<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File Number 0-22572
OM GROUP, INC.
(exact name of registrant as specified in its charter)
Delaware 52-1736882
(state or other jurisdiction of (I.R.S., Employer
incorporation or organization) Identification Number)
Tower City
3800 Terminal Tower
Cleveland, Ohio 44113-2204
(Address of principal executive offices)
(zip code)
(216) 781-0083
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes __/X/__ No _______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of March 31, 1996: Common Stock, $.01 Par
Value -- 12,424,708 shares.
<PAGE>
INDEX
OM GROUP, INC.
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets -- March 31, 1996 and
December 31, 1995
Condensed consolidated statements of income -- Three months
ended March 31, 1996 and 1995
Condensed consolidated statements of cash flows -- Three months
ended March 31, 1996 and 1995
Notes to condensed consolidated financial statements - March
31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 1. Legal Proceedings - Not applicable
Item 2. Changes in Securities - Not applicable
Item 3. Defaults upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not
applicable
Item 5. Other information - Not applicable
Item 6. Exhibits and Reports on Form 8-K
(11) Statement regarding computation of earnings per share
(15) Independent Accountants' Review Report
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
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<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
March 31,
1996 December 31,
(Unaudited) 1995
----------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,630 $ 9,098
Accounts receivable 69,664 71,959
Inventories 151,801 139,067
Other current assets 14,495 13,817
-------- --------
Total Current Assets 243,590 233,941
PROPERTY, PLANT AND EQUIPMENT
Land 321 331
Buildings and improvements 33,628 33,607
Machinery and equipment 107,881 102,576
Furniture and fixtures 3,952 3,427
-------- --------
145,782 139,941
Less accumulated depreciation 46,540 42,661
-------- --------
99,242 97,280
OTHER ASSETS
Goodwill and other intangible assets 23,530 23,842
Other assets 3,182 2,979
________ ________
TOTAL ASSETS $369,544 $358,042
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 4,617 $ 5,263
Accounts payable 68,165 61,917
Other accrued expenses 12,755 19,766
-------- --------
Total Current Liabilities 85,537 86,946
LONG TERM LIABILITIES
Long-term debt 96,442 89,845
Deferred income taxes 19,129 18,597
Other long-term liabilities 1,302 1,226
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value:
Authorized 2,000,000 shares;
no shares issued or outstanding
Common stock, $0.01 par value:
Authorized 30,000,000 shares;
issued 12,506,250 shares 125 125
Capital in excess of par value 102,088 102,088
Retained earnings 67,547 61,763
Treasury stock (81,542 shares at March
31, 1996 and 86,112 shares at
December 31, 1995, at cost) (2,458) (2,512)
Foreign currency translation adjustments (168) (36)
-------- --------
Total Stockholders' Equity 167,134 161,428
________ ________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $369,544 $358,042
======== ========
See notes to condensed Consolidated Financial Statements
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<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars, except per share data)
(Unaudited)
Three Months Ended
March 31,
---------------------
1996 1995
-------- --------
OPERATIONS
Net sales $102,853 $ 89,429
Cost of products sold 82,642 71,882
-------- --------
20,211 17,547
Selling, general and administrative expenses 7,953 7,329
-------- --------
INCOME FROM OPERATIONS 12,258 10,218
OTHER INCOME (EXPENSE)
Interest expense (1,894) (920)
Interest income 34 67
Foreign exchange gain (loss) 170 (272)
-------- --------
(1,690) (1,125)
-------- --------
INCOME BEFORE INCOME TAXES 10,568 9,093
Income taxes 3,417 3,003
________ ________
NET INCOME $ 7,151 $ 6,090
======== ========
Net income per share $0.56 $0.48
Dividends paid per common share $0.11 $0.09
Weighted average shares (000) 12,821 12,732
See notes to condensed Consolidated Financial Statements
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<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Three Months Ended
March 31,
---------------------
1996 1995
-------- --------
OPERATING ACTIVITIES
Net income $7,151 $6,090
Items not affecting cash:
Depreciation and amortization 4,356 3,151
Foreign exchange (gain) loss (170) 272
Deferred income taxes 532 1,480
Changes in operating assets and liabilities (11,837) (8,070)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 32 2,923
INVESTING ACTIVITIES
Expenditures for property, plant
and equipment, net (6,053) (6,951)
Acquisition of business (5,013)
______ ______
NET CASH USED IN INVESTING ACTIVITIES (6,053) (11,964)
FINANCING ACTIVITIES
Dividend payments (1,367) (1,120)
Long-term borrowings 10,107 7,400
Payments of long-term debt (4,000)
Issuance (purchase) of treasury stock 54 (696)
______ ______
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,794 5,584
Effect of exchange rate changes on cash (241) 41
______ ______
Decrease in cash (1,468) (3,416)
Cash and cash equivalents at beginning of period 9,098 8,592
_______ ______
Cash and cash equivalents at end of period $ 7,630 $5,176
======= ======
See notes to condensed Consolidated Financial Statements
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<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1996
Note A Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair financial presentation have been included. For
further information refer to the consolidated financial
statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1995.
