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 June 30, 1998
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
50 Public Square
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 June 30, 1998: Common Stock, $.01 Par Value - 22,077,783
shares.
<PAGE>
INDEX
OM GROUP, INC.
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets -- June 30, 1998 and December
31, 1997
Condensed consolidated statements of income -- Three months ended
June 30, 1998 and 1997; Six months ended June 30, 1998 and 1997
Condensed consolidated statements of cash flows -- Six months ended
June 30, 1998 and 1997
Notes to condensed consolidated financial statements -- June 30,
1998
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
Item 5. Other information - Not applicable
Item 6. Exhibits and Reports on Form 8-K
(15) Independent Accountants' Review Report
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
Page 1
<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
June 30, December 31,
1998 1997
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,742 $ 13,193
Accounts receivable 96,065 80,602
Inventories 224,948 219,201
Other current assets 16,297 11,753
-------- --------
Total Current Assets 344,052 324,749
PROPERTY, PLANT AND EQUIPMENT
Land 3,930 2,867
Buildings and improvements 70,517 49,939
Machinery and equipment 199,581 162,938
Furniture and fixtures 10,694 8,615
-------- --------
284,722 224,359
Less accumulated depreciation 84,149 74,112
-------- --------
200,573 150,247
OTHER ASSETS
Goodwill and other intangible assets 181,687 116,751
Other assets 11,786 9,316
-------- --------
TOTAL ASSETS $738,098 $601,063
======== ========
Page 2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 157 $ 219
Accounts payable 61,590 67,521
Other accrued expenses 21,487 32,942
-------- --------
Total Current Liabilities 83,234 100,682
LONG-TERM LIABILITIES
Long-term debt 309,248 170,334
Deferred income taxes 21,093 20,555
Other long-term liabilities 6,564 8,251
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 22,209,346 shares 222 222
Capital in excess of par value 189,281 189,281
Retained earnings 134,499 117,465
Treasury stock (131,563 shares in 1998
and 142,720 shares in 1997, at cost) (5,004) (4,829)
Foreign currency translation adjustments (1,039) (898)
-------- --------
Total Stockholders' Equity 317,959 301,241
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $738,098 $601,063
======== ========
See notes to condensed Consolidated Financial Statements
Page 3
<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 Six Months Ended
June 30, June 30,
-------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- ---------
OPERATIONS
Net sales $139,154 $124,334 $277,252 $234,389
Cost of products sold 103,245 94,851 206,713 178,328
------- ------- ------- -------
35,909 29,483 70,539 56,061
Selling, general and
administrative expenses 14,259 11,614 28,356 22,496
------- ------- ------- -------
INCOME FROM OPERATIONS 21,650 17,869 42,183 33,565
OTHER INCOME (EXPENSE)
Interest expense (4,380) (3,488) (8,359) (7,154)
Interest income 72 41 180 62
Foreign exchange (loss) gain (60) 65 118 350
------- ------- ------- -------
(4,368) (3,382) (8,061) (6,742)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 17,282 14,487 34,122 26,823
Income taxes 5,746 4,908 11,417 9,028
------- ------- ------- -------
NET INCOME $11,536 $ 9,579 $22,705 $17,795
======= ======= ======= =======
Net income per common share $0.52 $0.46 $1.03 $0.90
Net income per common share -
assuming dilution $0.51 $0.44 $1.00 $0.87
Dividends paid per common share $0.09 $0.08 $0.18 $0.16
See notes to condensed Consolidated Financial Statements
Page 4
<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Six Months Ended
June 30,
-------------------
1998 1997
-------- --------
OPERATING ACTIVITIES
Net income $22,705 $17,795
Items not affecting cash:
Depreciation and amortization 12,710 10,365
Foreign exchange gain (118) (350)
Deferred income taxes 4,042 3,346
Changes in operating assets and liabilities (31,063) (38,708)
------- -------
NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES 8,276 (7,552)
INVESTING ACTIVITIES
Expenditures for property, plant and equipment, net (40,618) (17,602)
Acquisition of businesses (106,543) (124,547)
------- ---------
NET CASH USED IN INVESTING ACTIVITIES (147,161) (142,149)
FINANCING ACTIVITIES
Dividend payments (3,973) (3,256)
Long-term borrowings 139,000 156,095
Payments of long-term debt (86) (88,400)
Purchase of treasury stock (2,415) (798)
Proceeds from exercise of stock options 542 64
Sale of common stock 87,239
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 133,068 150,944
Effect of exchange rate changes on cash (634) (144)
------- -------
(Decrease) increase in cash (6,451) 1,099
Cash and cash equivalents at beginning of period 13,193 7,818
------- -------
Cash and cash equivalents at end of period $ 6,742 $ 8,917
======= =======
See notes to condensed Consolidated Financial Statements
Page 5
<PAGE>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1998
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. Past operating results are not
necessarily indicative of the results which may occur in future
periods. 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, 1997.
