Document 0gKb1QXmBMyww4zvkxZ3avbeR

1981 VOL. 2 J-Z MOODY'S INDUSTRIAL MANUAL COVERING NEW YORK, AMERICAN & REGIONAL STOCK EXCHANGES & INTERNATIONAL COMPANIES WILLIAM O. DWYER, Publisher HOWARD G. KIEDAISCH, Ass't Publisher L. JOSEPH ROGERS, Gen. Manager ROBERT p. HANSON, Editor-in-Chief Editorial Board ROBERT W. BURKE DIANE R. KRUTZ BRIAN T. COFFEY JOSEPH B. LEIGH ALFRED G. ELLINGHAM WILLIAM H. MOORE HAROLD H, GOLDBERG WILLIAM M. PACCIONE ALVIN E. GOUVIA FRANK R. PLATAROTE JOHN J, IERACI MICHAEL A. RABBIA BERNARDO G. SCERI, JR. Moody's Investors Service a company of The Dun & Bradstreet Corporation SEE FOLLOWING PAGE FOR COMPLETE LIST OF OFFICES Copyright 1981 bv MOODY'S INVESTORS SERVICE, INC. New York Ail rights reserved. / 3304 MOODTS INDUSTRIAL MANUAL REYNOLDS METALS CO. r CAPITAL STRUCTURE Times LONG TERM DEBT Issue Rating 1. First s.f. 44s.C, due Dec. 1, 1981........................................ 2. First s.f. 5%s, D, due Dec. 1, 1987 .................................... 3. First s.f. 5V4S, E, due June 1, 1990 ................................. 1st 5/4S, F, due Tune 1, 1993 ................................................ 1st 91/4S, G, due Dec. 15, 1994 .............................................. 4. 1st 8.85s, H, Sept. I, 1998 ........................................................ 1st 5.055s, AA, due June 1, 1990 ........................................... 1st 5.023s, BB, due Tune 1, 1990 ......................................... 1st 5.137s, CC, due June l. 1990 ......................................... 5. Gonv. subord. deb. 4V2S, 1991.............................. Ba 6. Other debt........................................................................................ 7. Eurodollar conv. deb. 5s, 1988 ........................................... Amount Outstanding $8,693,000 17,500,000 61,732,000 104,000,000 58,000,000 130,000,000 41,549,000 16,397,000 32,468,000 57,500,000 309,800,000 42,400,000 Charges Earned 1980 1979 Interest Dates J &D 1 J &D 1 J &D 1 J &D 1 J &D 1 M&S 1 J &D 1 J &D 1 J&D 1 M&S 1 J &D l Call Price (I31OOV4 Text * Price Range 1980 1979 57 % CAPITAL STOCK Par Amount Earned per Sh. Divs. per Sh. Call Price Range Issue Value Outstanding 1980 1979 1980 1979 Price 1980 1979 * 1. 4*/4% preferred, A........................................................... $50 70,389shs.$2,561.47 $1,984.34 $2,375 $2,375 51.00 431/4- 4iy 50V4* 46 ' 2. 4 %% conv. second preferred......................................100 412,620shs. $436.96 344.96 4.50 4.50 100 82 - 59 80%- 59 3. Common.................._...................................................... Nopar 019,111,596shs. 09.32 09.25 2.25 2.00 40%- 27% 39%- 28VV As reported by Co. based on avg. shs. outstg.; fully diluted, 1980, $8.32; 1979, $8.16. See text. Sold privately. SSubject to change; see text Wi HISTORY In 1956 acquired Arrow Brands, Inc., Long to receive a royalty of $0.20 per ton of co*^ Incorporated in Delaware July 18, 1928 with Beach, Cal., and Security Chain Link Fence mined, with provision for escalation. Co. has a perpetual charter, and acquired the foil busi Co. Both later dissolved. retained certain land, coal and water rights ia ness and operating assets of United States Foil Co. In Aug., 1928 purchased entire capital stock of Robertshaw Thermostat Co., incor- orated 1914; also acquired control of Fultqn gylphon Co., incorporated 1926. On Jan. 3, 1930 purchased and transferred In Mar., 1958, acquired minority interest in Venesta Ltd., London, Eng., manufacturer of aluminum foil, etc., from Efeco Products Co. Company and Tube Investments Ltd. (owners of Reynolds T.I. Aluminium Ltd.) acquired at various times (about 96%) of ordi- Wyoming to provide for future manufacturing operations. In early 1980, Co. sold 51% of its Jamaica^ mining assets and operations and all of its land holdings in Jamaica to Jamaican government- 1991 to newly organized subsidiary Midland Foil Co., Inc. substantially ail assets of Midland nary shares of The British Aluminium Co. Ltd. Company owns 48% interest and Tube SUBSIDIARIES & ASSOCIATED Metal Co. of Chicago. On May 29, 1930 ac Investments Ltd., 48% interest in this stock. COMPANIES :<i ? quired certain assets of Lehmaier, Schwartz & In 1959 the foil business of Venesta was Set forth below is a list of the subsidiaries Co., Inc., New York, manufacturers of metal transferred to a new subsidiary, Venesta and associated companies of Reynolds Metals foils. On Aug. 8, 1930 purchased net assets of Foils, Limited, and sold to Reynolds T.I. Alu Company. Embossed Metal Products Corp., New York. minium, Ltd. Caribbean Steamship Company, S.A. (Pans- - On Dec. 18, 1933 acquired net assets of Stan On Apr. 10, 1961, merged United States Foil rna) lyj dard Art Works, Louisville, Ky. In 1935 ac Co. Under the plan United States Foil Co. [TJReynolds Alumina Stade, Inc. (Del.) [-J quired interest in Richmond Radiator Co. (lat class A and B no par common was reclassified Aluminum Oxid Stade Gesellschaft mlt ter merged with Rheem Mfg. Co. in 1956). into single class of voting stock on basis of 3 In Feb., 1936 acquired through Robertshaw shares for each class A share and one share for beschr&nkter (50%) Haftung (West Germany)/a Thermostat Co. entire stock of Grayson Heat each class B share; new stock was subsequent Reynolds Aluminium Deutschland, Inc4' Control, Ltd., Lynwood, Cal. In Mar., 1936 ly exchanged for company stock on basis of (Del.) formed Bridgeport Thermostat Co., Inc. to ac- 0.85 share for each United States Foil Co. new Suite property and rights obtained . from share. Bridgeport Brass Co. In Mar.; 1938 acquired On jJwulvy j31i, 1961 umreerigBewd Tilo Roofing Co.j through Robertshaw Thermostat Co. entire Inncc. providing for exchange of one share of common stock of American Thermometer Co. $4.50 convertible second preferred for each 5% Hamburger Aluminium--Werk Gesella-, chaft mit beschr&nkter Haftung (West uGrermany (33%%so)) _ L [TJReynolds Aluminum Building Products^ Comnanv (Del ) On Oct. 9, 1940 company incorporated common shares of Tilo. Reynolds Aluminum Export Corporatia Bauxite Mining Corp. (Del.) to conduct baux In Nov. 1961 Reynolds International, Inc., (Del.) ite exploration ana mining activities; name subsidiary acquired for cash Aluminum Ex Reynolds Aluminum Credit Corporation| changed to Reynolds Mining Corp., Aug. 9, truders Ltd. from Kruger Organization Ltd. (Del.) 1941. In early 1965 Reynolds International Inc. Reynolds Aluminum International Servio \ On Jan. 23, 1941, organized Reynolds Alloys subsidiary acquired all stock of Filter Lite All- Inc. (Del.) Co. and Reynolds Ore Co.; former merged in 1955 and latter dissolved June 13, 1945. In Oct., 1943, purchased stock of Charter Oak Weather (Alum.) Ltd. in which it previously held 50% interest. Name changed to R.M.P. (Quebec) Ltd. May 10, 1965, and to Reynolds Societa per Azioni Fonderpress Q^eynolds International, Inc. (Panaf Stove Si Range Co.; name changed to Reyn Cable Co. Ltd. Aug. 1, 1967. ma) 4 olds Sales Co. on May 18, 1951; name changed to Reynolds Aluminum Recycling Co. on May 12, 1975. In 1945, organized Reynolds Internacional de Mexico, S.A. (now Reynolds Aluminio, S.A.) to operate an aluminum plant in Mexico. Also purchased plants, and other assets of Aluminum Products Co. of La Grange and Lemont, Illinois. During 1947, Robertshaw Thermostat Co., Fulton Sylphon Co., and Bridgeport Thermo stat Co., wholly-owned subsidiaries were merged into Fulton Sylphon Co. (name subse quently changed' to Robertshaw Controls Co.). On Oct. 31, 1947 securities of latter were sold in the market and company received ap proximately $12,000,000 in cash and at the same time retained approximately 50% inter est in the common stock of Robertshaw-Fulton Controls Co. (subsequently reduced). On Jan. 1, 1968 acquired facilities and busi ness of Foote-Burt Co., a machine tool manu facturer (subsequently discontinued opera tions). * In Aug. 1969, acquired Industrial Metals, Inc., Kansas City-based metals distributor, thru an exchange offer under which all but one shareholder of Industrial exchanged one In dustrial capital sh. for 10.75 Company com mon shs. 18,367 common shs. were issued at this ratio. Remaining shareholder exchanged one Industrial sh. for 9.7561 Company com mon shs. and 19,912 common shs. were issued at this ratio. Up to 31,721 additional Company common shs. will be issued to this shareholder contingent upon future earnings (dissolved in Mar. 1973). On July 31, 1970 merged Canadian British Aluminum Co. (see Moody's 1970 Industrial Manual)_ a subsidiary Co. also merged CRM Capital Ltd. Through merg;eer co. formed Aluminio del Caroni, S.A. (Venezuelan (28%) Aluminio Reynolds de Venezuela, SJ (Venezuela) Industria Navarra del Aluminio, SJ (Spain) (50.5%) Reeynolds Aluminio, Sodedad Anon (Mexico) (53%) Reynolds Aluminium Europe, (Belgium) H_feRee; yno*ld's Aluminium Holland B.V. (ti Netherlands) (95%) Reynolds Aluminum Company Canada Ltd.-- Societe d' Aluminium Reynolds (C ____ada) Limitee (Canada) (65%) t ,,. Reynolds Cable Company Limited-- Societe des Cables Reynolds LimitPJg (Canada) Reynolds Extrusion Comp Limited--La Compagnie de Profi In 1949 acquired outstanding capital stock of Reynolds Research Institute, Inc. (name changed to Reynolds Aluminum Service Corp. on June 17, 1954 and to Reynolds Aluminum new subsidiary Canadian Reynolds Metals Co., Ltd. In Aug. 1971 acauired assets (which were contributed to El Campo Aluminum Co., a Reynolds Limitee (Canada)- Reynolds Philippine Corporata (Philippines) (39%) Societa Lavorazioni Industrials Me Service Corp. of Virginia on Nov. 8, 1957 and to Reynolds Metals Development Co."on July new wholly owned subsidiary) of May Alumi num Co. for 51,226 common shares. During S.p.A. (Italy) (60%) (Reynolds Aluminum Riecycling Compa 31, 1963). third quarter of 1974 these shares were repur (Mo.) During 1949, Reynolds Aluminum Co. ac chased by Co. Additional consideration was Reynolds Jamaica Alumina, Ltd. (Del.) quired from U.S. Government six plants, for given for waiver of rights to receive an inde Alumina Partners of Jamaica (Part merly leased, for $57,581,958. terminable number of additional shares of ship) (Del.) (36.5%) T On July 18, 1949, organized Reynolds Ja Reynolds common stock. Jamaica Alumina Security Company, Lt* maica Mines, Ltd., to develop and operate Ja On Jan. 1, 1975 assets of Reynolds Guyana (Del.) (37%) maica ore properties. Company subscribed Mines, Ltd., were nationalized by Gov't of Reynolds Jamaica Mines, Ltd. (Del.) $1,910,500 for common stock and subsequent Guyana. Under an agreement between Com- Jamaica Reynolds Bauxite Partnfl ly arranged with Mutual Security Agency (formerly ECA) for advance to subsidiary of $14,287,033 against agency's purchase of Alu minum over 20-year period. In June, 1950, company exercised its option to purchase controlling stock interest in Southern States Iron Roofing Co. -(name changed to Reynolds Aluminum Supply Co. gany, Reynolds Guyana Mines, Ltd., Gov't of (Partnership) (Jamaica) (49%) iuyana, and Overseas Private Investment Reynolds Metals European Capital Cori Corp., a U.S. gov't agency. Company received ration (Del.) payment of 810,000,000 on Feb. 20, 1975 for [Canadian Reynolds Metals Comp* nationalized assets. Limited--Societe C&n&dienne de Metatf In Sept. 1978 Co. sold its interest in British Reynolds, Limitee (Canada) . Aluminum Co. and Reynolds T.I. Aluminum M&nicouagan Power Company-r"~ Ltd. for $86,000,000. Compagnie _ HydroelectnQ* Nov. 1, 1957 and dissolved in 1965). In Nov. 1978, Reynolds Mining Corp., sub Manicouagan (Canada) (40%) In Dec., 1952,-purchased bauxite rights and sidiary, was merged into Company. Robertshaw Controls Company (I assets of Berbice Co., Ltd., in British Guiana. Sale of Mineral Properties: In late 1973 Co. Acquisition included mining leases and exclu transferred to Texaco, Inc. (see alphabetical Subsidiaries included in Consolidated 1 sive permissions covering some 490,000 acres, index) a major portion of its interests in over nancial Statements. complete mining equipment, houses, washing 30,000 acres of land owned and held under Unconsolidated Subsidiaries and As plant, drying plant, service facilities, short contract, as well as associated coal and water ated Companies (20% to 50% owned) railroad and barge line. rights and permits, located in Wyoming. Pur counted for by the equity method. In 1953, organized Reynolds International, suant to transfer, Co. received initial payment The names of a number of consolid* Inc. to consolidate and expand foreign opera of $15,282,000. Agreement also provides that subsidiaries, as well as unconsolidated sub tions. Co. shall receive minimum advance royalties iaries and associated companies, have t In 1955 Reynolds Alloys Co., Reynolds Alu of $12,000,000 per year for next 10 years be omittted because considered in the aggrelffj minum Co. and Reynolds Reduction Co. were ginning in 1974 to apply against first 700 mil they would not constitute a significant sub" merged into parent company. lion tons of coal to be mined. Thereafter Co. is iary. MOODY'S INDUSTRIAL MANUAL Vanturas: Alumina plant opened in Ja Special packaging machinery, sales and Reduction: in 1969 with initial capacity of 950,000 leasing Listerhill, Ala. ' 1,300,000 tons by late 1972) is 36.5% by Reynolds Metals Co.; 27% by Ana- Co- and 36.5% by Kaiser Aluminum & deal Corp. -jjov. 1976, Company signed an agree- vnth CVRJD, the Brazilian state-owned rprise, to form a new company called to construct an aluminum smelter in company initially to have 30% interest iture which will eventually decline to b. 1980, Co. 6l three other companies jO participate in a joint venture for the of constructing and operating a proj[Weatem Australia to mine bauxite from s proven to contain at least 200 million Reynolon PVC shrink and stretch films Tight wrap oven film and cook-in bags Bag-in-Box Beverage container product*: All-aluminum beer and soft drink cans All-aluminum can ends Stay-on-Tab non-detachable can ends Can making machinery ' Conmunwr products: Reynolds Wrap household foil Diamond household foil Reynolds Oven Cooking Bags Reynolds Redi-Pan containers Eskimo freezer paper Electrical products: Metallurgical: Richmond, Va. Product Development Richmond, Va. Electrical Technology: Bellwood, Va. r Can Development Richmond, Va. Packaging Technology: Bellwood, Va. Grottoes, Va. RecyclingTechnology: Bellwood, Ba. Other Minerals and Fuel Properties nc tons and to produce alumina with [ designal capacity of one million meti per year. MESS * PRODUCTS Stranded aluminum and