##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION







FORM 10-K






|  |                                                                                         
|- | ----------------------------------------------------------------------------------------
|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934







|  |                                                                                             
|- | --------------------------------------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934




Commission file number 001-12515


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 No.)
|                                                          
|127 Public Square,
    1500 Key Tower,
    Cleveland, Ohio |  | 44114-1221         
|(Address of principal executive offices)                   |  | (Zip Code)         

216-781-0083




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


|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|                                        |  |                                          
|Common Stock, par value $0.01 per share |  | New York Stock Exchange                  

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




o x


o


x o


o x








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Table of Contents


|         |  |                                                                                                                      |  |  |    | 
|-------- |  | -------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I  
|Item 1.  |  | Business                                                                                                             |  |  | 2  | 
|Item 2.  |  | Properties                                                                                                           |  |  | 7  | 
|Item 3.  |  | Legal Proceedings                                                                                                    |  |  | 8  | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |  | 9  | 
|PART II 
|Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |  | 10 | 
|Item 6.  |  | Selected Financial Data                                                                                              |  |  | 10 | 
|Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |  | 11 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |  |  | 22 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                                          |  |  | 25 | 
|         |  | Report of Independent Registered Public
    Accounting Firm                                                          |  |  | 25 | 
|         |  | Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                                     |  |  | 28 | 
|         |  | Statements of Consolidated Operations for
    the years ended December 31, 2004, 2003 and 2002                       |  |  | 29 | 
|         |  | Statements of Consolidated Cash Flows for
    the years ended December 31, 2004, 2003 and 2002                       |  |  | 30 | 
|         |  | Statements of Consolidated
    Stockholders Equity for the years ended December 31,
    2004, 2003 and 2002         |  |  | 31 | 
|         |  | Notes to Consolidated Financial
    Statements                                                                       |  |  | 33 | 
|Item 9.  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |  | 67 | 
|Item 9A. |  | Controls and Procedures                                                                                              |  |  | 67 | 
|Item 9B. |  | Other Information                                                                                                    |  |  | 69 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the
    Registrant                                                               |  |  | 70 | 
|Item 11. |  | Executive Compensation                                                                                               |  |  | 72 | 
|Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |  | 75 | 
|Item 13. |  | Certain Relationships and Related
    Transactions                                                                   |  |  | 76 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                               |  |  | 77 | 
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules and
    Signatures                                                           |  |  | 78 | 



1



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PART I







|        |         
|------- | --------
|Item 1. | Business

General










Recent Developments


New President and Chief Executive
Officer


2



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Agreements to Settle Class Action and Derivative
Lawsuits




Products






|                                         |  |                                                 |  |                                                                                                                                                                          
|---------------------------------------- |  | ----------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Applications                             |  | Metals Used                                     |  | Product Attributes                                                                                                                                                       
|                                         |  |                                                 |  |                                                                                                                                                                          
|Stainless Steel                          |  | Nickel                                          |  | Improves rust resistance in demanding applications; improves
    corrosion resistance in aggressive high temperatures or
    corrosive environments                      
|Rechargeable Batteries                   |  | Cobalt, Nickel                                  |  | Improves the electrical conduction of rechargeable batteries
    used in cellular phones, video cameras, portable computers,
    power tools and hybrid electric vehicles
|Coatings and paints                      |  | Cobalt, Manganese, Calcium, Zirconium, Aluminum |  | Promotes faster drying in such products as house paints
    (exterior and interior) and industrial and marine coatings                                                   
|Printing Inks                            |  | Cobalt, Manganese                               |  | Promotes faster drying in various printing inks                                                                                                                          
|Tires                                    |  | Cobalt                                          |  | Promotes bonding of metal-to-rubber in radial tires                                                                                                                      
|Construction Equipment and Cutting Tools |  | Cobalt                                          |  | Strengthens and adds durability to diamond and machine cutting
    tools and drilling equipment used in construction, oil and gas
    drilling, and quarrying            
|Petrochemical Refining                   |  | Cobalt, Nickel                                  |  | Reduces sulfur dioxide and nitrogen emissions                                                                                                                            
|Ceramics and Glassware                   |  | Cobalt, Nickel                                  |  | Provides color for pigments, earthenware and glass and
    facilitates adhesion of porcelain to metal                                                                    
|Polyester Resins                         |  | Cobalt, Copper, Zinc                            |  | Accelerates the curing of polyester resins found in reinforced
    fiberglass boats, storage tanks, bathrooms, sports equipment,
    automobile and truck components     
|Memory Disks                             |  | Nickel                                          |  | Enhances information storage on disks for computers                                                                                                                      

3



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Competition




Customers






Raw Materials








4



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5



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Research and Development






Patents and Trademarks




Environmental Matters










Employees




6



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SEC Reports


www.omgi.com





Item 2. Properties








|                       |  |           |  |           |  |             |         |  |              |                    
|---------------------- |  | --------- |  | --------- |  | ----------- | ------- |  | ------------ | -------------------
|                       |  |           |  | Facility  |  | Approximate |         |  |             
|Location               |  | Segment   |  | Function* |  | Square Feet |         |  | Leased/Owned
|                       |  |           |  |           |  |             |         |  |             
|Africa:                |  |           |  |           |  |             |         |  |              |                    
|Lubumbashi, DRC        |  | Cobalt    |  | M         |  |             | 116,000 |  |              | joint venture (55%)
|                      
|North America:         |  |           |  |           |  |             |         |  |              |                    
|Cleveland, Ohio        |  | Corporate |  | A         |  |             | 24,500  |  |              | leased             
|Westlake, Ohio         |  | Cobalt    |  | A, R      |  |             | 35,200  |  |              | owned              
|Belleville, Ontario    |  | Cobalt    |  | M         |  |             | 38,000  |  |              | owned              
|Franklin, Pennsylvania |  | Cobalt    |  | M         |  |             | 331,500 |  |              | owned              
|Newark, New Jersey     |  | Nickel    |  | A,R       |  |             | 32,000  |  |              | owned              
|                      
|Asia-Pacific:          |  |           |  |           |  |             |         |  |              |                    
|Kalgoorlie, Australia  |  | Nickel    |  | M         |  |             | 294,400 |  |              | leased             
|Kuching, Malaysia      |  | Nickel    |  | M, A, R   |  |             | 25,000  |  |              | owned              
|Tokyo, Japan           |  | Cobalt    |  | A         |  |             | 2,300   |  |              | leased             
|Taipei, Taiwan         |  | Cobalt    |  | A         |  |             | 4,000   |  |              | leased             
|Singapore              |  | Nickel    |  | W,A       |  |             | 4,700   |  |              | leased             

7



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|                    |  |         |  |           |  |             |         |  |              |       
|------------------- |  | ------- |  | --------- |  | ----------- | ------- |  | ------------ | ------
|                    |  |         |  | Facility  |  | Approximate |         |  |             
|Location            |  | Segment |  | Function* |  | Square Feet |         |  | Leased/Owned
|                    |  |         |  |           |  |             |         |  |             
|Europe:             |  |         |  |           |  |             |         |  |              |       
|Manchester, England |  | Cobalt  |  | M, A, R   |  |             | 73,300  |  |              | owned 
|Espoo, Finland      |  | Nickel  |  | A         |  |             | 3,000   |  |              | leased
|Harjavalta, Finland |  | Nickel  |  | M, A,R    |  |             | 591,000 |  |              | owned 
|Kokkola, Finland    |  | Cobalt  |  | M, A,R    |  |             | 470,000 |  |              | owned 






|  |                                                                                                    
|- | ---------------------------------------------------------------------------------------------------
|* | M  Manufacturing/refining; A 
    Administrative; R  Research and Development;
    W  Warehouse




Item 3. Legal Proceedings








8



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




9



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PART II







|        |                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

|                                             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |       |  
|-------------------------------------------- | ----------------------- | ----------------------- | ------- | ---- | ---- | - | ------- | ----- | - | - | ------- | ----- | - | ---- | ------- | ----- | - | - | ------- | ----- | -
|                                             |                         | Year Ended December 31, |        
|                                             |                         |                         |        
|                                             |                         | 2004                    |         |      | 2003 |   |         | 2002  |   |   | 2001    |       |   | 2000 |        
|(In millions, except per share data)         |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |        
|Income Statement Data:                       |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|Net sales                                    |                         | $                       | 1,347.3 |      |      | $ | 912.1   |       |   | $ | 738.9   |       |   | $    | 681.6   |       |   | $ | 764.4   |      
|Cost of products sold                        |                         |                         | 1,016.9 |      |      |   | 732.1   |       |   |   | 690.8   |       |   |      | 578.0   |       |   |   | 630.8   |      
|                                             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |        
|Gross profit                                 |                         |                         | 330.4   |      |      |   | 180.0   |       |   |   | 48.1    |       |   |      | 103.6   |       |   |   | 133.6   |      
|Selling, general and administrative expenses |                         |                         | 129.1   |      |      |   | 197.0   |       |   |   | 136.0   |       |   |      | 81.3    |       |   |   | 70.7    |      
|                                             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |        
|Income (loss) from operations                |                         |                         | 201.3   |      |      |   | (17.0   | )     |   |   | (87.9   | )     |   |      | 22.3    |       |   |   | 62.9    |      
|Other expense  net                          |                         |                         | (39.1   | )    |      |   | (25.6   | )     |   |   | (44.6   | )     |   |      | (36.5   | )     |   |   | (36.6   | )    
|Income (loss) from continuing operations     |                         |                         | 125.7   |      |      |   | (56.3   | )     |   |   | (110.7  | )     |   |      | (13.1   | )     |   |   | 1.0     |      
|Income (loss) of discontinued operations     |                         |                         | 2.9     |      |      |   | 140.0   |       |   |   | (98.1   | )     |   |      | (22.1   | )     |   |   | (13.9   | )    
|                                             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |        
|Net income (loss)                            |                         | $                       | 128.6   |      |      | $ | 83.7    |       |   | $ | (208.8  | )     |   | $    | (35.2   | )     |   | $ | (12.9   | )    
|Basic earnings per common share:             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|                                             | Continuing operations   |                         | $       | 4.42 |      |   | $       | (1.99 | ) |   | $       | (3.95 | ) |      | $       | (0.55 | ) |   | $       | 0.04  |  
|                                             | Discontinued operations |                         |         | 0.10 |      |   |         | 4.94  |   |   |         | (3.50 | ) |      |         | (0.91 | ) |   |         | (0.58 | )
|                                             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |        
|                                             | Net income (loss)       |                         | $       | 4.52 |      |   | $       | 2.95  |   |   | $       | (7.45 | ) |      | $       | (1.46 | ) |   | $       | (0.54 | )
|Diluted earnings per common share:           |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|                                             | Continuing operations   |                         | $       | 4.39 |      |   | $       | (1.99 | ) |   | $       | (3.95 | ) |      | $       | (0.55 | ) |   | $       | 0.04  |  
|                                             | Discontinued operations |                         |         | 0.10 |      |   |         | 4.94  |   |   |         | (3.50 | ) |      |         | (0.91 | ) |   |         | (0.58 | )
|                                             |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |        
|                                             | Net income (loss)       |                         | $       | 4.49 |      |   | $       | 2.95  |   |   | $       | (7.45 | ) |      | $       | (1.46 | ) |   | $       | (0.54 | )
|Dividends declared and paid per common share |                         |                         |        |      |      |   |        |       |   | $ | 0.42    |       |   | $    | 0.52    |       |   | $ | 0.44    |      
|Ratio of earnings to fixed charges(a)        |                         |                         | 5.0     | x    |      |   |        |       |   |   |        |       |   |      |        |       |   |   | 1.5     | x    
|Balance Sheet Data:                          |                         |                         |         |      |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |      
|Total assets                                 |                         | $                       | 1,333.6 |      |      | $ | 1,211.4 |       |   | $ | 2,105.3 |       |   | $    | 2,074.0 |       |   | $ | 1,055.1 |      
|Long-term debt, excluding current portion(b) |                         |                         | 24.7    |      |      |   | 430.5   |       |   |   | 1,195.6 |       |   |      | 1,299.7 |       |   |   | 551.1   |      



|    |  |                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Earnings were inadequate to cover fixed charges by
    $42.9 million, $134.5 million, and $18.5 million
    in 2003, 2002 and 2001, respectively.
|   
|(b) |  | Amount in 2004 excludes $400 million of long-term debt in
    default which is classified as current.                                            









10



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Goodwill
and Other Intangible Assets.











|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Overview








11



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Dispositions and Restructuring










