-----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, L+7K1f+1mkBDxhcF6tZDxpGRTR6Fod40kfv0UT98Q2v1iMrcM+yb2NBOeTzBCVg/ ZPvaGSB+pOvIFN15tlNyng== 0000083604-00-000021.txt : 20000501 0000083604-00-000021.hdr.sgml : 20000501 ACCESSION NUMBER: 0000083604-00-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000428 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: 612767 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, 2000 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 27, 2000, the Registrant had 63,681,199 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 2000 1999 - ----------------------------------------------------------------- REVENUES $1,319 $1,068 COSTS AND EXPENSES Cost of products sold 1,047 925 Selling, general and administrative expenses 88 82 Depreciation and amortization 61 57 Interest 18 20 Merger-related expenses 7 - - ----------------------------------------------------------------- 1,221 1,084 - ----------------------------------------------------------------- EARNINGS Income (loss) before income taxes 98 (16) Taxes on income (credit) 27 (6) - ----------------------------------------------------------------- NET INCOME (LOSS) $ 71 $ (10) ================================================================= EARNINGS PER SHARE Basic: Average shares outstanding 64 64 Net income (loss) $1.11 $(0.15) Diluted: Average shares outstanding 64 64 Net income (loss) $1.10 $(0.15) - ----------------------------------------------------------------- CASH DIVIDENDS PER COMMON SHARE $0.35 $0.35 ================================================================= The accompanying notes to consolidated financial statements are an integral part of these statements.
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CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) ============================================================================ (millions) March 31 December 31 - ---------------------------------------------------------------------------- 2000 1999 - ---------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 54 $ 55 Receivables, less allowances of $9 (1999 - $10) 722 654 Inventories 586 519 Prepaid expenses and other 62 61 - ---------------------------------------------------------------------------- Total current assets 1,424 1,289 Unincorporated joint ventures and associated companies 1,680 1,692 Property, plant and equipment 4,335 4,336 Less allowances for depreciation and amortization 2,343 2,320 - ---------------------------------------------------------------------------- 1,992 2,016 Deferred taxes and other assets 943 953 - ---------------------------------------------------------------------------- Total assets $6,039 $5,950 ============================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, accrued and other liabilities $ 798 $ 819 Short-term borrowings 177 180 Long-term debt 147 153 - ---------------------------------------------------------------------------- Total current liabilities 1,122 1,152 Long-term debt 1,150 1,067 Postretirement benefits 966 962 Environmental, deferred taxes and other liabilities 597 623 Stockholders' equity: Common stock 1,588 1,575 Retained earnings 1,305 1,257 Treasury stock, at cost (626) (626) Accumulated other comprehensive income (63) (60) - ---------------------------------------------------------------------------- Total stockholders' equity 2,204 2,146 - ---------------------------------------------------------------------------- Contingent liabilities (Note 7) Total liabilities and stockholders' equity $6,039 $5,950 ============================================================================ The accompanying notes to consolidated financial statements are an integral part of these statements.
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CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) ============================================================================ - ---------------------------------------------------------------------------- Quarters ended March 31 (millions) 2000 1999 - ---------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ 71 $ (10) Adjustments to reconcile to net cash used in operating activities: Depreciation and amortization 61 57 Merger-related expenses 5 - Changes in operating assets and liabilities net of effects of dispositions: Accounts payable, accrued and other liabilities (18) (18) Receivables (73) (21) Inventories (69) (56) Environmental and restructuring liabilities (4) (9) Other (18) (55) - ---------------------------------------------------------------------------- Net cash used in operating activities (45) (112) INVESTING ACTIVITIES Capital investments: Operational (15) (26) Strategic (71) (80) Sales of assets - operational restructuring 56 193 Other 10 - - ---------------------------------------------------------------------------- Net cash provided by (used in) investing activities (20) 87 FINANCING ACTIVITIES Increase (decrease) in short-term borrowings (3) 41 Proceeds from long-term debt 100 150 Reduction of long-term debt (22) (46) Cash dividends paid (23) (23) Stock options exercised 12 - - ---------------------------------------------------------------------------- Net cash provided by financing activities 64 122 CASH AND CASH EQUIVALENTS Net increase (decrease) (1) 97 At beginning of period 55 94 - ---------------------------------------------------------------------------- At end of period $ 54 $ 191 ============================================================================ The accompanying notes to consolidated financial statements are an integral part of these statements.
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) ============================================================================ - ---------------------------------------------------------------------------- Quarters ended March 31 2000 1999 - ---------------------------------------------------------------------------- SHARES (thousands): Common stock Balance at January 1 74,826 74,105 Issued under employee benefit plans 201 - - ---------------------------------------------------------------------------- Balance at March 31 75,027 74,105 - ---------------------------------------------------------------------------- Treasury stock Balance at January 1 (11,344) (9,648) Purchased and held as treasury stock (6) - - ---------------------------------------------------------------------------- Balance at March 31 (11,350) (9,648) - ---------------------------------------------------------------------------- Net common shares outstanding 63,677 64,457 - ---------------------------------------------------------------------------- DOLLARS (millions): Common stock Balance at January 1 $1,575 $1,533 Issued under employee benefit plans 13 - - ---------------------------------------------------------------------------- Balance at March 31 $1,588 $1,533 - ---------------------------------------------------------------------------- Retained earnings Balance at January 1 $1,257 $1,222 Net income (loss) 71 (10) Cash dividends declared for common stock (23) (23) - ---------------------------------------------------------------------------- Balance at March 31 $1,305 $1,189 - ---------------------------------------------------------------------------- Treasury stock Balance at January 1 $ (626) $ (526) Purchased and held as treasury stock - - - ---------------------------------------------------------------------------- Balance at March 31 $ (626) $ (526) - ---------------------------------------------------------------------------- Accumulated other comprehensive