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, 1999
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, 1999: Common Stock, $.01 Par Value - 23,789,719
shares.
<PAGE>
INDEX
OM GROUP, INC.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- June 30, 1999 and December
31, 1998
Condensed consolidated statements of income -- Three months ended
June 30, 1999 and 1998; Six months ended June 30, 1999 and 1998
Condensed consolidated statements of cash flows -- Six months ended
June 30, 1999 and 1998
Notes to condensed consolidated financial statements -- June 30,
1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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>
Part I Financial Information
Item 1 Financial Statements
OM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data)
(Unaudited)
June 30, December 31,
1999 1998
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,727 $ 7,750
Accounts receivable 87,470 80,906
Inventories 362,212 283,264
Other current assets 30,612 48,321
-------- --------
Total Current Assets 489,021 420,241
PROPERTY, PLANT AND EQUIPMENT
Land 5,383 4,241
Buildings and improvements 81,347 80,148
Machinery and equipment 284,069 242,137
Furniture and fixtures 13,165 12,242
-------- --------
383,964 338,768
Less accumulated depreciation 102,996 93,423
-------- --------
280,968 245,345
OTHER ASSETS
Goodwill and other intangible assets 186,338 188,486
Other assets 14,578 16,647
-------- --------
TOTAL ASSETS $970,905 $870,719
======== ========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 14 $ 141
Short-term debt 2,000
Accounts payable 87,139 76,412
Other accrued expenses 36,681 41,014
-------- --------
Total Current Liabilities 123,834 119,567
LONG-TERM LIABILITIES
Long-term debt 384,181 309,964
Deferred income taxes 28,870 29,950
Other long-term liabilities 7,779 7,095
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 60,000,000 shares;
issued 23,959,346 shares 240 240
Capital in excess of par value 258,085 258,085
Retained earnings 175,300 155,691
Treasury stock (169,627 shares in 1999
and 234,847 shares in 1998, at cost) (5,807) (8,494)
Accumulated other comprehensive income (1,577) (1,379)
-------- --------
Total Stockholders' Equity 426,241 404,143
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $970,905 $870,719
======== ========
See notes to condensed Consolidated Financial Statements
<PAGE>
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,
-------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- ---------
Net sales $123,706 $139,154 $237,819 $277,252
Cost of products sold 84,244 103,245 161,248 206,713
------- ------- ------- -------
39,462 35,909 76,571 70,539
Selling, general and
administrative expenses 14,832 14,259 29,138 28,356
------- ------- ------- -------
INCOME FROM OPERATIONS 24,630 21,650 47,433 42,183
OTHER INCOME (EXPENSE)
Interest expense (4,772) (4,380) (9,222) (8,359)
Interest income 55 72 70 180
Foreign exchange gain (loss) 280 (60) 680 118
------- ------- ------- -------
(4,437) (4,368) (8,472) (8,061)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 20,193 17,282 38,961 34,122
Income taxes 6,145 5,746 11,940 11,417
-------- -------- -------- --------
NET INCOME $ 14,048 $ 11,536 $ 27,021 $ 22,705
======== ======== ======== ========
Net income per common share $0.59 $0.52 $1.14 $1.03
Net income per common share -
assuming dilution $0.58 $0.51 $1.11 $1.00
Dividends paid per common share $0.10 $0.09 $0.20 $0.18
See notes to condensed Consolidated Financial Statements
<PAGE>
OM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Six Months Ended
June 30,
-------------------
1999 1998
-------- --------
OPERATING ACTIVITIES
Net income $27,021 $22,705
Items not affecting cash:
Depreciation and amortization 13,453 12,710
Foreign exchange gain (680) (118)
Deferred income taxes (1,067) 4,042
Changes in operating assets and liabilities (57,631) (31,063)
------- -------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (18,904) 8,276
INVESTING ACTIVITIES
Expenditures for property, plant and equipment, net (43,850) (40,618)
Acquisitions of businesses (2,650) (106,543)
------- ---------
NET CASH USED IN INVESTING ACTIVITIES (46,500) (147,161)
FINANCING ACTIVITIES
Dividend payments (4,749) (3,973)
Long-term borrowings 74,113 139,000
Payments of long-term debt (86)
Payments of short-term debt (2,023)
Purchase of treasury stock (1,864) (2,415)
Proceeds from exercise of stock options 1,477 542
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 66,954 133,068
Effect of exchange rate changes on cash and
cash equivalents (573) (634)
------- -------
Increase (decrease) in cash and cash equivalents 977 (6,451)
Cash and cash equivalents at beginning of period 7,750 13,193
------- -------
Cash and cash equivalents at end of period $ 8,727 $ 6,742
======= =======
See notes to condensed Consolidated Financial Statements
<PAGE>
OM GROUP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(Thousands of dollars, except per share amounts)
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, 1998.