In June, 1997, SFAS No. 130, "Reporting Comprehensive Income", was
issued. SFAS No. 130 establishes new standards for reporting
comprehensive income and its components. The Company adopted SFAS
No. 130 in the first quarter of fiscal year 1998. The Company's
comprehensive income for the six months ended June 30, 1998, which
includes net income of $22,705 and foreign currency translation
losses of $141, did not differ materially from net income.
In June, 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", was issued. SFAS No. 131
changes the standards for reporting financial results by operating
segments and related products and services, geographic areas, and
major customers. The Company must adopt SFAS No. 131 no later than
year-end 1998; adoption of this statement is not expected to have a
material impact on the Company.
In June, 1998, SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities" was issued. SFAS No. 133 provides a
comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. The Company must
adopt SFAS No. 133 no later than the first quarter of fiscal year
2000; adoption of this statement is not expected to have a material
effect on earnings or the financial position of the Company.
Page 6
<PAGE>
Part I Financial Information
Item 1 Financial Statements
Note B Inventories
Inventories consist of the following (in thousands):
June 30, December 31,
1998 1997
-------- --------
Raw materials and supplies $104,808 $110,477
Finished goods 113,618 107,989
-------- --------
218,426 218,466
LIFO reserve 6,522 735
-------- --------
Total inventories $224,948 $219,201
======== ========
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.
Note D Acquisitions
The Company acquired Auric Corporation (Fidelity) and Dussek Campbell
Limited (Dussek) in January and February, 1998, respectively, for an
aggregate amount of approximately $94 million. These acquisitions,
which had combined fiscal 1997 sales aggregating approximately $60
million, have been recorded using the purchase method of accounting.
Accordingly, the Company's results of operations reflect the impact
of Fidelity and Dussek from their respective dates of acquisition.
In April, 1998, the Company acquired the carbothermal reduction
technology and assets of Dow Chemical Company for approximately $12.5
million, plus a conditional amount up to $20 million based upon the
achievement of certain performance targets, which would be paid at
the end of five years. This acquisition will complement the
Page 7
<PAGE>
Part I Financial Information
Item 1 Financial Statements
Company's present tungsten recycling capability, allow it to better
serve its existing customer base in the hard metal tool industry, and
provide for the possibility of expanding this technology to other
metal powders and product applications.
The acquisitions were initially financed through bank borrowings. In
July, 1998, the Company sold 1,750,000 shares of common stock in a
public offering; the net proceeds of $68.7 million were used to pay
down a portion of the debt incurred in the aforementioned
acquisitions. Had these shares been issued at the dates of
acquisition, net income per common share assuming dilution for the
three and six months ended June 30, 1998 would have been $.50 and
$.99 per share, respectively.
Note E Computation of Earnings per Share
The following table sets forth the computation of net income per
common share and net income per common share - assuming dilution (in
thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1998 1997 1998 1997
------- ------ ------- -------
Net income $11,536 $9,579 $22,705 $17,795
Weighted average number
of shares outstanding 22,078 20,921 22,071 19,774
Dilutive effect of stock
options 716 708 736 704
------- ------ ------- -------
Weighted average number of
shares outstanding -
assuming dilution 22,794 21,629 22,807 20,478
======= ====== ====== ======
Net income per common share $.52 $.46 $1.03 $.90
==== ==== ===== ====
Net income per common share -
assuming dilution $.51 $.44 $1.00 $.87
==== ==== ===== ====
Page 8
<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 June 30, 1998 Compared to Three Months Ended June
30, 1997
Net sales for the three months ended June 30, 1998 were $139.2
million, an increase of 11.9% compared to the same period for 1997.
