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, 2000

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, 2000: Common Stock, $.01 Par Value - 23,833,103 shares.

 INDEX

OM GROUP, INC.

Part I.

Financial Information

    Item 1.

     Financial Statements (Unaudited)

     Condensed consolidated balance sheets -- June 30, 2000 and December 31, 1999

     Condensed statements of consolidated income -- Three months ended June 30, 2000 and
     1999; Six months ended June 30, 2000 and 1999

     Condensed statements of consolidated cash flows -- Six months ended June 30, 2000 and
     1999

     Notes to condensed consolidated financial statements -- June 30, 2000

    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

     (15.1)  Independent Accountants' Review Report
     (15.2)  Letter re: Unaudited Interim Financial Information
     (27)  Financial Data Schedule

OM GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except share data)

(Unaudited)

June 30,  

December 31,

ASSETS

     2000     

     1999     

CURRENT ASSETS

   Cash and cash equivalents

$     14,129 

$       9,433 

   Accounts receivable

152,125 

100,492 

   Inventories

367,677 

332,810 

   Other current assets

      84,694 

      54,289 

      Total Current Assets

618,625 

497,024 

PROPERTY, PLANT AND EQUIPMENT

   Land

6,090 

6,099 

   Buildings and improvements

129,089 

93,819 

   Machinery and equipment

435,864 

317,388 

   Furniture and fixtures

      14,046 

       14,419 

585,089 

431,725

   Less accumulated depreciation

    126,606 

     112,910 

458,483 

318,815 

OTHER ASSETS

   Goodwill and other intangible assets

190,517 

183,974 

   Other assets

40,112 

18,108 

TOTAL ASSETS

$1,307,737 
                 

$1,017,921 
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

   Current portion of long-term debt

$     12,839 

$            25 

   Accounts payable

83,821 

77,037 

   Other accrued expenses

      59,022 

       47,794 

      Total Current Liabilities

155,682 

124,856 

LONG TERM LIABILITIES

   Long-term debt

578,572 

384,888 

   Deferred income taxes

51,672 

31,434 

   Other long-term liabilities

45,531 

27,515 

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

258,895 

258,815 

   Retained earnings

225,270 

198,047 

   Treasury stock (126,243 shares in 2000

      and 165,161 shares in 1999, at cost)

(5,436)

(5,537)

   Accumulated other comprehensive loss

(2,246)

(1,837)

   Unearned compensation

         (443)

         (500)

Total Stockholders' Equity

476,280 

449,228 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$1,307,737 
                 

$1,017,921 
                 

See notes to condensed Consolidated Financial Statements

OM GROUP, INC.

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Thousands of dollars, except per share data)

(Unaudited)

Three Months Ended  

Six Months Ended   

           June 30,         

          June 30,          

   2000   

   1999   

   2000   

   1999   

Net sales

$273,522 

$123,706 

$421,807 

$237,819 

Cost of products sold

  218,122 

    84,244 

  324,405 

  161,248 

55,400 

39,462 

97,402 

76,571 

Selling, general and administrative expenses

18,488 

14,832 

33,449 

29,138 

INCOME FROM OPERATIONS

36,912 

24,630 

63,953 

47,433 

OTHER INCOME (EXPENSE)

Interest expense

(11,593)

(4,772)

(17,045)

(9,222)

Interest income

880 

55 

985 

70 

Foreign exchange (loss) gain

       (167)

        280 

       (239)

        680 

  (10,880)

    (4,437)

  (16,299)

    (8,472)

INCOME BEFORE INCOME TAXES

    26,032 

    20,193 

    47,654 

    38,961 

Income taxes

      7,604 

      6,145 

    14,076 

    11,940 

NET INCOME

$  18,428 
               

$  14,048 
               

$  33,578 
               

$  27,021 
               

Net income per common share
Net income per common share - assuming dilution

$0.77 
$0.76 

$0.59 
$0.58 

$1.41 
$1.39 

$1.14 
$1.11 

Dividends paid per common share

$0.11 

$0.10 

$0.22 

$0.20 

See notes to condensed Consolidated Financial Statements

OM GROUP, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Thousands of dollars)

(Unaudited)

Six Months Ended      

              June 30,             

     2000    

     1999    

OPERATING ACTIVITIES

   Net income

$   33,578 

$  27,021 

   Items not affecting cash:

      Depreciation and amortization

18,499 

13,453 

      Foreign exchange loss (gain)

239 

(680)

      Deferred income taxes

(1,762)

(1,067)

   Changes in operating assets and liabilities

    (25,604)

   (57,631)

      NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

24,950 

(18,904)

INVESTING ACTIVITIES

   Expenditures for property, plant and equipment, net

(27,735)