income (loss) Balance at January 1 $ (60) $ (35) Foreign currency translation adjustments (3) (19) Income taxes - - ---------------------- Other comprehensive income (loss) (3) (19) - ---------------------------------------------------------------------------- Balance at March 31 $ (63) $ (54) - ---------------------------------------------------------------------------- Total stockholders' equity $2,204 $2,142 - ---------------------------------------------------------------------------- COMPREHENSIVE INCOME (millions): Net income (loss) $ 71 $ (10) Other comprehensive income (loss) (3) (19) - ---------------------------------------------------------------------------- Comprehensive income (loss) $ 68 $ (29) - ---------------------------------------------------------------------------- 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, 2000 and 1999 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 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Reynolds Metals Company (Reynolds) annual report on Form 10-K for the year ended December 31, 1999. Certain amounts have been reclassified to conform to the 2000 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 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. Reynolds must adopt this statement by January 1, 2001. Reynolds has not determined the impact this statement will have on its financial position or results of operations. 3. PROPOSED MERGER On August 18, 1999, Reynolds, Alcoa Inc. (Alcoa) and RLM Acquisition Corp., a wholly owned subsidiary of Alcoa, entered into an agreement and plan of merger. Under the merger agreement, each outstanding share of Reynolds common stock would be converted into 1.06 shares of Alcoa common stock and Reynolds would become wholly owned by Alcoa. In January 2000, Alcoa declared a 2-for-1 stock split, subject to approval by its shareholders at a meeting scheduled for May 12, 2000. If approval is received, additional common shares will be distributed on June 9, 2000 to Alcoa shareholders of record on May 26, 2000. If the stock split is approved, and the Reynolds-Alcoa merger occurs after May 26, 2000, the exchange ratio will be adjusted from 1.06 to 2.12. The proposed merger, which was approved by Reynolds stockholders at a special meeting held on February 11, 2000, is subject to customary closing conditions, including antitrust clearances. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Alcoa and Reynolds from completing the merger until certain information has been furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission, and until certain waiting period requirements have been satisfied. Alcoa filed a Hart-Scott-Rodino Premerger Notification and Report Form on August 24, 1999 and Reynolds filed such a Form on August 30, 1999. On September 29, 1999, the Antitrust Division issued a request for additional information and documentary material (a "second request"). On February 11, 2000, both Reynolds and Alcoa announced that they believed that they were in substantial compliance with the second request. They also advised the Department of Justice that they would not close the merger before March 31, 2000, in order to provide the Department sufficient time to review the transaction. The agreement not to close the merger has been extended to May 2000. 6 7 3. PROPOSED MERGER - continued In Europe, certain regulations require that Alcoa file a premerger notification form with the Commission of the European Communities prior to consummation of the proposed merger. Alcoa filed such notification on November 18, 1999. This filing began an initial one-month review period in which the European Commission was required to determine whether there were sufficiently "serious doubts" about the proposed merger's compatibility with the common market to require a more complete review. The initial one-month period expired on December 20, 1999, whereupon the European Commission issued a determination that the proposed merger did require a more complete review. The European Commission must complete its investigation and make a final determination with respect to the proposed merger no later than May 10, 2000. Reynolds and Alcoa have also made filings under the competition laws of Canada, Australia and certain other countries where the companies have significant operations. Alcoa and Reynolds have been advised that the Canadian Competition Bureau has classified this merger as "very complex." Its review is expected to be completed by May 24, 2000. The Australian review process is also expected to be completed by the end of May 2000. The merger agreement contains certain restrictions on the conduct of Reynolds' business before completion of the merger. For example, Reynolds has agreed to operate its business only in the ordinary course, to refrain from taking certain corporate actions without Alcoa's consent, and not to solicit alternative acquisition proposals. In the first quarter of 2000, Reynolds recognized $7 million of merger-related expenses. Merger-related expenses are principally for investment banking and legal services. Reynolds expects total merger-related expenses to be at least $35 million, including $19 million that was recognized in 1999. 4. EARNINGS PER SHARE The following reconciles net income and average shares for the basic and diluted earnings per share computations.
Quarters ended March 31 ------------------------------ 2000 1999 ------------------------------ Net income (numerator) $71 $(10) Average shares (denominator): Basic 63,718,000 64,475,000 Effect of dilutive securities 553,000 - ------------------------------ Diluted 64,271,000 64,475,000 ------------------------------ Per share amount: Basic $1.11 $(0.15) Diluted $1.10 $(0.15) Antidilutive securities excluded: Stock options 675,000 4,977,000
5. FINANCING ARRANGEMENTS In the first quarter of 2000, Reynolds borrowed $100 million under its credit facilities. The borrowing bears interest at a variable rate (6.5% at March 31, 2000) and requires repayment in a lump sum in 2001. The variable rate is based on the London Interbank Offer Rate. 7 8 6. COMPANY OPERATIONS
Packaging Construction Base and and Materials Consumer Distribution ============================================================================= FIRST QUARTER 2000 Customer aluminum shipments 222 35 55 Intersegment aluminum shipments 49 - - - ----------------------------------------------------------------------------- Total aluminum shipments 271 35 55 ============================================================================= Revenues: Aluminum $403 $189 $187 Nonaluminum 95 152 130 Intersegment revenues - aluminum 78 - - - ----------------------------------------------------------------------------- Total revenues $576 $341 $317 ============================================================================= Segment operating income (loss) $124 $ 24 $ 13 Corporate amounts Merger expenses - ----------------------------------------------------------------------------- Corporate operating income Interest expense Taxes on income - ----------------------------------------------------------------------------- Net income ============================================================================= FIRST QUARTER 1999 Customer aluminum shipments 212 33 47 Intersegment aluminum shipments 56 - - - ----------------------------------------------------------------------------- Total aluminum shipments 268 33 47 ============================================================================= Revenues: Aluminum $302 $178 $159 Nonaluminum 75 134 78 Intersegment revenues - aluminum 81 - - - ----------------------------------------------------------------------------- Total revenues $458 $312 $237 ============================================================================= Segment operating income (loss) $ 14 $ 26 $ 8 Inventory accounting adjustments Corporate amounts - ----------------------------------------------------------------------------- Corporate operating income Interest expense Taxes on income - ----------------------------------------------------------------------------- Net income (loss) =============================================================================
