(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1999

OR

[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                 to                

Commission file number 0-22572

OM GROUP, INC.

216-781-0083

Securities registered pursuant to Section 12 (b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act:

None

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [   ]

     The aggregate market value of Common Stock, par value $.01 per share, held by non-affiliates (based upon the closing sale price on the NYSE) on March 16, 2000 was approximately $923,456,000.

     As of March 16, 2000, there were 23,831,117 shares of Common Stock, par value $.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the annual meeting of stockholders to be held on May 9, 2000 are incorporated by reference.

Table of Contents

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PART I

Item 1.  Business

The Company operates in a single business segment with product lines comprised of metal-based specialty chemicals.

Competition

The Company believes that its focus on metal-based specialty chemicals as a core business is an important competitive advantage. Competition in the metal-based specialty chemicals market is based primarily on product quality, supply reliability, price, service and technical support capabilities.

Generally, the Company is able to pass through to its customers increases and decreases in raw material prices by increasing or decreasing, respectively, the prices of its products. The degree of profitability of the Company depends, in part, on the Company’s ability to maintain the differential between its product prices and raw material prices. The timing and amount of such adjustments in its product prices depends upon the type of product sold and the inventories and market share positions of the Company and its competitors.

The Company’s flexibility with respect to the timing of its price adjustments is greater with respect to carboxylates than with inorganic salts and powders. Inorganic salt and powder prices respond almost immediately to changes in the raw material base metal prices.

Customers

While customer demand for the Company’s products is generally non-seasonal, supply/demand and price perception dynamics of key raw materials do periodically cause customers to either accelerate or delay purchases of the Company’s products, generating short-term results that may not be indicative of longer-term trends.

Raw Materials

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Raw material cost increases and/or contractual commitments can result in higher working capital needs. The Company has had sufficient cash availability and borrowing capacity to finance higher working capital as needed.

Research and Development

The Company’s research staff of 79 full time persons conducts carboxylate, metal salts and powders research and development at the Company’s laboratories located in Westlake, Ohio; Research Triangle Park, North Carolina; Newark, New Jersey; and Kokkola, Finland. The Company’s Finnish facility also maintains a research agreement with Outokumpu Research Oy.

Patents and Trademarks

Environmental Matters

Annual environmental compliance costs were approximately $3.2 million in 1999. Such ongoing expenses include costs relating to waste water analysis and disposal, hazardous and non-hazardous solid waste analysis and disposal, sea water control, air emissions control, soil and groundwater clean-up and monitoring and related staff costs. The Company anticipates that it will continue to incur costs and make expenditures at moderately increasing levels for the foreseeable future in light of the fact that environmental laws and regulations are becoming increasingly stringent, including the likely lowering of permissible discharge limits.

The Company has also incurred capital expenditures of approximately $2.1 million in 1999 in connection with environmental compliance. The Company anticipates that capital expenditure levels for such purposes will increase to approximately $2.8 million in 2000, as it continues to modify on an ongoing, regular basis, certain of its processes which may have an environmental impact.

Due to the ongoing development and understanding of facts and remedial options and due to the possibility of unanticipated regulatory developments, the amount and timing of future environmental expenditures could vary significantly from those currently anticipated. Although it is difficult to quantify the potential impact of compliance with or liability under environmental protection laws, based on presently available information, the

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Employees

International Operations

The Company’s products are manufactured at facilities located in Belleville, Canada; Kokkola, Finland; Ezanville, France; Kuching, Malaysia; Bangkok, Thailand; Newark, New Jersey; Research Triangle Park, North Carolina; Franklin, Pennsylvania; Johnstown, Pennsylvania; and St. George, Utah. The Company conducts its marketing and sales primarily from its offices in Düsseldorf, Germany; Research Triangle Park, North Carolina; Westlake, Ohio; Newark, New Jersey; Taipei, Taiwan; and Tokyo, Japan.

Although most of the Company’s raw material purchases and product sales are transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and income taxes are denominated in local currencies. Accordingly, fluctuations in currency prices may affect the Company’s operating results and net income. Specifically, when the euro has weakened against the U. S. Dollar, there has been a net favorable effect on the Company due to lower operating expenses and lower net balance sheet liabilities when translated into U. S. Dollars. The reverse has been true when the euro strengthened against the U. S. Dollar. During 1999, in order to partially hedge the balance sheet exposure to fluctuating rates, the Company entered into forward contracts to purchase euros.

