acquired by the Company, unless all past and current dividends on Preferred Stock and Second Preferred Stock have been paid or provided for. Under certain of the Company's credit agreements, the Company may not declare or pay dividends on, make any payment on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any shares of capital stock of the Company, nor may the Company make any other distribution in respect thereof, if specified events of default (including payment defaults and events relating to bankruptcy, insolvency or reorganization) have occurred and are continuing. No such events of default have occurred. VOTING RIGHTS. Holders of Common Stock are entitled to one vote for each share held of record and are not entitled to cumulate votes for the election of directors. As a consequence, holders of more than 50% of the shares of Common Stock voting for the election of directors can elect all of the directors if they so choose; in such event, the holders of the remaining shares of Common Stock would not be able to elect any directors. Holders of Common Stock have voting powers on all matters requiring approval of stockholders, other than certain matters subject to the voting rights of holders of the Company's Preferred Stock and Second Preferred Stock to the extent provided in the applicable resolutions authorizing their issuance or otherwise under Delaware law. LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in the assets of the Company remaining after payment or provision for payment of all the Company's debts and other liabilities and after the holders of any outstanding series of Preferred Stock and Second Preferred Stock have been paid the full preferential amounts due them. Any preferential rights to be accorded holders of Preferred Stock and Second Preferred Stock will be set forth in resolutions of the Board of Directors authorizing issuance of any series. PREEMPTIVE RIGHTS; ASSESSABILITY. Holders of Common Stock have no preemptive or conversion rights and there are no redemption or sinking fund provisions applicable thereto. The outstanding shares of Common Stock are fully paid and non- assessable. TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the Common Stock is ChaseMellon Shareholder Services, L.L.C., 450 West 33rd Street, 15th Floor, New York, New York 10001. PREFERRED STOCK PURCHASE RIGHTS. On November 21, 1997, the Board of Directors of the Company declared a dividend distribution of one Preferred Stock Purchase Right (individually a "Right", and collectively the "Rights") for each outstanding share of Common Stock to stockholders of record at the close of business on December 1, 1997. The description and terms of the Rights are set forth in an Amended and Restated Rights Agreement, dated as of March 8, 1999 (the "Rights Agreement"), between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. The Rights are exercisable only if a person or group buys 15% or more of the Company's Common Stock, or announces a tender offer for 15% or more of the outstanding Common Stock. Each Right will entitle a holder to buy one-hundredth of a share of the Company's Series A Junior Participating Preferred Stock at an exercise price of $300, subject to adjustment in certain circumstances. If a person or group acquires 15% or more of the Common Stock, each Right would permit its holder to buy Common Stock having a market value equal to two times the exercise price of the Right. In addition, if at any time after the Rights become exercisable, the Company is acquired in a merger, or if there is a sale or transfer of 50% or more of its assets or earning power, each Right would permit its holder to buy common stock of the acquiring company having a market value equal to two times the exercise price of the Right. The Rights, which do not have voting privileges, expire on December 1, 2007. The Board of Directors of the Company may redeem the Rights before expiration, under certain circumstances, for $0.01 per Right (the "Redemption Price"). For so long as the Rights are redeemable, the Rights Agreement may be amended from time to time by the Company in its sole discretion. After the Rights have ceased to be redeemable, the Company may not adopt any amendment that adversely affects the interests of any holder of a Right, cause the Rights Agreement to be amendable other than in accordance with this sentence, or cause the Rights again to become redeemable. Notwithstanding the foregoing, the Company may not under any circumstances change the Redemption Price of the Rights. DELAWARE GENERAL CORPORATION LAW SECTION 203 The Company is subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware ("DGCL Section 203"), the "business combination" statute. In general, the statute prohibits a public Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless (i) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares described in DGCL Section 203), or (iii) on or after such date, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders and by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the "interested stockholder". "Business combination" is defined to include mergers, asset sales and certain other transactions resulting in a financial benefit to a stockholder. An "interested stockholder" is defined generally as a person who, together with affiliates and associates, owns (or, within the prior three years, did own) 15% or more of a corporation's voting stock. The Company's Restated Certificate of Incorporation does not exclude the Company from the restrictions imposed under DGCL Section 203. Thus, such statute could prohibit or delay the accomplishment of mergers or other takeover or change in control attempts with respect to the Company and, accordingly, may discourage attempts to acquire the Company. -----END PRIVACY-ENHANCED MESSAGE-----