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Total Transportation Other Segments ============================================================================= FIRST QUARTER 2000 Customer aluminum shipments 20 13 345 Intersegment aluminum shipments - - 49 - ---------------------------------------------------------------------------- Total aluminum shipments 20 13 394 ============================================================================= Revenues: Aluminum $111 $39 $ 929 Nonaluminum - 8 385 Intersegment revenues - aluminum - - 78 - ---------------------------------------------------------------------------- Total revenues $111 $47 $1,392 ============================================================================= Segment operating income (loss) $ (7) $ 4 $ 158 Corporate amounts Merger expenses - ---------------------------------------------------------------------------- Corporate operating income Interest expense Taxes on income - ---------------------------------------------------------------------------- Net income ============================================================================= FIRST QUARTER 1999 Customer aluminum shipments 17 14 323 Intersegment aluminum shipments - - 56 - ---------------------------------------------------------------------------- Total aluminum shipments 17 14 379 ============================================================================= Revenues: Aluminum $ 94 $25 $ 758 Nonaluminum - 1 288 Intersegment revenues - aluminum - - 81 - ---------------------------------------------------------------------------- Total revenues $ 94 $26 $1,127 ============================================================================= Segment operating income (loss) $ (2) $ 3 $ 49 Inventory accounting adjustments Corporate amounts - ---------------------------------------------------------------------------- Corporate operating income Interest expense Taxes on income - ---------------------------------------------------------------------------- Net income (loss) =============================================================================
Reconciling Items Consolidated ================================================================= FIRST QUARTER 2000 Customer aluminum shipments - 345 Intersegment aluminum shipments (49) - - ---------------------------------------------------------------- Total aluminum shipments (49) 345 ================================================================= Revenues: Aluminum $ - $ 929 Nonaluminum 5 390 Intersegment revenues - aluminum (78) - - ----------------------------------------------------------------- Total revenues $(73) $1,319 ================================================================= Segment operating income (loss) $ - $ 158 Corporate amounts (35) Merger expenses (7) - ----------------------------------------------------------------- Corporate operating income 116 Interest expense (18) Taxes on income (27) - ----------------------------------------------------------------- Net income $ 71 ================================================================= FIRST QUARTER 1999 Customer aluminum shipments - 323 Intersegment aluminum shipments (56) - - --------------------------------------------------------------- Total aluminum shipments (56) 323 ================================================================ Revenues: Aluminum $ - $ 758 Nonaluminum 22 310 Intersegment revenues - aluminum (81) - - --------------------------------------------------------------- Total revenues $(59) $1,068 ================================================================ Segment operating income (loss) $ - $ 49 Inventory accounting adjustments 2 Corporate amounts (47) - --------------------------------------------------------------- Corporate operating income 4 Interest expense (20) Taxes on income 6 - --------------------------------------------------------------- Net income (loss) $ (10) ================================================================
9 10 7. CONTINGENT LIABILITIES As previously disclosed in Reynolds' 1999 Form 10-K, Reynolds 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. Reynolds 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 Reynolds' competitive or financial position. However, such costs could be material to results of operations in a future interim or annual reporting period. 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 wholly owned subsidiaries of Reynolds are obligors (thus subjecting them to reporting requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934), are fully and unconditionally guaranteed by Reynolds. Financial information relating to these companies is presented herein in accordance with Staff Accounting Bulletin 53 as an addition to the footnotes to the financial statements of Reynolds. Summarized financial information is as follows:
CANADIAN REYNOLDS METALS COMPANY, LTD. Quarters ended March 31 -------------------------------- 2000 1999 -------------------------------- Net Sales: Customers $ 84 $110 Parent and related companies 206 100 -------------------------------- $290 $210 Cost of products sold 229 196 Net income $ 38 $ 6
March 31 December 31 2000 1999 ------------------------------- Current assets $ 361 $ 176 Noncurrent assets 1,119 1,184 Current liabilities (127) (148) Noncurrent liabilities (445) (345)
10 11 8. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM COMPANY OF CANADA, LTD. - continued
REYNOLDS ALUMINUM COMPANY OF CANADA, LTD. Quarters ended March 31 ----------------------------- 2000 1999 ----------------------------- Net Sales: Customers $ 84 $ 110 Parent and related companies 206 100 ----------------------------- $ 290 $ 210 Cost of products sold 229 195 Net income $ 39 $ 7
March 31 December 31 2000 1999 ----------------------------- Current assets $ 351 $ 224 Noncurrent assets 1,128 1,192 Current liabilities (127) (129) Noncurrent liabilities (447) (347)