Note B Inventories
Inventories consist of the following:
March 31, December 31,
1996 1995
-------- --------
Raw materials and supplies $111,148 $ 99,853
Finished goods 75,254 74,715
-------- --------
186,402 174,568
LIFO reserve (34,601) (35,501)
-------- --------
Total inventories $151,801 $139,067
======== ========
Note C Contingent Matters
The Company is a party to various legal proceedings incidental
to its business and is subject to a variety of environmental and
pollution control laws and regulations in the jurisdictions in
which it operates. As is the case with other companies in
similar industries, the Company faces exposure from actual or
potential claims and legal proceedings involving environmental
matters. Although it is very difficult to quantify the
potential impact of compliance with or liability under
environmental protection laws, management believes that the
ultimate aggregate cost to the Company of environmental
remediation, as well as other legal proceedings arising out of
operations in the normal course of business, will not result in
a material adverse effect upon its financial condition or
results of operations.
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<PAGE>
Part I Financial Information
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995
Net sales for the three months ended March 31, 1996 were $102.9
million, an increase of 15.0% compared to the same period for 1995.
The increase in sales resulted principally from changes in
product mix, which resulted in higher physical volume of cobalt
based products sold.
Cobalt market prices ranged from $28 to $32 per pound during the
three month period ended March 31, 1996 compared to a range of
$27 to $30 per pound during the same period in 1995. The market
price of nickel ranged from $3.43 to $3.78 per pound during the
three months ended March 31, 1996 compared to $3.37 to $4.57 per
pound during the same period in 1995.
Pounds of product sold by the Company were approximately 23.5
million pounds in the three month period ended March 31, 1996
compared to 24.3 million pounds in the same period in 1995. The
following table sets forth the pounds of carboxylates, salts and
powders sold during each period:
Three Months Ended March 31, Percentage
(in millions of pounds) 1996 1995 Change
---- ---- -------
Carboxylates 10.0 10.5 (4.8)%
Salts 12.8 13.4 (4.5)%
Powders 0.7 0.4 75.0 %
---- ---- ------
23.5 24.3 (3.3)%
==== ====
The decrease in physical volume of carboxylate products sold
resulted principally from quarter-to-quarter fluctuations in
demand for certain product lines in the United States. The
decrease in physical volume of salts sold resulted from lower
sales of lower margin nickel sulfate salts, offsetting higher
sales of cobalt salts. The increase in physical volumes of
powders sold was the result of higher sales of coarse grade
cobalt powder.
Gross profit increased to $20.2 million for the three month
period ended March 31, 1996, a 15.2% increase over the same
period in 1995. The improvement in gross profit was primarily
the result of higher physical volume of cobalt based products
sold. Cost of products sold remained approximately the same at
80% of net sales for the three months ended March 31, 1996
compared to the same period of 1995.
-6-
<PAGE>
Selling, general and administrative expenses decreased to 7.7%
of net sales for the first three months of 1996 compared to 8.2%
of net sales in the same period in 1995.
