Back to GetFilings.com



Table of Contents

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, 2003
Commission File Number 0-22572

OM GROUP, INC.
(exact name of registrant as specified in its charter)

     
Delaware
(state or other jurisdiction of
incorporation or organization)
  52-1736882
(I.R.S., Employer
Identification Number)

Tower City
50 Public Square
Suite 3500
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)

Yes      X        No            

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of June 30, 2003: Common Stock, $.01 Par Value — 28,354,804 shares.

 


TABLE OF CONTENTS

Part I Financial Information
Item 1 Financial Statements
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4 Controls and Procedures
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
Item 6 Exhibits and Reports on Form 8-K
SIGNATURE
EX-12 Computation-Ratio of Earnings:Fixed Charges
EX-31.1 302 Certification of CEO
EX-31.2 302 Certification of CFO
EX-32.1 906 Certification of CEO
EX-32.2 906 Certification of CFO


Table of Contents

INDEX
OM GROUP, INC.

       
Part I. Financial Information
 
Item 1.   Financial Statements (Unaudited)
 
    Condensed consolidated balance sheets — June 30, 2003 and December 31, 2002
 
    Condensed statements of consolidated operations — Three months ended June 30, 2003 and 2002; Six months ended June 30, 2003 and 2002
 
    Condensed statements of consolidated cash flows -Six months ended June 30, 2003 and 2002
 
    Notes to condensed consolidated financial statements — June 30, 2003
 
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.   Quantitative and Qualitative Disclosures about Market Risk
 
Item 4.   Controls and Procedures
 
Part II. Other Information
 
Item 1.   Legal Proceedings — Not applicable
 
Item 2.   Changes in Securities and Use of Proceeds — 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
 
    (a)  Exhibits
           (12)    Computation of Ratio of Earnings to Fixed Charges
           (31.1)    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Chief Executive Officer
           (31.2)    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Chief Financial Officer
           (32.1)    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Chief Executive Officer
           (32.2)    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Chief Financial Officer
 
    (b)  Reports on Form 8-K
 
           1. The Company furnished to the SEC a Current Report on Form 8-K under Item 12, filed under Item  9 pursuant to the SEC’s interim guidance, dated April 29, 2003, regarding the Company’s financial results for the quarter ended March 31, 2003.
 
           2. The Company furnished to the SEC a Current Report on Form 8-K under Item 9, dated June 3, 2003, regarding a definitive agreement to sell its Precious Metals business, and a letter of intent to sell its PVC Heat Stabilizer product line.
 
           3. The Company furnished to the SEC a Current Report on Form 8-K under Item 12, filed under Item  9 pursuant to the SEC’s interim guidance, dated June 3, 2003, regarding Second Quarter 2003 financial expectations.
 
    Signature    

 


Table of Contents

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,
          2003   2002
         
 
ASSETS
               
CURRENT ASSETS
               
 
Cash and cash equivalents
  $ 19,518     $ 11,757  
 
Accounts receivable
    110,120       95,829  
 
Inventories
    306,965       295,951  
 
Other current assets
    69,450       90,377  
 
   
     
 
     
Total Current Assets
    506,053       493,914  
PROPERTY, PLANT AND EQUIPMENT
               
 
Land
    5,117       4,970  
 
Buildings and improvements
    175,797       176,110  
 
Machinery and equipment
    510,344       499,226  
 
Furniture and fixtures
    15,558       15,392  
 
   
     
 
 
    706,816       695,698  
 
Less accumulated depreciation
    223,375       196,920  
 
   
     
 
 
    483,441       498,778  
OTHER ASSETS
               
 
Goodwill and other intangible assets
    190,073       188,597  
 
Other assets
    93,882       91,080  
 
Assets of discontinued operations
    1,089,860       1,066,767  
 
   
     
 
TOTAL ASSETS
  $ 2,363,309     $ 2,339,136  
 
   
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
 
Current portion of long-term debt
  $ 7,000     $ 6,750  
 
Accounts payable
    63,317       94,186  
 
Other accrued expenses
    57,225       55,203  
 
   
     
 
     
Total Current Liabilities
    127,542       156,139  
LONG -TERM LIABILITIES
               
   
Long-term debt
    1,145,776       1,187,650  
   
Deferred income taxes
    58,024       64,136  
   
Minority interests and other long-term liabilities
    65,879       64,483  
   
Liabilities of discontinued operations
    444,832       396,843  
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 28,402,163 shares in 2003 and 2002
    284       284  
 
Capital in excess of par value
    490,741       490,741  
 
Retained deficit
    (21,329 )     (17,943 )
 
Treasury stock (47,359 shares in 2003 and 2002, at cost)
    (2,255 )     (2,255 )
 
Accumulated other comprehensive income
    56,305       2,008  
 
Unearned compensation
    (2,490 )     (2,950 )
 
   
     
 
Total Stockholders’ Equity
    521,256       469,885  
 
   
     
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 2,363,309     $ 2,339,136  
 
   
     
 

See notes to condensed Consolidated Financial Statements

 


Table of Contents

Part I Financial Information
Item 1 Financial Statements

OM GROUP, INC.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS

(Thousands of dollars, except per share data)
(Unaudited)

                                   
      Three Months Ended   Six Months Ended
      June 30,   June 30,
     
 
      2003   2002   2003   2002
     
 
 
 
Net sales
  $ 196,719     $ 182,487     $ 406,059     $ 349,041  
Cost of products sold
    161,775       130,836       335,635       250,150  
 
   
     
     
     
 
 
    34,944       51,651       70,424       98,891  
Selling, general and administrative expenses
    20,597       18,288       40,338       38,083  
Restructuring charges
                    3,799          
 
   
     
     
     
 
INCOME FROM OPERATIONS
    14,347       33,363       26,287       60,808  
OTHER INCOME (EXPENSE)
                               