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 Reynolds' 1999 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 Reynolds and other forward-looking statements. Please refer to the "Risk Factors" section beginning on page 17, 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. PROPOSED MERGER - --------------- On August 18, 1999, Reynolds, Alcoa Inc. (Alcoa) and RLM Acquisition Corp., a wholly owned subsidiary of Alcoa, entered into an agreement and plan of merger. Under the merger agreement, each outstanding share of Reynolds common stock would be converted into 1.06 shares of Alcoa common stock and Reynolds would become wholly owned by Alcoa. In January 2000, Alcoa declared a 2-for-1 stock split, subject to approval by its shareholders at a meeting scheduled for May 12, 2000. If approval is received, additional common shares will be distributed on June 9, 2000 to Alcoa shareholders of record on May 26, 2000. If the stock split is approved, and the Reynolds-Alcoa merger occurs after May 26, 2000, the exchange ratio will be adjusted from 1.06 to 2.12. The proposed merger, which was approved by Reynolds stockholders at a special meeting held on February 11, 2000, is subject to customary closing conditions, including antitrust clearances. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Alcoa and Reynolds from completing the merger until certain information has been furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission, and until certain waiting period requirements have been satisfied. Alcoa filed a Hart-Scott-Rodino Premerger Notification and Report Form on August 24, 1999 and Reynolds filed such a Form on August 30, 1999. On September 29, 1999, the Antitrust Division issued a request for additional information and documentary material (a "second request"). On February 11, 2000, both Reynolds and Alcoa announced that they believed that they were in substantial compliance with the second request. They also advised the Department of Justice that they would not close the merger before March 31, 2000, in order to provide the Department sufficient time to review the transaction. The agreement not to close the merger has since been extended to May 2000. In Europe, certain regulations require that Alcoa file a premerger notification form with the Commission of the European Communities prior to consummation of the proposed merger. Alcoa filed such notification on November 18, 1999. This filing began an initial one-month review period in which the European Commission was required to determine whether there were sufficiently "serious doubts" about the proposed merger's compatibility with the common market to require a more complete review. The initial one-month period expired on December 20, 1999, whereupon the European Commission issued a determination that the proposed merger did require a more complete review. The European Commission must complete its investigation and make a final determination with respect to the proposed merger no later than May 10, 2000. Reynolds and Alcoa have also made filings under the competition laws of Canada, Australia and certain other countries where the companies have significant operations. Alcoa and Reynolds have been advised that the Canadian Competition Bureau has classified this merger as "very complex." Its review is expected to be completed by May 24, 2000. The Australian review process is also expected to be completed by the end of May 2000. 12 13 PROPOSED MERGER - continued - --------------- The merger agreement contains certain restrictions on the conduct of Reynolds' business before completion of the merger. For example, Reynolds has agreed to operate its business only in the ordinary course, to refrain from taking certain corporate actions without Alcoa's consent, and not to solicit alternative acquisition proposals. In the first quarter of 2000, Reynolds recognized $7 million of merger-related expenses. Merger-related expenses are principally for investment banking and legal services. Reynolds expects total merger-related expenses to be at least $35 million, including $19 million that was recognized in 1999. RESULTS OF OPERATIONS - ---------------------
First Quarter --------------------------- 2000 1999 --------------------------- Aluminum shipments 345 323 Revenues $1,319 $1,068 Net income (loss) 71 (10) EPS (diluted) $1.10 $(0.15)
Net income for the first quarter of 2000 includes after-tax merger-related expenses of $6 million. The net loss for the first quarter of 1999 includes foreign currency related losses, principally in Brazil, of $12 million. The first quarter 2000 results reflect strong demand and higher pricing for aluminum, alumina and stainless steel. The increase in income before income taxes of $114 million was primarily due to the following:
Higher prices for aluminum products $86 Higher prices for alumina and stainless steel products 19 Higher shipments and sales 12
The increase in selling, general and administrative expenses was wholly attributable to 1999 acquisitions. Looking forward, results are expected to further benefit from increased sales of Packaging and Consumer products as the year progresses, peaking in the fourth quarter. In addition, we expect the start-up of the expansion of the Worsley Alumina Refinery to be under way in the second quarter of 2000. We also expect to benefit from continuing cost reduction efforts in all of our businesses. GLOBAL BUSINESS UNITS Reynolds 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, foodservice, consumer, and 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 13 14 RESULTS OF OPERATIONS - continued - --------------------- GLOBAL BUSINESS UNITS - continued BASE MATERIALS
First Quarter ----------------------- 2000 1999 ----------------------- Aluminum shipments: Customer 222 212 Internal 49 56 ----------------------- Total 271 268 ======================= Revenues: Customer - aluminum $403 $302 - nonaluminum 95 75 Internal - aluminum 78 81 ----------------------- Total $576 $458 ======================= Operating income $124 $ 14 =======================
Customer aluminum shipments increased during the first quarter of 2000 because of higher demand for our value-added products (foundry and sheet ingot, billet and rod). Value-added products made up a record 82% of our primary aluminum shipments in this period and 73% in the first quarter of 1999. Aluminum revenues increased principally due to higher primary aluminum prices. The average realized price for primary aluminum was $0.82 per pound in the first quarter of 2000 compared to $0.64 per pound in the same period of 1999. The increase in non-aluminum revenues resulted from strong demand and higher prices for alumina. The increase in operating income was due to strong prices for aluminum and alumina. Costs were lower as a result of higher production volume. These lower costs were somewhat offset by an increase in power costs that are indexed to the LME aluminum price.
PACKAGING AND CONSUMER First Quarter ---------------------- 2000 1999 ---------------------- Customer aluminum shipments 35 33 Revenues: Customer - aluminum $189 $178 - nonaluminum 152 134 ---------------------- Total $341 $312 ====================== Operating income $ 24 $ 26 ======================
The increase in aluminum shipments and revenues was due to strong demand for packaging and foodservice products. Nonaluminum revenues were higher because of strong demand for plastic packaging and consumer products. These increases were realized from domestic and international growth, and new products. Operating profit was lower because of higher material costs. This effect was somewhat offset by the increased shipping volumes and pricing improvements. 14 15 RESULTS OF OPERATIONS - continued - --------------------- GLOBAL BUSINESS UNITS - continued
CONSTRUCTION AND DISTRIBUTION First Quarter --------------------- 2000 1999 --------------------- Customer aluminum shipments 55 47 Revenues: Customer - aluminum $187 $159 - nonaluminum 130 78 --------------------- Total $317 $237 ===================== Operating income $ 13 $ 8 =====================
The increase in aluminum shipments in the first quarter of 2000 resulted from strong demand for distribution products, particularly aluminum mill products, and Reynobond aluminum composite material. The increase in aluminum revenues reflects the strong shipping volume and higher prices. The increase in non-aluminum revenues was due to acquisitions and higher prices for stainless steel products. The increase in operating income resulted from the higher shipping volume and prices. The benefits from higher prices were partly offset by increased material costs.