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
2001; adoption of this statement is not expected to have a material
effect on earnings or the financial position of the Company.
Note B Inventories
Inventories consist of the following (in thousands):
June 30, December 31,
1999 1998
-------- --------
Raw materials and supplies $162,448 $ 99,471
Finished goods 134,952 123,651
-------- --------
297,400 223,122
LIFO reserve 64,812 60,142
-------- --------
Total inventories $362,212 $283,264
======== ========
<PAGE>
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 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
(shares in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
-------- -------- ------- -------
Net income $14,048 $11,536 $27,021 $22,705
======= ======= ======= =======
Weighted average number
of shares outstanding 23,790 22,078 23,746 22,071
Dilutive effect of
stock options 582 716 562 736
------- ------- ------- -------
Weighted average number of
shares outstanding
- assuming dilution 24,372 22,794 24,308 22,807
======= ======= ======= =======
Net income per common share $.59 $.52 $1.14 $1.03
==== ==== ===== =====
Net income per common share -
assuming dilution $.58 $.51 $1.11 $1.00
==== ==== ===== =====
<PAGE>
Note E Comprehensive Income
The principal differences between net income as reported in the
condensed consolidated statements of income and comprehensive income
are foreign currency translation adjustments recorded in
stockholders' equity. Comprehensive income for the six months ended
June 30, 1999 and 1998 was $26,823 and $22,564, respectively, and
did not differ materially from net income.
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended June 30, 1999 Compared to Three Months Ended June
30, 1998
Net sales for the three months ended June 30, 1999 were $123.7
million, a decrease of 11.1% compared to the same period for 1998.
The decrease in sales resulted principally from lower cobalt
and copper raw material prices.
The following table summarizes market price fluctuations on the
primary raw materials used by the Company in manufacturing its
products:
Market Price Ranges per Pound
Three Months Ended June 30,
--------------------------------------
1999 1998
---------------- ----------------
Cobalt - 99.3% Grade $13.55 to $20.00 $19.86 to $21.18
Nickel $ 2.19 to $ 2.49 $ 1.99 to $ 2.48
Copper $ .62 to $ .72 $ .74 to $ .85
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) 1999 1998 Change
---- ---- ------
Carboxylates 17.8 16.3 9.2%
Salts 24.2 22.4 8.0%
Powders 10.7 10.5 1.9%
---- ---- ----
52.7 49.2 7.1%
==== ==== ====
<PAGE>
The increase in physical volume of carboxylate products sold was
primarily due to increased sales of PVC plastic additives in the
United States. The increase in physical volume of salt products
reflects higher sales of memory disk and battery grade chemicals in
Asia Pacific, as well as strong sales of nickel carbonate to the
United States steel industry. The increase in physical volume of
powders sold was primarily due to an increase in cobalt extra fine
sales to the United States hard metal tool and diamond tool
industries, and sales of coarse grade cobalt powder to the Asia
Pacific rechargeable battery market. Copper powder sales volumes
were essentially equivalent to second quarter of 1998 levels.
Gross profit increased to $39.5 million for the three month period
ended June 30, 1999, a 9.9% increase over the same period in 1998.
The improvement in gross profit was primarily the result of a
combination of increased volumes, improved product mix and lower
expenses. Cost of products sold decreased to 68.1% for the three
months ended June 30, 1999 from 74.2% of net sales during the same
period of 1998 as a result of lower cobalt and copper pricing and
improved product mix.
Selling, general and administrative expenses increased by
$.6 million in the three month period ended June 30, 1999 from the
same period in 1998 resulting from general increases in
administrative costs due to the Company's growth. Due to the
decline in net sales resulting from lower cobalt and copper prices,
selling, general and administrative expenses increased to 12.0% of
net sales for the second quarter of 1999 compared to 10.2% of net
sales for the same period in 1998.
Other expense - net in the second quarter of 1999 remained
approximately the same as in 1998 at $4.4 million. Increased
interest expense in 1999 on higher outstanding borrowings resulting
from provisional payments made on Zambia Consolidated Copper Mines
Limited cobalt-copper concentrate and capital expenditures was
partially offset by gains on foreign exchange.
Income taxes as a percentage of income before income taxes decreased
to 30.4% for the second quarter of 1999 from 33.2% in the same
period in 1998. The lower effective tax rate is due primarily to
higher income earned in the relatively low statutory tax countries
of Finland and Malaysia.
Net income for the three month period ended June 30, 1999 was $14.0
million, an increase of $2.5 million from the same period in 1998,
due to the aforementioned factors.
<PAGE>
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30,
1998
Net sales for the six months ended June 30, 1999 were $237.8
million, a decrease of 14.2% compared to the same period for 1998.