Interest expense
    (10,679 )     (5,800 )     (20,890 )     (12,487 )
Foreign exchange gain
    3,196       6,894       734       6,595  
Investment income and other, net
    492       2,783       963       2,812  
 
   
     
     
     
 
 
    (6,991 )     3,877       (19,193 )     (3,080 )
 
   
     
     
     
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTERESTS
    7,356       37,240       7,094       57,728  
Income taxes
    1,542       8,328       1,542       16,834  
Minority interests
    (1,429 )     25       (1,367 )     (21 )
 
   
     
     
     
 
INCOME FROM CONTINUING OPERATIONS
    7,243       28,887       6,919       40,915  
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES
    (2,868 )     (3,386 )     (10,308 )     7,954  
 
   
     
     
     
 
NET INCOME (LOSS)
  $ 4,375     $ 25,501     $ (3,389 )   $ 48,869  
 
   
     
     
     
 
Net income (loss) per common share — basic
                               
 
Continuing operations
  $ 0.26     $ 1.02     $ 0.24     $ 1.48  
 
Discontinued operations
    (0.11 )     (0.12 )     (0.36 )     0.28  
 
   
     
     
     
 
 
Net income (loss)
  $ 0.15     $ 0.90     $ (0.12 )   $ 1.76  
Net income (loss) per common share — assuming dilution
                               
 
Continuing operations
  $ 0.26     $ 1.01     $ 0.24     $ 1.45  
 
Discontinued operations
    (0.11 )     (0.12 )     (0.36 )     0.29  
 
   
     
     
     
 
 
Net income (loss)
  $ 0.15     $ 0.89     $ (0.12 )   $ 1.74  
Weighted average shares outstanding (000)
                               
 
Basic
    28,306       28,253       28,304       27,696  
 
Assuming dilution
    28,308       28,706       28,305       28,151  
Dividends paid per common share
  $     $ 0.14     $     $ 0.28  

See notes to condensed Consolidated Financial Statements

 


Table of Contents

Part I Financial Information
Item 1 Financial Statements

OM GROUP, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Thousands of dollars)
(Unaudited)

                         
            Six Months Ended
            June 30,
           
            2003   2002
           
 
OPERATING ACTIVITIES
               
   
Income from continuing operations
  $ 6,919     $ 40,915  
   
Items not affecting cash:
               
     
Depreciation and amortization
    30,393       25,754  
     
Foreign exchange gain
    (734 )     (6,595 )
     
Minority interests
    (1,367 )     (21 )
     
Changes in operating assets and liabilities
    (32,491 )     (66,712 )
 
   
     
 
       
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    2,720       (6,659 )
INVESTING ACTIVITIES
               
 
Expenditures for property, plant and equipment, net
    (2,182 )     (41,054 )
 
Investments in unconsolidated joint venture
            (994 )
 
   
     
 
     
NET CASH USED IN INVESTING ACTIVITIES
    (2,182 )     (42,048 )
FINANCING ACTIVITIES
               
   
Payments of long-term debt
    (41,624 )     (245,851 )
   
Dividend payments
          (7,915 )
   
Long-term borrowings
            9,994  
   
Proceeds from exercise of stock options
            2,716  
   
Proceeds from sale of common shares
          225,805  
 
   
     
 
     
NET CASH USED IN FINANCING ACTIVITIES
    (41,624 )     (15,251 )
 
   
     
 
Cash used in continuing operations
    (41,086 )     (63,958 )
Cash provided by discontinued operations (See Note B)
    48,296       61,045  
Effect of exchange rate changes on cash and cash equivalents
    551       977  
 
   
     
 
Increase (decrease) in cash and cash equivalents
    7,761       (1,936 )
Cash and cash equivalents at beginning of period
    11,757       18,852  
 
   
     
 
Cash and cash equivalents at end of period
    19,518       16,916  
 
   
     
 

See notes to condensed Consolidated Financial Statements

 


Table of Contents

Part I Financial Information
Item 1 Financial Statements

OM GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2003
(Thousands of dollars, except as noted and 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, and the interim period results are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
 
Note B   Divestitures of Precious Metals (Subsequent Event) and SCM Metals, Inc.
    On June 3, 2003, the Company announced that it had entered into a definitive agreement with Umicore to sell its Precious Metals business (“PMG business”). This business is comprised of the Precious Metal Chemistry and Metal Management reportable segments, which were acquired by the Company from Degussa in August 2001. The sale to Umicore was completed on July 31, 2003, on which date the Company received gross proceeds of €697 million, or $814 million, before transaction costs, taxes and expenses. The PMG business has been classified as a discontinued operation, and the consolidated financial statements of prior periods have been restated, where applicable, to reflect this business as a discontinued operation. The transaction and related gain on sale will be recorded in the third quarter of 2003.
    The gross proceeds were used to repay the Company’s outstanding indebtedness under its Senior credit facilities. The net proceeds from the sale are expected to be approximately $730 million, after transaction costs and expenses and taxes. During June 2003, the Company received a commitment for a new $150 million revolving credit facility. The new facility, which closed on August 7, 2003, bears interest at an interest rate of LIBOR plus 2.00% to 3.00% or PRIME plus 0.25% to 1.25%, matures in August 2006 and includes covenants that are less stringent than those in the previous Senior facility.
    On April 1, 2003, the Company completed its previously announced sale of its copper powders business — SCM Metal Products, Inc. — for proceeds of $65 million before transaction costs and expenses. The net proceeds, which are included in Cash provided by discontinued operations in the Condensed Statements of Consolidated Cash Flows, were used to repay a portion of the Company’s outstanding indebtedness under its credit facilities. There was no gain or loss recorded on that date, as the business was written-down to fair value in the fourth quarter of 2002. This business has been presented as a discontinued operation for all periods presented.
    Operating results of discontinued operations are summarized as follows (in millions):