TRANSPORTATION First Quarter --------------------- 2000 1999 --------------------- Customer aluminum shipments 20 17 Customer revenues $111 $94 Operating loss (7) (2) =====================
Shipments and revenues were higher in the first quarter of 2000 because of strong demand for cast aluminum wheels and increased shipments of engine cradles. The increased loss resulted from higher conversion costs due to manufacturing difficulties in wheel operations and higher material costs. Profit margins were adversely affected as a result of higher aluminum costs not being offset by price increases because of a time lag in the pricing formula. OTHER In the "Other" category, revenues were higher because of real estate sales and improvements at European extrusion and Latin American can operations. The improvement in corporate amounts reflects the effects of foreign currency related losses of $12 million recognized in the first quarter of 1999. For additional information concerning the global business units, see Note 6 to the consolidated financial statements. INTEREST EXPENSE Interest expense was lower in the first quarter of 2000 because of an increase in capitalized interest. 15 16 RESULTS OF OPERATIONS - continued - --------------------- TAXES ON INCOME The effective tax rates reflected in the income statement differ from the U.S. federal statutory rate principally because of the following: . foreign taxes at different rates . the effects of percentage depletion allowances . credits and other tax benefits LIQUIDITY AND CAPITAL RESOURCES - -------------------------------
WORKING CAPITAL March 31 December 31 2000 1999 ------------ ------------- Working capital $302 $137 Ratio of current assets to current liabilities 1.3/1 1.1/1
The increase in working capital was due principally to higher receivables and inventories. The increase in receivables resulted from lower sales of customer accounts receivable and an increase in swap arrangements. The increase in inventories is in anticipation of higher shipping levels in the second quarter of 2000. OPERATING ACTIVITIES Cash generated from operating activities was supplemented with cash provided by financing activities to fund the increase in working capital. INVESTING ACTIVITIES Capital investments totaled $86 million in the first quarter of 2000. This amount includes $15 million for operating requirements (replacement equipment, environmental control projects, etc.). The remainder was for strategic projects (performance improvements, investments, etc.) principally carried forward from 1999, including: . expansion of the Worsley Alumina Refinery in Australia . modernization of U.S. foil plants . small capacity expansions, equipment upgrades, improvement programs and other initiatives that have been completed or are currently under way at a number of facilities Capital investments planned for 2000 (in the range of $250 - $275) 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. In the first quarter of 2000, we sold our remaining investment in a Canadian rolling mill and related assets. No material gain or loss was realized. This investment was included in our "Other" category. FINANCING ACTIVITIES In the first quarter of 2000, we borrowed $100 million under our credit facilities and increased the amount of debt securities we can issue under our shelf registration to $163 million. We used the proceeds from the borrowing to fund investing activities and to partially fund an increase in working capital. 16 17 RISK FACTORS - ------------ This section should be read in conjunction with Part I, Item 1 (Business), Item 3 (Legal Proceedings) and Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of Reynolds' 1999 Form 10-K and the preceding portions of this Item. This report contains (and oral communications made by or on behalf of Reynolds may contain) forecasts, projections, estimates, statements of management's plans, objectives and strategies for Reynolds and other forward-looking statements. Reynolds' 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 Reynolds' 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 Reynolds' actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Reynolds remains optimistic about the demand for aluminum for the balance of 2000. The strong recovery in 1999, when aluminum consumption grew by more than 5%, has set the stage for further strength in 2000. While some uncertainty exists about the extent of the economic expansion in the United States, the outlook for continuing growth in Europe and Asia remains very positive. We expect that consumption of aluminum will continue to grow at a rate of 4% to 6% per year for 2000 and 2001. Economic and/or market conditions other than those forecasted by Reynolds in the preceding paragraph could cause Reynolds' actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. The following factors also could affect Reynolds' 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 Reynolds' shipments, changes in aluminum pricing have a rapid effect on its operating results. Reynolds' use from time to time of contractual arrangements, including fixed-price sales contracts, fixed- price supply contracts, and forward, futures and option contracts, reduces its exposure to price volatility but does not eliminate it. . The markets for most aluminum products are highly competitive. Certain of Reynolds' competitors are larger than Reynolds 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 Reynolds' key markets. Plastic products compete with similar products made by Reynolds' competitors, as well as with products made of glass, aluminum, steel, paper, wood and ceramics, among others. Unanticipated actions or developments by or affecting Reynolds' competitors and/or the willingness of customers to accept substitutions for the products sold by Reynolds could affect results. [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," "scheduled," or "plan" and words of similar effect. 17 18 RISK FACTORS - continued - ------------ . Reynolds spends substantial capital and operating amounts relating to ongoing compliance with environmental laws. In addition, Reynolds is involved in remedial investigations and actions in connection with past disposal of wastes. The identification of additional material remediation sites in the future at which Reynolds may be named as a potentially responsible party (that are presently unknown) could have a material adverse effect on its results of operations in a future interim or annual reporting period. Moreover, estimating future environmental compliance and remediation costs is imprecise due to: - continuing evolution of environmental laws and regulatory requirements and uncertainties about their application to Reynolds' operations - availability and application of technology - allocation of costs among potentially responsible parties . Reynolds has investments and activities in various emerging markets, including China 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 Reynolds other than as anticipated by management and counsel, could have a material adverse effect on its results of operations for a particular reporting period. . Changes in the costs or availability of supply of power, resins, caustic soda, green coke and other raw materials can materially affect results. Substantial increases in power costs, particularly in the Pacific Northwest, may adversely affect Reynolds' primary aluminum production plants which require reliable, low-cost power. . Operating factors such as supply disruptions, the failure of equipment or processes to meet specifications, failure to achieve operating improvements in the Transportation global business unit, changes in operating conditions, and weather could materially affect results. . Changes in laws and regulations, both U.S. and foreign, or their interpretation and application, including changes in tax laws and their interpretation and application, could affect Reynolds' results. . A number of Reynolds' operations are cyclical and can be influenced by economic conditions. . A failure to complete and successfully start up major capital projects, such as the ongoing expansion of the Worsley Alumina Refinery (by reason of construction delays or disputes, labor unrest or otherwise), as scheduled and within budget or a failure to launch successfully new growth or strategic business programs, such as the engine cradle program where Reynolds is experiencing higher than anticipated costs, could affect Reynolds' results. . A strike at a customer facility or a significant downturn in the business of a key customer supplied by Reynolds could affect Reynolds' results. 