-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K+8UDJ6fbLEmkPUSsETQpcyr9ium5ejt+1gBelLoL9W5rmksoH2ehqCQC8KM5U3o Lykb0oF49H5h0OuGSwnXjw== 0000899723-96-000012.txt : 19961104 0000899723-96-000012.hdr.sgml : 19961104 ACCESSION NUMBER: 0000899723-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961101 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OM GROUP INC CENTRAL INDEX KEY: 0000899723 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 521736882 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22572 FILM NUMBER: 96651893 BUSINESS ADDRESS: STREET 1: 3800 TERMINAL TOWER STREET 2: 3800 TERMINAL TOWER CITY: CLEVELAND STATE: OH ZIP: 44113-2204 BUSINESS PHONE: 2167810083 MAIL ADDRESS: STREET 1: 3900 TERMINAL TOWER CITY: CLEVELAND STATE: OH ZIP: 44113 10-Q 1 OM GROUP, INC. FORM 10-Q FOR QUARTER ENDING 09/30/96 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 September 30, 1996 Commission File Number 0-22572 OM GROUP, INC. (exact name of registrant as specified in its charter) Delaware 52-1736882 (state or other jurisdiction of (I.R.S., Employer incorporation or organization) Identification Number) Tower City 3800 Terminal Tower Cleveland, Ohio 44113-2204 (Address of principal executive offices) (zip code) (216) 781-0083 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No_______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of September 30, 1996: Common Stock, $.01 Par Value - 12,410,460 shares. INDEX OM GROUP, INC. Part I. Financial Information Item 1. Financial Statements Condensed consolidated balance sheets -- September 30, 1996 and December 31, 1995 Condensed consolidated statements of income -- Three months ended September 30, 1996 and 1995; Nine months ended September 30, 1996 and 1995 Condensed consolidated statements of cash flows -- Nine months ended September 30, 1996 and 1995 Notes to condensed consolidated financial statements -- September 30, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 1. Legal Proceedings - Not applicable Item 2. Changes in Securities - Not applicable Item 3. Defaults upon Senior Securities - Not applicable Item 4. Submission of Matters to a Vote of Security Holders - Not applicable Item 5. Other information - Not applicable Item 6. Exhibits and Reports on Form 8-K (11) Statement regarding computation of earnings per share (15) Independent Accountants' Review Report (15) Letter re: Unaudited Interim Financial Information (27) Financial Data Schedule -1- Part I Financial Information Item 1 Financial Statements OM GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands of dollars) September 30, 1996 December 31, (Unaudited) 1995 --------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,263 $ 9,098 Accounts receivable 58,561 71,959 Inventories 194,997 139,067 Other current assets 10,082 13,817 -------- -------- Total Current Assets 268,903 233,941 PROPERTY, PLANT AND EQUIPMENT Land 468 331 Buildings and improvements 38,738 33,607 Machinery and equipment 113,645 102,576 Furniture and fixtures 4,476 3,427 -------- -------- 157,327 139,941 Less accumulated depreciation 54,044 42,661 -------- -------- 103,283 97,280 OTHER ASSETS Unprocessed inventory 20,231 Goodwill and other intangible assets 22,932 23,842 Other assets 3,963 2,979 -------- -------- TOTAL ASSETS $419,312 $358,042 ======== ======== -2- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 3,548 $ 5,263 Accounts payable 83,147 61,917 Other accrued expenses 14,080 19,766 -------- -------- Total Current Liabilities 100,775 86,946 LONG-TERM LIABILITIES Long-term debt 96,295 89,845 Contract payable 20,231 Deferred income taxes 21,860 18,597 Other long-term liabilities 1,224 1,226 STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value: Authorized 2,000,000 shares; no shares issued or outstanding Common stock, $0.01 par value: Authorized 30,000,000 shares; issued 12,506,250 shares 125 125 Capital in excess of par value 102,088 102,088 Retained earnings 80,067 61,763 Treasury stock (95,790 shares at September 30, 1996 and 86,112 shares at December 31, 1995, at cost) (3,120) (2,512) Foreign currency translation adjustments (233) (36) -------- -------- Total Stockholders' Equity 178,927 161,428 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $419,312 $358,042 ======== ======== See notes to condensed Consolidated