The decrease in sales resulted principally from lower cobalt,
nickel, and copper raw material prices.
The following table summarizes market price fluctuations on the
primary raw materials used by the Company in manufacturing its
products:
Market Price Ranges per Pound
Six Months Ended June 30,
----------------------------------------
1999 1998
--------------- ----------------
Cobalt - 99.3% Grade $6.70 to $20.00 $18.10 to $21.18
Nickel $1.81 to $ 2.49 $ 1.99 to $ 2.69
Copper $ .61 to $ .72 $ .74 to $ .85
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) 1999 1998 Change
----- ----- -------
Carboxylates 35.3 30.7 15.0%
Salts 48.0 44.2 8.6%
Powders 20.9 21.3 (1.9)%
----- ----- -----
104.2 96.2 8.3%
===== ===== =====
The increase in physical volume of carboxylate products sold was
primarily due to increased sales of PVC plastic additives in the
United States. The increase in physical volume of salt products
reflects higher sales of memory disk and battery grade chemicals in
Asia Pacific, as well as strong sales of nickel carbonate to the
United States steel industry. The decrease in physical volume of
powders sold was due to first quarter softness in copper powder
products, partially offset by increases in sales of cobalt extra
fine and tungsten powders to the hard metal tool and diamond tool
industries.
<PAGE>
Gross profit increased to $76.6 million for the six month period
ended June 30, 1999, an 8.6% increase over the same period in 1998.
The improvement in gross profit was primarily the result of a
combination of increased volumes, improved product mix and lower
expenses. Cost of products sold decreased to 67.8% for the six
months ended June 30, 1999 from 74.6% of net sales during the same
period of 1998 as a result of lower cobalt, nickel and copper
pricing and improved product mix.
Selling, general and administrative expenses increased by
$.8 million in the six month period ended June 30, 1999 from the
same period in 1998 resulting from general increases in
administrative costs due to the Company's growth. Due to the
decline in net sales resulting from lower cobalt, nickel, and
copper prices, selling, general and administrative expenses
increased to 12.3% of net sales for the first six months of 1999
compared to 10.2% of net sales for the same period in 1998.
Other expense - net in 1999 was $8.5 million compared to $8.1
million in 1998, due primarily to increased interest expense on
higher outstanding borrowings as a result of provisional payments
made on Zambia Consolidated Copper Mines Limited cobalt-copper
concentrate and capital expenditures, partially offset by gains on
foreign exchange.
Income taxes as a percentage of income before income taxes
decreased to 30.6% for the first six months of 1999 from 33.5% in
the same period in 1998. The lower effective tax rate is due
primarily to higher income earned in the relatively low statutory
tax countries Finland and Malaysia.
Net income for the six month period ended June 30, 1999 was $27.0
million, an increase of $4.3 million from the same period in 1998,
due to the aforementioned factors.
Liquidity and Capital Resources
During the six month period ended June 30, 1999, the Company's net
working capital increased by approximately $65 million, compared to
December 31, 1998. This increase was primarily the result of
provisional payments made on Zambia Consolidated Copper Mines
Limited cobalt-copper concentrate which were funded primarily
through additional bank borrowings. Capital expenditures increased
in 1999, primarily due to the completion of the Company's solvent
extraction unit in Kokkola, Finland and the continuing smelter
construction project in Lumbumbashi, Democratic Republic of Congo.
These capital expenditures were funded through cash generated by
operations as well as additional borrowings under the Company's
revolving credit facility.
In January, 1999, the Company's revolving credit facility was
revised to increase available credit to $325 million to finance the
purchase of cobalt-copper concentrate, and to expand its sources of
capital by adding three new institutions.
<PAGE>
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.
Year 2000
Based on ongoing reviews of the Company's systems, 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's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing and
implementation. The following table summarizes the Company's
progress on these Year 2000 phases, with respect to: 1) the nature
and potential effects of the Year 2000 on information (IT) and non-
IT systems; 2) the status of the Company's progress in becoming
Year 2000 ready for both IT and non-IT systems, including estimated
timetable for completion of each phase; and 3) third parties and
their exposure to the Year 2000.