18 19 RISK FACTORS - continued - ------------ . Reynolds' proposed merger with Alcoa Inc. is subject to certain conditions, including antitrust clearance. As discussed under "Merger" in this Item 2, on September 29, 1999, the Antitrust Division issued a request for additional information and documentary material (a "second request"). On February 11, 2000, both Reynolds and Alcoa announced that they believed that they were in substantial compliance with the second request. They also advised the Department of Justice that they would not close the merger before March 31, 2000, in order to provide the Department sufficient time to review the transaction. The agreement not to close the merger has been extended to May 2000. In addition, the European Commission has until no later than May 10, 2000, to complete its investigation and to make a final determination with respect to the merger. Reynolds and Alcoa have also made filings under the competition laws of Canada, Australia and certain other countries where the companies have significant operations. Reynolds and Alcoa have been advised that the Canadian Competition Bureau has classified this merger as "very complex." Its review is expected to be completed by May 24, 2000. The Australian review process is also expected to be completed by the end of May 2000. It is possible that regulatory authorities may not approve the merger, impose conditions on the combined operations or require divestitures as a condition to approving the merger. While Reynolds is working promptly toward completion of the merger, no assurances can be given as to whether regulatory delays will be encountered or regulatory conditions to the merger imposed, or the possible effects of such delays or conditions. In addition to the factors referred to above, Reynolds is exposed to general financial, political, economic and business risks in connection with its worldwide operations. Reynolds continues to evaluate and manage its operations in a manner to mitigate the effects from exposure to such risks. In general, Reynolds' 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 Reynolds 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 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. 19 20 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As previously reported, on August 11, 1999, eight class action complaints on behalf of stockholders of Reynolds were filed in the Delaware Court of Chancery against Reynolds and certain present and former members of its board of directors. These actions were styled Tozour Energy Systems Retirement Plan v. Sheehan, et al.; Lisa v. Reynolds Metals Company, et al.; Yassin v. Reynolds Metals Company, et al.; Weinfeld v. Sheehan, et al.; Bader & Yakaitis Profit Sharing Plan and Trust v. Sheehan, et al.; Rand v. Sheehan, et al.; Grill v. Sheehan, et al.; and Randolph Capital Management, Inc. v. Sheehan, et al. The complaints were filed after Alcoa announced its proposal to acquire Reynolds. The plaintiff in each action alleged, among other things, that the directors of Reynolds failed to negotiate with Alcoa before Alcoa's announcement; that they were breaching their fiduciary duties by failing to explore offers for the purchase of Reynolds or to engage in meaningful discussions with interested parties such as Alcoa; that they were attempting to entrench themselves in their positions at Reynolds through misuse of Reynolds' shareholder rights plan; and that they were attempting to deprive the plaintiffs of the true value of their investment in Reynolds. The plaintiff in each action sought injunctive relief requiring the directors of Reynolds to give due consideration to any proposed business combination, to resolve any conflicts in favor of Reynolds' public stockholders, and to refrain from consummating any business combination without conducting an auction or other process to obtain the highest possible price for Reynolds. The complaints also sought unspecified damages and awards of fees and costs. On February 11, 2000, Reynolds' stockholders approved the merger agreement between Reynolds and Alcoa. On April 3, 2000, the Delaware Court of Chancery entered orders of dismissal, without prejudice, dismissing all of the above- described actions. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) Recent Sales of Unregistered Securities STOCK PLAN FOR OUTSIDE DIRECTORS. Under Reynolds' Stock Plan for Outside Directors (the "Stock Plan"), 91.825 phantom shares, in the aggregate, were granted to Reynolds' nine outside Directors on January 3, 2000, based on an average price of $75.969 per share. These phantom shares represented dividend equivalents paid on phantom shares previously granted under the Stock Plan. 756.250 phantom shares, in the aggregate, were granted to the nine outside Directors on March 31, 2000, based on an average price of $67.844 per share. These phantom shares represented a quarterly installment of each outside Director's annual grant under the Stock Plan. To the extent that these grants constitute sales of equity securities, Reynolds 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 Stock Plan, the number of outside Directors participating in the Stock 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 Stock Plan is contained in Reynolds' 1999 Form 10-K in Part II, Item 5, under the caption "Sale of Unregistered Securities." LONG-TERM PERFORMANCE SHARE PLAN. Under Reynolds' Long-Term Performance Share Plan (the "Plan"), executive officers and other key employees of Reynolds and its subsidiaries and affiliates who are designated by the Compensation Committee of Reynolds' Board of Directors are granted performance share units for a designated cycle (generally four years, although an initial two-year cycle was also established for 1998-99). The units may be earned (or not) based on Reynolds' total shareholder return (i.e., stock price appreciation plus dividends reinvested quarterly) relative to the Standard & Poor's Basic Materials Index. A threshold payment is made if Reynolds matches the 40th percentile of the group, while target is payable at the 60th percentile and a maximum award of 150% is payable at the 80th percentile. After the end of each performance cycle, each participant will be entitled to receive an award for that cycle only to the extent the performance goals 20 21 established for that cycle have been met. Half of the award will be payable in cash; the other half will be in the form of phantom stock. Participants may voluntarily defer receipt of up to 85% of the cash portion, which may be deferred into an interest account or, subject to the terms of the Plan, a phantom stock account. The phantom stock (including all deferred awards) will not be paid out until the year following termination of employment or, in the case of a change in control of Reynolds, immediately following the change in control, and will be paid in shares of common stock. On January 1, 2000, 61,945.052 phantom shares, in the aggregate, were credited to the accounts of the executive officers and other key employees participating in the Plan, based on an average stock price calculated in accordance with the Plan of $72.49 per share. These phantom shares represented awards under the Plan for the two-year cycle January 1, 1998 through December 31, 1999. To the extent that these awards constitute sales of equity securities, Reynolds 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 Plan's restriction on the payout of the phantom stock until after the participants' termination of employment, the number of executive officers and other key employees participating in the Plan, the sophistication of such participants and their access to the kind of information that a registration statement would provide. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS As previously reported in Reynolds' 1999 Form 10-K in Part I, Item 4, a special meeting of Reynolds' stockholders was held on February 11, 2000. The stockholders approved and adopted the Agreement and Plan of Merger, dated as of August 18, 1999, among Alcoa Inc., RLM Acquisition Corp. and Reynolds, and approved the transactions contemplated thereby. At December 29, 1999, the record date for the special meeting, 63,463,257 shares of common stock were outstanding and entitled to vote at the meeting. The number of votes cast for and against, and the number of abstentions, as applicable, were as set forth below. No other matter was voted upon at the meeting.