The increase in sales resulted principally from an increase in
physical volume of cobalt based products sold and the acquisition of
Fidelity, which offset a decline in the Company's product prices
resulting principally from lower nickel and copper market prices.
Cobalt 99.3% grade market prices ranged from $20 to $21 per pound
during the three month period ended June 30, 1998 compared to a range
of $19 to $22 per pound during the same period in 1997. The market
price of nickel ranged from $1.99 to $2.48 per pound during the three
months ended June 30, 1998 compared to $3.18 to $3.48 per pound
during the same period in 1997. The market price of copper ranged
from $0.74 to $0.85 per pound during the three months ended June 30,
1998 compared to $1.07 to $1.20 per pound during the same period in
1997.
Pounds of product sold by the Company were approximately 49.2 million
pounds in the three month period ended June 30, 1998 compared to 38.3
million pounds in the same period in 1997. The following table sets
forth the pounds of carboxylates, salts and powders sold during each
period:
Three Months Ended June 30, Percentage
(in millions of pounds) 1998 1997 Change
---- ---- ------
Carboxylates 16.3 13.1 24.4%
Salts 22.4 15.3 46.4%
Powders 10.5 9.9 6.1%
---- ---- -----
49.2 38.3 28.5%
==== ==== =====
The increase in physical volume of carboxylate products sold reflects
1.6 million pounds of product sold as a result of the Dussek
acquisition and increased sales of carboxylates in Europe. The
increase in physical volume of salt products sold reflects an
increase of 8.6 million pounds as a result of the Fidelity
acquisition and a decrease of 2.1 million pounds as a result of
continuing deemphasis of lower margin nickel sulfate products. The
increase in physical volume of powder products sold reflects
increases in fine and coarse grade cobalt powders, as well as copper
powders.
Page 9
<PAGE>
Part I Financial Information
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Gross profit increased to $35.9 million for the three month period
ended June 30, 1998, a 21.8% increase over the same period in 1997.
The improvement in gross profit was primarily the result of the
acquisitions of Fidelity and Dussek and higher physical volumes of
cobalt based product sold. Cost of products sold decreased to 74.2%
of net sales for the three months ended June 30, 1998 compared to
76.3% of net sales during the same period of 1997, primarily because
of improved product mix and lower nickel and copper market prices.
Selling, general and administrative expenses increased to 10.2% of
net sales for the second quarter of 1998 compared to 9.3% of net
sales in the same period in 1997, due to the acquisition of Fidelity
and its relatively higher selling, administrative, and research
expenses per dollar of sales and to the decline in net sales
resulting from lower nickel and copper prices.
Other expense in 1998 was $4.4 million compared to $3.4 million in
1997, due primarily to increased interest expense on higher
outstanding borrowings, primarily as a result of the acquisition of
Fidelity.
Income taxes as a percentage of income before tax decreased to 33.2%
for the second quarter of 1998 from 33.9% in the same period in 1997.
As a result of the Fidelity acquisition, a percentage of 1998 pretax
income was earned in Malaysia, which granted the Company a pioneer
status tax incentive, resulting in a lower effective tax rate than in
the prior year.
Net income for the three month period ended June 30, 1998 was $11.5
million, an increase of $2.0 million from the same period in 1997,
due to the aforementioned factors.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30,
1997
Net sales for the six months ended June 30, 1998 were $277.3 million,
an increase of 18.3% compared to the same period for 1997. The
increase in sales resulted principally from an increase in physical
volume of products sold and the acquisition of Fidelity, which offset
a decline in the Company's product prices resulting from lower
nickel, copper, and cobalt market prices.
Cobalt 99.3% grade market prices ranged from $18 to $21 per pound
during the six month period ended June 30, 1998 compared to a range
of $19 to $22 per pound during the same period in 1997. The market
price of nickel ranged from $1.99 to $2.69 per pound during the six
months ended June 30, 1998 compared to $2.88 to $3.66 per pound
Page 10
<PAGE>
Part I Financial Information
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
during the same period in 1997. The market price of copper ranged
from $0.74 to $0.85 per pound during the six months ended June 30,
1998 compared to $1.05 to $1.80 per pound during the same period in
1997.