 


Table of Contents

                                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2003   2002   2003   2002
   
 
Net sales
  $ 941.9     $ 1,079.1     $ 2,081.6     $ 2,101.3  
Operating income
    22.4       21.6       37.7       46.1  
Interest expense — allocated
    14.0       12.5       29.1       23.4  
Income taxes
    2.9       2.0       6.8       2.0  
     
    The operating results summarized above include an allocation of consolidated interest expense, based upon the estimated net proceeds from the sales of the respective discontinued businesses that are required to be used to re-pay amounts under the Company’s credit facilities.
    The assets and liabilities of these businesses, which have been classified as Assets of Discontinued Operations and Liabilities of Discontinued Operations in the Consolidated Balance Sheet, consist of the following (in millions):
                 
    June 30,   December 31,
    2003   2002
   
 
Current assets
  $ 880.9     $ 829.3  
Property, plant and equipment
    187.1       194.2  
Other long-term assets
    21.9       43.3  
 
   
     
 
Total assets of discontinued operations
  $ 1,089.9     $ 1,066.8  
 
   
     
 
Current liabilities, including accounts payable and other accrued expenses
  $ 256.7     $ 272.0  
Long-term liabilities
    188.1       124.8  
 
   
     
 
Total liabilities of discontinued operations
  $ 444.8     $ 396.8  
 
   
     
 
     
    Current assets include primarily accounts receivable and inventories.
 
Note C   Restructuring Charges
    During the first quarter of 2003, the Company recorded restructuring charges related to continuing operations of $3.8 million. These charges, which represent the continuation of the Company’s restructuring plan that commenced in the fourth quarter of 2002, are recorded in a separate line in the Condensed Statement of Consolidated Operations.
    Restructuring liabilities for continuing operations at December 31, 2002, charges taken in the first quarter of 2003, and amounts utilized in 2003 to date are summarized as follows (in millions):
                                         
    Number of   Workforce   Inventory and other   Facility Exit        
    Employees   Reductions   asset write-downs   and Other   Total
   
 
 
 
 
Balance at 12/31/02
    68     $ 5.2     $ 0     $ 2.0     $ 7.2  
Charges in 2003
    11       0.7       1.5       1.6       3.8  
Utilized in 2003
    (74 )     (2.6 )     (1.5 )     (1.4 )     (5.5 )
 
   
     
     
     
     
 
Balance at 6/30/03
    5     $ 3.3     $ 0     $ 2.2     $ 5.5  
 
   
     
     
     
     
 
     
    In connection with the first quarter 2003 restructuring activities, the Company also recorded charges of

 


Table of Contents

     
    $6.3 million related to discontinued operations, which are included in Income (Loss) from Discontinued Operations.
 
Note D   Inventories
    Inventories consist of the following:
                 
    June 30,   December 31,
    2003   2002
   
 
Raw materials and supplies
  $ 144,303     $ 133,015  
Finished goods
    126,123       119,975  
 
   
     
 
 
    270,426       252,990  
LIFO reserve
    36,539       42,961  
 
   
     
 
Total inventories
  $ 306,965     $ 295,951  
 
   
     
 
     
Note E   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 F   Computation of Net Income (Loss) Per Common Share
    The following table sets forth the computation of net income (loss) per common share and net income (loss) per common share — assuming dilution (shares in thousands):
                                   
      Three Months Ended   Six Months Ended
      June 30,   June 30,
     
 
      2003   2002   2003   2002
     
 
 
 
Net income (loss)
  $ 4,375     $ 25,501     $ (3,389 )   $ 48,869  
 
   
     
     
     
 
Weighted average number of shares outstanding
    28,306       28,253       28,304       27,696  
Dilutive effect of stock-based compensation
    2       453       1       455  
 
   
     
     
     
 
Weighted average number of shares outstanding – assuming dilution
    28,308       28,706       28,305       28,151  
 
   
     
     
     
 
Net income (loss) per common share
  $ 0.15     $ 0.90     $ (0.12 )   $ 1.76  
 
   
     
     
     
 
Net income (loss) per common share – assuming dilution
  $ 0.15     $ 0.89     $ (0.12 )   $ 1.74  
 
   
     
     
     
 

 


Table of Contents

     
Note G   Comprehensive Income
                                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
   
 
    2003   2002   2003   2002
Net income (loss)
  $ 4,375     $ 25,501     $ (3,389 )   $ 48,869  
Unrealized loss on available-for-sale securities
            (2,869 )             (901 )
Foreign currency translation
    43,374       4,363       52,875       9,121  
Unrealized gain on cash flow hedges
    578       1,233       332       4,346  
Additional minimum pension liability
    1,090             1,090        
 
   
     
     
     
 
Total comprehensive income
  $ 49,417     $ 28,228     $ 50,908     $ 61,435  
 
   
     
     
     
 
     
Note H   Stock Compensation — Adoption of SFAS No. 148
    In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, was issued. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition when a company voluntarily changes to the fair value-based method of recognizing expense in results of operations for stock-based employee compensation, including stock options granted to employees. Prior to 2003, the Company accounted for stock-based employee compensation under APB No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Under APB 25, compensation expense has been recorded for restricted stock granted to certain executive officers, but no expense was recorded for stock options granted to employees, as all options had an intrinsic value of zero on the date of grant. During the second quarter of 2003, the Company voluntarily adopted, effective January 1, 2003, the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under the prospective method of adoption selected by the Company under the provisions of SFAS No. 148, the recognition provisions will be applied to all employee awards granted, modified or settled after January 1, 2003. As such, net income for 2003 will include expense for stock options granted to employees in 2003; there have been no such grants during the six months ended June 30, 2003.
    If the Company had previously elected to adopt the fair value provisions of SFAS No. 123 and thereby recorded compensation expense related to employee stock options, pro forma results of operations would have been as follows:
                                   