(43,850)

   Acquisitions of businesses

  (192,320)

     (2,650)

      NET CASH USED IN INVESTING ACTIVITIES

(220,055)

(46,500)

FINANCING ACTIVITIES

   Dividend payments

(5,248)

(4,749)

   Long-term borrowings

223,750 

74,113 

   Payments of long-term debt

(17,252)

(2,023)

   Purchase of treasury stock

(4,834)

(1,864)

   Proceeds from exercise of stock options

       3,808 

      1,477 

      NET CASH PROVIDED BY FINANCING ACTIVITIES

200,224 

66,954

Effect of exchange rate changes on cash and cash equivalents

(423)

(573)

Increase in cash and cash equivalents

4,696 

977 

Cash and cash equivalents at beginning of period

9,433 

7,750 

Cash and cash equivalents at end of period

$   14,129 
                 

$    8,727 
                

See notes to condensed Consolidated Financial Statements

Part I

Financial Information

Item 1

Financial Statements

OM GROUP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2000

(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, 1999.

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.

In December, 1999, SAB No. 101 "Revenue Recognition in Financial Statements" was issued. SAB No. 101 provides clarification in applying generally accepted accounting principles to revenue recognition in financial statements. The Company must adopt SAB No. 101 by December 31, 2000; adoption of this statement is not expected to have a material effect on the earnings or the financial position of the Company.

Note B

Inventories

Inventories consist of the following:

June 30,  

December 31,

    2000    

   1999        

Raw materials and supplies
Finished goods

LIFO reserve
Total inventories

$151,955
  156,257
308,212
    59,465
$367,677
               

$137,337   
  138,417   
275,754   
    57,056   
$332,810   
                  

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,       

   2000  

   1999  

   2000  

   1999  

Net income

$18,428
            

$14,048
            

$33,578
            

$27,021
            

Weighted average number of shares
    outstanding

23,833

23,790

23,855

23,746

Dilutive effect of stock options

     444

     582

     389

     562

Weighted average number of shares
    outstanding - assuming dilution

24,277
           

24,372
           

24,244
           

24,308
           

Net income per common share

$.77
       

$.59
       

$1.41
       

$1.14
       

Net income per common share -
     assuming dilution

$.76
       

$.58
       

$1.39
        

$1.11
        

Note E

Comprehensive Income

The principal differences between net income as reported in the condensed statements of consolidated income and comprehensive income are foreign currency translation adjustments recorded in stockholders' equity. Comprehensive income for the six months ended June 30, 2000 and 1999 was $33,169 and $26,823, respectively, and did not differ materially from net income.

Note F

Acquisition and Pro Forma Earnings Per Share

On April 4, 2000, the Company acquired Outokumpu Nickel Oy (OKN) for a purchase price of $187.7 million, including related financing and transaction costs. The acquisition of OKN, which had fiscal 1999 sales of $341.5 million, was financed through bank borrowings and has been recorded using the purchase method of accounting. Accordingly, the Company's results of operations reflect the impact of OKN from the date of acquisition. The purchase price allocation was based on preliminary estimates and may be revised at a later date as fair value determinations are finalized.

Pro forma net sales, net income and net income per share, for the six months ended June 30, 2000 and 1999, as if the acquisition had occurred as of January 1, 2000 and 1999, respectively, would have been as follows:

           Six Months Ended             

 June 30, 2000 

 June 30, 1999 

Net sales
Net income
Net income per common share
Net income per common share - assuming dilution

$571,807    
$  43,678    
$1.83    
$1.80    

 $376,140     
$34,734     
$1.46     
$1.43     

The pro forma results include estimates and assumptions which the Company's management believes are reasonable. However, the pro forma results are not necessarily indicative of the results which would have occurred if the acquisition had occurred on the dates indicated, or which may result in the future. Prior to the acquisition on April 4, 2000, OKN inventories were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of 2000 purchases. The effect of this liquidation was to increase net income during the six months ended June 30, 2000 by $6.1 million ($0.25 per share).

The aforementioned pro forma information reflects additional amortization of goodwill on a straight-line basis over 20 years; additional amortization of financing costs over 6 years; depreciation for the write-up of property, plant and equipment over 10 years; and an interest cost on the funds borrowed to finance the acquisition.

Results of Operations

Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999

Net sales for the three months ended June 30, 2000 were $273.5 million, an increase of 121.1% compared to the same period for 1999. The increase in sales resulted principally through an increase in physical volume of products sold, due to the acquisition of OKN.