Overall operating results for 2004, 2003 and 2002




|                                             |  |      |         |   |  |  |      |   |  |   |       |      |  |  |      |    |  |   |        |   |  |  |       |   
|-------------------------------------------- |  | ---- | ------- | - |  |  | ---- | - |  | - | ----- | ---- |  |  | ---- | -- |  | - | ------ | - |  |  | ----- | --
|                                             |  | 2004 |         |   |  |  | 2003 |   |  |   |       | 2002 |  |  |     
|(Millions of dollars & percent of net sales) |  |      |         |   |  |  |      |   |  |   |       |      |  |  |     
|Net sales                                    |  | $    | 1,347.3 |   |  |  |      |   |  | $ | 912.1 |      |  |  |      |    |  | $ | 738.9  |   |  |  |       |   
|Cost of products sold                        |  |      | 1,016.9 |   |  |  |      |   |  |   | 732.1 |      |  |  |      |    |  |   | 690.8  |   |  |  |       |   
|                                             |  |      |         |   |  |  |      |   |  |   |       |      |  |  |      |    |  |  
|Gross profit                                 |  |      | 330.4   |   |  |  | 24.5 | % |  |   | 180.0 |      |  |  | 19.7 | %  |  |   | 48.1   |   |  |  | 6.5   | % 
|Selling, general and administrative expenses |  |      | 129.1   |   |  |  | 9.6  | % |  |   | 197.0 |      |  |  | 21.6 | %  |  |   | 136.0  |   |  |  | 18.4  | % 
|                                             |  |      |         |   |  |  |      |   |  |   |       |      |  |  |      |    |  |  
|Income (loss) from operations                |  |      | 201.3   |   |  |  | 14.9 | % |  |   | (17.0 | )    |  |  | (1.9 | )% |  |   | (87.9  | ) |  |  | (11.9 | )%
|Other expense, net                           |  |      | (39.1   | ) |  |  |      |   |  |   | (25.6 | )    |  |  |      |    |  |   | (44.6  | ) |  |  |       |   
|Income tax expense (benefit)                 |  |      | 35.1    |   |  |  |      |   |  |   | 14.5  |      |  |  |      |    |  |   | (13.6  | ) |  |  |       |   
|Income (loss) from continuing operations     |  |      | 125.7   |   |  |  |      |   |  |   | (56.3 | )    |  |  |      |    |  |   | (110.7 | ) |  |  |       |   
|Income (loss) from discontinued operations   |  |      | 2.9     |   |  |  |      |   |  |   | 140.0 |      |  |  |      |    |  |   | (98.1  | ) |  |  |       |   
|                                             |  |      |         |   |  |  |      |   |  |   |       |      |  |  |      |    |  |  
|Net income (loss)                            |  | $    | 128.6   |   |  |  |      |   |  | $ | 83.7  |      |  |  |      |    |  | $ | (208.8 | ) |  |  |       |   
|                                             |  |      |         |   |  |  |      |   |  |   |       |      |  |  |      |    |  |  

12



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2004 operating results compared to 2003
















13



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Cobalt segment













Nickel segment







14



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Corporate expenses




2003 operating results compared to 2002










15



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Cobalt segment













16



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Nickel segment













Corporate expenses




Liquidity and Capital Resources


Operating Activities




17



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Investing and Financing Activities












18



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Shareholder Litigation Obligation










19



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Contractual Obligations




|                               |  |       |           |  |           |   |           |           |  |   |           |  |  |            |         |  |  |   |        | 
|------------------------------ |  | ----- | --------- |  | --------- | - | --------- | --------- |  | - | --------- |  |  | ---------- | ------- |  |  | - | ------ | 
|                               |  | Total |           |  | 2005-2006 |   |           | 2007-2008 |  |   | 2009-2010 |  |  | After 2010 |        
|                               |  |       |           |  |           |   |           |           |  |   |           |  |  |            |        
|Purchase obligations(1)        |  | $     | 1,343,663 |  |           | $ | 802,216   |           |  | $ | 413,881   |  |  | $          | 127,566 |  |  |   | NCD    | 
|Debt obligations(2)            |  |       | 423,000   |  |           |   | 411,500   |           |  |   | 11,500    |  |  |            |        |  |  |   |       | 
|Interest payments on debt      |  |       | 299,248   |  |           |   | 75,624    |           |  |   | 75,624    |  |  |            | 74,000  |  |  | $ | 74,000 | 
|Operating lease obligations    |  |       | 20,806    |  |           |   | 7,724     |           |  |   | 5,991     |  |  |            | 5,028   |  |  |   | 2,063  | 
|Other long-term liabilities(3) |  |       | 16,371    |  |           |   | 2,098     |           |  |   | 2,242     |  |  |            | 2,543   |  |  |   | 9,488  | 
|                               |  |       |           |  |           |   |           |           |  |   |           |  |  |            |        
|Total                          |  | $     | 2,103,088 |  |           | $ | 1,299,162 |           |  | $ | 509,238   |  |  | $          | 209,137 |  |  | $ | 85,551 | 
|                               |  |       |           |  |           |   |           |           |  |   |           |  |  |            |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For 2005 through 2010, purchase obligations include raw material
    contractual obligations reflecting estimated future payments
    based on committed tons of material per the applicable contract
    multiplied by the reference/market price of each metal. The
    price used in the computation is the average daily price for the
    last week of December 2004 for each respective metal.
    Commitments made under these contracts represent future
    purchases in line with expected usage. The contractual cash
    obligations after 2010 are not currently determinable (NCD).
|   
|(2) | Commencing March 31, 2004, the $400 million of
    9.25% Senior Subordinated Notes due 2011 was in default
    under the indenture governing the notes due to the delay of the
    Company filing its 2003 Form 10-K with the SEC (see
    Note G to the consolidated financial statements contained
    in Item 8 of this Annual Report). Such Form 10-K was
    filed with the SEC on March 31, 2005.                                                                                                                                                                                          
|   
|(3) | Represents future pension and other post-employment benefit
    payments to comply with funding requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Critical Accounting Policies










20



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Accounting for Stock-Based
Compensation Transition and Disclosure, Accounting for Stock-Based
Compensation, Accounting for Stock Issued to Employees, Accounting for Stock-Based
Compensation.










21



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Cautionary Statement for Safe Harbor Purposes
Under the Private Securities Litigation Reform Act of 1995








|  |                                                                                                                                                                                                                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the completion of the settlements of the shareholder class
    action and derivative lawsuits filed against the Company,
    certain of its executives and its directors in a manner that is
    consistent with the definite agreement and agreement in
    principle reached with the lead plaintiffs in such lawsuits;                                                                          
| 
| | the speed and sustainability of price changes in cobalt and
    nickel;                                                                                                                                                                                                                                                                                                                            
| 
| | the potential for lower of cost or market write-downs of the
    carrying value of inventory necessitated by decreases in the
    market prices of cobalt and nickel;                                                                                                                                                                                                                              
| 
| | the availability of competitively priced supplies of raw
    materials, particularly cobalt and nickel;                                                                                                                                                                                                                                                                                            
| 
| | the effect of the Companys inability to meet the SEC and
    NYSE filing obligations on a timely basis upon funding
    availability under the Companys credit facilities or upon
    debt obligations outstanding;                                                                                                                                                                              
| 
| | the effect of the Company not completing the documentation and
    testing of its internal controls over financial reporting such
    that management of the Company and its independent registered
    public accounting firm are unable to report as to such internal
    control over financial reporting;                                                                                      
| 
| | the risk that new or modified internal controls, implemented in
    response to the 2004 investigation by the audit committee of the
    Companys board of directors and the Companys
    examination of its internal control over financial reporting
    pursuant to Section 404 of the Sarbanes-Oxley Act, are not
    effective and need to be improved, resulting in additional
    expense;
| 
| | 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 and conducting
    operations in foreign countries, including political, social,
    economic and regulatory factors;                                                                                                                                                                                                                                
| 
| | the outcome of the previously announced SEC Division of
    Enforcement review of the investigation conducted by the
    Companys audit committee; and                                                                                                                                                                                                                                            
| 
| | the general level of global economic activity and demand for the
    Companys products.                                                                                                                                                                                                                                                                                                           






|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk




22



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##### 









|                                          |                          |                   |   |         |        |  |   |       |   |      |      |       |   |      |   |       |       |  |  |       |  |  |       |   |  |  |   |         |  |  |   |         | 
|----------------------------------------- | ------------------------ | ----------------- | - | ------- | ------ |  | - | ----- | - | ---- | ---- | ----- | - | ---- | - | ----- | ----- |  |  | ----- |  |  | ----- | - |  |  | - | ------- |  |  | - | ------- | 
|                                          |                          | December 31, 2004 |   |         |        |  |   |       |  
|                                          |                          |                   |   |         | There- |  |   |       |   | Fair |     
|                                          |                          | 2005              |   |         | 2006   |  |   | 2007  |   |      | 2008 |       |   | 2009 |   |       | after |  |  | Total |  |  | Value |  
|(Thousands of dollars)                    |                          |                   |   |         |        |  |   |       |   |      |      |       |   |      |   |       |       |  |  |       |  |  |       |  
|Long-term debt, including current portion |                          |                   |   |         |        |  |   |       |   |      |      |       |   |      |   |       |       |  |  |       |  |  |       |   |  |  |   |         |  |  |   |        
|                                          | Fixed rate               |                   | $ | 400,000 | (a)    |  |   |      |   |      |      |      |   |      |   |      |       |  |  |      |  |  |       |  |  |  | $ | 400,000 |  |  | $ | 426,000 | 
|                                          | Fixed interest rate      |                   |   | 9.25    | %      |  |   |       |   |      |      |       |   |      |   |       |       |  |  |       |  |  |       |   |  |  |   |         |  |  |   |         | 
|                                          | Variable rate            |                   | $ | 5,750   |        |  | $ | 5,750 |   |      | $    | 5,750 |   |      | $ | 5,750 |       |  |  |      |  |  |       |  |  |  | $ | 23,000  |  |  |   | 23,000  | 
|                                          | Average interest rate(b) |                   |   | 3.53    | %      |  |   | 3.53  | % |      |      | 3.53  | % |      |   | 3.53  | %     |  |  |       |  |  |       |   |  |  |   |         |  |  |   |         | 

23



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##### 



|                                          |                       |                   |  |   |        |  |  |      |  |      |      |   |  |      |  |   |       |  |   |        |  |  |       |         |  |  |   |         |  |  |   |         | 
|----------------------------------------- | --------------------- | ----------------- |  | - | ------ |  |  | ---- |  | ---- | ---- | - |  | ---- |  | - | ----- |  | - | ------ |  |  | ----- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                          |                       | December 31, 2003 |  |   |        |  |  |      | 
|                                          |                       |                   |  |   | There- |  |  |      |  | Fair |     
|                                          |                       | 2004              |  |   | 2005   |  |  | 2006 |  |      | 2007 |   |  | 2008 |  |   | after |  |   | Total  |  |  | Value |        
|(Thousands of dollars)                    |                       |                   |  |   |        |  |  |      |  |      |      |   |  |      |  |   |       |  |   |        |  |  |       |        
|Long-term debt, including current portion |                       |                   |  |   |        |  |  |      |  |      |      |   |  |      |  |   |       |  |   |        |  |  |       |         |  |  |   |         |  |  |   |        
|                                          | Fixed rate            |                   |  |  |        |  |  |     |  |      |      |  |  |      |  |  |       |  |   |       |  |  | $     | 400,000 |  |  | $ | 400,000 |  |  | $ | 416,000 | 
|                                          | Average interest rate |                   |  |   |        |  |  |      |  |      |      |   |  |      |  |   |       |  |   |        |  |  |       | 9.25%   |  |  |   |         |  |  |   |         | 
|                                          | Variable rate         |                   |  |  |        |  |  |     |  |      |      |  |  |      |  |  |       |  | $ | 22,900 |  |  | $     |        |  |  | $ | 22,900  |  |  | $ | 22,900  | 
|                                          | Average interest rate |                   |  |   |        |  |  |      |  |      |      |   |  |      |  |   |       |  |   | 3.91%  |  |  |       |         |  |  |   |         |  |  |   |         | 






|       |                                                                                                                                                                                                                    
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)   | Represents long-term debt in default. See Note G to the
    consolidated financial statements contained in Item 8 of
    this Annual Report for further discussion.                                                
|      
|(b)   | The interest rate is based on the LIBOR rate (as of
    November 1, 2004) plus 2.75%. See Note G to the
    consolidated financial statements contained in Item 8 of
    this Annual Report for further discussion.