aluminum conductors SSAC and ACSR Line wire and service drop cables Insulated aluminum power cables alloy Coal: Kentucky, Wyoming Latertte and Clay: Oregon, Washington, Geor gia Limestone: Kentucky, Arkansas ny is a major producer of primary and fabricated aluminum products , engaged in most phases of aluminum y. Company manufactures aluminum s for a variety of industries including ^ and construction, transportation and otive, electrical and communications, j&ces and utensils, containers and pack, machinery and equipment and chemi- ducts include: I Reynold* Products i and Ore: Solar products: Reynolds Aluminum solar hot water sys tems Research A Marketing: Innovations pioneered a siding, _____ _____________ .. - .. foil, high-strength overhead electrical conduc tor, all-aluminum 12-oz. beverage can, alloy for all-aluminum engine block, nationwide aluminum recycling, all-aluminum auto bumpers. Company was first basic metals pro ducer to move from product to market ap proach to sales, and in 1969 combined market Fluorspar (mineral claims): Colorado, Ken tucky OTHER OPERATIONS--DOMESTIC Real Estate Protects Dover, N.J. Pinellas Park. Fla. East Syracuse, N.Y. Providence, R.I. Fort Myers, Fla. South Glens Falls, N.Y. Hartford, Conn. Syracuse, N.Y. Johnston, R.I. Titusville, Pa. Kittanning, Pa. Phoenix, Ariz. New York Mills, N.Y. Watertown, N.Y. Philadelphia, Pa. __te, Aluminum Fluoride orated Alumina spar ing and production responsibility for specific markets in various divisions* under new orga nization. OTHER OPERATIONS--ABROAD Co. has varying interests in these operations in*the following countries: f aluminum: l and billet cined Coke flat and coiled _patterned and embossed i Stock, bare and coated circles PRINCIPAL PLANTS & PROPERTIES Co. operates facilities located as follows: ALUMINUM PRODUCTION & PROCESSING Bauxtts Bauxite, Ark. Lydford, Jamaica Miragoane, Haiti Chsmlcsls Australis Bauxite and alumina (tinder construction) Brazil Bauxite (2) Canada Electirc power generation, mill products, foil packaging, building products Columbia Mill products, foil, utensils, shipbuilding , machined and sculptured es, extruded and drawn , extruded and drawn , irrigation, drill pipe ^ rod and bar products ig stock _. urals and structural fabrication t sheet t pole tubing t sheet i and pastes r machine stock 3 products: ---------. Classic residential siding and ac- Hurricane Creek, Ark. Calcined Coke Baton Rouge, La. Alumina Corpus Christi, Tex. Hurricane Creek, Ark. Fluorpar Eagle Pass, Tex. Shipping Corpus Christi, Tex. Power Qsnsrstlon Corpus Christi, Tex. Hurricane Creek, Ark. Jones Mills, Ark. MU? products Ghana Primary aluminum Italy Mill products, foil Jamaica Alumina Japan Mill products, foil, fabricated products Mexico Mill products, foil Philippines Mill products, foil, utensils i canning equipment 1 residential siding l and trim lit roofing and accessories rs, louvers, vents and flashing : and Shadowcrest aluminum roofing tidal colonial columns ate Guard insulating windows ~"t Guard insulating sliding glass doors ; Guard extrusions s Guard insulation board 1 extrusions rcial roofing and siding and accesso- ---Rail commercial railing systems ft roofing and siding and accessories t-Yourself Aluminum products 1 products: --* Fabricating-welding, F ud forming, finishing firmed tube a seating lan bridges l systems 6 pirns and bobbins stamping, I products: I products 1 products * production products ftdttoing products: hum toil, plain, printed, colored, coath cut sheets and rolls Primary Aluminum Arkadelphia, Ark. Listerhill, Ala. Baie Comeau, Quebec Longview, Wash. Corpus Christi Tex. Massena, N.Y. Jones Mills, Ark. Troutdale, Ore. Recycling end Rscismatfon Bellwood,va (2) Listerhill, Ala. Recycling Plants & Service Centers (85) Electrical Products La Maibaie, Quebec Longview, Wash. Malvern, Ark. MHI Products Bellwood, Va. (2) McCook, HI. Bologna, Italy Merxheim, France Grand Rapids, Michi Mons-GhUn, Belgium Hamburg, West Germany Phoenix, Ariz. (2) Listerhill, Ala. (2) Richmond Hill, Ontario Louisville, Ky. (2) Torrance, Cal. Maracay, Venezuela Continuous Rolling Hot Spring County, Ark. FINISHED PRODUCTS & OTHER SALES Packaging & Consumer Products Bellwood, Va. Mons-Ghiin, Belgium Grottoes, Va. Richmond, Va. (2) Louisville, Ky. St. Louis, Mo. Building Products Ashville, Ohio Spain Mill products, foil, wire and cable Thailand Mill products, foil The Netherlands Mill products, fabricated products Venezuela Primary aluminum, mill products, foil, cans West Germany Alumina, primary aluminum, mill products LETTER TO SHAREHOLDERS The following is the letter to shareholders of David P. Reynolds, Chairman of the Board end Chief Executive Officer of Reynolds Metals Com pany as it appeared In the Company's 1M0 Annu al Report: The first year of the new decade was a very good one for our company. Although reces sion and inflation combined to disrupt the general economy, creating clouds of uncer tainty over the year, the company was able to attain new levels of sales and earnings and to make progress on various programs designed to improve operations and position us for fu ture growth. Reynolds Metals reported 1980 earnings were S1S0.3 million or 89.32 per common share on net sales of S3.7 billion, surpassing the 1979 records of S177.1 million or S9.25 per share on net sales of S3.3 billion. Earnings from opera tions in 1980 were the second highest in the company's history after adjusting for the ef fect of foreign currency translation gains, as -ffutations to papers, paper board and foil surface uncoated, coated, col- ^"jinted ` beat sealable overwraps at-seala`b`le p; ouch materials, printed ated folding cartons, printed and hated labels, printed and embossed Mainers, formed and folded, unco&t- l coated .foodservice foil, film and alumi- vT'neerrss, Cushion Fold sandwich gs, inter-folded sheets as F^leexx-Can laminated pouch mate- Cans Bristol, Va. San Francisco, Cal. (TJGuayama, Puerto Rico Seattle. Wash. Honolulu, Hawaii Tampa, Fla. Houston, Tex. Torrance, Cal. Kansas City, Mo. W&Ukill, N.Y. Rocklin, Cal. Woodbridge, N.J. Salisbury, N.C. Can Machinery and Systems Chesterfield County, Va. (2) Richmond, Va. RESEARCH FACILITIES Alumina: Hurricane Creek, Ark. detailed in the financial section of this report. In December of 1980, for the seventh tune in as many years, the board of directors was able to increase the dividend on common shares. The dividend was increased from S2.20 to an annual rate of S2.40. Since year-end 1975, dividends have in creased at a compound annual growth of about 19 p>ercent. During this same period of time, inflation, measured by the U.S. consum er price index, increased at a compound annu al rate of just over nine percent. This compar ison points up our company's commitment to its shareowners to provide for a fair and rea sonable rate of growth in dividend payout without inhibiting future growth. 3306 MOODY'S INDUSTRIAL MANUAL Return on average invested capital (shareowners* equity plus long-term debt) was 10 percent in 1980. Return on shareowners' equi ty was 14 percent. Tonnage shipments were off only slightly from the previous year. The slack in domestic business caused by the recession was partially offset by a spurt in our export business during part of the year. Domestically, shipments to the recession-hit automotive and housing markets, as expected, declined. But volume continued strong in oth er major markets such as aircraft, electrical and cans. And our own consumer products sales, which include Reynolds Wrap house hold foil, continued to increase. In May, new three-year labor contracts were signed with the two unions representing the majority of the company's hourly produc tion employees--the United Steelworkers of America and the Aluminum Workers Interna tional Union. The agreements call for signifi cant increases in wages and benefits over the next three years. Substantial gains in productivity will be necessary to help offset higher labor, energy and other costs. We are directing our manage rial efforts, and much of our capital improve ment activity, toward this major objective. During 1980 we launched a number of new facilities designed to improve efficiency and quality and reduce energy and other costs. Our new continuous rolling plant in Arkansas, which will achieve a 35 percent reduction in energy compared with the traditional process for making foil feedstock, was officially opened. Our new highspeed rolling mill, the fastest in the industry, went into its startup phase late in the year at our McCook, 111., sheet and plate plant. The combined effect of these two major capital projects will be to give us an additional 300,000 pounds or more per year of aluminum sheet capacity. During the year, ground was broken for the Worsley bauxite-alumina complex in Western Australia. We opened a modem, new alumi num can plant in Seattle, Wash., neared com pletion of a can plant in Kansas City, Mo., and started construction of a can plant in Puerto Rico. We moved ahead with capital improve ments at numerous other facilities, further ex panded our nationwide recycling operations and opened new facilities for reclaiming alu minum from solid waste. Our total capital ex penditures for the year, including 814.7 million for our ongoing environmental control pro grams, were S271 million. We should begin to realize the benefits of many of the new or improved operations in 1981. And their beneficial impact on our per formance will grow as the decade unfolds. We expect to see some decline in shipments in the early part of 1981, with gradual strengthening as the year progresses. Howev er, the underlying strength or the aluminum business demonstrated in 1980, despite the re cession' reinforces our confidence that alumi num will continue to enjoy a robust demand and grow steadily during the decade of the eighties. vVe have always had faith in the basic strength of the U.S. economy and in the ability of our versatile, recyclable metal to serve the changing needs of our society on into the next century. The increasing demand in the world for quality materials that can save energy and conserve resources through durability and re cyclability, opens up more potential applica tions for aluminum than ever before across the entire spectrum of industries. I cannot complete this report on the compa ny's past year without acknowledging the loss caused by the death of my brothers Richard S. Reynolds, JTr., who headed the company for many years as chairman, and William G. Reynolds, who contributed so much to our growth as executive vice-president for re search and development. Both men played major roles in the history and success of our company and are deeply missed. A number of our veteran officers and man agers retired during the year and the company is most grateful for their long and dedicated service. We are able to fill these positions by promoting experienced and talented people from our own ranks under the company's Hu man Resource Development Program. This program, which is enabling us to identify and prepare leadership talent to meet our needs at all levels and in ail departments of the compa ny, assures our future. On behalf of the board of directors, I hearti ly thank all of the fine men and women who make up Reynolds Metals Company, and you our shareowners, for the support and confi dence which enabled the company to reach new milestones in 1980. David P. Reynolds Chairman of the Board and Chief Executive Officer February 17, 1981 MANAGEMENT Officers D.P. Reynolds, Chmn. fit Chief Exec. Off. W.S. Leonhardt, Vice-Chmn. At Chief Fin. Off. T.E. Blomquist, Pres. fit Chief Oper. Off. J.L. Reynolds, Exec. Vice-Pres.; R.H. Featherston, Group Vice-Pres. N.W. Zundel, Group Vice-Pres. Paul Murphy, Group Vice-Pres. F.R. Edney, Vice-Pres. Personnel fit Corpo rate Admin. T.N. Brown, Vice-Pres. (Corp. Oper. Serv.) R.W. Winstead, Vice-Pres. (Mill Prod. Div.) W.H. Honaker, Jr., Vice-Pres. (Reynolds Alum. Sup. Co. Div.) R.G. Holder, Vice-Pres. (Flex. Pkg. Div.) J.M. Noonan, Vice-Pres. (Construction Prod. Div.) W.H. Darden? Vice-Pres. (Govt, relations) J.H. Galea, Vice-Pres. and Gen. Counsel H.L. Albrecht, Vice-Pres. (Purch. fit Transp.) R.D. O'Donnell, Vice-Pres. (Can Div.) E.H. Lucas, Jr., Vice-Pres. (Electrical Div.) A.D. Reynolds, III, Vice-Pres. (Alumina fit Chem. Div.) S.D. Wyllie, Vice-Pres. (Cons. Div.) j.T. Hudson, Jr., Fin. Vice-Pres. R.N. Bolling, Vice-Pres. (Recycling fit Recla mation Div.) H.V. Helton, Vice-Pres. (Primary Metals Div.) J.H. Taylor, Treasurer W.G. Reynolds, Jr., Vice-Pres. tions fit Pub. Affairs) R.I. Dawes, Secretary D.C. Bilsing, Controller (Gov't Reis, f Directors (Showing Age fit Principal Corporate Affiliations) David P. Reynolds, (65), Chmn. At Chief Exec. Off. of Co.; Chmn., Robertshaw Controls Co.. Chmn., Reynolds Metals European Capiu( Corp.; Dir., Umted Virginia Bankshares, Inc*- United Virginia Bank. ** John E. Blomquist, (66), Pres, fit Chief Oper Off. of Co.; Dir., Robertshaw Controls Co* Reynolds Metals European Capital Corp. '' William S. Leonhardt, (65), Vice-Chmn. a Chief Fin. Off. of Co.; Dir., Robertsahw Con. trols Co., Reynolds Metals European Capital Corp.; Royal Bai.^ fit Trust Co. Paul Murphy, (66), Group Vice-Pres. of Co. Ralph S. Thomas, (57), Pres, fit Chief Exec. Off., Robertshaw Controls Co.; Dir., Robershaw Controls Co., Bank of Virginia Trust Co.; Bank of Virginia Co. Fred R. Edney, (63), Vice-Pres. of Co. Allen W. Merrell, (64), Former Chmn., Sattley Co. Herbert Stein, (64), Prof, of Economics, Univ. of Virginia. Henry R. Unden, (59), Pres, fit Dir., Gas Re search Institute: Dir., Southern Natural Resources, Inc., UGI Corp. Thomas A. Graves, Jr., (56), Pres., College of William and Mary; Dir., Life Insurance Co. of Virginia, United Virginia Bank. Neil W. Zundel, (57), Group Vice-Pres. of Co. Richard L Terrell, (62), Former Vice-China* General Motors Corp. Dir., Philips Industirea, Inc., Esmark, Inc., NCR Corp., General Mills, Inc., Missouri Pacific Corp., Canada Life In surance Co., Ashland Oil Co., First National Bank fit Trust Co. of Naples. Tom K. Smith, Jr., (62), Former Senior VicePres., Monsanto Co.; Dir., Federal Reserve Bank of St. Louis, Clayton Federal Savings & Loan Association. Auditors: Ernst fit Whinney. Annual Meeting: Third Wed. in Apr. Shareholder Relations: R.I. Dawes, Corporate Secretary. TeL: (804)281-2811. Director Meetings: 3rd Friday of each months No. of Stockholders: Dec. 31, 1980: 4%% pfd739; 41/2% pfd., 2,094; com., 25,714, No. of Employees: 1980, (Average) 36,800. Executive Office: Reynolds Metals Bldg* Richmond, VA 23261. TeL: (804)281-2000. New York Office: 16th Floor, 245 Park Ave*' New York, NY 10017. Primary Production (tons) year to Dec. 31: 1980......................1,073,400 1976 .........................983, ,400 1979........................1,093,400 1975 .........................821,! 