Item 2.  Properties

The Company’s Kokkola, Finland production facility (KCO) is situated on property owned by Outokumpu Zinc Oy. KCO and Outokumpu Zinc Oy share certain physical facilities, services and utilities under agreements with varying expiration dates. Utilities and raw material purchase assistance contracts provide that KCO jointly purchase with, or pay a fee to, affiliates of Outokumpu Oy for assistance in negotiating contracts and securing bulk quantity discounts.

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Certain information regarding the Company’s primary offices, research and product development and manufacturing facilities is set forth below:

Item 3.  Legal Proceedings

Item 4.  Submission of Matters to a Vote of Security Holders

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Executive Officers of the Registrant

James P. Mooney — 52

•	Chairman and Chief Executive Officer, 1994

Edward W. Kissel — 58

•	President and Chief Operating Officer, 1999
•	Chief Executive Officer, RotoCast Technologies, Inc., 1993
•	Chief Executive Officer, Kissel Group, Ltd., 1993

James M. Materna — 54

•	Chief Financial Officer, 1992

PART II

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters

Item 6.  Selected Financial Data

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Set forth below is summary consolidated information of the Company for the years ended December 31, 1999, 1998, and 1997.

Results of Operations

The following table summarizes market price fluctuations on the primary raw materials used by the Company in manufacturing its products:

Pounds of product sold by the Company were 209.4 million pounds during 1999, an increase of 10.1% compared to 190.2 million pounds in 1998. The increase in physical volume of carboxylate products sold was primarily the result of an increase in sales of cobalt carboxylates and PVC plastic additives, both in Europe and Asia Pacific. In the salts category, the increase in physical volume of products sold reflects higher sales of memory disk and battery grade chemicals in Asia Pacific. The increase in physical volume of powder products reflects continued strong growth in sales of cobalt fine powder to the hard metal tool industry, coarse grade powders to the rechargeable battery market and stainless steel alloy powders in automotive applications.

Gross profit increased to $159.5 million in 1999, a 10.0% increase from 1998. The improvement in gross profit was primarily the result of increased volumes and an improved product mix increasing contribution from higher value-added products. Cost of products sold decreased to 68.5% of net sales for the year ended 1999 from 72.2% of net sales in 1998 as a result of lower cobalt pricing and improved product mix.

Selling, general and administrative expenses increased to 12.0% of net sales in 1999 from 11.1% of net sales in 1998, resulting from general increases in administrative costs due to the Company’s growth.

Other expense-net was $18.4 million in 1999 compared to $15.6 million in 1998 due primarily to increased interest expense on higher outstanding borrowings, primarily as a result of provisional payments made on cobalt-copper concentrate and capital expenditures.

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Income taxes as a percentage of income before income taxes decreased to 30.5% in 1999 from 32.2% in 1998. The lower effective tax rate was due primarily to higher income earned in the relatively low statutory tax country of Finland and a tax holiday in Malaysia.

Net income for 1999 was $55.8 million, an increase of $7.5 million from 1998, primarily due to the aforementioned factors.

1998 Compared to 1997

The following table summarizes market price fluctuations on the primary raw materials used by the Company in manufacturing its products:

The Company generally passes through to its customers increases and decreases in raw material prices by increasing and decreasing, respectively, the prices of its products. Cobalt 99.3% market prices (per pound) dropped from approximately $18 at September 30, 1998, to $8.85 by December 31, 1998, and then rebounded to approximately $17 during the first quarter of 1999. When raw material prices decrease precipitously, the Company’s LIFO inventory value may exceed the value at which the inventory can be sold (i.e., LIFO inventory costs may exceed market). Consequently, the Company evaluates its inventory carrying value to state it at the lower of cost or market. At December 31, 1998, no adjustment to carrying value was needed, as the market value of the inventory exceeded LIFO cost.

Pounds of product sold by the Company were 190.2 million pounds during 1998 compared to 149.9 million pounds in 1997. The increase in carboxylate products sold was primarily the result of the acquisition of Dussek Campbell Limited (Dussek) and increases in sales of cobalt carboxylates and PVC additives. In the salts category, the increase was due to the acquisition of Fidelity as overall nickel salt volumes, excluding Fidelity, declined due primarily to a decrease in the sales of lower margin nickel sulfate products. The increase in physical volume of powder products reflects the introduction of tungsten powders during 1998 and overall growth in cobalt extra fine powders, which offset a decrease in copper powder volumes related to slowness in the aerospace and agricultural equipment business areas.