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,          

        2000          

         1999          

Cobalt - 99.3% Grade
Nickel
Copper

$ 12.73 to $15.15
$  3.62 to $  4.75
$  0.75 to $  0.84

$ 13.55 to $20.00
$  2.19 to $  2.49
$  0.62 to $  0.72

The following table sets forth the pounds of organics, inorganics, powders and metals sold during each period:

Three Months Ended June 30,

Percentage

(in millions of pounds)

2000       

1999       

Change

Organics
Inorganics
Powders
Metals

20.4       
26.1       
11.4       
27.6       
85.5       
              

17.8       
24.2       
10.7       
  0.0       
52.7       
              

14.6%      
7.9%      
6.5%      
--%      
62.2%      

The increase in physical volume of organic products sold was primarily due to generally stronger cobalt catalyst sales in all geographic regions and increased sales of plastic additives in Asia Pacific. The increase in physical volume of inorganic products sold was primarily attributable to an increase in sales of nickel salts in the Americas to the steel industry. The increase in physical volume of powders sold reflects significant increases in cobalt powder sales to the Asia Pacific battery industry, increased sales of tungsten powders and cobalt extra fine to the hard metal and diamond tool industries, offsetting a decrease in sales of copper powders to the automotive industry. The increase in physical volume of metal products sold is a result of the acquisition of OKN and the resulting sales of nickel briquettes and cathodes to the European steel industry.

Gross profit increased to $55.4 million for the three month period ended June 30, 2000, a 40.4% increase over the same period in 1999. The improvement in gross profit was due to increased volumes of product sold. Cost of products sold increased to 79.7% for the three months ended June 30, 2000 from 68.1% of net sales during the same period of 1999 primarily as a result of the acquisition of OKN with lower value added nickel products, higher sales of lower value added cobalt containing products and higher nickel and copper pricing.

Selling, general and administrative expenses increased by $3.7 million in the three month period ended June 30, 2000, from the same period in 1999, resulting primarily from the OKN acquisition and general increases in administrative costs due to the Company's growth. Due to the relatively low selling, general and administrative expenses to support OKN and relatively high nickel prices, selling, general and administrative expenses decreased to 6.8% of net sales for the second quarter of 2000 compared to 12.0% of net sales for the same period in 1999.

Other expense - net in the second quarter of 2000 was $10.9 million compared to $4.4 million in 1999, due primarily to increased interest expense on higher outstanding borrowings as a result of the OKN acquisition and higher interest rates.

Income taxes as a percentage of income before income taxes decreased to 29.2% for the second quarter of 2000 from 30.4% in the same period in 1999. The lower effective tax rate is due primarily to higher income earned in the relatively low statutory tax country of Finland and a tax holiday in Malaysia.

Net income for the three month period ended June 30, 2000 was $18.4 million, an increase of $4.4 million from the same period in 1999, due to the aforementioned factors.

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

Net sales for the six months ended June 30, 2000 were $421.8 million, an increase of 77.4% compared to the same period for 1999. The increase in sales resulted principally through an increase in physical volume of products sold, due to the acquisition of OKN.

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,            

        2000          

       1999         

Cobalt - 99.3% Grade
Nickel
Copper

$ 11.91 to $15.25
$  3.62 to $  4.75
$  0.75 to $  0.87

$6.70 to $20.00
$1.81 to $  2.49
$0.61 to $  0.72

The following table sets forth the pounds of organics, inorganics, powders and metals sold during each period:

Six Months Ended June 30,

Percentage

(in millions of pounds)

2000       

1999       

Change

Organics
Inorganics
Powders
Metals

39.8       
53.3       
23.4       
  27.6       
144.1       
                

35.3       
48.0       
20.9       
    0.0       
104.2       
                

12.7%      
11.0%      
12.0%      
--%      
38.3%      

The increase in physical volume of organic products sold was primarily due to generally stronger cobalt catalyst sales in all geographic regions and increased sales of plastic additives in Asia Pacific. The increase in physical volume of inorganic products sold reflects higher sales of battery grade chemicals in Asia Pacific, strong demand for catalyst products in the United States and increased volume of electronics chemicals to the printed circuit board industry. The increase in physical volume of powders sold reflects significant increases in cobalt powder sales to the Asia Pacific battery industry, and increased sales of tungsten powders and cobalt extra fine to the hard metal and diamond tool industries. The increase in physical volume of metal products sold is a result of the acquisition of OKN and the resulting sales of nickel briquettes and cathodes to the European steel industry.

Gross profit increased to $97.4 million for the six month period ended June 30, 2000, a 27.2% increase over the same period in 1999. The improvement in gross profit was due to increased volumes of product sold. Cost of products sold increased to 76.9% for the six months ended June 30, 2000 from 67.8% of net sales during the same period of 1999 primarily as a result of the acquisition of OKN with lower value added nickel products, higher sales of lower value added cobalt containing products and higher nickel and copper pricing.