Number of Votes Cast "For" 41,335,471 Number of Votes Cast "Against" 457,861 Number of Abstentions 5,609,245
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 2000, Reynolds filed four Current Reports on Form 8-K with the Commission, all of which reported matters under Item 5: (1) A Form 8-K dated January 18, 2000, containing unaudited pro forma condensed consolidated financial statements relating to the proposed merger of Reynolds with Alcoa Inc.; (2) A Form 8-K dated January 19, 2000, containing a copy of a press release issued that date by Reynolds announcing its 1999 fourth quarter and year-end results; (3) A Form 8-K dated February 14, 2000, containing copies of press releases issued on February 11, 2000 by Reynolds and Alcoa Inc. concerning their proposed merger; and 21 22 (4) A Form 8-K dated March 21, 2000, containing a copy of a press release issued on March 20, 2000 by Reynolds and Alcoa Inc. announcing that they had agreed to provide the Department of Justice additional time to review their proposed merger. 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 and Controller (Chief Accounting Officer) DATE: April 28, 2000 23 24 INDEX TO EXHIBITS (Attached herewith are Exhibits 27 and 99) * EXHIBIT 2 - Agreement and Plan of Merger among Alcoa Inc., RLM Acquisition Corp. and Reynolds Metals Company dated as of August 18, 1999. (File No. 001-01430, Form 8-K dated August 19, 1999, EXHIBIT 99.1) * EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended. (File No. 001-01430, 1999 Form 10-K Report, EXHIBIT 3.1) * EXHIBIT 3.2 - By-laws, as amended. (File No. 001-01430, 1998 Form 10-K Report, EXHIBIT 3.2) EXHIBIT 4.1 - Restated Certificate of Incorporation. See EXHIBIT 3.1. EXHIBIT 4.2 - By-laws. See EXHIBIT 3.2. * EXHIBIT 4.3 - Form of Common Stock Certificate. (Registration Statement No. 333-79203 on Form S-8, dated May 24, 1999, EXHIBIT 4.2) * EXHIBIT 4.4 - Indenture dated as of April 1, 1989 (the "Indenture") between Reynolds Metals Company and The Bank of New York, as Trustee, relating to Debt Securities. (File No. 001-01430, Form 10-Q Report for the Quarter ended March 31, 1989, EXHIBIT 4(c)) * EXHIBIT 4.5 - Amendment No. 1 dated as of November 1, 1991 to the Indenture. (File No. 001- 01430, 1991 Form 10-K Report, EXHIBIT 4.4) * EXHIBIT 4.6 - Amended and Restated Rights Agreement dated as of March 8, 1999 (the "Rights Agreement") between Reynolds Metals Company and ChaseMellon Shareholder Services, L.L.C. (File No. 001-01430, Form 8-K Report dated March 8, 1999, EXHIBIT 4.1) * EXHIBIT 4.7 - First Amendment dated August 20, 1999 to the Rights Agreement. (File No. 001-01430, Form 8-A/A (Amendment No. 2 to Registration Statement on Form 8-A, pertaining to Preferred Stock Purchase Rights) dated August 19, 1999, EXHIBIT 1) * EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.3) * EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.4) * EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term Note. (File No. 001-01430, 1991 Form 10- K Report, EXHIBIT 4.15) _______________________ * Incorporated by reference. 24 25 * EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term Note. (File No. 001-01430, 1991 Form 10- K Report, EXHIBIT 4.16) * EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003. (File No. 001-01430, Form 8-K Report dated August 16, 1991, EXHIBIT 4(a)) * EXHIBIT 4.13 - Articles of Continuance of Societe d'Aluminium Reynolds du Canada, Ltee/Reynolds Aluminum Company of Canada, Ltd. (formerly known as Canadian Reynolds Metals Company, Limited -- Societe Canadienne de Metaux Reynolds, Limitee) ("RACC"), as amended. (File No. 001-01430, 1995 Form 10-K Report, EXHIBIT 4.13) * EXHIBIT 4.14 - By-Laws of RACC, as amended. (File No. 001- 01430, Form 10-Q Report for the Quarter ended March 31, 1997, EXHIBIT 4.14) * EXHIBIT 4.15 - Articles of Incorporation of Societe Canadienne de Metaux Reynolds, Ltee/Canadian Reynolds Metals Company, Ltd. ("CRM"), as amended. (File No. 001- 01430, Form 10-Q Report for the Quarter ended September 30, 1997, EXHIBIT 4.15) * EXHIBIT 4.16 - By-Laws of CRM, as amended. (File No. 001- 01430, Form 10-Q Report for the Quarter ended September 30, 1997, EXHIBIT 4.16) * EXHIBIT 4.17 - Indenture dated as of April 1, 1993 among RACC, Reynolds Metals Company and The Bank of New York, as Trustee. (File No. 001-01430, Form 8-K Report dated July 14, 1993, EXHIBIT 4(a)) * EXHIBIT 4.18 - First Supplemental Indenture, dated as of December 18, 1995 among RACC, Reynolds Metals Company, CRM and The Bank of New York, as Trustee. (File No. 001-01430, 1995 Form 10-K Report, EXHIBIT 4.18) * EXHIBIT 4.19 - Form of 6-5/8% Guaranteed Amortizing Note due July 15, 2002. (File No. 001-01430, Form 8-K Report dated July 14, 1993, EXHIBIT 4(d)) =* EXHIBIT 10.1 - Reynolds Metals Company 1987 Nonqualified Stock Option Plan. (Registration Statement No. 33-13822 on Form S-8, dated April 28, 1987, EXHIBIT 28.1) =* EXHIBIT 10.2 - Reynolds Metals Company 1992 Nonqualified Stock Option Plan. (Registration Statement No. 33-44400 on Form S-8, dated December 9, 1991, EXHIBIT 28.1) =* EXHIBIT 10.3 - Amendment and Restatement of Reynolds Metals Company Performance Incentive Plan, as adopted and executed May 21, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.3) ______________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. 25 26 =* EXHIBIT 10.4 - Amendment and Restatement of Supplemental Death Benefit Plan for Officers, as adopted and executed April 26, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.5) =* EXHIBIT 10.5 - Financial Counseling Assistance Plan for Officers. (File No. 001-01430, 1987 Form 10-K Report, EXHIBIT 10.11) =* EXHIBIT 10.6 - Management Incentive Deferral Plan. (File No. 001-01430, 1987 Form 10-K Report, EXHIBIT 10.12) =* EXHIBIT 10.7 - Amendment and Restatement of Deferred Compensation Plan for Outside Directors, as adopted and executed April 28, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.8) =* EXHIBIT 10.8 - Form of Indemnification Agreement for Directors and Officers. (File No. 001- 01430, 1998 Form 10-K Report, EXHIBIT 10.9) =* EXHIBIT 10.9 - Form of Executive Severance Agreement, as amended, between Reynolds Metals Company and key executive personnel, including each of the individuals listed in Item 4A of this report. (File No. 001-01430, Form 10-Q Report for the Quarter ended September 30, 1999, EXHIBIT 10.9) =* EXHIBIT 10.10 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective May 20, 1988. (File No. 001- 01430, Form 10-Q Report for the Quarter ended June 30, 1988, EXHIBIT 19(a)) =* EXHIBIT 10.11 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective October 21, 1988. (File No. 001-01430, Form 10-Q Report for the Quarter ended September 30, 1988, EXHIBIT 19(a)) =* EXHIBIT 10.12 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective January 1, 1987. (File No. 001-01430, 1988 Form 10-K Report, EXHIBIT 10.22) =* EXHIBIT 10.13 - Form of Stock Option and Stock Appreciation Right Agreement, as approved February 16, 1990 by the Compensation Committee of the Company's Board of Directors. (File No. 001-01430, 1989 Form 10-K Report, EXHIBIT 10.24) =* EXHIBIT 10.14 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective January 18, 1991. (File No. 001-01430, 1990 Form 10-K Report, EXHIBIT 10.26) _______________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. 