Other expense in 1996 was $1.7 million compared to $1.1 million
in 1995, due primarily to increased interest expense on higher
outstanding borrowings.
Income taxes as a percentage of income before tax remained
approximately the same at 33% for the first three months of 1996
compared to the same period in 1995.
Net income for the three month period ended March 31, 1996 was
$7.2 million, an increase of $1.1 million from the same period
in 1995, due to the aforementioned factors.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1996, the Company's
working capital needs increased primarily as a result of higher
net sales. In addition, the Company paid for the transportation
costs associated with certain cobalt slag shipments. As a result
of higher net sales, principal payments on prior business
acquisitions and transportation cost payments, cash balances
declined and the Company increased net borrowings by $6.0 million.
The Company believes that it will have sufficient cash generated
by operations and through its credit facilities to provide for
its future working capital and capital expenditure requirements
and to pay quarterly dividends on its common stock, subject to
the Board's discretion. Subject to several limitations in its
credit facilities, the Company may incur additional borrowings
to finance working capital and certain capital expenditures,
including, without limitation, the purchase of additional raw
materials.
-7-
<PAGE>
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
The following exhibits are included herein:
Exhibit(11) Statement Regarding Computation of Earnings Per Share
Exhibit(15) Independent Accountants' Review Report
Exhibit(15) Letter re: Unaudited Interim Financial Information
Exhibit(27) Financial Data Schedule
There were no reports on Form 8-K filed during the three months
ended March 31, 1996.
-8-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 9, 1996 OM GROUP, INC.
/s/ James M. Materna
--------------------------
James M. Materna
Chief Financial Officer
(Duly authorized signatory
of OM Group, Inc.)
-9-
<PAGE>
Exhibit 11
OM GROUP, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
March 31,
-----------------------
1996 1995
---------- ----------
Issued at March 31 12,506,250 12,506,250
Net effect of repurchased treasury
shares and dilutive stock options
based on the treasury stock method 314,851 225,521
__________ __________
Totals 12,821,101 12,731,771
========== ==========
Net income (000) $7,151 $6,090
====== ======
Per share amount $0.56 $0.48
====== ======
-10-
<PAGE>
Independent Accountants' Review Report
Stockholders and Board of Directors
OM Group, Inc.
We have reviewed the accompanying condensed consolidated balance sheet
of OM Group, Inc. as of March 31, 1996, and the related condensed
consolidated statements of income and cash flows for the three-month
periods ended March 31, 1996 and 1995. These financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, which will be performed for the full year
with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated financial
statements referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of OM Group, Inc. as of December
31, 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for the year then ended, not presented herein, and in
our report dated January 30, 1996, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
31, 1995, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
May 9, 1996
<PAGE>
Acknowledgment of Independent Accountants
Stockholders and Board of Directors
OM Group, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-74674) of OM Group, Inc. for the registration of 1,015,625
shares of its common stock of our report dated May 9, 1996, relating to the
unaudited condensed consolidated interim financial statements of OM Group,
Inc. which are included in its Form 10-Q for the quarter ended March 31, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
May 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the OM Group, Inc. Consolidated Balance Sheets at March 31, 1996
(Unaudited) and the OM Group, Inc. Consolidated Statements of Income
for the three months ended March 31, 1996 (Unaudited) and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,630
<SECURITIES> 0
<RECEIVABLES> 69,664
<ALLOWANCES> 0
<INVENTORY> 151,801
<CURRENT-ASSETS> 243,590
<PP&E> 145,782
<DEPRECIATION> 46,540
<TOTAL-ASSETS> 369,544
<CURRENT-LIABILITIES> 85,537
<BONDS> 0
0
0
<COMMON> 125
<OTHER-SE> 167,009
<TOTAL-LIABILITY-AND-EQUITY> 369,544
<SALES> 102,853
<TOTAL-REVENUES> 102,853
<CGS> 82,642
<TOTAL-COSTS> 82,642
<OTHER-EXPENSES> 7,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,894
<INCOME-PRETAX> 10,568
<INCOME-TAX> 3,417
<INCOME-CONTINUING> 7,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,151
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