      Three Months   Six Months
      Ended   Ended
      June 30,   June 30,
     
 
      2003   2002   2003   2002
     
 
 
 
Net income (loss)
                               
 
As reported
  $ 4,375     $ 25,501     $ (3,389 )   $ 48,869  
 
Pro forma
  $ 4,329     $ 24,636     $ (3,507 )   $ 47,280  
Basic net income (loss) per share
                               
 
As reported
  $ 0.15     $ 0.90     $ (0.12 )   $ 1.76  
 
Pro forma
  $ 0.15     $ 0.87     $ (0.12 )   $ 1.71  
Diluted net income (loss) per share
                               
 
As reported
  $ 0.15     $ 0.89     $ (0.12 )   $ 1.74  
 
Pro forma
  $ 0.15     $ 0.86     $ (0.12 )   $ 1.68  

 


Table of Contents

     
Note I   Income Taxes
    Income taxes as a percentage of income from continuing operations before income taxes and minority interests for the six months ended June 30, 2003 were 21.7% compared to 29.2% in the same period in 2002. These effective rates are lower than the statutory rate in the United States due primarily to significant income earned each period in Malaysia, where the Company has a tax holiday, and the allocation of a portion of interest expense in the United States to discontinued operations, which effectively shifted a portion of the U.S. net operating loss without a corresponding tax benefit to discontinued operations. The lower rate in 2003 compared to 2002 is due primarily to higher earnings in the tax holiday country of Malaysia.
 
Note J   Guarantor and Non-Guarantor Subsidiary Information
    In December 2001, the Company issued $400 million in aggregate principal amount of 9.25% Senior Subordinated Notes due 2011 (the “Notes”). These Notes are guaranteed by the Company’s wholly-owned domestic subsidiaries. The guarantees are full, unconditional and joint and several.
    The Company’s foreign subsidiaries are not guarantors of these Notes. The Company, as presented below, represents OM Group, Inc. exclusive of its guarantor subsidiaries and its non-guarantor subsidiaries. Condensed consolidating financial information for the Company, the guarantor subsidiaries, and the non-guarantor subsidiaries is as follows:
                                           
      June 30, 2003
     
              Combined   Combined                  
      The   Guarantor   Non-Guarantor                
Balance Sheet Data Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Assets
                                       
Current assets:
                                       
 
Cash
  $ 2,003     $ 2,621     $ 14,894             $ 19,518  
 
Accounts receivable
    731,220       77,553       431,005     $ (1,129,658 )     110,120  
 
Inventories
            30,070       276,895               306,965  
 
Other current assets
    18,572       3,834       47,044               69,450  
 
   
     
     
     
     
 
Total current assets
    751,795       114,078       769,838       (1,129,658 )     506,053  
Property, plant and equipment, net
            41,652       441,789               483,441  
Goodwill and other intangible assets
    75,830       59,016       55,227               190,073  
Intercompany receivables
    188,604       23,400       1,154,525       (1,366,529 )        
Investment in subsidiaries
    714,780       360,631       1,441,346       (2,516,757 )        
Other assets
    25,584       7,738       60,560               93,882  
Assets of discontinued operations
            110,893       978,967               1,089,860  
 
   
     
     
     
     
 
Total assets
  $ 1,756,593     $ 717,408     $ 4,902,252     $ (5,012,944 )   $ 2,363,309  
 
   
     
     
     
     
 
Liabilities and stockholders’ equity
                                       
Current liabilities:
                                       
 
Current portion of long-term debt
  $ 7,000                       $ 7,000  
 
Accounts payable
    40,881     $ 350,415     $ 403,516     $ (731,495 )     63,317  
 
Other accrued expenses
    (3,782 )     13,517       47,490               57,225  
 
   
     
     
     
     
 
Total current liabilities
    44,099       363,932       451,006       (731,495 )     127,542  
Long-term debt
    1,145,776                               1,145,776  
Deferred income taxes
    35,297               22,727               58,024  
Other long-term liabilities
    137               65,742               65,879  
Intercompany payables
            407,729       1,341,600       (1,749,329 )        
Liabilities of discontinued operations
            52,503       392,329               444,832  
Stockholders’ equity
    531,284       (106,756 )     2,628,848       (2,532,120 )     521,256  
 
   
     
     
     
     
 
Total liabilities and stockholders’ equity
  $ 1,756,593     $ 717,408     $ 4,902,252     $ (5,012,944 )   $ 2,363,309  
 
   
     
     
     
     
 

 


Table of Contents

                                           
      December 31, 2002
     
              Combined   Combined                
Balance Sheet Data The   Guarantor   Non-guarantor                
      Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Assets
                                       
Current assets:
                                       
 
Cash and cash equivalents
  $ 667     $ 1,887     $ 9,203           $ 11,757  
 
Accounts receivable
    752,800       85,378       404,084     $ (1,146,433 )     95,829  
 
Inventories
            29,686       266,265               295,951  
 
Other current assets
    26,553       4,902       58,922               90,377  
 
 
   
     
     
     
     
 
Total current assets
    780,020       121,853       738,474       (1,146,433 )     493,914  
Property, plant and equipment, net
            42,260       456,518               498,778  
Goodwill and other intangible assets
            134,922       53,675               188,597  
Intercompany receivables
    300,768               1,146,191       (1,446,959 )        
Investment in subsidiaries
    655,822       522,939       1,268,535       (2,447,296 )        
Other assets
    21,231       10,146       59,703               91,080  
Assets of discontinued operations
            208,051       858,716               1,066,767  
 
 
   
     
     
     
     