Exposure Type Resolution Phases
---------------------- ----------------------------------------
Assess Remedi- Imple-
-ment ation Testing mentation
-------- -------- -------- ---------
INFORMATION SYSTEMS
------------------------
% Complete at 6/30/99 90% 85% 80% 75%
Expected Completion Date Aug 1999 Sep 1999 Sep 1999 Oct 1999
NON-INFORMATION SYSTEMS
------------------------
Production and
Manufacturing Systems
% Complete at 6/30/99 100% 90% 80% 75%
Expected Completion Date Sep 1998 Aug 1999 Aug 1999 Sep 1999
Products
% Complete at 6/30/99 100% N/A N/A N/A
Expected Completion Date Sep 1998
<PAGE>
THIRD PARTIES
------------------------
System Interface
% Complete at 6/30/99 100% N/A N/A N/A
Expected Completion Date Apr 1999
Other Material Exposures
% Complete at 6/30/99 100% N/A N/A N/A
Expected Completion Date Sep 1998
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. As of June 30, 1999, approximately $1.5
million has been incurred. Of the total project cost,
approximately $.8 million is attributable to a new software
purchase, which has been capitalized. The remaining $1.7 million,
which is being expensed as incurred, is not expected to have a
material effect on the results of operations of the Company.
Management of the Company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. As noted
above, the Company has not yet completed all necessary phases of
the Year 2000 program. Disruptions in the economy generally
resulting from Year 2000 issues could also materially adversely
affect the Company. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
The Company does not believe that lack of completion of all phases
of the Year 2000 program by December 31, 1999 would materially
disrupt its operations, based on an evaluation of the status of the
program in April, 1999, and has determined that a contingency plan
is not necessary.
Euro Conversion
The Company has converted and/or installed the necessary software
modifications and is successfully operating in the post-euro
conversion European economy since the introduction of the euro
currency on January 1, 1999.
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. Such
forward-looking statements 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
<PAGE>
control of the Company, that could cause actual results of the
Company to differ materially from those matters expressed in or
implied by such 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, copper and nickel;
(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; (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 Company's
ability and its customers' and suppliers' ability to replace,
modify or upgrade computer programs in ways that adequately address
the Year 2000 Issue.
Item 3 Quantitative and Qualitative Disclosures About Market Risk
A discussion of market risk exposures is included in Part II, Item
7a, "Qualitative and Quantitative Disclosure About Market Risk", of
the Company's 1998 Annual Report on Form 10-K. There have been no
material changes during the six months ended June 30, 1999.
Item 4 Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of OM Group, Inc. was held on
May 4, 1999. An election of Directors was held at which Lee R.
Brodeur, Thomas R. Miklich and James P. Mooney were nominated and
elected for terms which expire in the year 2002. The following
votes were cast with respect to each of the nominees:
Director For Against Abstain
---------------- ---------- ------- -------
Lee R. Brodeur 16,749,086 118,498 0
Thomas R. Miklich 16,749,311 118,273 0
James P. Mooney 16,704,149 163,435 0
Other directors whose terms of office will continue after the
meeting are:
Term of
Director Office Expires
--------------- --------------
Eugene Bak 2001
Frank E. Butler 2001
John E. Mooney 2000
Markku Toivanen 2000
<PAGE>
Ernst & Young LLP was re-elected as independent auditors:
For - 16,855,078, against - 4,286, abstain - 8,220.
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, 1999.
<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 10, 1999 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, 1999, and the related condensed consolidated
statements of income for the three-month and six-month periods ended June 30,
1999 and 1998, and the condensed consolidated statements of cash flows for the
six-month periods ended June 30, 1999 and 1998. 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,
1998, 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 12, 1999, 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, 1998,
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 9, 1999
<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 6 and August 9, 1999,
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, 1999 and June 30, 1999.
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 9, 1999
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from the OM
Group, Inc. Condensed Consolidated Balance Sheet at June 30, 1999 (Unaudited)
and the OM Group, Inc. Condensed Consolidated Statements of Income for the three
and six months ended June 30, 1999 (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-31-1999 Dec-31-1999
<PERIOD-END> Jun-30-1999 Jun-30-1999
<CASH> 8,727 8,727
<SECURITIES> 0 0
<RECEIVABLES> 87,470 87,470
<ALLOWANCES> 0 0
<INVENTORY> 362,212 362,212
<CURRENT-ASSETS> 489,021 489,021
<PP&E> 383,964 383,964
<DEPRECIATION> 102,996 102,996
<TOTAL-ASSETS> 970,905 970,905
<CURRENT-LIABILITIES> 123,834 123,834
<BONDS> 0 0
0 0
0 0
<COMMON> 240 240
<OTHER-SE> 426,001 426,001
<TOTAL-LIABILITY-AND-EQUITY> 970,905 970,905
<SALES> 123,706 237,819
<TOTAL-REVENUES> 123,706 237,819
<CGS> 84,244 161,248
<TOTAL-COSTS> 99,076 190,386
<OTHER-EXPENSES> (335) (750)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,772 9,222
<INCOME-PRETAX> 20,193 38,961
<INCOME-TAX> 6,145 11,940
<INCOME-CONTINUING> 14,048 27,021
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,048 27,021
<EPS-BASIC> .59 1.14
<EPS-DILUTED> .58 1.11