Financial Statements -3- 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 Nine Months Ended September 30, September 30, -------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- --------- OPERATIONS Net sales $89,071 $80,967 $293,409 $255,370 Cost of products sold 68,166 62,490 231,263 200,215 ------- ------- ------- ------- 20,905 18,477 62,146 55,155 Selling, general and administrative expenses 7,869 7,378 23,768 22,285 ------- ------- ------- ------- INCOME FROM OPERATIONS 13,036 11,099 38,378 32,870 OTHER INCOME (EXPENSE) Interest expense (1,776) (1,387) (5,530) (3,744) Interest income 86 80 217 199 Foreign exchange (loss) gain (45) (29) 167 (414) ------- ------- ------- ------- (1,735) (1,366) (5,146) (3,959) ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 11,301 9,763 33,232 28,911 Income taxes 3,631 3,157 10,828 9,493 ------- ------- -------- -------- NET INCOME $ 7,670 $ 6,606 $ 22,404 $ 19,418 ======= ======= ======== ======== Net income per share $0.60 $0.52 $1.75 $1.52 Dividends paid per common share $0.11 $0.09 $0.33 $0.27 Weighted average shares (000) 12,834 12,779 12,838 12,752 See notes to condensed Consolidated Financial Statements -4- Part I Financial Information Item 1 Financial Statements OM GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of dollars) (Unaudited) Nine Months Ended September 30, ------------------- 1996 1995 -------- -------- OPERATING ACTIVITIES Net income $22,404 $19,418 Items not affecting cash: Depreciation and amortization 12,537 9,996 Foreign exchange (gain) loss (167) 414 Deferred income taxes 3,263 4,874 Changes in operating assets and liabilities (24,120) (27,960) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 13,917 6,742 INVESTING ACTIVITIES Expenditures for property, plant and equipment, net (17,662) (24,225) Acquisition of businesses (150) (14,854) ------- ------- NET CASH USED IN INVESTING ACTIVITIES (17,812) (39,079) FINANCING ACTIVITIES Dividend payments (4,100) (3,356) Long-term borrowings 19,318 67,556 Payments of long-term debt (14,427) (37,155) Purchase of treasury stock (608) (1,061) ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 183 25,984 Effect of exchange rate changes on cash (123) 12 ------- ------- Decrease in cash (3,835) (6,341) Cash and cash equivalents at beginning of period 9,098 8,592 ------- ------- Cash and cash equivalents at end of period $ 5,263 $ 2,251 ======= ======= See notes to condensed Consolidated Financial Statements -5- Part I Financial Information Item 1 Financial Statements OM GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 1996 Note A Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair financial presentation have been included. For further information refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. Note B Inventories Current inventories consist of the following: September 30, December 31, 1996 1995 -------- -------- Raw materials and supplies $127,740 $ 99,853 Finished goods 83,258 74,715 -------- -------- 210,998 174,568 LIFO reserve (16,001) (35,501) -------- -------- Total current inventories $194,997 $139,067 ======== ======== Unprocessed inventory represents cobalt slag feedstock. The cost of the cobalt obtained from the slag feedstock is based upon prevailing market prices. A twelve-month supply of the cobalt slag is included in inventory; the remainder of the slag is classified as non-current unprocessed inventory. 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. -6- Part I Financial Information Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Three Months Ended September 30, 1996 Compared to Three Months Ended September 30, 1995 Net sales for the three months ended September 30, 1996 were $89.1 million, an increase of 10.0% compared to the same period for 1995. The increase in sales resulted principally from increases in physical volume of products sold and from changes in product mix, more than offsetting a decline in the Company's product prices resulting from decreasing cobalt market prices. Cobalt market prices ranged from $20 to $24 per pound during the three month period ended September 30, 1996 compared to a range of $27 to $29 per pound during the same period in 1995. The market price of nickel ranged from $3.13 to $3.45 per pound during the three months ended September 30, 1996 compared to $3.77 