 
Total assets
  $ 1,757,841     $ 1,040,171     $ 4,581,812     $ (5,040,688 )   $ 2,339,136  
 
 
   
     
     
     
     
 
Liabilities and stockholders’ equity
                                       
Current liabilities:
                                       
 
Current portion of long-term debt
  $ 6,750                             $ 6,750  
 
Accounts payable
    65,917     $ 382,699     $ 373,228     $ (727,658 )     94,186  
 
Other accrued expenses
    (7,681 )     5,742       57,142               55,203  
 
 
   
     
     
     
     
 
Total Current liabilities
    64,986       388,441       430,370       (727,658 )     156,139  
Long-term debt
    1,187,650                               1,187,650  
Deferred income taxes
    35,320       (131 )     28,947               64,136  
Other long-term liabilities
            1,824       62,659               64,483  
Intercompany payables
            557,894       1,230,175       (1,788,069 )        
Liabilities of discontinued operations
            73,242       323,601               396,843  
Shareholder’s equity
    469,885       18,901       2,506,060       (2,524,961 )     469,885  
 
 
   
     
     
     
     
 
Total liabilities and stockholders’ equity
  $ 1,757,841     $ 1,040,171     $ 4,581,812     $ (5,040,688 )   $ 2,339,136  
 
 
   
     
     
     
     
 

 


Table of Contents

                                         
    Three Months Ended June 30, 2003
   
            Combined   Combined                
Income Statement Data The   Guarantor   Non-Guarantor                
    Company   Subsidiaries   Subsidiaries   Eliminations   Total
   
 
 
 
 
Net sales
          $ 36,756     $ 219,684     $ (59,721 )   $ 196,719  
Cost of products sold
            26,550       194,946       (59,721 )     161,775  
 
   
     
     
     
     
 
 
            10,206       24,738               34,944  
Selling, general and administrative expenses
            5,450       15,147               20,597  
 
   
     
     
     
     
 
Income from operations
            4,756       9,591               14,347  
Interest expense
  $ (8,655 )     (1,684 )     (18,916 )     18,576       (10,679 )
Foreign exchange gain (loss)
    451       (28 )     2,773               3,196  
Investment income and other, net
    4,866       509       13,693       (18,576 )     492  
 
   
     
     
     
     
 
Income (loss) from continuing operations before income taxes and minority interests
    (3,338 )     3,553       7,141               7,356  
Income taxes
                    1,542               1,542  
Minority interests
                    (1,429 )             (1,429 )
 
   
     
     
     
     
 
Income (loss) from continuing operations
    (3,338 )     3,553       7,028               7,243  
Loss from discontinued operations
    (14,000 )     (2,721 )     (13,853 )             (2,868 )
 
   
     
     
     
     
 
Net income (loss)
  $ (17,338 )   $ 832     $ 20,881             $ 4,375  
 
   
     
     
     
     
 

 


Table of Contents

                                           
      Three Months Ended June 30, 2002
     
              Combined   Combined                
Income Statement Data The   Guarantor   Non-Guarantor                
      Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Net sales
          $ 36,806     $ 207,417     $ (61,736 )   $ 182,487  
Cost of products sold
            25,288       167,284       (61,736 )     130,836  
 
   
     
     
     
     
 
 
            11,518       40,133               51,651  
Selling, general and administrative expenses
            8,966       9,322               18,288  
 
   
     
     
     
     
 
Income (loss) from operations
            2,552       30,811               33,363  
Interest expense
  $ (5,928 )     (3,466 )     (11,771 )     15,365       (5,800 )
Foreign exchange gain (loss)
    717       (543 )     6,720               6,894  
Investment income and other, net
    3,547       (94 )     14,695       (15,365 )     2,783  
 
   
     
     
     
     
 
Income (loss) from continuing operations before income
                                       
 
taxes and minority interests
    (1,664 )     (1,551 )     40,455               37,240  
Income taxes
    (2,419 )     (1,156 )     11,903               8,328  
Minority interests
                    25               25  
 
   
     
     
     
     
 
Income (loss) from continuing operations
    755     (395 )     28,527               28,887  
Loss from discontinued operations
    (11,700 )     (2,304 )     10,618             (3,386 )
 
   
     
     
     
     
 
Net income (loss)
  $ (10,945 )   $ (2,699 )   $ 39,145             $ 25,501  
 
   
     
     
     
     
 

 


Table of Contents

                                           
      Six Months Ended June 30, 2003
     
              Combined   Combined                
Income Statement Data     The   Guarantor   Non-Guarantor                
      Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Net sales
          $ 77,982     $ 442,681     $ (114,604 )   $ 406,059  
Cost of products sold
            55,927       394,312       (114,604 )     335,635  
 
   
     
     
     
     
 
 
            22,055       48,369               70,424  
Selling, general and administrative expenses
            24,788       15,550               40,338  
Restructuring charges
            2,694       1,105               3,799  
 
   
     
     
     
     
 
Income (loss) from operations
            (5,427 )     31,714               26,287  
Interest expense
  $ (18,149 )     (5,386 )     (37,041 )     39,686       (20,890 )
Foreign exchange gain (loss)
    524       (13 )     223               734  
Investment income and other, net
    10,293       311       30,045       (39,686 )     963  
 
   
     
     
     
     
 
Income (loss) from continuing operations before income
                                       
 
taxes and minority interests
    (7,332 )     (10,515 )     24,941               7,094  
Income taxes
            7       1,535               1,542  
Minority interests
                    (1,367 )             (1,367 )
 
   
     
     
     
     
 
Income (loss) from continuing operations
    (7,332 )     (10,522 )     24,773               6,919  
Loss from discontinued operations
    (28,100 )     (5,774 )     23,566               (10,308 )
 
   
     
     
     
     
 
Net income (loss)
  $ (35,432 )   $ (16,296 )   $ 48,339             $ (3,389 )
 