500 1978.......................1,059,900 1974........................1,201,800 1977........................1,001,300 INCOME ACCOUNTS COMPARATIVE CONSOLIDATED INCOME ACCOUNT, YEARS ENDED DEC. 31 (taken from reports filed with Securities fit Exchange Commission) Net sales........................................................................... Other revenues............................................................ 1980 3,653,200 94,500 (in thousand 8) 1979 1978 3,305,200 2,829,300 65,800 44,700 1977 2,352,755 39,286 1976 2.084,414 47,742 Balance................................................................... QCost of products sold.......................................... Selling, adv., res., admin, fit gen. exp.............. Depreciation, deplet. and amort....................... Interest and debt expense.................................... Other deductions....................................................... 3,747,700 3,063,400 246,000 89,800 62,800 1,300 3,371,000 2,684,500 223,900 82,900 70,100 23,800 2,874,000 2,261,000 200,600 77,700 68,200 35,300 2,392,041 1,936,315 180,855 74,408 63,703 8,731 2,132,156 1,729,255 166,549 71,547 60,728 7,662 01975 1,679,262 51,693 1,730,955 1,360,652 152,111 72,612 61,446 6,502 SHU 1,993, 180 55,77 2,048,961 1,559,957 139,420 76,800 vM 2,SB Inc. bef. taxes, and extraord. items-----Taxes on income......................................................... 284,400 104,100 285,800 108,700 231,200 113,400 128,029 41,777 96,415 21,350 77,632 17,615 n.6>l Net Income................................... Retained earnings, begin, of year Preferred dividends........................... Common dividends--cash............. 180,300 961,900 2,200 42,000 177,100 824,500 2,700 37,000 117,800 738,700 3,000 29,000 86,252 679,577 3,113 24,024 75,065 626,370 3,177 18,681 [TJRetained earnings, end of year. SUPPLEMENTARY!*, fit L. DATA Maintenance fit repairs.................... Depreciation, deplet. and amort.. Lilraxes other than income..........~. Advertising...............\.......................... Research and development .......... 1,098,000 304,400 100,200 961,900 266,700 104,700 824,500 229,400 101,500 738,692 198,027 74,000 128,701 23,300 679,577 177,360 71,547 110,073 22,400 'Tineludes related portions of items shown under `'Supplementary P. fit L. Data" below statement. Restated. See General Note (c) under Balance Sheets, below. 01980-78, excludes payroll taxes also; 1977-74 in cludes payroll taxes. Restated. SCertain amounts have been restated to conform to 1976 presentation. Statement of Changes In Consolidated Flnan- dal Position, years ended Dec. 31 (in 8 000): Source of Working Capital: 1980 1979 Net income.................... 180,300 177,100 Deprec., depl. fit amort........................ 89,800 82,900 Foreign curr. transl. (13,900) 13,000 Def. taxes, etc. 25,700 (11,800) From oper........... Incr. in lg.-tm. debt . Proc. from sales of assets ...................... 281,900 33,300 23,400 261,200 17,100 m 2,800 Other, net Total ...................... Disposition of Funds: Capital expend.............. Dividends paid............ Reduct, of l.-t.-d. oth. liab................................ Incr. in inv. fit adv.... Incr. indef. chrgs. fit oth. assets............... Total ............... Incr. in work cap. 60,017 586,585 3,270 16,962 626,370 145,002 72,612 92,842 21,300 2,400 341,000 271,400 44,200 59,800 21,900 446,800 (105,800) 492,700 3,34} 17,014 586,5B 159.26} 76-S 0103,62 13,70# 4,001 MOODY'S INDUSTRIAL MANUAL Eaminga, years ended Dec. 81 (in thousands of dollars): Cost and Oth. Inc. & Inc. Bef. Income Net Common Com. Shs. Net Sales Expenses Balance Ded. (Net) Taxes Taxes Income Dividends Outstand. 478.311 433,328 44,983 dl 1,509 33,474 8,375 25,099 7,803 16,514,527 537,259 484,801 52,458 dl3,?23 38,735 12,403 26,332 7,850 16,514,927 565,609 517,726 47,883 <112,096 35,787 8,440 27,347 7,850 16,513,119 620,059 553,735 66,324 c/14,540 51,784 15,395 36,389 9,424 16,522,569 739,796 642,990 96,806 dl3,940 82,866 30,286 52,580 10,149 16,624,069 839,402 721,342 118,060 dl2,433 105,627 41.338 64,289 13,038 16,673,611 803.963 712,214 91,749 dl 7,289 74,460 27,213 047,247 14,895 16,681.460 843,753 776,990 66,763 d30,005 36,758 6,126 30,632 14,876 16,681,460 1,012,652 902,956 109,696 d30,695 79,001 23,021 S5.980 15,707 16,719,839 1.035,166 934,700 100,466 d31,233 69,233 22,131 47,102 18,275 17,024,226 1,093,248 1,048.467 44,781 d39,328 5,453 crlOl 5,554 14,386 17,225,340 1,162,183 1,129,099 33,084 d38,l99 d5,115 rr5,325 210 7,656 17,228,405 1,449.751 1.362,002 87.749 d30A89 57,560 18,891 38,669 6,813 17,235,782 1,993,189 1,776,193 216,996 d24,100 192,896 78,653 114,243 17,014 17,243,704 to include equity in undistributed net income of additional associated companies. restated to include provision for deferred taxes on undistributed net income of certain unconsolidated subsidiaries and associated companies. lore special items, after, S52,14o,000 and S2.89. estatea in 1975. 'ore special items; after, <0636,000 and d9Q.24. Years 1960 and 1962, ind. are as originally reported. 3307 Earn. Per, Com. Sh. U6 Lf39 1.39 1.94 2.92 3.62 02.60 1.61 3.13 2.55 0.11 d0.19 2.04 86.41 nce sheets ~ets t Assets; St marketable securities. *:vables................................ tones ..................................... !d expenses......................... COMPARATIVE CONSOLIDATED BALANCE SHEETS, AS OF DEC. 31 (taken from reports filed with Securities & Exchange Commission) 1980 (in thousand S) 1979 01978 1977 1976 55,000 500,900 677,000 11,800 164,000 440,900 682,100 26,000 197,200 396,700 673,000 12,000 52,635 299,067 659,756 17,253 65,016 285,766 583,429 8,583 Tota...l current assets............. .......... ents in unconsol, subs, and ited companies .............................. rfcjtoitw. .&foerqdueipp.r--eca.,t cost....................... dept. & amort.. 1,244,700 273,800 2,609,300 1,226,700 1,313,000 238,900 2,412,000 1,187,800 1,278,900 220,200 2,199,400 1,119,200 1,028,711 298,105 2,075,534 1,067,347 942,794 298,183 2,002,117 1,009,176 et property account............... 1 charges and other assets 1,382,600 196,300 1,224,200 147,000 1,080,200 129,400 1,008,187 127,444 992,941 107,946 Total......................................................... ILITIES t liabilities: ~ts payable and accruals ... -term debt--current portion . on income..................................... 3,097,400 429,100 46,800 98,100 94,000 2,923,100 397,500 42,700 103,300 87,000 2,708,700 320,600 43,100 92,300 69,200 2,462,447 249,922 63,655 27,990 47,378 2,341,864 239,899 73,536 21,807 28,587 .Tota_l current liabilities .................... debt (exd. conv. sub. debs.)... ed credits and other liabilities. ble subordinated debentures . 2nd pfd..................................................... stock............................................ earnings............................................. 668,000 736,000 245,700 99,900 41,300 208,500 1,098,000 630,500 764,600 210,900 106,000 51,300 197,900 961.900 525,200 776,600 221,600 112,000 59.600 189,200 824,500 388,945 738,503 222,585 118,000 67,195 188,527 738,692 363,829 759,908 214,236 121,500 69,428 133,386 679,577 `otil. ERTY ACCT.---ANALYSIS '^ons at cost........................................ "ents or sales................................ additions--net.............................. r. RESERVE--ANALYSIS ons charged to income............ renewals charged to res.......... additions.......................................... reductions........................................ 3,097,400 576,700 272,300 75,000 89,800 50,900 2,923,100 682,500 82,900 16,700 2,400 2,708,700 753,700 77,700 25.800 2,462,447 639,766 74,408 16,237 2,341,864 578,965 71,547 15,733 1975 65,622 220,161 550,855 8,281 844,919 275,477 1,936,444 953,362 983,082 100,660 2,204,138 169,325 65,532 13,805 42,886 291,548 742,163 214,828 125,000 1371.359 132,870 626,370 2,204,138 553,371 72,612 11,634 17,825 01974 112,480 276,687 503,254 9,757 902,178 248,201 1,998,595 910,209 1,088,386 107,632 2,346,397 199,462 52,077 38,225 50,280 340,044 865,524 223,704 125.000 373,1*9 132,351 586,585 2,346,397 562,134 101,728 44,611 76,808 32,455 r reserves (1980.112,700,000). Jo par shares (after deducting treasury shares 79, none; 1978-74, 7,449): 1980. 19,167,666; 1979. 136; 1978, 18,778,519; 1977. 18,757,790; 1976, ' 5; 1975, 17,247,667; 1974, 17,243,704. sd. additions: 1979. 1233,500,000; 1978, ,000; 1977, 192,977,000; 1976, 182,559,000; 1114,415,000. Total deductions: 1979, 000; 1978,132,900,000; 1977,119,560,000; 1976, 1975,1176,566,000. ed for comparative purposes in accordSEC mandate on reclassification of repreferred stock with mandatory sinking !rements. 3,500,000 (1979. $4,S00,000) 4*4% Series A which has mandatory sinking fund require- `urn comprised of 4*4% 2nd pfd. and 4*4% Senes A pfd. GENERAL NOTES ^ken from Annual Report of Company) A--Significant Accounting Policies of Consolidation: The accounts of pany and wholly-owned subsidiaries uded in the consolidated financial ts after elimination of significant inPsay transactions and profits and loss- i foreign subsidiaries and associated are accounted for on a three.g basis. Investments in unconsolidatadiaries and associated (more than med) companies are carried at cost, for the Company's equity in their un- net income. In the opinion cf the ~"v's management, the excess cost (ap- . ly 127 million) of investments in over equity in related net assets does not require amortization. Inventories: Inventories are stated at the lower of cost or market. Cost of inventories of approximately 1450 million in 1980 and 1486 million in 1979 is determined by the last-in, first-out method ("LIFO"). Cost of other in ventories is determined by the average or first-in, first-out method. If the latter method were applied to all inventories, they would in crease by approximately S619 million and 1493 million at Dec. 3i, 1980 and 1979, respectively. In addition, as a result of LIFO, cost of prod ucts sold increased by 1126 million in 1980, 1117 million in 1979, and 154 million in 1978. Certain inventories of the Company may be sold at various stages of processing and no practical distinction can be made between fin ished products, in-process products and other materials and therefore inventories are pre sented as a single classification. Depreciation, Depletion, Amortization and Oth er Expenses: Depreciation of plant and equip ment is provided by the straight-line method over their estimated useful lives. Depletion of the unrecovered cost of mines is computed based on the relationship that the quantity of minerals mined each year bears to the esti mated reserves as of the beginning of the year. Capital leases and improvements to leased properties are amortized generally on the ba sis of the shorter of the terms of the respective leases or the estimated useful lives of the re lated facilities. Pre-operating and start-up expenses appli cable to certain new facilities are amortized by the straight-line method over various periods up to ten years. Expenses in connection with the issuance of long-term debt are amortized in proportion to the amount of debt outstand ing. Expenditures for mine exploration and development (including stripping) are charged to expense as incurred. Investment Tex Credits: Investment tax cred its are accounted for by the flow-through method (Note J). Pension Plans: The Company and its subsidi aries have several pension plans covering sub stantially all employees. The provisions for pension costs includes, as to certain of the plans, amortization of prior service cost over various periods not exceeding forty years. It is the Company's policy to fund substantially all its annual pension costs (Note I). Capitalization of Interest: In accordance with the requirements of Financial Accounting Standards Board Statement No. 34, effective for the year 1980, the Company capitalized in terest costs applicable to the acquisition of certain fixed assets. As a result of this change, interest costs were reduced by S12 million and net income was increased approximately 86.5 million (34 cents per share). Not* B--Unconsolidated Subsidiaries and As sociated Companies: The carrying amount (Si 17.3 million for unconsolidated subsidiaries and S156.5 million for associated companies) of the Company's investments in and ad vances to such companies at Dec. 31, 1980 was substantially equal to its equity in the related net assets. The carrying amount at Dec. 31, 1980 and 1979 include advances of 878.2 mil lion and 854.5 million, respectively. At Dec. 31, 1980 undistributed net income of such compa nies amounting to approximately 873 million was included in consolidated retained earn ings. 3308 MOODY'S INDUSTRIAL MANUAL Summarized financial information for such companies is as follows: Unconsolidated Financial Position: Curr. assets................................................................... Other assets................................................................. Curr. liab....................................................................... Other liab........................................................................ Stockholders' equity............................................... Reynolds sh. of stockholders' equity............ Results of Oper.: Rev..................................................................................... Net inc. (loss).............................................................. Reynolds sh. of net inc. (loss)--Note K . Div. rec...............,,.......................................................... 