24



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##### 








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm














Accounting for Stock-Based Compensation






| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





25



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##### 






Report of Independent Registered Public Accounting Firm


On Internal Control over Financial Reporting


The Board of Directors and Shareholders of OM Group, Inc.
















|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company maintained inadequate controls over the financial
    statement close process. These control deficiencies, which
    relate primarily to the Americas operating location, resulted in
    errors in the depreciation of fixed assets, amortization of
    intangible assets, deferral of costs, valuation of inventory,
    recording of accruals, revenue recognition, classification of
    certain assets and liabilities and elimination of intercompany
    profit in inventory. These errors resulted in adjustments to
    such accounts. When aggregated, these control deficiencies
    constitute a material weakness over the financial statement
    close process.

26



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##### 





|  |                                                                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company maintained inadequate controls over the recording of
    income tax contingency reserves and deferred income tax assets,
    liabilities and the related valuation allowance. These control
    deficiencies resulted in adjustments to such accounts.







| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





27



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##### 






Consolidated Balance Sheets


|                                           |                                                                              |                                                                             |           |         |      |   |           |          |     | 
|------------------------------------------ | ---------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------- | ------- | ---- | - | --------- | -------- | --- | 
|                                           |                                                                              | December 31                                                                 |          
|                                           |                                                                              |                                                                             |          
|                                           |                                                                              | 2004                                                                        |           |         | 2003 |  
|(Thousands of dollars, except share data)  |                                                                              |                                                                             |           |         |      |  
|Assets                                     |                                                                              |                                                                             |           |         |      |   |           |         
|Current assets:                            |                                                                              |                                                                             |           |         |      |   |           |         
|                                           | Cash and cash equivalents                                                    |                                                                             | $         | 26,779  |      |   | $         | 54,719   |    
|                                           | Accounts receivable, less allowance of $1,960 in 2004 and $2,022
    in 2003 |                                                                             |           | 161,346 |      |   |           | 136,700  |    
|                                           | Inventories                                                                  |                                                                             |           | 415,517 |      |   |           | 269,201  |    
|                                           | Advances to suppliers                                                        |                                                                             |           | 32,498  |      |   |           | 19,400   |    
|                                           | Other                                                                        |                                                                             |           | 52,719  |      |   |           | 45,669   |    
|                                           |                                                                              |                                                                             |           |         |      |  
|Total current assets                       |                                                                              |                                                                             | 688,859   |         |      |   | 525,689   |         
|Property, plant and equipment, at cost     |                                                                              |                                                                             |           |         |      |   |           |         
|                                           | Land                                                                         |                                                                             |           | 4,982   |      |   |           | 5,511    |    
|                                           | Buildings and improvements                                                   |                                                                             |           | 161,566 |      |   |           | 157,738  |    
|                                           | Machinery and equipment                                                      |                                                                             |           | 493,930 |      |   |           | 470,435  |    
|                                           | Furniture and fixtures                                                       |                                                                             |           | 17,130  |      |   |           | 16,287   |    
|                                           |                                                                              |                                                                             |           |         |      |  
|                                           |                                                                              |                                                                             | 677,608   |         |      |   | 649,971   |         
|                                           | Less accumulated depreciation                                                |                                                                             |           | 287,796 |      |   |           | 238,611  |    
|                                           |                                                                              |                                                                             |           |         |      |  
|                                           |                                                                              |                                                                             | 389,812   |         |      |   | 411,360   |         
|Other assets:                              |                                                                              |                                                                             |           |         |      |   |           |         
|                                           | Goodwill                                                                     |                                                                             |           | 181,871 |      |   |           | 178,678  |    
|                                           | Receivables from joint venture partners                                      |                                                                             |           | 29,379  |      |   |           | 51,187   |    
|                                           | Other                                                                        |                                                                             |           | 44,780  |      |   |           | 44,524   |    
|                                           |                                                                              |                                                                             |           |         |      |  
|Total assets                               |                                                                              | $                                                                           | 1,334,701 |         |      | $ | 1,211,438 |         
|                                           |                                                                              |                                                                             |           |         |      |  
|Liabilities and stockholders equity       |                                                                              |                                                                             |           |         |      |   |           |         
|Current liabilities:                       |                                                                              |                                                                             |           |         |      |   |           |         
|                                           | Current portion of long-term debt                                            |                                                                             | $         | 5,750   |      |   | $         |         |    
|                                           | Long-term debt in default                                                    |                                                                             |           | 400,000 |      |   |           |         |    
|                                           | Accounts payable                                                             |                                                                             |           | 132,312 |      |   |           | 136,190  |    
|                                           | Accrued employee costs                                                       |                                                                             |           | 17,062  |      |   |           | 15,623   |    
|                                           | Retained liabilities of businesses sold                                      |                                                                             |           | 21,837  |      |   |           | 41,654   |    
|                                           | Shareholder litigation accrual                                               |                                                                             |           | 74,000  |      |   |           |         |    
|                                           | Other                                                                        |                                                                             |           | 50,835  |      |   |           | 51,659   |    
|                                           |                                                                              |                                                                             |           |         |      |  
|Total current liabilities                  |                                                                              |                                                                             | 701,796   |         |      |   | 245,126   |         
|                                           | Long-term debt                                                               |                                                                             |           | 24,683  |      |   |           | 430,466  |    
|                                           | Deferred income taxes                                                        |                                                                             |           | 31,033  |      |   |           | 29,042   |    
|                                           | Shareholder litigation accrual                                               |                                                                             |           | 18,000  |      |   |           | 84,500   |    
|                                           | Minority interests                                                           |                                                                             |           | 44,168  |      |   |           | 42,726   |    
|                                           | Other                                                                        |                                                                             |           | 27,989  |      |   |           | 29,126   |    
|Stockholders equity:                      |                                                                              |                                                                             |           |         |      |   |           |         
|                                           | Preferred stock, $.01 par value:                                             |                                                                             |           |         |      |   |           |          |    
|                                           |                                                                              | Authorized 2,000,000 shares, no shares issued or outstanding                |           |         |      |   |           |          |     | 
|                                           | Common stock, $.01 par value:                                                |                                                                             |           |         |      |   |           |          |    
|                                           |                                                                              | Authorized 60,000,000 shares; issued 28,494,098 shares
    in 2004 and 2003 |           |         | 285  |   |           |          | 285 | 
|                                           | Capital in excess of par value                                               |                                                                             |           | 498,250 |      |   |           | 495,107  |    
|                                           | Retained deficit                                                             |                                                                             |           | (32,080 | )    |   |           | (160,724 | )  
|                                           | Treasury stock (14,025 shares in 2004 and 2003, at cost)                     |                                                                             |           | (710    | )    |   |           | (710     | )  
|                                           | Accumulated other comprehensive income                                       |                                                                             |           | 21,287  |      |   |           | 17,086   |    
|                                           | Unearned compensation                                                        |                                                                             |           |        |      |   |           | (592     | )  
|                                           |                                                                              |                                                                             |           |         |      |  
|Total stockholders equity                 |                                                                              |                                                                             | 487,032   |         |      |   | 350,452   |         
|                                           |                                                                              |                                                                             |           |         |      |  
|Total liabilities and stockholders equity |                                                                              | $                                                                           | 1,334,701 |         |      | $ | 1,211,438 |         
|                                           |                                                                              |                                                                             |           |         |      |  

See accompanying notes to consolidated financial
statements.


28



---



##### 






Statements of Consolidated Operations


|                                                                                       |                                  |                         |           |         |      |   |         |         |       |   |          |         |       |  
|-------------------------------------------------------------------------------------- | -------------------------------- | ----------------------- | --------- | ------- | ---- | - | ------- | ------- | ----- | - | -------- | ------- | ----- | -
|                                                                                       |                                  | Year Ended December 31  |          
|                                                                                       |                                  |                         |          
|                                                                                       |                                  | 2004                    |           |         | 2003 |   |         | 2002    |      
|(Thousands of dollars, except per share data)                                          |                                  |                         |           |         |      |   |         |         |      
|Net sales                                                                              |                                  | $                       | 1,347,338 |         |      | $ | 912,145 |         |       | $ | 738,928  |        
|Cost of products sold                                                                  |                                  |                         | 1,016,891 |         |      |   | 732,148 |         |       |   | 690,854  |        
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|                                                                                       |                                  |                         | 330,447   |         |      |   | 179,997 |         |       |   | 48,074   |        
|Selling, general and administrative expenses                                           |                                  |                         | 129,075   |         |      |   | 197,023 |         |       |   | 136,022  |        
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Income (loss) from operations                                                          |                                  |                         | 201,372   |         |      |   | (17,026 | )       |       |   | (87,948  | )      
|Other income (expense):                                                                |                                  |                         |           |         |      |   |         |         |       |   |          |        
|                                                                                       | Interest expense                 |                         |           | (39,838 | )    |   |         | (41,052 | )     |   |          | (39,690 | )    
|                                                                                       | Foreign exchange gain (loss)     |                         |           | (5,310  | )    |   |         | 3,023   |       |   |          | (6,517  | )    
|                                                                                       | Investment and other income, net |                         |           | 6,036   |      |   |         | 12,392  |       |   |          | 1,616   |      
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|                                                                                       |                                  |                         | (39,112   | )       |      |   | (25,637 | )       |       |   | (44,591  | )      
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Income (loss) from continuing operations before income taxes and
    minority interest |                                  |                         | 162,260   |         |      |   | (42,663 | )       |       |   | (132,539 | )      
|Income tax expense (benefit)                                                           |                                  |                         | 35,068    |         |      |   | 14,534  |         |       |   | (13,591  | )      
|Minority interest income (losses)                                                      |                                  |                         | 1,442     |         |      |   | (914    | )       |       |   | (8,215   | )      
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Income (loss) from continuing operations                                               |                                  |                         | 125,750   |         |      |   | (56,283 | )       |       |   | (110,733 | )      
|Discontinued operations:                                                               |                                  |                         |           |         |      |   |         |         |       |   |          |        
|Income (loss) from operations, net of tax                                              |                                  |                         | 2,894     |         |      |   | 8,199   |         |       |   | (98,023  | )      
|Gain on disposal of Precious Metals Group, net of tax                                  |                                  |                         |          |         |      |   | 131,748 |         |       |   |         |        
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Income (loss) from discontinued operations, net of tax                                 |                                  |                         | 2,894     |         |      |   | 139,947 |         |       |   | (98,023  | )      
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Net income (loss)                                                                      |                                  | $                       | 128,644   |         |      | $ | 83,664  |         |       | $ | (208,756 | )      
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Basic earnings (loss) per common share:                                                |                                  |                         |           |         |      |   |         |         |       |   |          |        
|                                                                                       |                                  | Continuing operations   |           | $       | 4.42 |   |         | $       | (1.99 | ) |          |         | (3.95 | )
|                                                                                       |                                  | Discontinued operations |           | $       | 0.10 |   |         | $       | 4.94  |   |          |         | (3.50 | )
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|                                                                                       |                                  | Net income (loss)       |           | $       | 4.52 |   |         | $       | 2.95  |   |          | $       | (7.45 | )
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Diluted earnings (loss) per common share:                                              |                                  |                         |           |         |      |   |         |         |       |   |          |        
|                                                                                       |                                  | Continuing operations   |           | $       | 4.39 |   |         | $       | (1.99 | ) |          |         | (3.95 | )
|                                                                                       |                                  | Discontinued operations |           | $       | 0.10 |   |         | $       | 4.94  |   |          |         | (3.50 | )
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|                                                                                       |                                  | Net income (loss)       |           | $       | 4.49 |   |         | $       | 2.95  |   |          | $       | (7.45 | )
|                                                                                       |                                  |                         |           |         |      |   |         |         |      
|Cash dividends paid per common share                                                   |                                  | $                       |          |         |      | $ |        |         |       | $ | 0.42     |        
|                                                                                       |                                  |                         |           |         |      |   |         |         |      

See accompanying notes to consolidated financial
statements.