to $4.15 per pound during the same period in 1995. Pounds of product sold by the Company were approximately 24.2 million pounds in the three month period ended September 30, 1996 compared to 21.3 million pounds in the same period in 1995. The following table sets forth the pounds of carboxylates, salts and powders sold during each period: Three Months Ended September 30, Percentage (in millions of pounds) 1996 1995 Change ----- ----- ------- Carboxylates 11.2 10.4 7.7% Salts 12.3 10.4 18.3% Powders 0.7 0.5 40.0% ----- ----- 24.2 21.3 13.6% ===== ===== The increase in carboxylate products sold resulted principally from higher sales in Europe. The increase in salt products sold resulted principally from higher sales of cobalt based products. The increase in powders sold resulted principally from higher sales of coarse grade powders. Gross profit increased to $20.9 million for the three month period ended September 30, 1996, a 13.1% increase over the same period in 1995. The improvement in gross profit was primarily the result of higher physical volume of products sold. Cost of products sold decreased to 76.5% of net sales for the three months ended September 30, 1996 from 77.2% of net sales during the same period of 1995 primarily because of lower cobalt market prices. Selling, general and administrative expenses decreased to 8.8% of net sales for the third quarter of 1996 from 9.1% of net sales for the same period in 1995, as net sales increased greater than general increases in these expenses. -7- Other expense in 1996 was $1.7 million compared to $1.3 million in 1995, due primarily to increased interest expense on higher outstanding borrowings. Income taxes as a percentage of income before tax remained the same at approximately 32% for the three months of 1996 compared to the same period of 1995. Net income for the three month period ended September 30, 1996 was $7.7 million, an increase of $1.1 million from the same period in 1995, due to the aforementioned factors. Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30, 1995 Net sales for the nine months ended September 30, 1996 were $293.4 million, an increase of 14.9% compared to the same period for 1995. The increase in sales resulted principally from increases in physical volume of products sold and from changes in product mix, more than offsetting a decline in the Company's product prices resulting from decreasing cobalt market prices. Cobalt market prices ranged from $20 to $32 per pound during the nine month period ended September 30, 1996 compared to a range of $27 to $30 per pound during the same period in 1995. The market price of nickel ranged from $3.13 to $3.78 per pound during the nine months ended September 30, 1996 compared to $3.17 to $4.57 per pound during the same period in 1995. Pounds of product sold by the Company were approximately 72.0 million pounds in the nine month period ended September 30, 1996 compared to 67.1 million pounds in the same period in 1995. The following table sets forth the pounds of carboxylates, salts and powders sold during each period: Nine Months Ended September 30, Percentage (in millions of pounds) 1996 1995 Change ----- ----- ------- Carboxylates 32.3 31.2 3.5% Salts 37.6 34.5 9.0% Powders 2.1 1.4 50.0% ----- ----- 72.0 67.1 7.3% ===== ===== The increase in salt products sold resulted principally from higher sales of cobalt based products. The increase in powders sold resulted principally from higher sales of coarse grade cobalt powders. Gross profit increased to $62.1 million for the nine month period ended September 30, 1996, a 12.7% increase over the same period in 1995. The improvement in gross profit was primarily the result of higher physical volume of cobalt based products sold. Cost of products sold remained approximately the same at 78% of net sales for the nine months ended September 30, 1996 compared to the same period of 1995. -8- Selling, general and administrative expenses decreased to 8.1% of net sales for the first nine months of 1996 from 8.7% of net sales for the same period in 1995, as net sales increased greater than general increases in these expenses. Other expense in 1996 was $5.1 million compared to $4.0 million in 1995, due primarily to increased interest expense on higher outstanding borrowings. Income taxes as a percentage of income before tax remained approximately the same at 33% as compared to the same period in 1995. Net income for the nine month period ended September 30, 1996 was $22.4 million, an increase of $3.0 million from the same period in 1995, due to the aforementioned factors. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1996, the Company's working capital needs increased due to cobalt inventory purchases and transportation costs and advance payments associated with certain cobalt shipments. These factors were partially offset by falling cobalt raw material prices. The Company's revolving credit facility was revised in October, 1996 to increase available credit from $60 million to $120 million and expand its sources of capital by adding two new institutions. The Company believes that it will have sufficient cash generated by operations and available through its revolving and other credit facilities to provide for its future working capital and capital expenditure requirements and to pay quarterly dividends on its common stock, subject to the Board's discretion. Subject to several limitations in its credit facilities, the Company may incur additional borrowings to finance working capital and certain capital expenditures, including, without limitation, the purchase of additional raw materials. -9- Part II Other Information Item 6 Exhibits and Reports on Form 8-K The following exhibits are included herein: Exhibit (11) Statement Regarding Computation of Earnings Per Share Exhibit (15) Independent Accountants' Review Report Exhibit (15) Letter re: Unaudited Interim Financial Information Exhibit (27) Financial Data Schedule There were no reports on Form 8-K filed during the three months ended September 30, 1996. -10- 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. November 1, 1996 OM GROUP, INC. /s/ James M. Materna -------------------------- James M. Materna Chief Financial Officer (Duly authorized signatory of OM Group, Inc.) -11- Exhibit 11 OM GROUP, INC. STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE Three Months Ended Nine Months Ended September 30, September 30, ---------------------- --------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Issued at September 30 12,506,250 12,506,250 12,506,250 12,506,250 Net effect of repurchased treasury shares and dilutive stock options based on the treasury stock method 328,162 272,573 332,241 246,128 ---------- ---------- ---------- ---------- Totals 12,834,412 12,778,823 12,838,491 12,752,378 ========== ========== ========== ========== Net income (000) $7,670 $6,606 $22,404 $19,418 ====== ====== ======= ======= Per share amount $0.60 $0.52 $1.75 $1.52 ====== ====== ======= ======= -12- 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 September 30, 1996, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 1996 and 1995, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of OM Group, Inc. as of December 31, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended, not presented herein, and in our report dated January 30, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Ernst & Young LLP --------------------- Ernst & Young LLP Cleveland, Ohio November 1, 1996 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 9, 1996, August 2, 1996 and November 1, 1996, 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, 1996, June 30, 1996 and September 30, 1996: 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 November 1, 1996 EX-27 2 FINANCIAL DATA SCHEDULE FOR 3RD QUARTER 1996 10-Q
5 This schedule contains summary financial information extracted from the OM Group, Inc. Consolidated Balance Sheets at September 30, 1996 (Unaudited) and the OM Group, Inc. Consolidated Statements of Income for the three months and nine months ended September 30, 1996 (Unaudited) and is qualified in its entirely by reference to such financial statements. 1,000 3-MOS 9-MOS DEC-31-1996 DEC-31-1996 SEP-30-1996 SEP-30-1996 5,263 5,263 0 0 58,561 58,561 0 0 194,997 194,997 268,903 268,903 157,327 157,327 54,044 54,044 419,312 419,312 100,775 100,775 0 0 0 0 0 0 125 125 178,927 178,927 419,312 419,312 89,071 293,409 89,071 293,409 68,166 231,263 68,166 231,263 7,869 23,768 0 0 1,776 5,530 11,301 33,232 3,631 10,828 7,670 22,404 0 0 0 0 0 0 7,670 22,404 .60 1.75 .60 1.75 -----END PRIVACY-ENHANCED MESSAGE-----