Pounds of product sold by the Company were approximately 96.2 million
pounds in the six month period ended June 30, 1998 compared to 72.7
million pounds in the same period in 1997. The following table sets
forth the pounds of carboxylates, salts and powders sold during each
period:
Six Months Ended June 30, Percentage
(in millions of pounds) 1998 1997 Change
---- ---- ------
Carboxylates 30.7 24.7 24.3%
Salts 44.2 30.2 46.4%
Powders 21.3 17.8 19.7%
---- ---- ----
96.2 72.7 32.3%
==== ==== ====
The increase in physical volume of carboxylate products reflects 2.8
million pounds of product sold as a result of the Dussek acquisition
and increased sales of carboxylates in Europe. The increase in
physical volume of salt products sold reflects an increase of 14.1
million pounds of nickel salt products sold as a result of the
Fidelity acquisition and a decrease of 3.3 million pounds as a result
of continuing deemphasis of lower margin nickel sulfate products.
The increase in physical volume of powder products sold reflects 2.2
million pounds of copper powder products sold as a result of the
acquisition of SCM Metal Products, Inc., which occurred at the end
of January, 1997, and for which in 1998 there were six months of
sales.
Gross profit increased to $70.5 million for the six month period
ended June 30, 1998, a 25.8% increase over the same period in 1997.
The improvement in gross profit was primarily the result of the
acquisitions of Fidelity and Dussek and higher physical volumes of
product sold. Cost of products sold decreased to 74.6% of net sales
for the six months ended June 30, 1998 compared to 76.1% during the
same period of 1997, primarily because of improved product mix and
lower nickel, copper, and cobalt market prices.
Selling, general and administrative expenses increased to 10.2% of
net sales for the first six months of 1998 from 9.6% of net sales for
the same period in 1997, due to the acquisition of Fidelity and its
relatively higher selling, administrative, and research expenses per
dollar of sales and to the decline in net sales resulting from lower
nickel, copper, and cobalt market prices.
Page 11
<PAGE>
Part I Financial Information
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Other expense in 1998 was $8.1 million compared to $6.7 million in
1997, due primarily to increased interest expense on higher
outstanding borrowings, primarily as a result of the acquisition of
Fidelity.
Income taxes as a percentage of income before tax decreased to 33.5%
as compared to 33.7% during the same period in 1997. As a result of
the Fidelity acquisition, a percentage of 1998 pretax income was
earned in Malaysia, which granted the Company a pioneer status tax
incentive, resulting in a lower effective tax rate than in the United
States.
Net income for the six month period ended June 30, 1998 was $22.7
million, an increase of $4.9 million from the same period in 1997,
due to the aforementioned factors.
Liquidity and Capital Resources
During the six month period ended June 30, 1998, the Company's net
working capital increased by approximately $37 million, compared to
December 31, 1997. This increase was primarily the result of
additional working capital associated with the acquisitions of
Fidelity and Dussek. Capital expenditures increased in 1998,
primarily due to expansion at various plant facilities, acquisition
of the Dow product line (Note D), and the smelter construction
project in Lumbumbashi, Democratic Republic of Congo. These
increased cash needs were funded through cash generated by operations
as well as additional borrowings under the Company's revolving credit
facility.
In July, 1998, the Company sold 1,750,000 shares of common stock in a
public offering. The net proceeds of the offering, in the amount of
$68.7 million, were used to pay down a portion of the debt incurred
in the 1998 acquisitions.
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 under this line to
finance working capital and certain capital expenditures, including,
without limitation, the purchase of additional raw materials.
Page 12
<PAGE>
Part I Financial Information
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Year 2000
The Company presently believes that with modifications to existing
computer software and conversions to new software, the Year 2000
Issue will not pose significant operational problems to its normal
business activities.
The Company anticipates completing its Year 2000 project by December
31, 1998, which is prior to any anticipated impact on its operating
systems. This project will be completed using a combination of
existing internal and external resources. The total cost of the Year
2000 project is estimated at $2.5 million and is being funded through
operating cash flows. Of the total project cost, approximately $0.8
million is attributable to a new software purchase, which will be
capitalized. The remaining $1.7 million, which will be expensed as
incurred, is not expected to have a material effect on the results of
operations of the Company.