29



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##### 






Statements of Consolidated Cash Flows


|                                                                                             |                                                                |                        |         |          |      |   |          |         |   |   |          |         |  
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------- | ------- | -------- | ---- | - | -------- | ------- | - | - | -------- | ------- | -
|                                                                                             |                                                                | Year Ended December 31 |        
|                                                                                             |                                                                |                        |        
|                                                                                             |                                                                | 2004                   |         |          | 2003 |   |          | 2002    |  
|(Thousands of dollars)                                                                       |                                                                |                        |         |          |      |   |          |         |  
|Operating activities                                                                         |                                                                |                        |         |          |      |   |          |         |   |   |          |        
|Income (loss) from continuing operations                                                     |                                                                | $                      | 125,750 |          |      | $ | (56,283  | )       |   | $ | (110,733 | )      
|Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                                |                        |         |          |      |   |          |         |   |   |          |        
|                                                                                             | Depreciation and amortization                                  |                        |         | 50,954   |      |   |          | 56,442  |   |   |          | 50,131  |  
|                                                                                             | Foreign exchange (gain) loss                                   |                        |         | 5,310    |      |   |          | (3,023  | ) |   |          | 6,517   |  
|                                                                                             | Restructuring charges, less cash spent                         |                        |         |         |      |   |          | 7,678   |   |   |          | 78,695  |  
|                                                                                             | Deferred income taxes                                          |                        |         | 6,023    |      |   |          | 25,923  |   |   |          | (20,553 | )
|                                                                                             | Minority interest income (losses)                              |                        |         | 1,442    |      |   |          | (914    | ) |   |          | (8,215  | )
|                                                                                             | Bad debt expense                                               |                        |         | 1,381    |      |   |          | 1,161   |   |   |          | 979     |  
|                                                                                             | Equity income from investment                                  |                        |         | (4,479   | )    |   |          | (1,066  | ) |   |          | (474    | )
|Changes in operating assets and liabilities                                                  |                                                                |                        |         |          |      |   |          |         |   |   |          |        
|                                                                                             | Increase in accounts receivable                                |                        |         | (26,027  | )    |   |          | (38,842 | ) |   |          | (13,637 | )
|                                                                                             | (Increase) decrease in advances to suppliers                   |                        |         | (13,098  | )    |   |          | (12,272 | ) |   |          | 288     |  
|                                                                                             | (Increase) decrease in receivables from joint venture partners |                        |         | 21,808   |      |   |          | (19,117 | ) |   |          | 8,471   |  
|                                                                                             | Increase in inventories                                        |                        |         | (146,316 | )    |   |          | (58,128 | ) |   |          | (15,412 | )
|                                                                                             | Increase (decrease) in accounts payable                        |                        |         | (3,878   | )    |   |          | 36,235  |   |   |          | 13,029  |  
|                                                                                             | Increase (decrease) in retained liabilities of businesses sold |                        |         | (19,817  | )    |   |          | 41,654  |   |   |          |        |  
|                                                                                             | Increase in shareholder litigation accrual                     |                        |         | 7,500    |      |   |          | 84,500  |   |   |          |        |  
|                                                                                             | Other, net                                                     |                        |         | (10,510  | )    |   |          | (35,683 | ) |   |          | 10,313  |  
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  
|Net cash (used in) provided by operating activities                                          |                                                                |                        | (3,957  | )        |      |   | 28,265   |         |   |   | (601     | )      
|Investing activities                                                                         |                                                                |                        |         |          |      |   |          |         |   |   |          |        
|Expenditures for property, plant and equipment, net                                          |                                                                |                        | (18,417 | )        |      |   | (10,910  | )       |   |   | (61,510  | )      
|Acquisitions of businesses                                                                   |                                                                |                        | (6,715  | )        |      |   | (11,151  | )       |   |   | (13,275  | )      
|Proceeds from sales of businesses  net of cash sold                                         |                                                                |                        |        |          |      |   | 871,281  |         |   |   | 4,000    |        
|Investments in nonconsolidated joint ventures                                                |                                                                |                        |        |          |      |   |         |         |   |   | (3,566   | )      
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  
|Net cash (used in) provided by investing activities                                          |                                                                |                        | (25,132 | )        |      |   | 849,220  |         |   |   | (74,351  | )      
|Financing activities                                                                         |                                                                |                        |         |          |      |   |          |         |   |   |          |        
|Long-term borrowings                                                                         |                                                                |                        | 23,000  |          |      |   | 22,919   |         |   |   | 99,910   |        
|Payments of long-term debt                                                                   |                                                                |                        | (22,919 | )        |      |   | (794,400 | )       |   |   | (226,205 | )      
|Proceeds from exercise of stock options                                                      |                                                                |                        |        |          |      |   | 406      |         |   |   | 3,808    |        
|Proceeds from sale of common shares                                                          |                                                                |                        |        |          |      |   |         |         |   |   | 226,205  |        
|Dividend payments                                                                            |                                                                |                        |        |          |      |   |         |         |   |   | (11,899  | )      
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  
|Net cash provided by (used in) financing activities                                          |                                                                |                        | 81      |          |      |   | (771,075 | )       |   |   | 91,819   |        
|Effect of exchange rate changes on cash and cash equivalents                                 |                                                                |                        | 1,068   |          |      |   | 6,238    |         |   |   | 1,092    |        
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  
|Cash (used in) provided by continuing operations                                             |                                                                |                        | (27,940 | )        |      |   | 112,648  |         |   |   | 17,959   |        
|Cash used in discontinued operations                                                         |                                                                |                        |        |          |      |   | (70,399  | )       |   |   | (25,046  | )      
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  
|Increase (decrease) in cash and cash equivalents                                             |                                                                |                        | (27,940 | )        |      |   | 42,249   |         |   |   | (7,087   | )      
|Cash and cash equivalents at beginning of year                                               |                                                                |                        | 54,719  |          |      |   | 12,470   |         |   |   | 19,557   |        
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  
|Cash and cash equivalents at end of year                                                     |                                                                | $                      | 26,779  |          |      | $ | 54,719   |         |   | $ | 12,470   |        
|                                                                                             |                                                                |                        |         |          |      |   |          |         |  

See accompanying notes to consolidated financial
statements


30



---



##### 






Statements of Consolidated Stockholders Equity


|                                                          |                                                           |              |        |   |            |  |     |           |  |             |          |       |  |               |          |          |               |  |      |              |  |  |         |        |   |  |        |   |  |  |          |          |  
|--------------------------------------------------------- | --------------------------------------------------------- | ------------ | ------ | - | ---------- |  | --- | --------- |  | ----------- | -------- | ----- |  | ------------- | -------- | -------- | ------------- |  | ---- | ------------ |  |  | ------- | ------ | - |  | ------ | - |  |  | -------- | -------- | -
|                                                          |                                                           |              |        |   |            |  |     |           |  | Accumulated |          |       |  |               |         
|                                                          |                                                           | Common Stock |        |   | Capital in |  |     |           |  |             |          | Other |  |               |          |          |              
|                                                          |                                                           |              |        |   | Excess of  |  |     | Retained  |  |             | Treasury |       |  | Comprehensive |          |          | Unearned      |  |      |             
|                                                          |                                                           | Shares       |        |   | Dollars    |  |     | Par Value |  |             | Deficit  |       |  | Stock         |          |          | Income (Loss) |  |      | Compensation |  |  | Total   |       
|(Dollars in thousands)                                    |                                                           |              |        |   |            |  |     |           |  |             |          |       |  |               |          |          |               |  |      |              |  |  |         |       
|Balance at January 1, 2002                                |                                                           |              | 24,223 |   |            |  | 242 |           |  |             | 262,514  |       |  |               | (23,733  | )        |               |  | (119 | )            |  |  | (14,372 | )      |   |  | (3,937 | ) |  |  | 220,595  |         
|Other comprehensive loss:                                 |                                                           |              |        |   |            |  |     |           |  |             |          |       |  |               |          |          |               |  |      |              |  |  |         |        |   |  |        |   |  |  |          |         
|                                                          | Net loss                                                  |              |        |  |            |  |     |          |  |             |          |      |  |               |          | (208,756 | )             |  |      |             |  |  |         |       |   |  |        |  |  |  |          | (208,756 | )
|                                                          | Reclassification adjustment                               |              |        |  |            |  |     |          |  |             |          |      |  |               |          |         |               |  |      |             |  |  |         | (1,243 | ) |  |        |  |  |  |          | (1,243   | )
|                                                          | Unrealized gains on effective portion of cash flow hedges |              |        |  |            |  |     |          |  |             |          |      |  |               |          |         |               |  |      |             |  |  |         | 1,860  |   |  |        |  |  |  |          | 1,860    |  
|                                                          | Minimum pension liability adjustment                      |              |        |  |            |  |     |          |  |             |          |      |  |               |          |         |               |  |      |             |  |  |         | (5,783 | ) |  |        |  |  |  |          | (5,783   | )
|                                                          | Foreign currency translation adjustment                   |              |        |  |            |  |     |          |  |             |          |      |  |               |          |         |               |  |      |             |  |  |         | 53,596 |   |  |        |  |  |  |          | 53,596   |  
|                                                          |                                                           |              |        |   |            |  |     |           |  |             |          |       |  |               |          |          |               |  |      |              |  |  |         |       
|Total other comprehensive loss                            |                                                           |              |       |   |            |  |    |           |  |             |         |       |  |               |         |          |               |  |     |              |  |  |        |        |   |  |       |   |  |  | (160,326 | )       
|Dividends paid                                            |                                                           |              |       |   |            |  |    |           |  |             |         |       |  |               | (11,899  | )        |               |  |     |              |  |  |        |        |   |  |       |   |  |  | (11,899  | )       
|Exercise of employee stock options, including tax benefit |                                                           |              | 183    |   |            |  | 2   |           |  |             | 3,806    |       |  |               |         |          |               |  |     |              |  |  |        |        |   |  |       |   |  |  | 3,808    |         
|Restricted stock grants                                   |                                                           |              | 31     |   |            |  |    |           |  |             | 1,883    |       |  |               |         |          |               |  |     |              |  |  |        |        |   |  | (1,883 | ) |  |  |         |         
|Restricted stock forfeitures                              |                                                           |              | (10    | ) |            |  |    |           |  |             |         |       |  |               |         |          |               |  | (591 | )            |  |  |        |        |   |  | 591    |   |  |  |         |         
|Restricted stock compensation                             |                                                           |              |       |   |            |  |    |           |  |             |         |       |  |               |         |          |               |  |     |              |  |  |        |        |   |  | 2,279  |   |  |  | 2,279    |         
|Non-employee directors compensation                      |                                                           |              |       |   |            |  |    |           |  |             | 178      |       |  |               |         |          |               |  |     |              |  |  |        |        |   |  |       |   |  |  | 178      |         
|Sale of common stock                                      |                                                           |              | 4,025  |   |            |  | 40  |           |  |             | 226,165  |       |  |               |         |          |               |  |     |              |  |  |        |        |   |  |       |   |  |  | 226,205  |         
|                                                          |                                                           |              |        |   |            |  |     |           |  |             |          |       |  |               |          |          |               |  |      |              |  |  |         |       
|Balance at December 31, 2002                              |                                                           |              | 28,452 |   |            |  | 284 |           |  |             | 494,546  |       |  |               | (244,388 | )        |               |  | (710 | )            |  |  | 34,058  |        |   |  | (2,950 | ) |  |  | 280,840  |         