1980 $330.4 124.9 243.0 78.2 134.1 75.0 530.7 17.9 12.4 2.0 1979 $311.2 126.2 224.8 86.0 126.6 68.4 498.3 36.5 21.4 1.8 1978 $247.4 114.8 180.1 87.3 94.8 50.9 455.8 8.9 1.6 1.8 1980 $548.9 993.0 374.4 895.9 271.6 110.9 962.3 39.6 5.2 2.6 Associated Companies 1979 424.2 1,000.5 399.7 783.4 241.6 100.3 888.2 (34.2) (6.4) 2.2 r 197| $366.1 956.4 322.7 7694 2334 90.7- 762.1 (514) (54) 2.2 Investments in four associated companies with a carrying value of $94 million were sold in 1978 and are not included in the summa rized information shown above. Reynolds share of net income of such companies amounted to $7 million including dividends of $4.4 million. , ' A wholly-owned subsidiary of the Compa ny, Reynolds International, Inc., has an in vestment of $33.6 million in an associated company which is also owned by two , Vene zuelan government corporations. Subsequent to its year-end, the associated company issued an additional $58 million of capital stock to one of the Venezuelan government corpora tions and obtained a $100 million loan. These events significantly unproved the associated company's working capital and net worth. Reynolds International's interest was reduced from 50% to approximately 28%, which had no significant effect on its carrying value. Note C--Property, Plant end Equipment--At Cost The components of property, plant and equipment are as follows: 1980 1979 Land, land improv. & mineral prop. . $131.8 $134.0 Bldgs. & leasehold improv..................... 400.8 387.1 Mach. & equip............ 1,695.3 1,723.6 Constr. in prog, includ. restricted fds................................. 181.4 167.3 Less allow, for deprec,, depL & amort................... $2,609.3 1,226.7 $2,412.0 1,187.8 $1,382.6 $1,224.2 Note D--Long-Term Debt (excluding convert ible subordinated debentures) Long-term debt outstanding at Dec. 31, 1980 and 1979 is as follows: 1980 1979 First Mtge. Bds. 4Vi% to 5%% due thru 1993 .................. $285.0 $310.2 8.85% to 9V4% due thru 1998 .................. Install, purch. oblig. 5.0% to 9.0% due thru 1998................. 196.8 Cap. leases 4.7% to 2102.012%.d..u.e..t.h.r.u.... 57.8 Other 5.8% to 10.7% due thru 2009 .... 32.8 Less: Amts, due within one year 782.8 Noncurrent debt $736.0 $764.6 Maturities of long-term debt are as follows: Install First Purch. & Mtge. Cap. Bonds Leases Other Total 1981............. $29.3 $8.5 $9.0 $46.8 1982 ............. 28.7 8.7 3.9 41.3 1983............. 28.6 9.0 2.1 39.7 1984............. 37.3 9.9 1.8 49.0 1985............. 37.3 9.1 1.8 48.2 1986............. 37.3 13.8 1.8 52.9 1987-2009 . 274.5 208.5 21.9 504.9 The First Mortgage Bonds were issued in series and have annual sinking fund require ments. Bonds of additional series may be is sued subject to certain restrictive covenants of the Mortgage. Installment purchase obligations at Dec. 31, 1980 include West German mark obligations of DM 202 million ($103.1 million). These obli gations are subject to the actual interest ex pense incurred by the lender which at present is approximately 8%. under the terms of the indentures relating to the First Mortgage Bonds, liens exist on ap proximately 69% of the carrying value of property, plant and equipment, while install ment purchase obligations, capitalized leases and other long-term debt are collateralized by an additional 17% of the carrying value. Also, holdings of the Company in the stock of cer tain related companies having net assets of approximately Sill million are pledged under the indentures. Note E--Convertible Subordinated Debentures: The Company has authorized and issued 4 Vi% Debentures due Mar. 1, 1991 and 5% Debentures due June l, 1988. Information re Australia to a trust. The trust has obtained' lating to these securities at Dec. 31, 1980 and total long-term bank financing of $550 million 1979 is as follows: to provide funds for (1) its anticipated share 1980 Auth. & issued.......... . $75.0 Outstg.............................. 57.5 1979 $75.0 61.0 ...5% 1980 1979 $50.0 $50.0 42.4 45.3 of the capital cost of the project and related interest during construction, and (2) a stand-' by commitment (which requires matching funds from the Company) of $75 million3 Conv. price per sh.... 59.14 59.14 44.76 44.76 Annual sinking fund requirements: Amount......................... 3.5 3.5 2.5 2.5 Required through .. 1990 1990 1987^ 1987 In 1980 the Company prepaid all 9f the 1981 sinking fund requirements of S6.0 million (S5.7 million in 1979). Note F--Preferred and Common Stocks Shares Amount case of construction cost overruns. Construction of the initial designed capacity of the project is expected to cost approximate ly 900 million. Australian dollars ($1.1 billion at Dec. 31, 1980) excluding inflation and inter est during construction. Reynolds Australia, together with the other joint venturers, has a primary obligation for completion of the proj. ect, however the Company has undertaken to Second Preferred Stock assure that Reynolds Australia will satisfy its Auth., par val. $100/share............ Issued 4V2% conv. series (cum.).......... Optional redemp. price per sh.............. Conv. pace per com. sh................................... Outstanding: At beg. of 1978 .... Converted in: 1978..................................... 1,000,000 633,477 599,778 4,000 $100.0 $63.3 $100.00 $48.16 $60.0 .4 responsibilities under the joint venture agree ment until completion of construction of theproject (presently expected to occur in early 1984). The Company is to agree to purchase the trust's share of the project's alumina and to advance and subordinate $50 million (subject to increase under certain conditions as noted above) against future deliveries of the &iumi-; na. In addition the Company will warrant that completion of construction of the project wiH 1979..................................... 1980..................................... 82,385 100,773 8.3 occur by June 1, 1985. 10.0 Minimum rental commitments as of Decern-' ber 31, 1980 under the principal noncancellable, At end of year 1980 ........................... 412,620 leases are as follows: *41.3 Period Operating Capital Common Stock 1981.......... $18.2 $9J Auth., without par val................................. 50,000,000 1982.......... - 1983.......... . 15.0 11.2 9.1 94 Outstanding: At beg. of 1978 ------ 18.757.790 *188.5 Shs. issued in conv. of Second Pfd. Stk. & in exch. for pfd. stk. of subs. & other; 1984.......... 1985.......... Balance . 7.3 5.1 37.3 84 84 87* 1978..................................... 1979..................................... 1980.................................... 20,729 174,617 214,530 ,7 8.7 10.6 Less: Amts. representing int... $94.1 $13L At end of year 1980 ........................... Cash Dividends 1978................................ 1979................................ 1980................................ 19,167,666 Preferred $3.0 2.7 2.2 $208.5 Common $29.0 37.0 42.0 Present val. of cap. lease paymts. includ. in lg.-txn. debt........................... $7d Leases covering major items contain rene al and/or purchase options which may be ex Shares of Common Stock are reserved at ercised by the Company. Dec. 31, 1980 for issuance as follows; 1,920,459 shares for conversion of Convertible Deben tures and 856.769 shares for conversion of Sec ond Preferred Stock. At Dec. 31, 1980, $3.5 million ($4.5 million-- 1979) of 4V*% Series A Preferred Stock, which has mandatory sinking fund requirements, is included in deferred credits and other liabili ties. Note I--Pension Plans Total pension expense for the years 19 1979 and 1978 amounted to $78.1 million, $71 million and $64.9 million, respectively. At T 31, 1980, accumulated benefits and net assets for the Company's domestic defined bene**" plans are as follows: Actuarial present value of accum. plan benefits Note G--Dividend RestrictIona Vested...................................... Agreements underlying the First Mortgage Nonvested.............................. Bonds, convertible subordinated debentures and preferred stocks restrict cash dividends on Common Stock and certain other stock payments. At Dec. 31, 1980 approximately $71 Net assets avail, for benefits ... The weighted average assumed rate of $300 million of consolidated retamed earnings turn used in determining the actuarial pres was free from such restrictions. Dividends value of accumulated plan benefits was 7.5 cannot be paid on Common Stock during any (1979--6%). This change and to a lesser period when the Company is in default on the tent other changes in assumptions regard; sinking fund requirements of the 4%% Series salary increases, retirements and terminatio ^ A Preferred Stock. reduced the actuarial valuation of accumu'** Note H--Contingent Liabilities and Commit ed plan benefits by approximately $163 ments Various suits and claims are pending against the Company. In the opinion of the Company's management, after consultation with counsel, disposition of the suits and claims will not involve sums having a material adverse effect upon the consolidated financial position. The Company is committed to pay its pro lion. Note J--Taxes on Income This amount is comprised of the folio* (see Note K): 1980 1979 Federal......................... State.............................. $22.5 4.7 $82.8 11.4 Foreign...................... 40.7 33.4 portionate share of annual production charges Deferred .................... 36.2 (18.9) (including debt service) relating to its interests in an alumina plant and an aluminum reduc $104.1 $108.7 tion plant in West Germany, an alumina plant The major components of the def in Jamaica, a bauxite project in Brazil and is provision are as follows: contingently liable on certain bank debt of un 1980 1979 gconsolidated foreign subsidiaries. At Dec. 31, 1980 the Company's share of obligations (principally long-term) relating to these enter- rises amounted to approximately $232 milon. This amount includes West German Deprec........................... Fgn. curr. transl. gains (losses) .. Facility closings ... mark obligations of DM 320 million ($162 mil Empl. ben.................... lion). Capit. int,.................... $17.4 7.7 (8.1) 12.1 5.5 $4.7 (7.0) (2.8) (1.4) In Feb., 1980 the Company through its sub Other........................... 1.6 (12.4) Sill* 1971 U 13 sidiary, Reynolds Australia Alumina. Ltd. ("Reynolds Australia"), agreed to a 40% par ticipation in a joint venture to mine bauxite and produce alumina in Western Australia. $36.2 $(18.9) *li Other includes deferred taxes for interco^ pany profits, customer allowances, estima The Company intends to transfer Reynolds liabilities and various other timing differen- MOODY'S INDVSltiiAj. ------ nount of undistributed earnings of ea for which the Company has not taxes, the remittance of which is exbe indefinitely postponed, was imtJter exclusion of unremitted eamomestic tax-consolidated subsidiaries eamin^s which, if remitted under and available tax credits, would ndaily tax-free. ^mpany's effective income tax rate -from the United States statutory rate tory subs- & cos. t other rate.. credits , (20.5 *8.0............ allow............ ' taxes------ 1980 46% 1979 46% (2) (3) 1978 48% ;rate.......... 37% 38% 49% Note K--Company Operations The Company is a vertically integrated en terprise operating predominantly in the alu minum industry in Doth domestic and foreign areas. The Company, in order to more fully describe the nature of its operations and to supplement the foregoing, has separated its vertically integrated operations into two groups referred to as Aluminum Production and Processing and Finished Products and Other Sales. Generally the amounts presented for geographic data exclusive of the amounts presented for Aluminum Production and Processing and Finished Products and Other Sales would otherwise be reported. Aluminum Production and Processing in cludes the mining of bauxite, ocean shipping of bauxite and alumina, refining of bauxite into alumina and calcination of petroleum coke, all of which are vertically integrated with aluminum production ana processing plants that produce and sell primary alumi num and a wide range of semi-finished alumi num mill products, including flat rolled prod ucts, extruded and drawn products and other aluminum and nonaluminum products. It also includes revenues faom the sale of technology and various licensing, engineering and service fees relating to the production and processing of aluminum. Operating profit for 1980 ana 1979 has been reduced approximately $23 mil lion and $19 million by start-up costs related to new facilities as well as the restart of the Corpus Christi, Texas reduction plant. Finished Products and Other Sales includes^ the manufacturing and distribution of various finished aluminum products including flexible packaging products, containers, Reynolds wrap and printed foil and aluminum building products. It also includes the sale of miscella neous nonaluminum products including build ing products, plastic film, printing cylinders and machinery. Operating profit for 1980 has been reduced by approximately $22 million for the closing of certain domestic facilities. Start up costs associated with new facilities reduced 1980 and 1979 operating profit by approxi mately $7 million and $6 million. Summarized financial information relating to the Company's operations and investments by major operating and geographic areas is as follows: j Data and services sold ers................................................................ transfers............................................... I prod. & serv. sold.............................. g profit......................................................... i income (loss) of cos. not consol.. h|e assets.................................................... _i & advs. to cos. not consoL............. depL& amort......................................... expenditures............................................... hie Data and services sold ers between areas........................... ' prod. & serv. sold.............................. r profit......................................................... _j inc. (loss) of cos. not consol........... \ interest & other inc............................... & other expenses................................... e (loss) before taxes ....................... le assets.................................................... a & advs, to cos. not consol................ 1 assets....................................................... liabilities at December 31.................. __r Data and services sold ' transfers ............................................... prod & serv. sold.............................. j profit......................................................... line, (loss) of cos. not consol........... interest & other income.................... *. & other expenses................................... He before taxes..................................... >le assets.................................................... i & advs. to cos. not consol................ te assets....................................................... assets....................................................... depL & amort......................................... expenditures...................... ................ Data and services sold ers between areas .............................. ` prod & serv. sold.............................. ^profit......................................................... a income (loss) of cos. not consol.. \ interest & other income.................... 8c other expenses................................... -e (loss) before taxes ....................... ble assets..................................................... i 8e advs. to cos. not consoL............. ''Mai assets....................................................... Aluminum Production & Processing 1980 1979 $2,327.6 627.7 $1,984.2 632.4 $2,955.3 $233.1 $12.9 $2,218.6 $227.8 $74.9 $201.5 1980 $2,616.6 $242.6 $11.8 $2,015.7 $196.3 $69.3 $182.2 Domestic 1979 $3,308.1 198.1 $3,007.6 192.3 $3,506.2 $179.6 $4.7 50.S (42.6) $3,199.9 $276.5 $3.2 35.8 (64.9) $192.2 $2,377.6 46.0 $250.6 $2,252.6 42.6 $2,423.6 *2,295.2 Eliminations, etc. 1980 1979 $(630A) $<630.1) $14.8 $4.7 $(636.1) 5(636.1) $(9.6) $3.2 1978 $1,674.1 S57.0 $2,231.1 $206.2 $(.6) $1,865.3 $179.8 $64.5 $120.3 1978 $2,598.0 174.6 $2,772.6 $266.4 $3.6 27.1 (63.0) $236.1 12,086.6 40.4 *2,127.0 1978 $(561.4) $(561.4) $.8 $3.6 *(2.S> $46.0 $( 14.8) $42.6 $(9.1) $40.4 1980 *(673.5) $(673.5) $.S (.S> .8 $.5 $(67.0) $(67.0) 1979 $(572.9) $(572.9) $(5.1) (2.8) 2.8 $(5.1) S<91.8) $(91.8) 1978 $(489.1) $(489A) $.3 (1.9) 1.9 $.3 $(98.4) $(98.4) Finished Products & Other Sales 1980 1979 $1,340.6 2.4 $1,331.3 3.7 $1,343.0 $20.4 $1,335.0 $90.3 $526.8 $489.5 $14.9 $69.9 1980 $13.6 $47.9 Foreign 1979 $360.1 475.4 $307.9 360.6 $835.5 $88.2 $12.9 12.2 (21.6) $688.5 $51.9 $11.8 7.5 (30,9) $91.7 $513.0 227.8 $40.3 $523.4 196.3 $740.8 $345.2 1980 $719.7 $357.4 Consolidated 1979 $3,668.2 $3,315.5 $3,668.2 $268.3 17.6 61.9 (63.4) $3,315.5 $323.3 15.0 40.5 (93.0) $284.4 $2,742.9 273.8 80.7 $285.8 $2,490.4 238.9 193.8 $3,097.4 $89.8 $271.4 1980 $2,923A $82.9 $230.1 Consolidated 1979 $3,668.2 $3,315.5 $3,668.2 $268.3 17.6 61.9 (63.4) $284.4 $2,823.6 273.8 $3,097.4 $3,315.5 $323.3 15.0 40.5 (93.0) $285.8 $2,684.2 238.9 $2,923.1 1978 $1,168.2 4.4 $1,172.6 $92.4 $427.5 $13.2 $41.8 1978 $244.3 314.5 $558.8 $30.7 *(.6) 3.6 (38.9) *(3.2) $500.3 179.8 $680.1 $346.3 1978 $2,842.3 $2,842.3 $299.4 3.0 28.8 (100.0) $231.2 $2,283.7 220.2 204.8 $2,708.7 *77.7 $162.1 1978 $2,842.3 $2,842.3 $299.4 3.0 28.8 (100.0) $231.2 $2,488.5 220.2 $2,708.7 ately 34% in 1980 (40% in prior * of the transfers between operating ar- * all transfers between geographic areas : raw materials (bauxite and alumina) shipping operations are reflected related prices. All other transfers are --ted for at market prices. ting income is after allocation of all administrative and general expenses. Oot reflect profit on the sale of invest(ee Note B) interest expense, foreign translation and exchange adjustd other items of income and expense to be general corporate in nature, ate assets consist principally of cash veatments. Costs and Expenses and Other Income Foreign curr. transl. & exchange (gains) losses re- fleeted in: 1980 1979 1978 Other inc................. *((8.8) Equity inc.............. Other deduct. . .. (l.l) $2.3 20.6 $13.6 29.0 Rent.............................. Research & devel. . (19.9) 57.3 31.7 22.9 42.8 28.3 42.6 33.6 2S.2 Note L--Supplementary information on the Ef fects of Changing Prices (Unaudited) Financial Accounting Standard, Statement No. 33, Financial Reporting and Changing Prices ("FAS 33"), established in 1979, speci fies a supplemental presentation to portray the effect of general price level changes (con stant dollars) and price changes of specific as sets (current cost) on certain financial data. Management has not concluded that the data presented in the following supplemen tary schedules are fair representations of the impact of inflation on the Company's opera tions nor on the statistical data presented. It is important that financial statement users un derstand what the inflation adjusted data is intended to represent and also recognize its in herent limitations. The following explanations are provided to assist in a general understand ing of the development and presentation of the required data. Statement of Consolidated income Under the provisions of FAS 33 the Compa ny has elected to restate only inventories, cost of products sold, and depreciation, depletion and amortization. 3310 MOODYS INDUSTRIAL MANUAL Constant Dollar ' sociated with the use or sale of assets at the of purchasing power gains relating to Constant dollar accounting is a method of reporting statement elements in dol- lars, each of which has the same purchasing power. This method intends to measure the impact of general inflation through the use of the Consumer Price Index for All Urban Con- current costs to purchase or produce such items. This method intends to reflect the effects of changes in specific prices of resources used in operations rather than the historical cost amounts actually expended to acquire them. Current cost calculations involve a sub- monetary liabilities, Mineral Resources r A_ integrated manufar^r.. ' J?IJJ5a*2L products, the Company requires baunte, ^ sumers ("CPI"), as required by the statement, stantial number of judgments by management aluminum bearing ore, tor its manufacturing Constant dollar information for inventories, as well as the use of estimating techniques operations. The Company s current bauxite properties and depreciation, depletion and that have been employed to accumulate the requirements are_ provided for principally amortization was determined by adjusting required data. Therefore, the data should be through its participation in various partner-* historical values into equivalent units of gen- viewed as reasonable approximations and not ships and joint ventures and through Ion*.'* era] purchasing power as measured by the as precise indications of the effects of infla- term supply contracts. Through these variola * CPI. The Company uses the LIFO method of tion. arrangements the Company has access tn accounting for approximately 82% (85% for Five-Year Comparison bauxite reserves available to supply its cur* 1979) of its inventories and thereby charges This comparison restates certain reported rent raw material requirements for at least th current period costs to the results of opera- dollar information to average 1980 dollar val- next 50 years. In addition the Company tions tor both financial reporting and income ues. For example, 1976 actual sales of *2,084.4 an ongoing exploration program to exnaS *M7 .additional reserves which wonU has alreaay recognized 5126 million and 5117 tor of 1.448 which was derived by dividing the w- available in the future It is exnecteH tkiS mUhon of inflation-related costs m 1980 and CPI for 1976 into the CPI for 1980. Sfiular eSoi^ wo^d ^o^de ^S^Sal^? 1979. Inventories amounting to 5227 million adjustments have been made to the 1979 cur- cnese c"n# wouia provide aaaiuonai re. (5196 million-1979) are accounted for using FIFO or average costs and, accordingly, an a 19go dollar value after adjustment of cost of able. During 1980 the Company obtained ap. adjustment to cost of products sold for the products sold and depreciation, depletion and proximately 5.1 million metnc tons or bauxite, purpose of determining the supplemental in- amortization as noted above for the current produced 2.5 million metnc tons of alumina flation accounting data has been made. year's statements. Adjusted net assets at year- and produced 1.1 million metnc tons of prf*1 Currant Coat end reflect the restatement of inventory and mary aluminum. The average price realized Current cost accounting is a method of mea- property, plant and equipment for current by the Company for 1980 sales of primary as suring and reporting assets and expenses as- costs and/or general inflation and the effects minum was 74 cents per pound. Statement of Consolidated Income Adjusted For Changing Prices Year Ended Dec. 31, 1980 As Reported Adj. Adj. for in Fin. for Gen. Changes in Revenues Statements Inflation Specific Prices Net sales........................................................................................................... 53,653.2 53,653.2 53,653.2 Royalty, interest, equity & other income...................................... .....94.5 94.5 94.5 , ,_ Year Ended Dec. S1K1979 As Reported Adj. Adj. for in Fin. for Gen. Changes ta Statements Inflation Specific Prices 53,305.2 53,305.2 53,3054 65.8 65.8 _________ 654. Costs and Expenses Cost of products sold............................................................................... Srillng arttrnn Ar ggn^ral j-rpg.............................................................. Provision for deprec., depl.amort. ............................................. Interest............... ......................................................................................... Other deductions....................................... 53,747.7 53,063.4 246.0 89.8 62.8 1.3 53.747.71 53,098.4 246.0 158.5 62.8 1.3 53,747.7 53,102.6 246.0 188.1 62.8 1.3 53,371.0 52,684.5 223.9 82.9 70.1 23.8 53,371.0 52,706.9 223.9 140.1 70.1 23.8 53,371.0 52,702.7 223.9.' 171.7 70.1' 234 53,463,3 53,567.0 53,600.8 53,085.2 53,164.8 53,1924 Inc. before taxes thereon................................................................... Taxes on income.............................................................................................. 5284.4 104.1 5180.7 104.1 5146.9 104.1 5285.8 108.7 5206.2 108.7 51784 108Jf Net income................................................................................................. Effective income tax rate............ ............................................................ Invent. & prop., pit. & equip.: roincr. in specific prices........................................................................... Incr. in general inflation.......................................................................... 5180.3 36.6% 576.6 57.6% 542.8 70.9% 5462.8 * 438.7 5177.1 38.0% 597.5 52.7% 570.1 404% * 83754 ________4144 Excess of incr. in specific prices (general inflation).......... 524.1 5(394) (TJAt Dec. 31, 1980 and 1979, current cost of inventory was 81,491.2 and 81,291.9, respectively and current cost of property, plant and equipment, net ok accumulated depredation was 52,519.3 and 52,240.3, respectively. Ftve-Year Comparison of Soloctad Supplementary Financial Data Adjusted For The Effects of Changing Prices (In Average 1980 Dollars, Except as Reported Amounts) Net sales: - As reported........................................................................................................................................... Adj. for gen. inflation ........................................................ Net income: As reported........................................................................................................................................... Adjusted for Gen. inflation................................................................................................................................. Changes in specific prices........................................................................................................ Primary per share: As reported........................................................................................................................................... Adjusted for General inflation............................................................................................................................ Changes in specific prices........................................................................................................ Purchasing power gain....................................................................................................................... Net assets at year end: Asreported........................................................................................................................................... Adjusted for General inflation............................................................................................................................ Changes in specific prices........................................................................................................ Cash dividends per common share: Asreported........................................................................................................................................... Adjusted for general inflation................................................................................................... 1980 53,653.2 3,653.2 180.3 76.6 42.8 9.32 3.90 2.13 113.2 1,347.8 2,610.1 3,136.7 2.25 2.25 1979 53,305.2 3,752.2 177.1 110.7 79.6 9.25 5.71 4.06 132.1 1,211.1 2,596.1 3,022.0 2.00 2.27 1978 52,8294 3,573.5 1.575 1.99 1977 52,352.7 3,1994 ^ 1976 52,0844 3,0174 1.35 1.84 l.JJ 1.59 Market price per common share at December 31: AsreportedT........................................................................................................................................ 35.25 32.50 32.63 32.37 ^* 3948 Adjusted for general inflation.............................................................. Average consumer price index ...................................................................................................... 