26 27 =* EXHIBIT 10.15 - Form of Stock Option Agreement, as approved April 22, 1992 by the Compensation Committee of the Company's Board of Directors. (File No. 001-01430, Form 10- Q Report for the Quarter ended March 31, 1992, EXHIBIT 28(a)) =* EXHIBIT 10.16 - Amendment and Restatement of Reynolds Metals Company Restricted Stock Plan for Outside Directors, as adopted and executed April 28, 1999 (File No. 001- 01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.17) =* EXHIBIT 10.17 - Amendment and Restatement of Reynolds Metals Company New Management Incentive Deferral Plan, as adopted and executed April 28, 1999 (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.18) =* EXHIBIT 10.18 - Amendment and Restatement of Reynolds Metals Company Salary Deferral Plan for Executives, as adopted and executed April 28, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.19) =* EXHIBIT 10.19 - Amendment and Restatement of Reynolds Metals Company Supplemental Long-Term Disability Plan for Executives, as adopted and executed April 26, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.20) =* EXHIBIT 10.20 - Amendment to Reynolds Metals Company 1987 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 001-01430, Form 10-Q Report for the Quarter ended September 30, 1994, EXHIBIT 10.34) =* EXHIBIT 10.21 - Amendment to Reynolds Metals Company 1992 Nonqualified Stock Option Plan effective August 19, 1994. (File No. 001-01430, Form 10-Q Report for the Quarter ended September 30, 1994, EXHIBIT 10.35) =* EXHIBIT 10.22 - Form of Split Dollar Life Insurance Agreement (Trustee Owner, Trustee Pays Premiums). (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1995, EXHIBIT 10.34) =* EXHIBIT 10.23 - Form of Split Dollar Life Insurance Agreement (Trustee Owner, Employee Pays Premium). (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1995, EXHIBIT 10.35) =* EXHIBIT 10.24 - Form of Split Dollar Life Insurance Agreement (Employee Owner, Employee Pays Premium). (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1995, EXHIBIT 10.36) - ----------------- * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. 27 28 =* EXHIBIT 10.25 - Form of Split Dollar Life Insurance Agreement (Third Party Owner, Third Party Pays Premiums). (File No. 001-01430, Form 10- Q Report for the Quarter ended June 30, 1995, EXHIBIT 10.37) =* EXHIBIT 10.26 - Form of Split Dollar Life Insurance Agreement (Third Party Owner, Employee Pays Premiums). (File No. 001-01430, Form 10- Q Report for the Quarter ended June 30, 1995, EXHIBIT 10.38) =* EXHIBIT 10.27 - Amendment and Restatement of Reynolds Metals Company 1996 Nonqualified Stock Option Plan, as adopted and executed April 15, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.28) =* EXHIBIT 10.28 - Amendment to Reynolds Metals Company 1992 Nonqualified Stock Option Plan effective January 1, 1993. (Registration Statement No. 333-03947 on Form S-8, dated May 17, 1996, EXHIBIT 99) =* EXHIBIT 10.29 - Form of Stock Option Agreement, as approved May 17, 1996 by the Compensation Committee of the Company's Board of Directors. (File No. 001-01430, Form 10- Q Report for the Quarter ended June 30, 1996, EXHIBIT 10.41) =* EXHIBIT 10.30 - Form of Three Party Stock Option Agreement, as approved May 17, 1996 by the Compensation Committee of the Company's Board of Directors. (File No. 001- 01430, Form 10-Q Report for the Quarter ended June 30, 1996, EXHIBIT 10.42) =* EXHIBIT 10.31 - Reynolds Metals Company Supplemental Incentive Plan. (File No. 001-01430, 1996 Form 10-K Report, EXHIBIT 10.40) =* EXHIBIT 10.32 - Amendment and Restatement of Reynolds Metals Company Stock Plan for Outside Directors, as adopted and executed April 28, 1999. (File No. 001-01430, Form 10- Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.34) =* EXHIBIT 10.33 - Amendment and Restatement of Reynolds Metals Company Long-Term Performance Share Plan, as adopted and executed April 26, 1999. (File No. 001-01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.37) =* EXHIBIT 10.34 - Reynolds Metals Company 1999 Nonqualified Stock Option Plan (Registration Statement No. 333-79203 on Form S-8, dated May 24, 1999, EXHIBIT 4.5) - ------------- * 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 10.35 - Form of Stock Option Agreement, as approved May 21, 1999 by the Compensation Committee of the Company's Board of Directors. (File No. 001-01430, Form 10- Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.40) =* EXHIBIT 10.36 Form of Three Party Stock Option Agreement, as approved May 21, 1999 by the Compensation Committee of the Company's Board of Directors. (File No. 001- 01430, Form 10-Q Report for the Quarter ended June 30, 1999, EXHIBIT 10.41) EXHIBIT 11 - Omitted; see Item 8 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 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. - -------------- * 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, 2000 and Consolidated Statement of Income (Unaudited) for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 1,000,000 3-MOS DEC-31-2000 MAR-31-2000 54 0 722 9 586 1424 4335 2343 6039 1122 1150 0 0 1588 616 6039 1319 1319 1047 1047 61 0 18 98 27 71 0 0 0 71 1.11 1.10
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 27, 2000, there were issued, outstanding and entitled to vote 63,681,199 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 2 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, as amended by the First Amendment dated August 20, 1999 (as amended, 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"). 2 3 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. On August 18, 1999, the Company, Alcoa Inc. ("Alcoa"), and RLM Acquisition Corp., a wholly owned subsidiary of Alcoa, entered into an agreement and plan of merger (the "Merger Agreement"). Under the Merger Agreement, each outstanding share of Company Common Stock would be converted into 1.06 shares of Alcoa common stock and the Company would become wholly owned by Alcoa. Completion of the merger is subject to customary closing conditions, including antitrust clearances. On August 20, 1999, the Company amended the Rights Agreement to render it inapplicable to the transaction contemplated by the Merger Agreement. 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. The Company's Board of Directors has approved the Merger Agreement for the purpose of exempting the proposed merger with Alcoa from the operation of DGCL Section 203. 3 -----END PRIVACY-ENHANCED MESSAGE-----