31



---



##### 



Statements of Consolidated Stockholders
Equity 


|                                                          |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |         |   |   |       |   |  |   |         |         |  
|--------------------------------------------------------- | ---------------------------------------------------------- | ------------ | ------ | - | ---------- | - | --- | --------- |  | ----------- | -------- | ----- |  | ------------- | -------- | ------- | ------------- | - | ---- | ------------ |  | - | ------ | ------- | - | - | ----- | - |  | - | ------- | ------- | -
|                                                          |                                                            |              |        |   |            |   |     |           |  | Accumulated |          |       |  |               |         
|                                                          |                                                            | Common Stock |        |   | Capital in |   |     |           |  |             |          | Other |  |               |          |         |              
|                                                          |                                                            |              |        |   | Excess of  |   |     | Retained  |  |             | Treasury |       |  | Comprehensive |          |         | Unearned      |   |      |             
|                                                          |                                                            | Shares       |        |   | Dollars    |   |     | Par Value |  |             | Deficit  |       |  | Stock         |          |         | Income (Loss) |   |      | Compensation |  |   | Total  |        
|(Dollars in thousands)                                    |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |        
|Other comprehensive income:                               |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |         |   |   |       |   |  |   |         |        
|                                                          | Net income                                                 |              |        |  |            |   |     |          |  |             |          |      |  |               |          | 83,664  |               |   |      |             |  |   |        |        |   |   |       |  |  |   |         | 83,664  |  
|                                                          | Unrealized gains on effective portion of cash flow hedges  |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | 5,848   |   |   |       |  |  |   |         | 5,848   |  
|                                                          | Minimum pension liability adjustment                       |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | 4,108   |   |   |       |  |  |   |         | 4,108   |  
|                                                          | Foreign currency translation adjustment                    |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | (26,928 | ) |   |       |  |  |   |         | (26,928 | )
|                                                          |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |        
|Total other comprehensive income                          |                                                            |              |       |   |            |   |    |           |  |             |         |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   |      |   |  |   | 66,692  |        
|Exercise of employee stock options, including tax benefit |                                                            |              | 28     |   |            |   | 1   |           |  |             | 536      |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   |      |   |  |   | 537     |        
|Restricted stock compensation                             |                                                            |              |       |   |            |   |    |           |  |             |         |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   | 2,358 |   |  |   | 2,358   |        
|Non-employee directors compensation                      |                                                            |              |       |   |            |   |    |           |  |             | 25       |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   |      |   |  |   | 25      |        
|                                                          |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |        
|Balance at December 31, 2003                              |                                                            |              | 28,480 |   |            | $ | 285 |           |  | $           | 495,107  |       |  | $             | (160,724 | )       |               | $ | (710 | )            |  | $ | 17,086 |         |   | $ | (592  | ) |  | $ | 350,452 |        
|Other comprehensive income:                               |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |         |   |   |       |   |  |   |         |        
|                                                          | Net income                                                 |              |        |  |            |   |     |          |  |             |          |      |  |               |          | 128,644 |               |   |      |             |  |   |        |        |   |   |       |  |  |   |         | 128,644 |  
|                                                          | Unrealized losses on effective portion of cash flow hedges |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | (3,214  | ) |   |       |  |  |   |         | (3,214  | )
|                                                          | Unrealized gain on marketable securities                   |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | 930     |   |   |       |  |  |   |         | 930     |  
|                                                          | Minimum pension liability adjustment                       |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | (1,177  | ) |   |       |  |  |   |         | (1,177  | )
|                                                          | Foreign currency translation adjustment                    |              |        |  |            |   |     |          |  |             |          |      |  |               |          |        |               |   |      |             |  |   |        | 7,662   |   |   |       |  |  |   |         | 7,662   |  
|                                                          |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |        
|Total other comprehensive income                          |                                                            |              |       |   |            |   |    |           |  |             |         |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   |      |   |  |   | 132,845 |        
|Stock option expense                                      |                                                            |              |       |   |            |   |    |           |  |             | 2,366    |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   |      |   |  |   | 2,366   |        
|Restricted stock compensation                             |                                                            |              |       |   |            |   |    |           |  |             | 587      |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   | 592   |   |  |   | 1,179   |        
|Non-employee directors compensation                      |                                                            |              |       |   |            |   |    |           |  |             | 190      |       |  |               |         |         |               |   |     |              |  |   |       |         |   |   |      |   |  |   | 190     |        
|                                                          |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |        
|Balance at December 31, 2004                              |                                                            |              | 28,480 |   |            | $ | 285 |           |  | $           | 498,250  |       |  | $             | (32,080  | )       |               | $ | (710 | )            |  | $ | 21,287 |         |   | $ |      |   |  | $ | 487,032 |        
|                                                          |                                                            |              |        |   |            |   |     |           |  |             |          |       |  |               |          |         |               |   |      |              |  |   |        |        

See accompanying notes to consolidated financial
statements


32



---



##### 






Notes to Consolidated Financial Statements


OM Group, Inc. and Subsidiaries


(Thousands of dollars, except as noted and per share
amounts)


A. Significant Accounting Policies


Principles of Consolidation Consolidation of Variable Interest
Entities




Cash Equivalents


Revenue Recognition


Cost of Products Sold


Concentrations of Credit Risk


Allowance for Doubtful Accounts


Inventories


Receivables from Joint Venture Partners and Minority
Interests






33



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




Advances to Suppliers


Depreciation and Amortization




Goodwill Goodwill and Other Intangible Assets,


Retained Liabilities of Businesses Sold


Research and Development


Repairs and Maintenance


Income Taxes


Foreign Currency Translation


34



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued






Derivative Instruments








Stock Options and Compensation Plans


Accounting for
Stock-Based Compensation Transition and
Disclosure, Accounting for Stock-Based
Compensation, Accounting for
Stock Issued to Employees,


35



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                                                  |                                                                                                             |                         |         |         |      |   |         |         |   |   |          |          |  
|------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | -------- | -------- | -
|                                                  |                                                                                                             | Year Ended December 31, |        
|                                                  |                                                                                                             |                         |        
|                                                  |                                                                                                             | 2004                    |         |         | 2003 |   |         | 2002    |  
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  
|Net income (loss) from continuing operations      |                                                                                                             | $                       | 125,750 |         |      | $ | (56,283 | )       |   | $ | (110,733 | )       
|                                                  | Add: Stock-based employee compensation expense included in net
    income (loss) from continuing operations |                         |         | 3,734   |      |   |         | 2,476   |   |   |          | 2,431    |  
|                                                  | Deduct: Total stock-based employee compensation expense using
    the fair value method for all awards      |                         |         | (4,001  | )    |   |         | (2,662  | ) |   |          | (5,464   | )
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  
|                                                  | Pro forma income (loss) from continuing operations                                                          |                         | $       | 125,483 |      |   | $       | (56,469 | ) |   | $        | (113,766 | )
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  
|Basic income (loss) from continuing operations:   |                                                                                                             |                         |         |         |      |   |         |         |   |   |          |         
|                                                  | As reported                                                                                                 |                         | $       | 4.42    |      |   | $       | (1.99   | ) |   | $        | (3.95    | )
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  
|                                                  | Pro forma                                                                                                   |                         | $       | 4.41    |      |   | $       | (1.99   | ) |   | $        | (4.06    | )
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  
|Diluted income (loss) from continuing operations: |                                                                                                             |                         |         |         |      |   |         |         |   |   |          |         
|                                                  | As reported                                                                                                 |                         | $       | 4.39    |      |   | $       | (1.99   | ) |   | $        | (3.95    | )
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  
|                                                  | Pro forma                                                                                                   |                         | $       | 4.38    |      |   | $       | (1.99   | ) |   | $        | (4.06    | )
|                                                  |                                                                                                             |                         |         |         |      |   |         |         |  



|                                              |  |                        |     |   |      |  |     |      |  |  |     |  
|--------------------------------------------- |  | ---------------------- | --- | - | ---- |  | --- | ---- |  |  | --- | -
|                                              |  | Year Ended December 31 |    
|                                              |  |                        |    
|                                              |  | 2004                   |     |   | 2003 |  |     | 2002 | 
|                                              |  |                        |     |   |      |  |     |      | 
|Risk-free interest rate                       |  |                        | 3.5 | % |      |  | 3.2 | %    |  |  | 2.7 | %
|Dividend yield                                |  |                        |    |   |      |  |    |      |  |  |    |  
|Volatility factor of Company common stock     |  |                        | .45 |   |      |  | .42 |      |  |  | .67 |  
|Weighted-average expected option life (years) |  |                        | 5   |   |      |  | 5   |      |  |  | 5   |  







New Accounting Pronouncements


36



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued








Use of Estimates


B. Inventories




|                           |  |      |         |  |      |   |         | 
|-------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                           |  | 2004 |         |  | 2003 |  
|                           |  |      |         |  |      |  
|Raw materials and supplies |  | $    | 248,536 |  |      | $ | 158,112 | 
|Work-in-process            |  |      | 37,711  |  |      |   | 43,109  | 
|Finished goods             |  |      | 129,270 |  |      |   | 67,980  | 
|                           |  |      |         |  |      |  
|                           |  | $    | 415,517 |  |      | $ | 269,201 | 
|                           |  |      |         |  |      |  

C. Divestiture of Precious Metals Group and Other
Discontinued Operations




37



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued










|                             |  |      |         |   |      |   |         |  
|---------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                             |  | 2003 |         |   | 2002 |  
|                             |  |      |         |   |      |  
|Net sales                    |  | $    | 2,415.6 |   |      | $ | 4,294.8 |  
|Operating income (loss)      |  |      | 48.0    |   |      |   | (18.9   | )
|Interest expense             |  |      | 38.8    |   |      |   | 51.7    |  
|Income tax (benefit) expense |  |      | (15.3   | ) |      |   | 23.4    |  
|Income (loss)                |  |      | 8.2     |   |      |   | (98.0   | )





D. Restructuring and Other Charges




|                                      |  |   |      | 
|------------------------------------- |  | - | ---- | 
|Exit of facilities                    |  | $ | 10.7 | 
|Workforce reductions                  |  |   | 3.7  | 
|Inventory and other asset write-downs |  |   | 1.2  | 
|Other                                 |  |   | 4.4  | 
|                                      |  |   |     
|                                      |  | $ | 20.0 | 
|                                      |  |   |     

38



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued










39



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                               |  |           |     |   |            |               |      |             |  |   |                    |   |  |       |       |   |  |   |       |  
|------------------------------ |  | --------- | --- | - | ---------- | ------------- | ---- | ----------- |  | - | ------------------ | - |  | ----- | ----- | - |  | - | ----- | -
|                               |  |           |     |   |            | Inventory and |      |             |  |   |                   
|                               |  | Number of |     |   | Workforce  |               |      | Other Asset |  |   | Exit of Facilities |   |  |      
|                               |  | Employees |     |   | Reductions |               |      | Write-downs |  |   | and Other          |   |  | Total |      
|                               |  |           |     |   |            |               |      |             |  |   |                    |   |  |       |      
|2002 charges                   |  |           | 110 |   |            | $             | 8.5  |             |  | $ | 34.7               |   |  | $     | 39.3  |   |  | $ | 82.5  |  
|Utilized in 2002               |  |           | (42 | ) |            |               | (3.3 | )           |  |   | (34.7              | ) |  |       | (36.7 | ) |  |   | (74.7 | )
|                               |  |           |     |   |            |               |      |             |  |   |                    |   |  |       |      
|Balance at December 31, 2002   |  |           | 68  |   |            | $             | 5.2  |             |  | $ |                   |   |  | $     | 2.6   |   |  | $ | 7.8   |  
|2003 charges                   |  |           | 19  |   |            |               | 3.7  |             |  |   | 1.2                |   |  |       | 15.1  |   |  |   | 20.0  |  
|Utilized in 2003               |  |           | (87 | ) |            |               | (5.8 | )           |  |   | (1.2               | ) |  |       | (16.3 | ) |  |   | (23.3 | )
|                               |  |           |     |   |            |               |      |             |  |   |                    |   |  |       |      
|Balance at December 31, 2003   |  |           |    |   |            |               | 3.1  |             |  |   |                   |   |  |       | 1.4   |   |  |   | 4.5   |  
|Reversal of prior year charges |  |           |    |   |            |               | (0.5 | )           |  |   |                   |   |  |       | (0.1  | ) |  |   | (0.6  | )
|Utilized in 2004               |  |           |    |   |            |               | (2.0 | )           |  |   |                   |   |  |       | (1.1  | ) |  |   | (3.1  | )
|                               |  |           |     |   |            |               |      |             |  |   |                    |   |  |       |      
|Balance at December 31, 2004   |  |           |    |   |            | $             | 0.6  |             |  | $ |                   |   |  | $     | 0.2   |   |  | $ | 0.8   |  
|                               |  |           |     |   |            |               |      |             |  |   |                    |   |  |       |      





E. Acquisitions


Business Combinations,


F. Goodwill and Other Intangible Assets




|                                |  |      |         |  |      |   |         | 
|------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                |  | 2004 |         |  | 2003 |  
|                                |  |      |         |  |      |  
|Balance at January 1            |  | $    | 178,678 |  |      | $ | 174,899 | 
|Changes due to foreign exchange |  |      | 3,193   |  |      |   | 3,779   | 
|                                |  |      |         |  |      |  
|Balance at December 31          |  | $    | 181,871 |  |      | $ | 178,678 | 
|                                |  |      |         |  |      |  

40



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                                                         |  |      |        |   |      |   |        |  
|-------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                         |  | 2004 |        |   | 2003 |  
|                                                         |  |      |        |   |      |  
|Historical cost                                          |  | $    | 12,686 |   |      | $ | 12,570 |  
|Accumulated amortization                                 |  |      | (8,545 | ) |      |   | (7,020 | )
|                                                         |  |      |        |   |      |  
|Intangible assets (recorded in other non-current assets) |  | $    | 4,141  |   |      | $ | 5,550  |  
|                                                         |  |      |        |   |      |  



G. Debt and Other Financial Instruments




|                                                      |                           |      |         |         |      |   |         |         | 
|----------------------------------------------------- | ------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------- | 
|                                                      |                           | 2004 |         |         | 2003 |  
|                                                      |                           |      |         |         |      |  
|Senior Subordinated Notes                             |                           | $    | 400,000 |         |      | $ | 400,000 |        
|Note payable  bank                                   |                           |      | 23,000  |         |      |   | 22,919  |        
|Deferred gain on termination of fair value hedges     |                           |      | 6,711   |         |      |   | 7,377   |        
|Fair value of interest rate swaps (fair value hedges) |                           |      | 722     |         |      |   | 170     |        
|                                                      |                           |      |         |         |      |  
|                                                      |                           |      | 430,433 |         |      |   | 430,466 |        
|Less: Current portion                                 |                           |      | 5,750   |         |      |   |        |        
|                                                      | Long-term debt in default |      |         | 400,000 |      |   |         |        | 
|                                                      |                           |      |         |         |      |  
|                                                      | Total long-term debt      |      | $       | 24,683  |      |   | $       | 430,466 | 
|                                                      |                           |      |         |         |      |  