33.67 246.8 34.89 217.4 39.69 195.4 42.93 181.5 5546 1704.. Central Commanta Taxaa Since taxing authorities in the major geo graphic areas that the Company conducts op erations do not recognize the effect of general inflation costs, the provision for taxes on in come has not been tax benefited in the accom panying data. Thus taxes are levied on the Company in real terms which exceed the tax rates computed under existing statutory regu lations and highlights the need for tax reform during periods of high inflation to permit the Company to realize adequate capital cost re covery. Purchasing Power Gain The computed purchasing power gain from holding net monetary liabilities has been ex cluded from the inflation adjusted statement of income as required by FAS 33. This com puted gain more than offsets or substantially reduces the impact of inflation resulting from the restatement of depreciation, depletion and amortization: however, such gains do not pro vide funds that are available for corporate use. Interpretations and Limitations of Data During the past two years the increase in specific prices for inventories has exceeded the increase in general price levels due principally to increases in labor and energy costs which have risen faster than inflation measured by the CPI. These higher costs have been reflect ed in cost of products sold. During the same two years the increase in general price levels for fixed assets exceeded the increase in specif ic prices. However in 1980 the increase in spe cific prices of inventories more than offsets the effect of general inflation related to fixed as sets. Depreciation and net assets at year-end show that since acquisition specific price lev els have risen faster than general inflation. With the promulgation of FAS 44, capitali zation of interest becomes an element of the cost of fixed assets acquired in 1980 and there after. Constant dollar and current cost data for fixed assets acquired in 1979 and prior years have not been adjusted to reflect the ef fects of capitalized interest because its impact would require numerous assumptions (such as interest rates, qualification of assets, and the extent to which financing would have been available) for which historical data has not been accumulated. These assumptions would also affect other items of costs and expenses, principally interest expense and depreciation, and the amounts for net assets at year-end. The Company has an ongoing program to upgrade and replace its manufacturing facili ties. This program involves long-range plan ning and assessment of future management goals regarding expansion of existing facilities, development of new products and manufac* turing processes and improvements and, changes in the various markets for Company products which management deems beneficial to continued future operations. The Company has not concluded that either current cost or constant dollar information reflects the eco nomic value of its assets. Therefore it is im portant that financial statement users recog nize the inherent limitations and experimental nature of such data. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (As taken from Company's Annual Report) Stockholders and Board of Directors Reynolds Metals Company Richmond, Virginia We have examined the consolidated balance sheet of Reynolds Metals Company and con solidated subsidiaries as of Dec. 31, 1980 and 1979, and the related consolidated statement* of income and retained earnings and change* in financial position for each of the three year* ended Dec. 31, 1980. Our examinations were made in accordance with generally accepted MOODY'S INDUSTRIAL MASSval, _ standards and, accordingly, included tests of the accounting records and such auditing procedures as we considered ary in the circumstances, our opinion, the financial statements re to above present fairly the consolidated cial position of Reynolds Metals Compad consolidated subsidiaries at Dec. 31, juid 1979, and the consolidated results of operations and changes in their financial `on for each of the three years ended Dec. 950, in conformity with generally accept-counting principles applied on a consisbasis. 8i Whinney ond, Virginia ary 27, 1981 FINANCIAL RESPONSIBILITY . taken from Company's Annual Report) e consolidated financial statements and financial information of Reynolds Met- Company have been prepared by manage nt which is responsible for their integrity objectivity. These statements have been red in accordance with generally accept- _ -ounting principles and, where appropriteflect estimates based on judgments of ~ent. olds maintains a system of internal ficontrols which considers the expected costs and benefits of specific control proce dures and provides reasonable assurance that Company assets are protected against loss or misuse, that transactions are executed in ac cordance with management's authorization and that the financial records can be relied upon to produce financial statements in ac cordance with generally accepted accounting principles. The internal financial control sys tem is supported by the management of the Company through the establishment and com munication of business and accounting poli cies, the division of responsibility in organiza tional matters, careful selection and training of management personnel and a comprehen sive program of internal audits to test the ef fectiveness of the system. The financial statements have been exam ined by the Company's independent auditors, Ernst & Whinney. Their examination was conducted in accordance with generally ac cepted auditing standards and their report is included elsewhere herein. As a part of their examination, Ernst & Whinney develops and maintains an understanding of the Company's internal accounting controls and conducts such tests and employs such procedures as they consider necessary to render their opin ion on the financial statements. The Board of Directors, through its Audit Committee which consists of four outside di rectors, is responsible for assuring that man agement fulfills its financial reporting respon sibilities. The Board of Directors, upon the recommendation of the Audit Committee, se lects the independent auditors subject to rati> fication by the stockholders. The Audit Com mittee meets periodically with representatives of management, Ernst & Whinney anjf the Company's internal auditors to assure that each is properly discharging its responsibili ties. Ernst & Whinney and the Company's in ternal auditors have full and free access to meet with the Audit Committee, with or with out the presence of management representa tives. W.S. Leonhardt Vice Chairman of the Board and Chief Finan cial Officer Shipments and Revenues By Year (Tons in thousands, dollars in millions): Aluminum shipments and revenues from products and services sold to customers for three years end ed Dec. 31 are shown in the table below. This data has been separated into the company's two major operating areas: aluminum produc tion and processing, and finished products and other sales. See Note K to the consolidat ed financial statements for additional informa tion regarding company operations. man production A processing aluminum............................................. ed................................................................ i and drawn.......................................... aluminum.................................................. uminum..................................................... 1980 Tons 300.6 378.4 235.3 89.8 ' Amts. $446.0 790.5 624.4 234.9 231.8 1979 Tons 289.5 343.4 257.8 101.6 Amts. $351.9 662.5 583.8 236.0 150.0 1978 Tons 269.0 371.0 238.0 76.7 Amts. $280.9 671.9 459.3 136.9 125.1 products A other sales j & containers........................... aluminum.......................................... nminnm ........................................... 1,004.1 243.1 72.6 $2,327.6 953.2 212.8 174.6 992.3 246.2 91.2 $1,984.2 884.0 252.4 194.9 954.7 240.3 91.8 $1,674.1 781.7 226.9 159.6 315.7 $1,340.6 337.4 $1,331.3 332.1 $1,168.2 Total products 8t services sold .. 1,319.8 X3,668.2 1,329.7 $3,315.5 1,286.8 1 $2,842.3 Quarterly Results of Operations (In millions, except sshhaarre data) 1980 1st 2~ nd' 3rd Sales...................................................................... $876.2 $957.1 $913.7 on Income..................................................... 32.5 31.4 21.5 Income.............................................................. 52.1 58.1 36.6 Common Share: *ry Earnings...................... $2.70 $3.02 $1.88 vcnge Shares Outstanding 19,053,746 ,120,637 19.130,966 ally Diluted Earnings.......... $2.39 $2.67 $1.69 sexmge Shares Outstanding 21,986,905 ,019,418 21,980,145 4th $906.2 18.7 33.5 $1.72 19,151,902 $1.55 21,929,130 1979 1st $775.7 28.7 38.3 $2.00 18,796,421 $1.75 22,173,917 2nd $873.5 40.S 59.4 $3.12 18,814,456 $2.71 22,146,589 3rd $829.1 20.7 35.0 $1.82 18,849,959 $1.61 22,059,272 4th $826.9 18.8 44.4 $2.31 18,946,941 $2.03 22,056,179 company's primary earnings per share . after preferred dividend requirements. ~ diluted earnings assume full conversion avertible debentures and Second Pre- Stock. Net income for the fourth quarof 1980 includes a charge of $8.6 million per share) for closing certain domestic _ea. The tax rate for the fourth quarter of was favorably affected by equity income additional tax credits. Nat Salas and Other income shipments and net sales for 1980 with prior years were: Shipments Net Sales (thousands of tons) (millions of dollars) 1,320 -1% $3,653 +11% 1,330 +3% * 3,305 +17% 1,287 +7% 2,829 + 20% increases in domestic markets, al- partially restrained by government controls, and shipments to foreign mar- at average prices higher than domestic _ resulted in higher reported net sales in compared to 1979.' Both price realizations oranand contributed to the sales growth in and 1978. ' interest, equity and other income -w was $94.5 million. This compares with Bullion in 1979 and $44.7 million in 1978. Included $18.8 million of foreign currency on gains. _ j income for the three years beginning was $3.0, $15.0 and $17.6 million. Equi. --~e in 1980 was adversely affected by a for the better part of the year at the "n sheet and foil company. t income for the three years begin1978 was $14.5, $24.4 and $26.0 mil- Curraney Effects -Sn currency translation and exchange and losses result chiefly from the U.S. " relationship to the West German well as to the Belgian franc, effect on equity, other income and oth- *Tions is set forth in Note K to the genabove. ** Expenses of the company's continued emphareduction, costs and expenses have - e .to escalate over prior periods as the higher levels of inflation, particularly ffcas of energy and wages tied to the Uving index. Costs in the second half of ^ reflect increases granted in the first the new three-year negotiated labor - signed during the year. 1980 coats ^ charge of approximately $22 million associated with the closiiig of certain domestic manufacturing and distribution facilities. Start-up costs for new facilities and the restart of the company's Corpus Christi, Texas re duction plant amounted to approximately $30 million in 1980 and $25 million in 1979 com pared to less than $1 million in 1978. Interest expense in 1980 was reduced by $12 million as a result of capitalization of Interest costs applicable to the acquisition of capital assets as now required by Financial Account ing Standards Board Statement No. 34. For information concerning the effects of in flation on 1980 and 1979 results, see Note L to the general notes, above. Taxes on Income The effective tax rates for 1978, 1979 and 1980 were 49 percent, 38 percent and 37 per cent respectively. Comparisons of these effec tive rates are set forth in Note J to the general notes, above. Return on Capital and Equity Return on average invested capital (stock holders' equity plus long-term debt) was 10.0 percent in 1980 compared with 10.6 percent in 1979 and 8 percent in 1978. Return on average stockholders' equity was 14.0 percent in 1980 compared with IS.4 percent in 1979 and 11.4 percent in 1978. Common Stock and Dividends The quarterly dividend on Common Stock was increased to 60 cents (annual rate of $2.40 per share) from 55 cents per share, effective with the fourth quarter payment. Dividends during 1980 on Common Stock totaled $42.0 million, or $2.25 per share. Total cash divi dends declared in 1980, including $2.2 million on preferred stock, were $44.2 million. - The high and low sales price of Reynolds Common Stock based on NYSE-Composite transac tions, and dividends paid per share of Com mon Stock during the quarterly periods of 1980, 1979 and 1978 are tabulated on the inside back cover. Working Capital Working capital totaled $576.7 million at Dec. 31, 1980, a decrease from the $682.5 mil lion at Dec. 31, 1979, and $753.7 million at Dec. 31, 1978. The ratio of current assets to current liabilities was 1.86/1, compared to 2.08/1 a year ago and 2.44/1 for 1978. The change in working capital results prin cipally from the utilization of funds generated in 1978 from the sale of the company's invest ments in associated companies to assist in fi nancing the company's capital expenditure program during 1979 and 1980. As pan of an ongoing program to strengthen the company's financial position, while maintaining sufficient funds to meet working capital needs, manage ment is exploring new ways to minimize working capital requirements and to provide additional flexibility in financing future re quirements. For additional information on changes in the company's consolidated finan cial position and changes in working capital by component see above. Long-Term Debt One of management's prime goals has been to reduce long-term debt in relation to equity. Significant progress has been made. Debt has been reduced by more than $125 million since year-end 1974. Equity has been increased by $568 million. The debt to equity ratio at the end of 1974 was 56/44. At the end of 1980 it was 38/62. During 1980 the company reduced long term debt by $28.6 million and retired $6.1 mil lion of convertible subordinated debentures. At year-end, long-term debt (excluding con vertible subordinated debentures) totaled $736.0 million, compared with $764.6 million at the end of 1979. Additional information on long-term debt is shown above. Stockholders' Equity and Book Value Stockholders' equity, represented by Reyn olds Metals second preferred and common stocks and net income retained for use in the business, rose to $1.3 billion at the end of 1980 from $1.2 billion at the end of 1979. Book val ue per share of Common Stock increased to $68.16 at the end of 1980, from $61.19 a year earlier. Capital Expenditures Reynolds Metals has an ongoing capital ex penditure progam designed to expand, replace or improve its manufacturing facilities. This program involves long-range planning and continuing assessment of corporate goals and objectives. These goals emphasize projects which are related to 1) reduced energy con sumption, 2) expansion of facilities to meet in creased demand and/or changing markets for the company's products, 3) improved produc tivity and cost reduction and 4) improvements in environmental control facilities. Capital expenditures by Reynolds Metals Company and consolidated subsidiaries for property, plant and equipment in 1980 totaled $271.4 million, compared with $230.1 million in 1979. Included are expenditures for domestic environmental control facilities of approxi mately $24.7 million in 1980 and $10.6 million in 1979. 