Forward Looking Statements
The Company is making this statement in order to satisfy the "safe
harbor" provisions contained in the Private Securities Litigation
Reform Act of 1995. The foregoing discussion includes forward-
looking statements relating to the business of the Company. Forward
looking statements contained herein or in other statements made by
the Company are subject to uncertainties and factors relating to the
Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the control of the
Company, that could cause actual results of the Company to differ
materially from those matters expressed in or implied by forward-
looking statements. The Company believes that the following factors,
among others, could affect its future performance and cause actual
results of the Company to differ materially from those expressed in
or implied by forward-looking statements made by or on behalf of the
Company: (a) the price and supply of raw materials, particularly
cobalt, nickel and copper; (b) demand for metal-based specialty
chemicals in the mature markets in the United States and Europe;
(c) demand for metal-based specialty chemicals in Asia Pacific and
other less mature markets, which geographic areas are an announced
focus of the Company's activities; (d) the effect of non-currency
risks of investing in and conducting operations in foreign countries,
together with fluctuations in currency exchange rates upon the
Company's international operations, including those relating to
political, social, economic and regulatory factors; and (e) the
availability and cost of personnel trained in Year 2000 modifications
and the ability to locate and correct all relevant computer codes.
Page 13
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
The following exhibits are included herein:
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 June 30, 1998.
Page 14
<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.
August 6, 1998 OM GROUP, INC.
_________________________________________
James M. Materna
Chief Financial Officer
(Duly authorized signatory of OM Group, Inc.)
<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 June 30, 1998, and the related condensed consolidated
statements of income for the three-month and six-month periods ended June 30,
1998 and 1997, and the condensed consolidated statements of cash flows for the
six-month periods ended June 30, 1998 and 1997. 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,
1997, 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 February 3, 1998, 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, 1997,
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
Cleveland, Ohio
August 6, 1998
<PAGE>
Acknowledgment of Independent Accountants
Stockholders and Board of Directors
OM Group, Inc.
We are aware of the incorporation by reference in the following Registration
Statements of OM Group, Inc. of our reports dated May 5 and August 6, 1998,
relating to the unaudited condensed consolidated interim financial statements of
OM Group, Inc. which are included in its Form 10-Q for the quarters ended March
31 and June 30, 1998.
Registration
Number Description Filing Date
- -------- ----------- -----------
33-74674 OM Group, Inc. Long-Term Incentive
Compensation Plan - Form S-8
Registration Statement - 1,015,625 Shares January 27, 1994
333-07529 OMG Americas, Inc. Employees' Profit
Sharing Plan -- Form S-8 Registration
Statement -- 250,000 Shares July 3, 1996
333-07531 OM Group, Inc. Non-Employees Directors'
Equity Plan -- Form S-8 Registration
Statement -- 250,000 Shares July 3, 1996
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a part
of the registration statements 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
Cleveland, Ohio
August 6, 1998
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from the OM
Group, Inc. Condensed Consolidated Balance Sheets at June 30, 1998 (Unaudited)
and the OM Group, Inc. Condensed Consolidated Statements of Income for the
three and six months ended June 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997
<PERIOD-END> Jun-30-1998 Jun-30-1998
<CASH> 6,742 6,742
<SECURITIES> 0 0
<RECEIVABLES> 96,065 96,065
<ALLOWANCES> 0 0
<INVENTORY> 224,948 224,948
<CURRENT-ASSETS> 344,052 344,052
<PP&E> 284,722 284,722
<DEPRECIATION> 84,149 84,149
<TOTAL-ASSETS> 738,098 738,098
<CURRENT-LIABILITIES> 83,234 83,234
<BONDS> 0 0
0 0
0 0
<COMMON> 222 222
<OTHER-SE> 317,737 317,737
<TOTAL-LIABILITY-AND-EQUITY> 738,098 738,098
<SALES> 139,154 277,252
<TOTAL-REVENUES> 139,154 277,252
<CGS> 103,245 206,713
<TOTAL-COSTS> 103,245 206,713
<OTHER-EXPENSES> 14,259 28,356
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,380 8,359
<INCOME-PRETAX> 17,282 34,122
<INCOME-TAX> 5,746 11,417
<INCOME-CONTINUING> 11,536 22,705
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,536 22,705
<EPS-PRIMARY> .52 1.03
<EPS-DILUTED> .51 1.00