41



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued














H. Metals Financial Instruments






42



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued






I. Income Taxes




|                          |  |                        |         |   |      |   |          |      |  |   |          |  
|------------------------- |  | ---------------------- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                          |  | Year Ended December 31 |        
|                          |  |                        |        
|                          |  | 2004                   |         |   | 2003 |   |          | 2002 | 
|                          |  |                        |         |   |      |   |          |      | 
|United States             |  | $                      | (71,900 | ) |      | $ | (192,915 | )    |  | $ | (116,090 | )
|Outside the United States |  |                        | 234,160 |   |      |   | 150,252  |      |  |   | (16,449  | )
|                          |  |                        |         |   |      |   |          |      | 
|                          |  | $                      | 162,260 |   |      | $ | (42,663  | )    |  | $ | (132,539 | )
|                          |  |                        |         |   |      |   |          |      | 



|          |                           |                        |        |        |      |   |         |         |       |   |         |         |    | 
|--------- | ------------------------- | ---------------------- | ------ | ------ | ---- | - | ------- | ------- | ----- | - | ------- | ------- | -- | 
|          |                           | Year Ended December 31 |       
|          |                           |                        |       
|          |                           | 2004                   |        |        | 2003 |   |         | 2002    |      
|          |                           |                        |        |        |      |   |         |         |      
|Current:  |                           |                        |        |        |      |   |         |         |       |   |         |        
|          | United States:            |                        |        |        |      |   |         |         |       |   |         |         |   
|          |                           | Federal                |        | $      | 769  |   |         | $       | 1,385 |   |         | $       |   | 
|          |                           | State and local        |        |        |     |   |         |         | 3     |   |         |         | 95 | 
|          | Outside the United States |                        |        | 28,276 |      |   |         | (12,777 | )     |   |         | 6,867   |   
|          |                           |                        |        |        |      |   |         |         |      
|          |                           |                        | 29,045 |        |      |   | (11,389 | )       |       |   | 6,962   |        
|Deferred: |                           |                        |        |        |      |   |         |         |       |   |         |        
|          | United States             |                        |        |       |      |   |         |        |       |   |         |        |   
|          | Outside the United States |                        |        | 6,023  |      |   |         | 25,923  |       |   |         | (20,553 | ) 
|          |                           |                        |        |        |      |   |         |         |      
|          |                           |                        | 6,023  |        |      |   | 25,923  |         |       |   | (20,553 | )      
|          |                           |                        |        |        |      |   |         |         |      
|          |                           | $                      | 35,068 |        |      | $ | 14,534  |         |       | $ | (13,591 | )      
|          |                           |                        |        |        |      |   |         |         |      

43



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                                                    |  |                        |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                    |  | Year Ended December 31 |        
|                                                                                    |  |                        |        
|                                                                                    |  | 2004                   |         |   | 2003 |   |         | 2002 | 
|                                                                                    |  |                        |         |   |      |   |         |      | 
|Income taxes at the United States statutory rate                                    |  | $                      | 56,791  |   |      | $ | (14,932 | )    |  | $ | (46,389 | )
|Effective tax rate differential on earnings/losses outside of
    the United States |  |                        | (36,764 | ) |      |   | (32,460 | )    |  |   | (10,881 | )
|Repatriation of foreign earnings                                                    |  |                        | 50,563  |   |      |   | 31,148  |      |  |   | 21,000  |  
|Malaysia tax holiday                                                                |  |                        | (6,697  | ) |      |   | (4,560  | )    |  |   | (877    | )
|Change in Finland tax rate                                                          |  |                        | (2,518  | ) |      |   |        |      |  |   |        |  
|Adjustment of worldwide tax liabilities                                             |  |                        | (692    | ) |      |   | (2,614  | )    |  |   | 968     |  
|Losses (with) without tax benefits                                                  |  |                        | (24,689 | ) |      |   | 37,528  |      |  |   | 20,702  |  
|Other, net                                                                          |  |                        | (926    | ) |      |   | 424     |      |  |   | 1,886   |  
|                                                                                    |  |                        |         |   |      |   |         |      | 
|                                                                                    |  | $                      | 35,068  |   |      | $ | 14,534  |      |  | $ | (13,591 | )
|                                                                                    |  |                        |         |   |      |   |         |      | 



|                                                                 |                            |             |          |         |      |   |          |         |  
|---------------------------------------------------------------- | -------------------------- | ----------- | -------- | ------- | ---- | - | -------- | ------- | -
|                                                                 |                            | December 31 |         
|                                                                 |                            |             |         
|                                                                 |                            | 2004        |          |         | 2003 |  
|                                                                 |                            |             |          |         |      |  
|Current asset  operating and litigation accruals                |                            | $           | 55,732   |         |      | $ | 28,802   |        
|Current liability  prepaid expenses                             |                            |             | (2,241   | )       |      |   | (2,646   | )      
|Non-current asset  employee benefit and litigation
    accruals |                            |             | 27,949   |         |      |   | 55,951   |        
|Non-current asset  operating loss carryforwards                 |                            |             | 92,309   |         |      |   | 106,399  |        
|Non-current liability  accelerated depreciation                 |                            |             | (69,948  | )       |      |   | (62,989  | )      
|Valuation allowance                                              |                            |             | (134,649 | )       |      |   | (154,129 | )      
|                                                                 |                            |             |          |         |      |  
|                                                                 | Net deferred tax liability |             | $        | (30,848 | )    |   | $        | (28,612 | )
|                                                                 |                            |             |          |         |      |  



|                                              |  |             |         |   |      |   |         |  
|--------------------------------------------- |  | ----------- | ------- | - | ---- | - | ------- | -
|                                              |  | December 31 |        
|                                              |  |             |        
|                                              |  | 2004        |         |   | 2003 |  
|                                              |  |             |         |   |      |  
|Other non-current assets                      |  | $           | 185     |   |      | $ | 588     |  
|Other current liabilities                     |  |             |        |   |      |   | (158    | )
|Deferred income taxes  long-term liabilities |  |             | (31,033 | ) |      |   | (29,042 | )
|                                              |  |             |         |   |      |  
|                                              |  | $           | (30,848 | ) |      | $ | (28,612 | )
|                                              |  |             |         |   |      |  







44



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued








J. Pension and Other Postretirement Benefit Plans






|                                               |  |                  |         |                      |          |   |         |      |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------- | -------------------- | -------- | - | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                                               |  |                  |         | Other Postretirement |         
|                                               |  | Pension Benefits |         |                      | Benefits |  
|                                               |  |                  |         |                      |          |  
|                                               |  | 2004             |         |                      | 2003     |   |         | 2004 |  |   | 2003   |  
|                                               |  |                  |         |                      |          |   |         |      |  |   |        |  
|Benefit obligation at beginning of year        |  | $                | (14,056 | )                    |          | $ | (13,365 | )    |  | $ | (4,133 | ) |  | $ | (6,118 | )
|Service cost                                   |  |                  |        |                      |          |   |        |      |  |   | (61    | ) |  |   | (169   | )
|Interest cost                                  |  |                  | (1,200  | )                    |          |   | (867    | )    |  |   | (251   | ) |  |   | (324   | )
|Participant contributions                      |  |                  |        |                      |          |   |        |      |  |   | (128   | ) |  |   | (165   | )
|Actuarial (loss) gain                          |  |                  | (1,393  | )                    |          |   | (663    | )    |  |   | (131   | ) |  |   | (1,082 | )
|Benefits paid                                  |  |                  | 903     |                      |          |   | 839     |      |  |   | 363    |   |  |   | 425    |  
|SERP obligation                                |  |                  | (6,171  | )                    |          |   |        |      |  |   |       |   |  |   |       |  
|Curtailment                                    |  |                  |        |                      |          |   |        |      |  |   |       |   |  |   | 3,300  |  
|                                               |  |                  |         |                      |          |   |         |      |  |   |        |  
|Benefit obligation at end of year              |  |                  | (21,917 | )                    |          |   | (14,056 | )    |  |   | (4,341 | ) |  |   | (4,133 | )
|                                               |  |                  |         |                      |          |   |         |      |  |   |        |  
|Fair value of plan assets at beginning of year |  |                  | 9,428   |                      |          |   | 8,777   |      |  |   |       |   |  |   |       |  
|Actual return on plan assets                   |  |                  | 854     |                      |          |   | 1,465   |      |  |   |       |   |  |   |       |  
|Employer contributions                         |  |                  | 714     |                      |          |   | 25      |      |  |   | 235    |   |  |   | 260    |  
|Participant contributions                      |  |                  |        |                      |          |   |        |      |  |   | 128    |   |  |   | 165    |  
|Benefits paid                                  |  |                  | (903    | )                    |          |   | (839    | )    |  |   | (363   | ) |  |   | (425   | )
|                                               |  |                  |         |                      |          |   |         |      |  |   |        |  
|Fair value of plan assets at end of year       |  |                  | 10,093  |                      |          |   | 9,428   |      |  |   |       |   |  |   |       |  
|                                               |  |                  |         |                      |          |   |         |      |  |   |        |  
|Benefit obligations in excess of plan assets   |  |                  | (11,824 | )                    |          |   | (4,628  | )    |  |   | (4,341 | ) |  |   | (4,133 | )

45



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                  |                                        |                                |       |                      |          |   |       |        |       |   |        |        |        |   |        |        |        |  
|------------------------------------------------- | -------------------------------------- | ------------------------------ | ----- | -------------------- | -------- | - | ----- | ------ | ----- | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                  |                                        |                                |       | Other Postretirement |         
|                                                  |                                        | Pension Benefits               |       |                      | Benefits |  
|                                                  |                                        |                                |       |                      |          |  
|                                                  |                                        | 2004                           |       |                      | 2003     |   |       | 2004   |       |   | 2003   |       
|                                                  |                                        |                                |       |                      |          |   |       |        |       |   |        |       
|Unamortized:                                      |                                        |                                |       |                      |          |   |       |        |       |   |        |        |        |   |        |       
|                                                  | Net (gain) loss                        |                                |       | 8,472                |          |   |       | 6,993  |       |   |        | (248   | )      |   |        | (452   | )     
|                                                  | Post measurement date contributions    |                                |       |                     |          |   |       |       |       |   |        |       |        |   |        | 73     |       
|                                                  | Prior service cost                     |                                |       | 5,314                |          |   |       |       |       |   |        | 381    |        |   |        | 421    |       
|                                                  |                                        |                                |       |                      |          |   |       |        |       |   |        |       
|Prepaid (accrued) benefit cost                    |                                        | $                              | 1,962 |                      |          | $ | 2,365 |        |       | $ | (4,208 | )      |        | $ | (4,091 | )     
|                                                  |                                        |                                |       |                      |          |   |       |        |       |   |        |       
|Amounts recorded in the balance sheet consist of: |                                        |                                |       |                      |          |   |       |        |       |   |        |        |        |   |        |       
|                                                  | Other non-current liabilities          |                                | $     | (6,221               | )        |   | $     | (4,628 | )     |   | $      | (4,208 | )      |   | $      | (4,091 | )     
|                                                  | Accumulated other comprehensive income |                                |       | 8,183                |          |   |       | 6,993  |       |   |        |       |        |   |        |       |       
|                                                  |                                        |                                |       |                      |          |   |       |        |       |   |        |       
|                                                  |                                        | Prepaid (accrued) benefit cost |       | $                    | 1,962    |   |       | $      | 2,365 |   |        | $      | (4,208 | ) |        | $      | (4,091 | )
|                                                  |                                        |                                |       |                      |          |   |       |        |       |   |        |       



|                                                  |  |                  |       |   |      |   |        |      |  |   |        |  
|------------------------------------------------- |  | ---------------- | ----- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                  |  | Pension Benefits |      
|                                                  |  |                  |      
|                                                  |  | 2004             |       |   | 2003 |   |        | 2002 | 
|                                                  |  |                  |       |   |      |   |        |      | 
|Service cost                                      |  | $                |      |   |      | $ |       |      |  | $ |       |  
|Interest cost                                     |  |                  | 1,200 |   |      |   | 867    |      |  |   | 879    |  
|Amortization of unrecognized net loss             |  |                  | 31    |   |      |   | 176    |      |  |   | 79     |  
|Expected return on plan assets                    |  |                  | (854  | ) |      |   | (1,033 | )    |  |   | (1,123 | )
|Amortization of unrecognized prior service cost   |  |                  | 857   |   |      |   |       |      |  |   |       |  
|Amortization of unrecognized net transition asset |  |                  | (117  | ) |      |   |       |      |  |   |       |  
|                                                  |  |                  |       |   |      |   |        |      | 
|                                                  |  | $                | 1,117 |   |      | $ | 10     |      |  | $ | (165   | )
|                                                  |  |                  |       |   |      |   |        |      | 

|                 |  |                      |     |  |      |   |        |      |  |   |     | 
|---------------- |  | -------------------- | --- |  | ---- | - | ------ | ---- |  | - | --- | 
|                 |  | Other Postretirement |    
|                 |  | Benefits             |    
|                 |  |                      |    
|                 |  | 2004                 |     |  | 2003 |   |        | 2002 | 
|                 |  |                      |     |  |      |   |        |      | 
|Service cost     |  | $                    | 61  |  |      | $ | 169    |      |  | $ | 288 | 
|Interest cost    |  |                      | 251 |  |      |   | 324    |      |  |   | 466 | 
|Net amortization |  |                      | 40  |  |      |   | (18    | )    |  |   | 15  | 
|Curtailment gain |  |                      |    |  |      |   | (3,085 | )    |  |   |    | 
|                 |  |                      |     |  |      |   |        |      | 
|                 |  | $                    | 352 |  |      | $ | (2,610 | )    |  | $ | 769 | 
|                 |  |                      |     |  |      |   |        |      | 



|                                                 |  |      |       |   |      |  |       |  
|------------------------------------------------ |  | ---- | ----- | - | ---- |  | ----- | -
|                                                 |  | 2004 |       |   | 2003 | 
|                                                 |  |      |       |   |      | 
|Discount rate                                    |  |      | 6.00  | % |      |  | 6.25  | %
|Return on pension plan assets                    |  |      | 8.75  | % |      |  | 8.75  | %
|Projected health care cost trend rate            |  |      | 13.00 | % |      |  | 14.00 | %
|Ultimate health care cost trend rate             |  |      | 6.00  | % |      |  | 6.00  | %
|Year ultimate health care trend rate is achieved |  |      | 2011  |   |      |  | 2011  |  