   
     
     
     
     
 

 


Table of Contents

                                           
      Six Months Ended June 30, 2002
     
              Combined   Combined                
Income Statement Data     The   Guarantor   Non-Guarantor                
      Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Net sales
          $ 71,321     $ 385,439     $ (107,719 )   $ 349,041  
Cost of products sold
            46,522       311,347       (107,719 )     250,150  
 
   
     
     
     
         
 
            24,799       74,092               98,891  
Selling, general and administrative expenses
            19,704       18,379               38,083  
 
   
     
     
     
     
 
Income (loss) from operations
            5,095       55,713               60,808  
Interest expense
  $ (12,058 )     (7,162 )     (26,632 )     33,365       (12,487 )
Foreign exchange gain (loss)
    513       (764 )     6,846               6,595  
Investment income and other, net
    8,164       204       27,809       (33,365 )     2,812  
 
   
     
     
             
 
Income (loss) from continuing operations before income
                                       
 
taxes and minority interests
    (3,381 )     (2,627 )     63,736               57,728  
Income taxes
    (6,794 )     (1,896 )     25,524               16,834  
Minority interests
                  (21 )             (21 )
 
   
     
     
     
     
 
Income (loss) from continuing operations
    3,413 )     (731 )     38,233               40,915  
Loss from discontinued operations
    (21,900 )     (3,695 )     33,549               7,954  
 
   
     
     
     
     
 
Net income (loss)
  $ (18,487 )   $ (4,426 )   $ 71,782             $ 48,869  
 
   
     
     
     
     
 

 


Table of Contents

                                           
      Six Months Ended June 30, 2003
     
              Combined   Combined                
Cash Flow Data The   Guarantor   Non-Guarantor                
      Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Net cash provided by (used in) operating activities
  $ 42,960     $ 1,964     $ (42,204 )   $                   $ 2,720  
Investing activities:
                                       
 
Expenditures for property, plant and equipment, net
          (507 )     (1,675 )           (2,182 )
 
   
     
     
     
     
 
Net cash used in investing activities
          (507 )     (1,675 )           (2,182 )
Financing activities:
                                       
 
Payments of long-term debt
    (41,624 )                           (41,624 )
 
   
     
     
     
     
 
Net cash used in financing activities
    (41,624 )                         (41,624 )
 
   
     
     
     
     
 
Cash provided by (used in) continuing operations
    1,336       1,457       (43,879 )           (41,086 )
Cash (used in) provided by discontinued operations
            (723 )     49,019               48,296  
Effect of exchange rate changes on cash and cash equivalents
                  551             551  
 
   
     
     
     
     
 
Increase in cash and cash equivalents
    1,336       734       5,691               7,761  
Cash and cash equivalents at beginning of the period
    667       1,887       9,203             11,757  
 
   
     
     
     
     
 
Cash and cash equivalents at end of the period
  $ 2,003     $ 2,621     $ 14,894           $ 19,518  
 
   
     
     
     
     
 
 
              Six Months Ended June 30, 2002        
     
              Combined   Combined                
Cash Flow Data The   Guarantor   Non-Guarantor                
      Company   Subsidiaries   Subsidiaries   Eliminations   Total
     
 
 
 
 
Net cash provided by (used in) operating activities
  $ 15,694     $ 1,542     $ (23,895 )       $ (6,659 )
Investing activities:
                                       
 
Expenditures for property, plant and equipment, net
            (663 )     (40,391 )             (41,054 )
 
Investments in unconsolidated joint venture
                    (994 )             (994 )
 
   
     
     
     
     
 
Net cash used in investing activities
            (663 )     (41,385 )             (42,048 )
Financing activities:
                                       
 
Payments of long-term debt
    (245,839 )     (12 )                     (245,851 )
 
Dividend payments
    (7,915 )                             (7,915 )
 
Long-term borrowings
    9,994                               9,994  
 
Proceeds from exercise of stock options
    2,716                               2,716  
 
Issuance of common stock
    225,805                               225,805  
 
   
     
     
     
     
 
Net cash provided by (used in) financing activities
    (15,239 )     (12 )                     (15,251 )
 
   
     
     
     
     
 
Cash provided by (used in) continuing operations
    455       867       (65,280 )             (63,958 )
Cash (used in) provided by discontinued operations
            (838 )     61,883               61,045  
Effect of exchange rate changes on cash and cash equivalents
                    977               977  
 
   
     
     
     
     
 
Increase (decrease) in cash and cash equivalents
    455       29       (2,420 )             (1,936 )
Cash and cash equivalents at beginning of the period
    638       1,647       16,567               18,852  
 
   
     
     
     
     
 
Cash and cash equivalents at end of the period
  $ 1,093     $ 1,676     $ 14,147         $ 16,916  
 
   
     
     
     
     
 

     
Item 2   Management’s Discussion and Analysis of Financial Condition and Results of Operations
    On June 3, 2003, the Company announced that it had entered into a definitive agreement to sell its Precious Metals business (PMG) to Umicore. This business is comprised of the Company’s Precious Metal Chemistry and Metal Management reportable segments, which were acquired by the Company from Degussa in August 2001. The sale to Umicore was completed on July 31, 2003. The PMG business has been classified as a discontinued operation, and prior periods have been restated to reflect this business as a discontinued operation. The continuing operations of the Company represent the historical base metals business for all periods presented.
    Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002
    Net sales for the three months ended June 30, 2003 were $196.7 million, an increase of 7.8% compared to the same period in 2002. The increase was the result of higher metal market prices for cobalt and nickel, resulting in higher selling prices for the Company’s products. This increase was partially offset by lower metal-contained sales volumes, due primarily to lower nickel volumes for the quarter.
    The following information summarizes market prices of the primary raw materials used by the Company:
                 