Gross profit increased to $145.0 million in 1998, a 23.5% increase from 1997. The improvement in gross profit was primarily the result of the acquisitions of Fidelity and Dussek, an increased contribution from higher value-added products, and higher physical volume excluding the decrease in lower margin nickel sulfate products. Cost of products sold decreased to 72.2% of net sales for the year ended 1998 from 75.9% of net sales in 1997 primarily because of lower cobalt, nickel and copper market prices, which declined more rapidly than selling prices, improved product mix and the acquisitions of Fidelity and Dussek.

Selling, general and administrative expenses increased to 11.1% of net sales in 1998 from 9.6% of net sales 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 cobalt, nickel and copper prices.

Other expense-net was $15.6 million in 1998 compared to $12.6 million in 1997 due primarily to increased interest expense on higher outstanding borrowings, primarily as a result of the acquisitions of Fidelity and Dussek.

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Income taxes as a percentage of income before income taxes decreased to 32.2% in 1998 from 33.7% in 1997. The lower effective tax rate was due primarily to higher income earned in the relatively low statutory tax country of Finland and a tax holiday in Malaysia, offsetting the impact of non-tax deductible goodwill related to the acquisitions of Fidelity and Dussek.

Net income for 1998 was $48.4 million, an increase of $9.9 million from 1997, primarily due to the aforementioned factors.

Liquidity and Capital Resources

In January, 1999, the Company’s revolving credit facility was revised to increase available credit to $325 million, and to expand its sources of capital by adding three new institutions. The Company may also borrow up to $15 million under a demand note agreement expiring March 31, 2000. At December 31, 1999, the Company had no outstanding borrowings under this demand note agreement.

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. In February, 2000 the Board of Directors authorized an increase in quarterly dividends to $.11 per share. 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.

The Company has ongoing capital expenditure programs to improve its processing technology and plant and equipment, and to expand capacity to accommodate future growth. The Company anticipates that capital spending, exclusive of acquisitions or joint ventures, will approximate $25 million for 2000.

Although most of the Company’s raw material purchases and product sales are transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and income taxes are denominated in local currencies. Accordingly, fluctuations in currency prices will affect the Company’s operating results and net income (see page 4 — International Operations).

Quantitative and Qualitative Disclosures About Market Risk

The primary raw materials used by the Company in manufacturing its products are cobalt, nickel and copper. While nickel and copper are worldwide commodities and generally available, cobalt availability can be more uncertain. The Company’s supply of cobalt has historically been sourced primarily from the Democratic Republic of Congo, Australia, Finland and Zambia. Although the Company has never experienced a material shortage of cobalt, production problems and political and civil instability in certain supplier countries may affect the supply and market price of cobalt. If a substantial interruption should occur in supply from a primary source, there is no assurance that the Company would be able to obtain as much cobalt from other sources as would be necessary to satisfy the Company’s requirements at prices comparable to its current arrangements. The Company attempts to mitigate changes in prices and availability by maintaining adequate inventories and long-term supply relationships with a variety of producers. The cost of raw materials fluctuates due to both actual and perceived changes in supply and demand. Generally, the Company is able to pass through to its customers increases and decreases in raw material prices by increasing or decreasing, respectively, the prices of its products. The degree of profitability

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The Company is exposed to interest rate risk primarily through its borrowing activities. The Company predominantly utilizes U.S. Dollar denominated borrowings to fund its working capital and investment needs. The majority of the Company’s borrowings are in variable rate instruments. The Company enters into interest rate swap agreements to convert a portion of the variable rate instruments to fixed rate contracts over typically a three year period. There is an inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements (see Note C). The following table presents principal cash flows and related weighted-average interest rates by expected maturity dates of the Company’s long term-debt.

In addition to the United States, the Company has manufacturing and other facilities in Canada, Europe and Asia-Pacific, and markets its products worldwide. Although most of the Company’s raw material purchases and product sales are transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and income taxes are denominated in local currencies. Accordingly, fluctuations in currency prices may affect the Company’s operating results and net income (see page 4 – International Operations).