46



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued






|                  |              |            |    |     |              |  |    |      |   |  |    |     |  
|----------------- | ------------ | ---------- | -- | --- | ------------ |  | -- | ---- | - |  | -- | --- | -
|                  |              | Target     |    |     | December 31, | 
|                  |              | Allocation |    |     |              | 
|                  |              | 2005       |    |     | 2004         |  |    | 2003 |  
|                  |              |            |    |     |              |  |    |      |  
|Equity securities |              |            | 65 | %   |              |  | 72 | %    |   |  | 65 | %  
|Debt securities   |              |            | 35 | %   |              |  | 25 | %    |   |  | 35 | %  
|Other             |              |            |   |     |              |  | 3  | %    |   |  |   |    
|                  |              |            |    |     |              |  |    |      |  
|                  | Total Assets |            |    | 100 | %            |  |    | 100  | % |  |    | 100 | %
|                  |              |            |    |     |              |  |    |      |  





|                          |  |         |       |                |          |   |       | 
|------------------------- |  | ------- | ----- | -------------- | -------- | - | ----- | 
|                          |  |         |       | Other          |         
|                          |  |         |       | Postretirement |         
|Expected benefit payments |  | Pension |       |                | Benefits |  
|                          |  |         |       |                |          |  
|2005                      |  | $       | 823   |                |          | $ | 226   | 
|2006                      |  |         | 834   |                |          |   | 215   | 
|2007                      |  |         | 852   |                |          |   | 238   | 
|2008                      |  |         | 922   |                |          |   | 230   | 
|2009                      |  |         | 1,038 |                |          |   | 237   | 
|2010-2014                 |  |         | 9,665 |                |          |   | 1,091 | 



|                                       |  |             |     |  |             |   |      |  
|-------------------------------------- |  | ----------- | --- |  | ----------- | - | ---- | -
|                                       |  | 1% Increase |     |  | 1% Decrease |  
|                                       |  |             |     |  |             |  
|2004 benefit cost                      |  | $           | 51  |  |             | $ | (40  | )
|Recorded liability at December 31,2004 |  | $           | 542 |  |             | $ | (440 | )

Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003,


47



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


K. Stockholders Equity








L. Accumulated Other Comprehensive Income (Loss)


|                             |                                |             |        |             |              |   |            |                 |   |            |           |        |             |               |         |        |   |   |         |         |  
|---------------------------- | ------------------------------ | ----------- | ------ | ----------- | ------------ | - | ---------- | --------------- | - | ---------- | --------- | ------ | ----------- | ------------- | ------- | ------ | - | - | ------- | ------- | -
|                             |                                |             |        | Unrealized  |              |   |            |                 |   |            |          
|                             |                                |             |        | Gains and   |              |   |            |                 |   |            |          
|                             |                                |             |        | Losses, Net |              |   | Unrealized |                 |   | Additional |           |        | Accumulated |              
|                             |                                | Foreign     |        |             | on Cash Flow |   |            | Gain on         |   |            | Minimum   |        |             | Other         |        
|                             |                                | Currency    |        |             | Hedging      |   |            | Available for  |   |            | Pension   |        |             | Comprehensive |        
|                             |                                | Translation |        |             | Derivatives  |   |            | Sale Securities |   |            | Liability |        |             | Income (Loss) |        
|                             |                                |             |        |             |              |   |            |                 |   |            |           |        |             |               |        
|Balance at January 1, 2002   |                                | $           | (9,265 | )           |              | $ | (1,019     | )               |   | $          | 1,243     |        |             | $             | (5,331  | )      |   | $ | (14,372 | )      
|                             | Reclassification adjustments   |             |        |            |              |   |            | 1,019           |   |            |           | (1,243 | )           |               |         |       |   |   |         | (224    | )
|                             | Current period credit (charge) |             |        | 53,596      |              |   |            | 1,294           |   |            |           |       |             |               |         | (7,371 | ) |   |         | 47,519  |  
|                             | Deferred taxes                 |             |        |            |              |   |            | (453            | ) |            |           |       |             |               |         | 1,588  |   |   |         | 1,135   |  
|                             |                                |             |        |             |              |   |            |                 |   |            |           |        |             |               |        
|Balance at December 31, 2002 |                                |             | 44,331 |             |              |   | 841        |                 |   |            |          |        |             |               | (11,114 | )      |   |   | 34,058  |        
|                             | Reclassification adjustments   |             |        | (74,297     | )            |   |            | (841            | ) |            |           |       |             |               |         | 2,484  |   |   |         | (72,654 | )
|                             | Current period credit          |             |        | 47,369      |              |   |            | 10,291          |   |            |           |       |             |               |         | 1,624  |   |   |         | 59,284  |  
|                             | Deferred taxes                 |             |        |            |              |   |            | (3,602          | ) |            |           |       |             |               |         |       |   |   |         | (3,602  | )
|                             |                                |             |        |             |              |   |            |                 |   |            |           |        |             |               |        
|Balance December 31, 2003    |                                |             | 17,403 |             |              |   | 6,689      |                 |   |            |          |        |             |               | (7,006  | )      |   |   | 17,086  |        
|                             | Reclassification adjustments   |             |        |            |              |   |            | (6,689          | ) |            |           |       |             |               |         |       |   |   |         | (6,689  | )
|                             | Current period credit (charge) |             |        | 7,662       |              |   |            | 4,632           |   |            |           | 930    |             |               |         | (1,177 | ) |   |         | 12,047  |  
|                             | Deferred taxes                 |             |        |            |              |   |            | (1,157          | ) |            |           |       |             |               |         |       |   |   |         | (1,157  | )
|                             |                                |             |        |             |              |   |            |                 |   |            |           |        |             |               |        
|Balance December 31, 2004    |                                | $           | 25,065 |             |              | $ | 3,475      |                 |   | $          | 930       |        |             | $             | (8,183  | )      |   | $ | 21,287  |        
|                             |                                |             |        |             |              |   |            |                 |   |            |           |        |             |               |        

48



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


M. Earnings Per Share




|                                                                       |  |      |         |  |      |   |         |      |  |   |          |  
|---------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                       |  | 2004 |         |  | 2003 |   |         | 2002 | 
|                                                                       |  |      |         |  |      |   |         |      | 
|Income (loss) from continuing operations                               |  | $    | 125,750 |  |      | $ | (56,283 | )    |  | $ | (110,733 | )
|Weighted average shares outstanding  basic                            |  |      | 28,470  |  |      |   | 28,354  |      |  |   | 28,039   |  
|Dilutive effect of stock options and restricted stock                  |  |      | 152     |  |      |   |        |      |  |   |         |  
|                                                                       |  |      |         |  |      |   |         |      | 
|Weighted average shares outstanding  assuming dilution                |  |      | 28,622  |  |      |   | 28,354  |      |  |   | 28,039   |  
|                                                                       |  |      |         |  |      |   |         |      | 
|Basic income (loss) per common share from continuing operations        |  | $    | 4.42    |  |      | $ | (1.99   | )    |  | $ | (3.95    | )
|                                                                       |  |      |         |  |      |   |         |      | 
|Dilutive income (loss) per common share from continuing
    operations |  | $    | 4.39    |  |      | $ | (1.99   | )    |  | $ | (3.95    | )
|                                                                       |  |      |         |  |      |   |         |      | 





|                                                        |  |      |         |  |      |   |        |      |  |   |          |  
|------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------ | ---- |  | - | -------- | -
|                                                        |  | 2004 |         |  | 2003 |   |        | 2002 | 
|                                                        |  |      |         |  |      |   |        |      | 
|Net income (loss)                                       |  | $    | 128,644 |  |      | $ | 83,664 |      |  | $ | (208,756 | )
|Weighted average shares outstanding                     |  |      | 28,470  |  |      |   | 28,354 |      |  |   | 28,039   |  
|Dilutive effect of stock options and restricted stock   |  |      | 152     |  |      |   | 14     |      |  |   |         |  
|                                                        |  |      |         |  |      |   |        |      | 
|Weighted average shares outstanding  assuming dilution |  |      | 28,622  |  |      |   | 28,368 |      |  |   | 28,039   |  
|                                                        |  |      |         |  |      |   |        |      | 
|Basic net income (loss) per common share                |  | $    | 4.52    |  |      | $ | 2.95   |      |  | $ | (7.45    | )
|                                                        |  |      |         |  |      |   |        |      | 
|Dilutive net income (loss) per common share             |  | $    | 4.49    |  |      | $ | 2.95   |      |  | $ | (7.45    | )
|                                                        |  |      |         |  |      |   |        |      | 



N. Stock Plans




49



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                                                               |           |         |           |          |       |   |       |         |          |  |           |          |   |          |       |       |       |  |           |          |   |   |       |       | 
|-------------------------------------------------------------- | --------- | ------- | --------- | -------- | ----- | - | ----- | ------- | -------- |  | --------- | -------- | - | -------- | ----- | ----- | ----- |  | --------- | -------- | - | - | ----- | ----- | 
|                                                               |           | 2004    |           |          | 2003  |   |       | 2002    |         
|                                                               |           |         |           |          |       |   |       |         |         
|                                                               |           |         |           | Weighted |       |   |       |         | Weighted |  |           |          |   | Weighted |      
|                                                               |           |         |           | Average  |       |   |       |         | Average  |  |           |          |   | Average  |      
|                                                               |           |         |           | Exercise |       |   |       |         | Exercise |  |           |          |   | Exercise |      
|                                                               |           | Options |           |          | Price |   |       | Options |          |  | Price     |          |   | Options  |       |       | Price | 
|                                                               |           |         |           |          |       |   |       |         |          |  |           |          |   |          |       |       |       | 
|Outstanding at January 1                                       |           |         | 1,328,691 |          |       | $ | 33.82 |         |          |  | 1,596,561 |          |   | $        | 40.31 |       |       |  | 1,725,045 |          |   | $ | 37.53 |      
|                                                               | Granted   |         |           | 355,000  |       |   |       | 31.37   |          |  |           | 322,409  |   |          |       | 18.18 |       |  |           | 54,700   |   |   |       | 62.83 | 
|                                                               | Exercised |         |           |         |       |   |       |        |          |  |           | (27,910  | ) |          |       | 14.57 |       |  |           | (183,184 | ) |   |       | 20.81 | 
|                                                               | Cancelled |         |           | (50,500  | )     |   |       | 56.47   |          |  |           | (562,369 | ) |          |       | 44.44 |       |  |           |         |   |   |       |      | 
|                                                               |           |         |           |          |       |   |       |         |          |  |           |          |   |          |       |       |       | 
|Outstanding at December 31                                     |           |         | 1,633,191 |          |       | $ | 32.58 |         |          |  | 1,328,691 |          |   | $        | 33.82 |       |       |  | 1,596,561 |          |   | $ | 40.31 |      
|Exercisable at end of year                                     |           |         | 1,074,858 |          |       |   |       |         |          |  | 1,006,282 |          |   |          |       |       |       |  | 1,541,861 |          |   |   |       |      
|Weighted-average fair value of options granted during the year |           |         |           |          |       | $ | 14.17 |         |          |  |           |          |   | $        | 8.20  |       |       |  |           |          |   | $ | 36.68 |      