    Market Price Ranges per Pound
    Three Months Ended June 30,
   
    2003   2002
Cobalt - 99.3% Grade
  $8.68 to $9.45   $6.55 to $8.45
Nickel
  $3.56 to $4.25   $2.97 to $3.33
     
    The following information summarizes the physical volumes of metals sold:
                         
    Three Months Ended June 30,        
   
  Percentage
(in millions of pounds) 2003   2002   Change

 
 
 
Cobalt
    4.9       4.6       6.5 %
Nickel
    26.1       29.1       -10.3 %
     
    Gross profit decreased to $34.9 million, or 17.8% of net sales, for the three month period

 


Table of Contents

     
    ended June 30, 2003, a 32.3% decrease compared to $51.7 million, or 28.3% of net sales, for the same period in 2002. The decrease in gross profit was primarily due to the negative impact of the strengthened euro against the dollar on the Company’s manufacturing expenses in Finland; increased raw material costs; LIFO charges in 2003 compared to benefits in 2002; and lower nickel production volumes at the Company’s facility in Harjavalta, Finland due to a planned maintenance shut-down. The effects were partially offset by the positive impact of higher cobalt and nickel prices.
    Selling, general and administrative expenses in 2003 increased as a percentage of sales, to 10.5% in 2003 compared to 10.0% in the 2002 period. This increase is primarily the result of the impact of the strengthened euro against the dollar in 2003 compared to 2002, partially offset by cost reductions from restructuring activities initiated in the fourth quarter of 2002. When the euro strengthens against the dollar, selling, general and administrative expenses at the Company’s facilities in Europe are translated into dollars at a higher rate, resulting in higher dollar expenses.
    Other expense — net was $7.0 million for the three-month period ended June 30, 2003, compared to income of $3.9 million for the same period in 2002, due primarily to higher interest expense in 2003 compared to 2002 as a result of higher interest rates under the Company’s December 2002 credit agreement and higher average outstanding borrowings, and smaller foreign exchange gains in 2003 ($3.2 million) compared to 2002 ($6.9 million).
    Income taxes as a percentage of income from continuing operations before income taxes and minority interests were 21.0% compared to 22.4% in the same period in 2002. These effective rates are lower than the statutory rate in the United States due primarily to significant income earned each period in Malaysia, where the Company has a tax holiday, and the allocation of a portion of interest expense in the United States to discontinued operations, which effectively shifted a portion of the U.S. net operating loss without a corresponding tax benefit to discontinued operations.
    Loss from discontinued operations was $2.9 million in 2003 compared to $3.4 million in 2002. The improvement is due primarily to the sale of certain unprofitable operations on or before April 1, 2003, which therefore impacted 2002 but not 2003, partially offset by higher interest expense as a result of higher interest rates in the current year period.
    Net income for the three-month period ended June 30, 2003 was $4.4 million, compared to net income of $25.5 million for the corresponding period in 2002, due primarily to the aforementioned factors.
    Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002
    Net sales for the six months ended June 30, 2003 were $406.1 million, an increase of 16.3% compared to the same period in 2002. The increase was the result of higher metal market prices for cobalt and nickel, resulting in higher selling prices for the Company’s products. This increase was partially offset by lower metal-contained sales volumes, due primarily to lower nickel volumes for the period.
    The following information summarizes market prices of the primary raw materials used by the Company:
                 
    Market Price Ranges per Pound
    Six Months Ended June 30,
   
    2003   2002
   
 
Cobalt - 99.3% Grade
  $6.45 to $9.45   $6.40 to $8.45
Nickel
  $3.28 to $4.25   $2.63 to $3.33
     
  The following information summarizes the physical volumes of metals sold:
                         
    Six Months Ended June 30,        
   
  Percentage
(in millions of pounds) 2003   2002   Change

 
 
 
Cobalt
    10.0       9.0       11.1 %
Nickel
    57.0       59.5       -4.2 %

 