3312 MOODY'S INDUSTRIAL MANUAL Expenditures for property, plant and equip ment for the next three years are expected to be in the same range as those for 1980. These expenditures will be financed from internal cask flow and through borrowings, including industrial revenue bonds and pollution control bonds, and by sale and lease-back financing. For the period 1978 through 1980, deprecia tion and other non-cash charges equaled 38 percent of operating cash flow and 44 percent of capital expenditures. Production and Supply The company's supply of aluminum in 1980 consisted of 901,900 tons of primary metal produced by its domestic plants and 171,500 tons produced by Canadian Reynolds Metals Company, Limited. The 1980 average operating rate for the company's primary aluminum plants was 93 percent of capacity. In a move designed to keep inventories in balance with demand the company reduced the production of primary aluminum at higher cost facilities. As a result, production from one potline at the Corpus Christi, Texas reduction plant and from four potlines at the Listerhill, Ala. reduction plant was suspended in July. Interruption in energy supplies also caused temporary curtailments in production at two Pacific Northwest plants. At year end the operating rate was at 91 per cent of primary capacity. Recycled and reclaimed aluminum also ac- counted for a growing portion of Reynolds metal supply in 1980. Reclaimed metal pro duction totaled 181,400 tons during the year. Other sources of supply included Reynolds share of production at partially-owned over seas reduction facilities, and production and purchases of hardening agents. The company obtains a portion of its baux ite and alumina from various supply arrange ments and in 1980 entered into agreements to obtain alumina from Western Australia. For additional information, see Note H to the gen eral notes, above. Congress passed legislation in 1980 aimed at alleviating power problems faced by the Pacif ic Northwest, where about one-third of the na tion's primary aluminum capacity is located. The legislation makes possible new long-term power supply contracts for direct-service in dustrial customers, including Reynolds Met als, served by the Bonneville Power Adminis tration. While rates paid by direct-service in dustrial customers will rise substantially, Bonneville earlier had indicated it would be unable, under previously existing power sup- iprc_lery i:_ln_i_m__d_i_ui_t__s_si,,tr__ti_o_a___l_r__e__c__nu____es__wt_o__mc____oe___n_r__st_r_adcutes withi d<*i*rect-serv to expire in the mid-1980s. The legislation enables Bonneville to purchase power to augment its supply of electricity as necessary to fill the needs of util ities, direct-service industries and federal agencies. Labor Agreements New three-year labor agreements 1^*^- signed in May with two unions represfentio^ the majority of the company's hourly employ;* ees--the United Steelworkers of America ann the Aluminum Workers International Union. The agreements in most cases provide for general wage increase of 60 cents an hour ov^ the three years, including an increase of 2$ cents an hour effective June 2, 1980, and creases of 20 cents an hour in the second yea* and 15 cents an hour the third year. Incr*. ments between wage grades were increased 2V2 cents per hour during the term of the con. tract. In most cases quarterly cost-of-living ad. justments, which represent the major cost im pact on the company, will continue at one cent an hour for each .3 increase in the Consumer Price Index, but in the third year will change to a new rate of one cent for each .26 increase' in the Consumer Price Index. Provisions in the settlement include improv. ing the pension base for future retirees and providing pension increases for current retir ees. Improvements also were made in insur ance benefits covering health, life, dental and vision care, and supplemental unemployment benefits and income maintenance programs. Total hourly and salaried company em ployment during 1980 averaged 36,800 per-,, sons. FINANCIAL & OPERATING DATA Statistical Record Earned per share--4*4% preferred............... --4l/2% preferred.................................................. --common (actual) ............................................. --nion avg. shs......................................................... --Hfully diluted.................................................... Dividends per share--4s/4% preferred.......... --4Vfe% preferred.................................................. --common................................................................. Price range--4*4% preferred.............................. --4l/a% preferred.................................................. --common................................................................. Net tangible assets per share--com................. Fixed charges earnedi Before income taxes............................................. After income taxes............................................... Times charges & pfd. divs. earned................. Price range deb. 4l/2S, 1991................................... Net tangible assets $1,000 lg.-tm. debt.......... Net curr. assets per $1,000 lg.-tm. debt .... Number of shares--4*4% preferred............... --4 l/a% preferred.................................................. --common (year end)........................................ --CDcommon (avg.) --H__jufull;ly d-iluted' . Financial And Operating Ratios Current assets & current liabilities . % cash to current assets...................... % inventory to current assets.......... % net current assets to net worth .. % property depreciated...................... 1980 $2,561.47 $436.96 $9.29 $9.32 $8.32 $2,375 $4.50 $2.25 43 vw i y2 82-59 40Vs-27l4 $68.16 1.86 4.42 54.39 42.79 47.01 1979 $1,984.34 $344.96 $9.20 $9.25 $8.16 $2,375 $4.50 $2.00 50*4-46 80V2-59 39*4-2814 $61.19 5.08 3.53 3.39 $2,549 $893 89,249 513,393 18,953,136 18,852,360 21,961,598 2.08 12.49 51.95 56.35 49.25 1978 $1,140.93 $197.72 $6.11 $6.11 $5.40 $2,375 $4.50 $1,575 45-4OV2 84-61V2 39*4-241/2 $53.98 2.44 15.42 52.62 70.22 50.89 1977 $597.52 $143.23 S4.58 $4.61 $4.12 $2,375 $4.50 $1.35 411/2-39*4 941/2-651/2 44y8-28i4 $49.82 2.64 5.11 64.13 64.33 51.42 1976 $397.28 $124.35 $4.17 $4.16 $3.74 $2,375 $4.50 $1.10 411/2-3614 91-5614 42*4-2214 $47.66 2.59 6.90 61.88 65.61 50.41 1975 $266.57 $98.02 $3.29 $3.29 $3.01 $2,375 $4.50 $1.00 39-34*4 59-441/2 2414-14*4 $44.67 2.26 1.97 1.88 59-511/2 $2,082 $746 225,149 601,016 17,247,667 17,274,084 20,832,423 2.90 7.76 65.19 66.62 49.23 1974 $436.46 $189.01 $6.43 $6.41 $5.60 $2.37S $4.50 $1.00 40-34 64-42*A 26/2-13Vj $42.4$ Capitalization: P long-term debt . 'Yp0 prefierreda sltoock................................................ % common stock and surplus.................... Sales-=-inventories.................................................. Sales receivables.................................................. % sales to net property........................................ % sales to total assets.......................................... % net income to net worth................................. rid. dividends times earned.............................. Analysis of Operations Sales, less disc., returns, allow., etc...........>. Net sales........................................................................ Other revenue............................................................ Balance........................................................................... Cost of products sold.................,........................ Selling admin. & other exp................................... Depreciation, deplet. & amort.......................... Interest & debt expense........................................ Other deductions.................................................... Income before taxes & extraord. item Taxes on income....................................................... Net income................................................................... [TJAs reported by Company. 35.32 1.98 62.70 5.40 7.29 264.23 117.94 5.82 13.38 % 100.00 97.48 2.52 100.00 81.74 6.56 2.40 1.68 0.03 7.59 2.78 4.81 38.70 2.60 58.70 4.85 7.50 269.99 113.07 14.62 65.59 % 100.00 98.05 1.95 100.00 79.64 6.64 2.46 2.08 0.70 8.48 3.22 5.26 41.98 3.22 54.80 4.20 7.13 261.90 104.45 10.98 39.27 % 100.00 98.44 1.56 100.00 78.67 6.98 2.70 2.37 1.23 8.05 3.95 4.10 42.61 3.87 53.52 3.57 7.87 233.36 95.54 8.67 27.70 % 100.00 98.35 1.65 100.00 80.94 7.56 3.12 2.66 0.37 5.35 1.74 3.61 46.27 4.23 49.50 3.57 7.29 209.92 89.01 8.51 23.63 % 100.00 97.76 2.24 100.00 81.10 7.81 3.36 2.85 0.36 4.52 LOO 3.52 47.18 4.53 48.29 3.05 7.63 170.82 76.19 7.22 18.35 % 100.00 97.01 2.99 100.00 78.61 8.79 4.19 3.55 0.38 4.48 1.02 3.46 LONG TERM DEBT 1. Reynolds Metals Co. first sinking fund 4*/a, aeries C, due 1861: OPEN MORTGAGE--Authorized, series C, $100,000,000; outstanding, series C, Dec. 31, 1980, $8,693,000. Held by insurance compa nies. DATED--June 12, 1958. MATURITY--Dec. 1, 1981. INTEREST--J$cD 1, Manufacturers Han over Trust Co., New York, trustee; T.C. Crane, individual trustee. CALLABLE--As a whole, or in part in lots of $1,000,000, at 106 to Dec. 1, 1961; reduced prices yearly thereafter; however, bonds may not be redeemed prior to June 1, 1969 from borrowings at interest rate or cost of less than 4*4% nor unless series A and B bonds are re deemed in same ratio to outstanding amounts. Also callable at par for sinking fund. SINKING FUND--Annually, cash (or series C bonds) to redeem $335,000 to 1968, incl.; $4,347,000 1969-80 inch $8,693,000 1981 series C bonds at par. SECURITY--Secured by a first mortgage on all property now owned or hereafter acquired, except all bauxite, fluorspar, gas, coal and oil mined or extracted; all real property outside of U.S. and certain other property, as provid ed. Secured also by pledge of capital stock of Reynolds Jamaica Mines Ltd.; Lydford. En terprises, Ltd., Caribbean Steamship Co., S.A., and Reynolds Haitian Mines, etc. (all whollyowned subsidiaries). ADDITIONAL BONDS--May be issued (1) on compliance with consolidated net tangible asset ratio; (2) against property additions; (3) against cash; (4) for refunding purposes. DIVIDEND RESTRICTIONS--Company may not pay cash dividends on common or acquire capital stock (except preferred) (1) in excess of 75% of consolidated net earnings af ter Dec. 31, 1965 plus $25,000,000. (2) unless consolidated net current assets equal at least $140,000,000. At Dec. 31, 1980, $300,000,000 of retained earnings were not so restricted. Dividends cannot be paid on Common stock during any period when the Company is in default on the sinking fund requirements of the 43/*% Series A preferred stock. PURPOSE--Proceeds toward building new aluminum reduction plant in New York State; expand capacity of one or more sheet fabricat ing plants and expand capacity of aluminum plant at Corpus Christi, Tex. 2. Reynolds Metals Co. first 5*/s, series D, due 1987: ^ OPEN MORTGAGE--Authorized, series D, $58,000,000; outstanding, series D, Dec. 31, 1980, $17,500,000. Held privately by 18 insur ance companies. DATED--June 1, 1962. MATURITY--Dec. 1, 1987. INTEREST--JfitD l. Manufacturers Han over Trust Co., New York and T.C. Crane, trustees. CALLABLE--As a whole, or in part id amounts of at least $1,000,000, at 105^8 to Dec* 1, 1963; reduced prices yearly thereafter to 100 after Dec. 1, 1986; however, bonds may not be redeemed prior to June 1, 1975 from funds borrowed at interest rate or cost below 5*4% nor unless series A, B and C bonds are re deemed in same ratio to outstanding amounts. Also callable at par for sinking fund (which see). SINKING FUND--Annually, cash (or senes D bonds) to redeem at par, on each Dec. L' 1968-86, 5% of series D bonds outstanding oh Apr. 1, 1963. SECURITY--ADDITIONAL BONDS-- Same as No. 1 above. DIVIDEND RESTRICTIONS--Same as No. 1 above. MOODY'S INDUSTRIAL MANUAL uu A i Metals Co. first 5%s, ssrlss 6, due mortgage: authorized, series E, _^0p0; outstanding, series E, Dec. 31, [*61,732,000; held privately. * d June 1, 1965; due June 1, 1990; inter- Manufacturers Hanover Trust Co., trustee; individual trustee, T.C. Crane, 'lsble at 105.25 to June 1, 1966; reduced t thereafter to 100 after June 1, 1989; not je, however, prior to June 1, 1975 .gh refunding at an interest cost lower ^51/4% nor unless series A. B, C and D ' \ are redeemed in same ratio to outstandnounts of series E; also callable for sink- ad at par. fing fund, annually cash (or bonds) to . senes E bonds to each June 1, incl., as Vs* 1969-80, $1,064,000; 1981, $3,518,000; $7, $4,895,000; 1988-89, $7,557,000; 1990, Fr30,000. rity, other provisions, same as No. 1 t*Othr Rrst Mortgage Bonds: (1) 1st 5%s, ' F, Authorized, $175,000,000; Outstand- TDec. 31, 1980, $104,000,000 due Tune 1, Sinking fund, annually, $6,500,000 1972- Jid $8,000,000 thereafter. (2) 1st 9V4S, se1 G. Authorized $80,000,000; outstanding 31, 1980, $58,000,000 sinking fund annual2,000,000 in 1975; $4,000,000 1976-1993 and "0,000 in 1994. (3) 1st 5.055s, series AA, aiding Dec. 31, 1980, $41,549,000. (4) 1st series BB, outstanding, Dec. 31, 1980, .397,000. (5) 1st 5.137s, series CC, outstand; Dec. 31, 1980. $32,468,000. (6) 1st 8.85s, H, outstanding, Dec. 31, 1980, 0,000. All sold privately, molds Metals Co. convertible subordinate debenture 4%s, due 1991: Rating--Be i.--$75,000,000; outstg. Dec. 31, 1980, [,TEi>--Mar. 1, 1966. DUE--Mar. 1, 1991. ITEREST--M&S 1 at office of trustee. tUSTEE---Chase Manhattan Bank (N.A.), rc. NOMINATION---Fully registered, $1,000 I authorized multiples thereof. JLABLE--As a whole or in part on at 30 days' notice to each last day Feb., as follows: ............100% 1983 ..............100% 1984..............100*/8 ............100% 1986..............100% 1991..............100 > callable for sinking fund (which see) at FUND--Cash (or debs.) to retire 1 Mar. 1, 1977-90, $3,500,000 debs, outstg., t similar optional payments. /ERTIBLE--Into com. at any time (if on or before redemption date) at $59.14 . No adjustment for interest or divs. Cash I in lieu of fractional shs. Conversion privi- protected against dilution. URITY--Not secured; subordinated to senior debt. "7IDEND RESTRICTION--Co. may not ' cash divs. on or acquire capital stock in as of (1) consolidated net income after . 