Year 2000

This project has been completed using a combination of existing internal and external resources. The total cost of the Year 2000 project was $2.5 million and was funded through operating cash flows. Of the total project cost, approximately $.8 million was attributable to a new software purchase, which has been capitalized. The remaining $1.7 million, which was expensed as incurred, did not have a material effect on the results of operations of the Company.

Euro Conversion

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Cautionary Statement for “Safe Harbor” Purposes Under the Private Securities

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 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; and (d) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to political, social, economic and regulatory factors, together with fluctuations in currency exchange rates upon the Company’s international operations.

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

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Item 8.  Financial Statements and Supplementary Data

Board of Directors and Stockholders

We have audited the accompanying consolidated balance sheets of OM Group, Inc. as of December 31, 1999 and 1998, and the related statements of consolidated income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of OM Group, Inc. at December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Cleveland, Ohio

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Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

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Statements of Consolidated Income

See accompanying notes to consolidated financial statements

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Statements Of Consolidated Stockholders’ Equity

See accompanying notes to consolidated financial statements.

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Statements Of Consolidated Cash Flows

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

(Thousands of dollars, except per share amounts)

A.  Significant Accounting Policies

Inventories — Inventories are principally stated at the lower of cost or market and valued using the last-in, first-out (LIFO) method.

Long-Lived Assets — Property, plant and equipment is recorded at historical cost less accumulated depreciation. Depreciation of plant and equipment is provided by the straight-line method over the useful lives ranging from 5 to 40 years for buildings and improvements and 3 to 15 years for other depreciable assets.

Goodwill represents the excess of the purchase price of businesses acquired over the estimated fair market value of the net assets acquired. Other intangibles represent principally patents, trademarks and technology acquired. Goodwill, other intangible assets and capitalized software are being amortized on a straight-line basis over their respective useful lives (five to forty years).

Long-lived assets are assessed for impairment when operating profits for the related business indicate that the carrying value may not be recoverable. The asset would be considered impaired when the future net undiscounted cash flows generated by the asset are less than its carrying value. An impairment loss would be recognized based on the amount by which the carrying value of the asset exceeds it fair value.

Research and Development — Selling, general and administrative expenses include research and development costs of $11,332, $10,367, and $6,687 in 1999, 1998 and 1997, respectively.

Income Taxes — Deferred income taxes are provided to recognize the effect of temporary differences between financial and tax reporting. Deferred income taxes are not provided for undistributed earnings of foreign consolidated subsidiaries, to the extent such earnings are reinvested for an indefinite period of time.

Foreign Currency Translation — The functional currency for the Company’s Finnish subsidiary is the U.S. Dollar since a majority of its purchases and sales are denominated in U.S. Dollars and it holds a significant intercompany note payable denominated in U.S. Dollars. Accordingly, foreign exchange gains and losses related to assets, liabilities and transactions which are denominated in other currencies (principally the euro) are included in results of operations. The Company enters into forward contracts to partially hedge its balance sheet exposure to the euro, and accordingly, gains or losses related to the forward contracts are also included in results of operations.

The functional currency for the Company’s other subsidiaries outside of the United States is the applicable local currency. For those operations, financial statements are translated into U.S. Dollars at year-end exchange rates as to assets and liabilities and weighted average exchange rates as to revenues and expenses. The resulting translation adjustments are recorded as a component of stockholders’ equity.

Cash Equivalents — For purposes of the statements of consolidated cash flows, all highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Stock Options and Compensation Plans — The Company grants stock options for a fixed number of shares to certain employees with an exercise price equal to the fair value of the shares at the date of grant and accounts for stock options using the intrinsic value method. Accordingly, compensation expense is not recognized for the stock option grants.

Non-employee members of the Board of Directors are eligible to receive their annual retainer in the form of cash, stock options, or restricted stock. If stock options or restricted stock are elected, the acquisition price is 75% of the fair market value and directors’ cash compensation is utilized to acquire the options or restricted stock. Also, directors electing to receive restricted stock receive additional restricted stock equal to 5% of their applied cash compensation. Accordingly, compensation expense is recognized for stock option and restricted share grants elected by eligible directors.

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Revenue Recognition — Revenues are recognized when products are shipped to unaffiliated customers.

Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements — 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.

B.  Inventories