Selling, general and administrative expenses increased by $4.3 million in the six month period ended June 30, 2000, from the same period in 1999, resulting primarily from the OKN acquisition and general increases in administrative costs due to the Company's growth. Due to the relatively low selling, general and administrative expenses to support OKN and relatively high nickel prices, selling, general and administrative expenses decreased to 7.9% of net sales for the first six months of 2000 compared to 12.3% of net sales for the same period in 1999.

Other expense - net in 2000 was $16.3 million compared to $8.5 million in 1999, due primarily to increased interest expense on higher outstanding borrowings as a result of the OKN acquisition and higher interest rates.

Income taxes as a percentage of income before income taxes decreased to 29.5% for the first six months of 2000 from 30.6% in the same period in 1999. The lower effective tax rate is due primarily to higher income earned in the relatively low statutory tax country of Finland and a tax holiday in Malaysia.

Net income for the six month period ended June 30, 2000 was $33.6 million, an increase of $6.6 million from the same period in 1999, due to the aforementioned factors.

Liquidity and Capital Resources

During the six month period ended June 30, 2000, the Company's net working capital increased by approximately $91 million, compared to December 31, 1999. This increase was primarily the result of the acquisition of OKN and reductions of current liabilities, through cash generated by operations. Capital expenditures in 2000 were primarily related to the continuing smelter construction project in Lubumbashi, 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 April, 2000, the Company's credit facilities were revised and increased to $675 million, in conjunction with the acquisition of OKN. These senior secured credit facilities are comprised of a $325 million revolving credit facility, a $150 million five-year term loan and a $200 million seven-year term loan.

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.

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 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 and products in the mature markets in the United States and Europe; (c) demand for metal-based specialty chemicals and products 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.

A discussion of market risk exposures is included in Part II, Item 7a, "Qualitative and Quantitative Disclosure About Market Risk", of the Company's 1999 Annual Report on Form 10-K. The acquisition of OKN on April 4, 2000 and subsequent assimilation into the Company's operations, increased the Company's exposure to changes in nickel commodity prices through its nickel refining operations, interest rates through increased variable rate borrowings, and foreign currency exchange rates through additional euro operating expenses and income taxes. The Company continues to manage the risks and/or costs associated with such exposure through its regular operating and financing activities.

Item 4

Submission of Matters to a Vote of Security Holders

The annual meeting of stockholders of OM Group, Inc. was held on May 9, 2000. An election of Directors was held at which John E. Mooney and Markku Toivanen were nominated and elected for terms which expire in the year 2003. The following votes were cast with respect to each of the nominees:

Director                

       For      

Against 

  Abstain  

John E. Mooney
Markku Toivanen

20,074,795
19,341,005

0    
0    

616,220
1,350,010

Other directors whose terms of office will continue after the meeting are:

Term of

Director             

Office Expires

Edward W. Kissel
Frank E. Butler
Lee R. Brodeur
Thomas R. Miklich
James P. Mooney

2001
2001
2002
2002
2002

Ernst & Young LLP was re-elected as independent auditors: For - 20,673,996; against - 5,861; abstain - 11,158.

Part II

Other Information

Item 6

Exhibits and Reports on Form 8-K

The following exhibits are included herein:

Exhibit (15.1) Independent Accountants' Review Report

Exhibit (15.2) Letter re: Unaudited Interim Financial Information

Exhibit (27) Financial Data Schedule

The following reports on Form 8-K were filed during the three months ended June 30, 2000:

1.

The Company's Current Report on Form 8-K filed with the Commission on April 18, 2000 regarding the Company's acquisition of Outokumpu Nickel Oy.

2.

The Company's Current Report on Form 8-K/A filed with the Commission on June 19, 2000 regarding the Company's acquisition of Outokumpu Nickel Oy.

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 11, 2000

OM GROUP, INC.

/s/ James M. Materna

 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, 2000, and the related condensed statements of consolidated income for the three-month and six-month periods ended June 30, 2000 and 1999, and the condensed statements of consolidated cash flows for the six-month periods ended June 30, 2000 and 1999. 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 auditing standards generally accepted in the United States, the consolidated balance sheet of OM Group, Inc. as of December 31, 1999, and the related statements of consolidated income, stockholders' equity, and cash flows for the year then ended, not presented herein, and in our report dated February 15, 2000, 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, 1999 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived

/s/ Ernst & Young LLP

Cleveland, Ohio

August 11, 2000

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 10 and August 11, 2000, relating to the unaudited condensed consolidated interim financial statements of OM Group, Inc. that are included in its Forms 10-Q for the quarters ended March 31, 2000 and June 30, 2000.

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

Cleveland, Ohio

August 11, 2000