31, 1965; (2) proceeds from sale of stock r such date; and (3) $35,000,000. "TS ON DEFAULT--Trustee, or 25% s. may declare principal due and pay* (30 days' grace for payment of interest or r fund). NTURE MODIFICATION--Indenmay be modified, except as provided, 1 consent of 66%% of outstg. debs. ^OSE--Proceeds to finance portion of sion program. iD---On New York Stock Exchange. ERED--($75,000,000) at 100 (proceeds to i.98%) on Mar. 16, 1966 thru Dillon, Read , Inc., and Reynolds & Co., NYC, and ates. Debt: Outstg., Dec. 31, 1980, 9*800,000 comprising: v $196,800,000 5%-9% installment pur ge obligations due through 1998. */ 870,700,000 4.7%-l2.1% capital leases I through 2002. ) $42,300,000 5.8%-l0.7% other debt due 2009. JbiWliry Eurodollar Debentures: Out- --r Dec. 31, 1980, $42,400,000 5% siiborguaranteed convertible debentures -1988 of Reynolds Metals European Capiyrp. For complete description, see ap- statement. STOCK ^Reynolds Metals Co. 4%% cumulative pre- A; par$50: "PRIZED--All series, 2,000,000 shares; . _ *ixed, series A, 800,000 shares; outstand- A, Dec. 31, 1980, 70,389 shares; par .ERENCES--Has preference for assets tS^idends. , *jrEND RIGHTS--Entitled to cumulaK|Videtids of $2,375 per share annually, rr*? Quarterly, Feb. 1, etc., to stock of rectftS?utTan. 10, etc. ^END RECORD--Initial dividend of paid May 1. 1956. Regular divipaxdquarterly thereafter, r ?I5Nr) RESTRICTIONS--Company gjdot pay cash dividends on or acquire 1B1 . (except from proceeds of junior ^ in excess of 75% of consolidated net income after Dec. 31, 1954, less dividends paid on preferred and equal or prior stock. Company may not pay cash dividends on or acquire junior stock while any series A pre ferred sinking fund is in default. VOTING RIGHTS--Has no voting power except on default of 4 quarterly dividends or of any sinking fund instalment when pre ferred, voting as a class, is entitled to elect one-fourth of directors and not less than 2. If sinking fund default continues for 60 days, preferred does not vote if clearing default would violate mortgage or loan provisions. Consent of 66%% of preferred required to change adversely terms of perferred (if less than all series affected, then consent of 66%% of series affected is required): sell substantial ly all assets or merge; increase authorized pre ferred; create equal or prior stock or authorize any class of stock convertible into such stock. Consent of majority of series A preferred re quired to issue preferred or equal or prior stock or to issue funded debt (see Additional Preferred, below). LIQUIDATION RIGHTS--In liquidation, entitled to $50 per share, if involuntary and redemption price, if voluntary; plus dividends. CALLABLE--As a whole or in part on at least 30 days' notice at $51 per share plus ac crued dividends. Also callable for sinking fund (which see) at $50 per share plus dividends. SINKING FUND--Annually and cumula tive, beginning Dec. 31, 1961, cash (or shares acquired otherwise than for purchase of sink ing fund), sufficient to redeem by Feb. 15 fol lowing at sinking fund redemption price 32,000 series A shares. RESTRICTIONS ON PREFERRED AC QUISITION: Under bond mortgage and loan agreements, company may not acquire pre ferred (1) unless thereafter 75% of consolidat ed net earnings after Dec. 31, 1954 exceeds sum of cash dividends on capital stock and amount by which total of capital stock acqui sitions plus unliquidated investment in, and net cost of company indebtedness and stock acquired by, certain non-wholly owned sub sidiaries, exceeds net proceeds of stock sold and (2) if consolidated net current assets would be less than $85,000,000. PREEMPTIVE RIGHTS--None. ADDITIONAL PREFERRED--Or any equal or prior stock may not be issued or any long term debt issued, unless either (a) for 12 out of 16 months preceding consolidated net income plus 12 months' interest on consolidat ed long term debt are at least 2% times sum of annual interest requirements on consolidated long term debt plus annual dividend require ments on all preferred, or (b) sum of consoli dated long term debt and prescribed value (greater of par or stated value, or involuntary liquidation price, excluding dividends) of all preferred, is not worth more than twice con solidated net worth, less aggregate of above prescribed value. Above provisions do not apply to issuance of debt for refunding long term debt or to issu ance of preferred for refunding stock of such classes. PURPOSE--Proceeds used toward construc tion of new properties. TRANSFER AND DIVIDEND DISBURS ING AGENT--Chase Manhattan Bank, New York. REGISTRAR--Morgan Guaranty Trust Co., New York. OFFERED--(800,000 shares) at $50 per share (proceeds to company $48.20 per snare) on Feb. 1, 1956 by Dillon, Read 8c Co. and Reyn olds 8t Co., New York, and associates. LISTED--On NYSE (Symbol: RLM Pr. A). 2. Reynolds Metals Co. 4%% convertible sec ond preferred;par $100: AUTHORIZED--Ail series, l ,000,000 shares; outstanding, this series, Dec. 31, 1980, 412,620 shares;_par $100. PREFERENCES--Has second preference for assets and dividends. DIVIDEND RIGHTS--Entitled to cumula tive dividends of $4.50 per share annually, payable quarterly, Feb. 1, etc, DIVIDEND RECORD--Initial dividend of 87% cents paid May 1, 1959; regular dividends paid quarterly thereafter. DIVIDEND RESTRICTION--Company may not pay cash dividends on or acquire junior stock in excess of consolidated net in come after Dec. 31, 1957. Junior shares may be acquired for not exceeding proceeds of junior stock sold after Dec. 31, 1957. VOTING RIGHTS--Has no voting power except on default of 4 quarterly dividends or any sinking fund payment, when, as a class, it has right to elect 2 directors. Consent of 66%% of second preferred re quired to increase authorized preferred or cre ate senior stock; change terms adversely or merge if rights would oe affected adversely. Consent of majority of second preferred re quired to increase authorized second preferred or create parity stock. Company may not merge or alter articles providing for issue of series second preferred adversely affecting rights of any series with out consent of 66%% of series affected, LIQUIDATION RIGHTS--In liquidation, entitled to SI00 a share if involuntary and re demption price if voluntary; plus dividends. CALLABLE--As a whole or in part at any time on at least 30 days' notice at $100 per share plus accrued dividends. CONVERTIBLE--Into common (if called, on or before 3rd full business day before re-*demption date) at $48.16 per share, with no adjustment for dividends; scrip or cash paM in lieu of fractional shares. Conversion privilege protected against dilution; however, no ad justment in conversion price is required on is sue or sale at less than conversion price of (a) treasury shares; (b) common shares on op tions to officers or employees or under any sale plan; (c) until accumulated change in con version price would be 50 cents or more. PREEMPTIVE RIGHTS--None. PURPOSE--Proceeds to reimburse treasury for acquisition of British Aluminum Co. Ltd. ordinary stock. TRANSFER AND DIVIDEND DISBURS ING AGENT--Chase Manhattan Bank, New York. REGISTRAR--Morgan Guaranty Trust Co., New York. OFFERED--(550,000 shares) at $100 per share (proceeds to company, $97.25 per share) on Feb. 11, 1959 by Dillon, Read & Co., Inc., Reynolds & Co., Inc. and Kuhn, Loeb 8t Co., New York, and associates. LISTED--On NYSE (Symbol: RLM Pr B). 3. Reynolds Metals Co. common; no pan AUTHORIZED--50,000,000 shares; outstand ing, Dec. 31, 1980, 19,167,666 shares; reserved for conversion of second preferred, 856,769 shares; reserved for conversion of debentures, 1,920,459 shares; no par. Par changed from no par to $1 Sept. 15, 1955 by 5-for-l split; from SI to no par Oct 13, 1959, by 3-for-2 split. .Original capital stock represented by class A* and B no par common shares was converted in October 1929 into one class of common stock (no par) and class A received in ex change IV4 shares of common for each share held while the class B common was exchanged on a share for share basis. Dividend Record (In $) (No par class A shares) 1928 ...............1.00 1929 ................3.41 (No par class B shares) 1928-29 ..........Nil (No par common shares) 1929 ..........0.35% 1930 ................. 2.20 1931 ................1.75 1932 ..........1.25 01933-36 ... 1.00 1937 ...............1.00 1938 ..........0.15 1939 ..................Nil 1940 ............... 0.30 1941..........Nil 1942 ................0.50 1943-44...........0.75 1945 ..........1.00 1946 ................0.75 01947..............1.00 01948------1.35 1949 ...............1.10 01950...............1.20 19S1 ..........1.10 {TJ1952-53 ... 1.00 019S4..............1.50 J)19SS....U62V2 ($1 par common shares) 1955 ..........0.12% 01956-58.. .0.65 1959 ...........0.52% (On no par shares after 3-for-2 split) 1959.........0.12% 1960-64 .. .0.50 1965 ..........0.73% 1966 ..........0.78% 1967-68...0.90 1969 ..........0.95 1970 ..........1.10 1971 ............0.85 1972 ..........0.45 1973 ..........0.40 1974-75... 1.00 1976 ..........1.10 1977 ..........X.35 1978 ............1.57% 1979 ...........2.00 1980 ..........2.25 019811.20 0Plus 25% stock in 1934 and $1 per share in 15- year debenture 3%s, 1951 paid in 1936. 0Stock dividends paid: 1947, 1948, 1950 and 1952, 10%; 1953, 1954 and 1955, 5%; 1958, 2%. 0ToTuly t. DIVIDEND REINVESTMENT PLAN-- Co. offers its holders of common stock the op portunity to buy additional shares of common stock through its Automatic Dividend Rein vestment and Optional Cash Payment Plan administered by United Virginia Bank, Rich mond, Va. Participating share-owners may in vest each quarter from $25.00 to $3,000, in ad dition to their dividend, at their option. Under the Plan, full dividend and any op tional cash payment of participating snare- owners is automatically applied to purchase of shares priced at average market value on each quarterly dividend payment date. There are no brokers* commissions or any service charges connected with stock purchas es for shareholders. All costs are paid by Com pany. DIVIDEND LIMITATION--See Long Term Debt (No. 1), above. VOTING RIGHTS--Has sole voting rights (one vote per share) with restrictions (see Pre ferred No. 1). PREEMPTIVE RIGHTS--None. TRANSFER AGENTS--Chase Manhattan Bank, New York, and United Virginia Bank, Richmond, Va. DIVIDEND DISBURSING AGENT--Chase Manhattan Bank, New York. REGISTRARS--Morgan Guaranty Trust Co., New York and First 8c Merchants Na tional Bank, Richmond, Va. OFFERED--On July 6, 1937, the unsub scribed portion of shares originally offered to stockholders was offered publicly at $17 per share by Lehman Bros, and Reynolds 8c Co., New York. (1,500,000 no par shs.) at $38.50 per sh. on June 29, 1977 thru Dillon, Read 8c Co,, Inc., Goldman Sachs 8c Co., Reynolds Securities, Inc. and associates. Proceeds for general cor porate purposes. LISTED--On NYSE (Symbol: RLM); unlist: ed trading on Pacific, Philadelphia, Cincinnati and Midwest Stock Exchanges. 3314 MOODY'S INDUSTRIAL MANUAL REYNOLDS METALS EUROPEAN CAPITAL CORPORATION (Controlled by Reynolds Metals Co.) r History: Incorporated in Delaware in 1966 as Ltd. in London and Banque Internationale a a wholly-owned subsidiary of Reynolds Met Luxembourg S.A. in Luxembourg. Payments als Co. (see preceding statement). referred to in (b) above will be made by a U.S. Business: Co. was formed for the principal dollar check drawn on a bank in NYC or by purpose of assisting in the financing of parent transfer to a U.S. dollar account maintained Co/s foreign operations. by payee with a bank in NYC. Control: Reynolds outstg. com. stock. Metals Co. owns all TRUSTEE--Chemical Bank, New York. DENOMINATION--Bearer coupon, 81,000. CALLABLE--As a whole or in part on at Officers least 30 days' notice on or after June 1, 1971 to D.P. Reynolds, Chinn. each May 31, incl., as follows: J.E. Blomqiiist, Pres. 1961 .............100y2 1988...................100 J.H. Galea, Vice-Pres. & Gen. Counsel Debs, may not be so redeemed, however, A.D. Reynolds, III, Vice-Pres. prior to June 1, 1973 unless current market J.T. Hudson, Jr., Vice-Pres. (Fin.) price for com. stock of Guarantor on each day D.C. Bilsing, Contr. on which there was such a current market R.I. Dawes, Sec. price within the 30 days preceding the 15th J.H. Taylor, Treas. day prior to redemption notice is at least Directors 150% of the conversion price in effect on each J.T. Hudson, Jr. F.R. Edney such day. D.P. Reynolds J.E. Blomquist If, at any time, Co. or Guarantor shall be _ J.L. Reynolds W.S.Leonhacrodmt e obligated to pay additional interest as J.H. Galea described under heading "Taxes on Principal, Auditors: Ernst & Whinney. Executive Office: 6601 Broad St. Road, Rich mond, VA 23261. TeL: (804)281-2000. Premium or Interest" as a result of any change in, or amendment to, laws of the U.S. or any subdivision thereof affecting taxation, or any change in the official application of, or Long Term Debt Reynolds Metals European execution of, or amendment to, any treaty or Capital Corp. subordinated guaranteed convert treaties affecting taxation to which the U.S. is ible debentures 5a, due 1988: a party, which change, amendment, change in AUTH.--850,000,000; outstg., Dec. 31, 1980, the application of or execution becomes effec 842,400,000. tive on or after June 1, 1968, debs, may be DATED--June 1, 1968. DUE--June 1, 1988. redeemed as a whole on at least 30 daysT no INTEREST--J&Dl. Principal and interest tice to each May 31, incl., as follows: payable in U.S. dollars (a) at corporate trust 1981 ............100% 1988...................100 office of Chemical Bank in NYC or (b) subject Also callable for sinking fund (which see) at Eto applicable laws in country of following of fices, at offices of Chemical Bank New York ar. INKING FUND--Annually, each June 1, Trust Co. in London, S.G. Warburg & Co. 1979-87, to retire debs., cash (or debs.), equal to 5% of debs, outstg. Mar. 1, 1979; plus i lar optional payments. SECURITY--Direct obligation of issuer. GUARANTEED--Unconditionally as principal, premium and interest by ReyuMetals Co. Payment of guarantee subord ed to certain senior debt of Guarantor. CONVERTIBLE--Into com. of parent at time on or after Mar. 31, 1969 (if called, on before redemption date) at 844.76 a sh. N0 justment for interest on divs. Cash paid in 1 of fractional shs. Conversion privilege pro' ed against dilution. TAXES ON PRINCIPAL, PREMIUM INTEREST--Co vill pay as additional in est such amounts as may be necessary to imburse non-resident alien holders for present or future U.S. withholding tax. RIGHTS ON DEFAULT--Trustee, or 2" of debs, outstg. may declare principal due payable (30 days' grace for payment of in est). INDENTURE MODIFICATION--In ture may be modified, except as provi with consent of 66%% of debs, outstg. LISTED--On New York and Luxembo Stock Exchanges. PURPOSE--Proceeds for parent Co.'s fore~ operations. OFFERED--(850,000,000) at 100 on June 1968 thru Dillon, Read & Co., Inc., S.G. W burg & Co. Ltd. and Reynolds & Co. and ciates. Capital Stock: Reynolds Metals European tal Corp.; common; 81 pan Auth., 100,000 shs.; outstg., 1,000 shs. owned by parent co.; par 81.