Table of Contents

     
    Gross profit decreased to $70.4 million, or 17.3% of net sales, for the six-month period ended June 30, 2003, a 28.8% decrease compared to $98.9 million, or 28.3% of net sales, for the same period in 2002. The decrease in gross profit was primarily due to the negative impact of the strengthened euro against the dollar on the Company’s manufacturing expenses in Finland; LIFO charges in 2003 compared to benefits in 2002; and lower nickel production volumes at the Company’s facility in Harjavalta, Finland due to a planned maintenance shut-down. The effects were partially offset by the positive impact of higher cobalt and nickel prices and healthy demand in certain key end-markets.
    Selling, general and administrative expenses in 2003 remained flat at 10.9% of sales compared to the 2002 period. These amounts were impacted positively in 2003 by cost reductions from restructuring activities initiated in the fourth quarter of 2002, which were offset by the impact of the strengthened euro against the dollar in 2003 compared to 2002, and additional restructuring charges of $3.8 million recorded in the first quarter of 2003.
    Other expense — net was $19.2 million for the six-month period ended June 30, 2003, compared to $3.1 million for the same period in 2002, due primarily to higher interest expense in 2003 compared to 2002 as a result of higher interest rates under the Company’s December 2002 credit agreement and higher average outstanding borrowings, and smaller foreign exchange gains in 2003 ($0.7 million) compared to 2002 ($6.6 million).
    Income taxes as a percentage of income from continuing operations before income taxes and minority interests were 21.7% compared to 29.2% in the same period in 2002. These effective rates are lower than the statutory rate in the United States due primarily to significant income earned each period in Malaysia, where the Company has a tax holiday, and the allocation of a portion of interest expense in the United States to discontinued operations, which effectively shifted a portion of the U.S. net operating loss without a corresponding tax benefit to discontinued operations. The lower rate in 2003 compared to 2002 is due primarily to higher earnings in the tax holiday country of Malaysia.
    Loss from discontinued operations, net of income taxes was $10.3 million in 2003 compared to income of $8.0 million in 2002, due primarily to restructuring changes taken in 2003, higher interest expense as a result of higher interest rates, and higher tax expense.
    Net loss for the six-month period ended June 30, 2003 was $3.4 million, compared to net income of $48.9 million for the corresponding period in 2002, due primarily to the aforementioned factors.
    Liquidity and Capital Resources
    During the six-month period ended June 30, 2003, the Company’s net working capital increased by approximately $40.7 million. This increase was primarily the result of a decrease in accounts payable of $30.9 million due to prepayments made by the Company for certain raw materials during the quarter, and an increase in accounts receivable of $14.3 million due to higher sales in the second quarter of 2003 compared to the fourth quarter of 2002. Capital expenditures in 2003 were $2.2 million and primarily related to ongoing projects to maintain current operating levels.
    During the six months ended June 30, 2003, the Company’s total debt balances decreased to $1.153 billion from $1.194 billion. This decrease represents primarily cash repayments using the net proceeds from the sale of SCM Metal Products, Inc. on April 1, 2003 (See Note B). Subsequent to June 30, the Company completed the sale of its Precious Metals business to Umicore for cash proceeds of $814 million, before transaction costs, taxes and expenses (See Note B). The gross proceeds were used to repay the Company’s outstanding indebtedness under its Senior Credit facilities. The Company’s $400 million Senior Subordinated Notes remain outstanding. The net proceeds from the sale are expected to be approximately $730 million, after transaction costs and expenses and taxes.
    During June 2003, the Company received a commitment for a new $150 million revolving credit facility. The new facility, which closed on August 7, 2003, bears interest at an interest rate of LIBOR plus 2.00% to 3.00% or PRIME plus 0.25% to 1.25%, matures in August 2006 and includes covenants that are less restrictive than those in the previous Senior facility.

 


Table of Contents

     
    Critical Accounting Policies
    The consolidated financial statements include accounts of the company and all majority-owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. There has been no change in the company’s critical accounting policies as disclosed in Form 10-K filed for the year ended December 31, 2002, except that policies associated with the divested Precious Metals business are no longer applicable. In addition, no new critical accounting policies have been adopted in the first six months of 2003, except for the adoption of SFAS No. 123, as amended by SFAS No. 148, effective January 1, 2003, related to stock-based employee compensation (See Note H).
    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. This report contains statements that the Company believes may be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not historical facts and generally can be identified by use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee” or other words or phrases of similar import. Similarly, statements that describe the Company’s objectives, plans or goals also are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that are difficult to predict, may be beyond the Company’s control and could cause actual results to differ materially from those currently anticipated. Factors that could materially affect these forward-looking statements can be found in this report.
    Important facts that may affect the Company’s expectations, estimates or projections include:
     
  the price and supply of raw materials, particularly cobalt and nickel;
  the demand for metal-based specialty chemicals and products in the Company’s markets;
  the effect of fluctuations in currency exchange rates on the Company’s international operations;
  the effect of non-currency risks of investing in and conducting operations in foreign countries, including political, social, economic and regulatory factors;
  the impact of the Company’s restructuring program on its continuing operations;
  the potential impact of the Company being named in a 2002 United Nations panel report focusing on companies and individuals operating in the Democratic Republic of Congo;
  the potential impact of an adverse result of the shareholder class action lawsuits filed against the Company and the named executives;
  the general level of global economic activity and demand for the Company’s products.
     
    The Company does not assume any obligation to update these forward-looking statements.

 


Table of Contents

     
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 2002 Annual Report on Form 10-K. There have been no material changes during the six months ended June 30, 2003, except that risks associated with the divested Precious Metals business are no longer applicable.
 
Item 4   Controls and Procedures
    (a) Evaluation of Disclosure Controls and Procedures
    The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2003. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to the Company is made known to them by others within the Company.
    (b) Changes in Internal Controls
    There were no significant changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.
 
Part II   Other Information
Item 4   Submission of Matters to a Vote of Security Holders
    The annual meeting of stockholders of OM Group, Inc. was held on May 6, 2003. 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 2006. The following votes were cast with respect to each nominee:
                 
Director   For   Withheld Authority

 
 
John E. Mooney
    24,999,380       382,596  
Markku Toivanen
    25,089,246       292,730  
     
    Ernst & Young LLP was re-elected as independent auditors: For - 24,887,181; against — 421,837; abstain — 72,958.
 
Item 6   Exhibits and Reports on Form 8-K
    EXHIBITS
    (12) Computation of Ratio of Earnings to Fixed Charges

 


Table of Contents

     
   
    (31.1) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Chief Executive Officer
    (31.2) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Chief Financial Officer
    (32.1) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Chief Executive Officer
    (32.2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Chief Financial Officer
    REPORTS ON FORM 8-K
The Company furnished to the SEC a Current Report on Form 8-K under Item 12, filed under Item 9 pursuant to the SEC’s interim guidance, dated April 29, 2003, regarding the Company’s financial results for the quarter ended March 31, 2003.
    The Company furnished to the SEC a Current Report on Form 8-K under Item 9, dated June 3, 2003, regarding the Company’s definitive agreement to sell its Precious Metals business to Umicore, and a letter of intent to sell its PVC Heat Stabilizer product line.
    The Company furnished to the SEC a Current Report on Form 8-K under Item 12, filed under Item 9 pursuant to the SEC’s interim guidance, dated June 3, 2003, regarding the Company’s Second Quarter 2003 financial expectations.

 


Table of Contents

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, 2003   OM GROUP, INC.
 
    /s/ Thomas R. Miklich

Thomas R. Miklich
Chief Financial Officer
(Duly authorized signatory of OM Group, Inc.)