|                          |               |             |  |           |             |  |          |          |  |  |           |          |  |          |  |         |  |  |   |       | 
|------------------------- | ------------- | ----------- |  | --------- | ----------- |  | -------- | -------- |  |  | --------- | -------- |  | -------- |  | ------- |  |  | - | ----- | 
|                          |               | Outstanding |  |           |            
|                          |               |             |  |           | Exercisable | 
|                          |               |             |  | Weighted  |             |  |          |          |  | 
|                          |               |             |  | Average   |             |  | Weighted |          |  |  |           | Weighted | 
|                          |               |             |  | Remaining |             |  | Average  |          |  |  |           | Average  | 
|                          |               | Number of   |  |           | Contractual |  |          | Exercise |  |  | Number of |          |  | Exercise | 
|                          |               | Shares      |  |           | Life        |  |          | Price    |  |  | Shares    |          |  | Price    | 
|                          |               |             |  |           |             |  |          |          |  |  |           |          |  |          | 
|Range of exercise prices: |               |             |  |           |             |  |          |          |  |  |           |          |  |          |  |         |  |  |   |      
|                          | $11.06-$16.59 |             |  | 72,266    |             |  |          | 0.5      |  |  | $         | 12.88    |  |          |  | 72,266  |  |  | $ | 12.88 | 
|                          | $16.60-$24.90 |             |  | 403,610   |             |  |          | 7.4      |  |  | $         | 18.47    |  |          |  | 200,277 |  |  | $ | 18.72 | 
|                          | $24.91-$37.37 |             |  | 732,503   |             |  |          | 7.0      |  |  | $         | 32.47    |  |          |  | 377,503 |  |  | $ | 33.51 | 
|                          | $37.38-$56.07 |             |  | 287,312   |             |  |          | 5.2      |  |  | $         | 44.61    |  |          |  | 287,312 |  |  | $ | 44.61 | 
|                          | $56.08-$66.45 |             |  | 137,500   |             |  |          | 7.2      |  |  | $         | 59.85    |  |          |  | 137,500 |  |  | $ | 59.85 | 



50



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


O. Commitments and Contingencies




|      |  |   |           | 
|----- |  | - | --------- | 
|2005  |  | $ | 518,000   | 
|2006  |  |   | 257,000   | 
|2007  |  |   | 201,000   | 
|2008  |  |   | 194,000   | 
|2009  |  |   | 40,000    | 
|2010  |  |   | 40,000    | 
|      |  |   |          
|Total |  | $ | 1,250,000 | 
|      |  |   |          







51



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued












P. Lease Obligations




52



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                             |  |   |        | 
|---------------------------- |  | - | ------ | 
|Year Ending December 31      |  |  
|                             |  |  
|2005                         |  | $ | 4,344  | 
|2006                         |  |   | 3,380  | 
|2007                         |  |   | 3,184  | 
|2008                         |  |   | 2,807  | 
|2009                         |  |   | 2,602  | 
|2010 and thereafter          |  |   | 4,489  | 
|                             |  |   |       
|Total minimum lease payments |  | $ | 20,806 | 
|                             |  |   |       

Q. Investment and Other Income, Net


|                                           |  |      |       |  |      |   |        |      |  |   |       |  
|------------------------------------------ |  | ---- | ----- |  | ---- | - | ------ | ---- |  | - | ----- | -
|                                           |  | 2004 |       |  | 2003 |   |        | 2002 | 
|                                           |  |      |       |  |      |   |        |      | 
|Equity income from investment              |  | $    | 4,479 |  |      | $ | 1,066  |      |  | $ | 474   |  
|Interest income from joint venture partner |  |      | 849   |  |      |   | 6,895  |      |  |   |      |  
|Gain on sale of businesses                 |  |      |      |  |      |   | 4,609  |      |  |   | 1,213 |  
|Other, net                                 |  |      | 708   |  |      |   | (178   | )    |  |   | (71   | )
|                                           |  |      |       |  |      |   |        |      | 
|Total                                      |  | $    | 6,036 |  |      | $ | 12,392 |      |  | $ | 1,616 |  
|                                           |  |      |       |  |      |   |        |      | 



R. Subsequent Event




S. Reportable Segments and Geographic Information




53



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued










54



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                                                                                        |                                      |        |           |         |         |   |           |          |         |   |          |         |         |  
|--------------------------------------------------------------------------------------- | ------------------------------------ | ------ | --------- | ------- | ------- | - | --------- | -------- | ------- | - | -------- | ------- | ------- | -
|                                                                                        |                                      | 2004   |           |         | 2003    |   |           | 2002     |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Business Segment Information                                                            |                                      |        |           |         |         |   |           |          |         |   |          |        
|Net Sales                                                                               |                                      |        |           |         |         |   |           |          |         |   |          |        
|                                                                                        | Cobalt                               |        | $         | 643,089 |         |   | $         | 379,890  |         |   | $        | 354,042 |        
|                                                                                        | Nickel                               |        |           | 781,778 |         |   |           | 567,897  |         |   |          | 428,336 |        
|                                                                                        | Intercompany sales between segments: |        |           |         |         |   |           |          |         |   |          |         |        
|                                                                                        |                                      | Cobalt |           |         | (2,688  | ) |           |          | (4,039  | ) |          |         | (4,057  | )
|                                                                                        |                                      | Nickel |           |         | (74,841 | ) |           |          | (31,603 | ) |          |         | (39,393 | )
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|                                                                                        |                                      | $      | 1,347,338 |         |         | $ | 912,145   |          |         | $ | 738,928  |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Income (loss) from operations                                                           |                                      |        |           |         |         |   |           |          |         |   |          |        
|                                                                                        | Cobalt(a)                            |        | $         | 146,898 |         |   | $         | 55,036   |         |   | $        | (40,776 | )      
|                                                                                        | Nickel(b)                            |        |           | 109,049 |         |   |           | 58,263   |         |   |          | 22,701  |        
|                                                                                        | Corporate(c)                         |        |           | (54,575 | )       |   |           | (130,325 | )       |   |          | (69,873 | )      
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|                                                                                        |                                      |        | 201,372   |         |         |   | (17,026   | )        |         |   | (87,948  | )      
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Interest expense                                                                        |                                      |        | (39,838   | )       |         |   | (41,052   | )        |         |   | (39,690  | )      
|Foreign exchange gain/(loss)                                                            |                                      |        | (5,310    | )       |         |   | 3,023     |          |         |   | (6,517   | )      
|Investment and other income, net                                                        |                                      |        | 6,036     |         |         |   | 12,392    |          |         |   | 1,616    |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|                                                                                        |                                      |        | (39,112   | )       |         |   | (25,637   | )        |         |   | (44,591  | )      
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Income/(loss) from continuing operations before income taxes and
    minority interests |                                      | $      | 162,260   |         |         | $ | (42,663   | )        |         | $ | (132,539 | )      
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Total assets                                                                            |                                      |        |           |         |         |   |           |          |         |   |          |        
|                                                                                        | Cobalt                               |        | $         | 741,432 |         |   | $         | 647,615  |         |   |          |         |        
|                                                                                        | Nickel                               |        |           | 571,324 |         |   |           | 539,008  |         |   |          |         |        
|                                                                                        | Corporate                            |        |           | 21,945  |         |   |           | 24,815   |         |   |          |         |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|                                                                                        |                                      | $      | 1,334,701 |         |         | $ | 1,211,438 |          |         |   |          |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Expenditures for property, plant & equipment                                            |                                      |        |           |         |         |   |           |          |         |   |          |        
|                                                                                        | Cobalt                               |        | $         | 9,046   |         |   | $         | 5,713    |         |   | $        | 23,378  |        
|                                                                                        | Nickel                               |        |           | 9,371   |         |   |           | 5,197    |         |   |          | 37,856  |        
|                                                                                        | Corporate                            |        |           |        |         |   |           |         |         |   |          | 276     |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|                                                                                        |                                      | $      | 18,417    |         |         | $ | 10,910    |          |         | $ | 61,510   |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|Depreciation and amortization                                                           |                                      |        |           |         |         |   |           |          |         |   |          |        
|                                                                                        | Cobalt                               |        | $         | 32,414  |         |   | $         | 35,458   |         |   | $        | 33,536  |        
|                                                                                        | Nickel                               |        |           | 15,940  |         |   |           | 18,674   |         |   |          | 16,376  |        
|                                                                                        | Corporate                            |        |           | 2,600   |         |   |           | 2,310    |         |   |          | 219     |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        
|                                                                                        |                                      | $      | 50,954    |         |         | $ | 56,442    |          |         | $ | 50,131   |        
|                                                                                        |                                      |        |           |         |         |   |           |          |        

55



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                             |  |                             |         |  |        |   |        |              |  |   |         | 
|---------------------------- |  | --------------------------- | ------- |  | ------ | - | ------ | ------------ |  | - | ------- | 
|                             |  | Carrying Amount of Goodwill |        
|                             |  |                             |        
|                             |  | Cobalt                      |         |  | Nickel |   |        | Consolidated | 
|                             |  |                             |         |  |        |   |        |              | 
|Balance at January 1, 2003   |  | $                           | 110,186 |  |        | $ | 64,713 |              |  | $ | 174,899 | 
|Foreign currency translation |  |                             | 3,779   |  |        |   |       |              |  |   | 3,779   | 
|                             |  |                             |         |  |        |   |        |              | 
|Balance at December 31, 2003 |  | $                           | 113,965 |  |        | $ | 64,713 |              |  | $ | 178,678 | 
|Foreign currency translation |  |                             | 3,193   |  |        |   |       |              |  |   | 3,193   | 
|                             |  |                             |         |  |        |   |        |              | 
|Balance at December 31, 2004 |  | $                           | 117,158 |  |        | $ | 64,713 |              |  | $ | 181,871 | 
|                             |  |                             |         |  |        |   |        |              | 

|                                 |  |              |           |                 |                |   |         | 
|-------------------------------- |  | ------------ | --------- | --------------- | -------------- | - | ------- | 
|                                 |  |              |           | Property, Plant |               
|                                 |  |              |           | and             |               
|                                 |  | Net Sales(d) |           |                 | Equipment, net |  
|                                 |  |              |           |                 |                |  
|Geographic Region Information    |  |              |           |                 |                |   |         | 
|2004                             |  |              |           |                 |                |   |         | 
|Finland                          |  | $            | 831,734   |                 |                | $ | 205,101 | 
|United States                    |  |              | 175,830   |                 |                |   | 32,151  | 
|Japan                            |  |              | 265,301   |                 |                |   | 110     | 
|Other                            |  |              | 74,473    |                 |                |   | 56,155  | 
|Democratic Republic of the Congo |  |              |          |                 |                |   | 96,295  | 
|                                 |  |              |           |                 |                |  
|                                 |  | $            | 1,347,338 |                 |                | $ | 389,812 | 
|                                 |  |              |           |                 |                |  
|2003                             |  |              |           |                 |                |   |         | 
|Finland                          |  | $            | 608,007   |                 |                | $ | 218,957 | 
|United States                    |  |              | 136,814   |                 |                |   | 33,489  | 
|Japan                            |  |              | 105,989   |                 |                |   | 141     | 
|Other                            |  |              | 61,335    |                 |                |   | 52,789  | 
|Democratic Republic of the Congo |  |              |          |                 |                |   | 105,984 | 
|                                 |  |              |           |                 |                |  
|                                 |  | $            | 912,145   |                 |                | $ | 411,360 | 
|                                 |  |              |           |                 |                |  
|2002                             |  |              |           |                 |                |   |         | 
|Finland                          |  | $            | 484,896   |                 |                |   |         | 
|United States                    |  |              | 145,437   |                 |                |   |         | 
|Japan                            |  |              | 48,057    |                 |                |   |         | 
|Other                            |  |              | 60,538    |                 |                |   |         | 
|                                 |  |              |           |                 |                |  
|                                 |  | $            | 738,928   |                 |                |   |         | 
|                                 |  |              |           |                 |                |  






|    |                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Cobalt segment operating profit (loss) in 2003 and 2002 includes
    restructuring charges of $9.6 million and
    $39.1 million, respectively.                                                                                                                           
|   
|(b) | Nickel segment operating profit in 2003 and 2002 includes
    restructuring charges of $4.1 million and
    $6.4 million, respectively.                                                                                                                                   
|   
|(c) | Corporate expenses in 2004 and 2003 include a charge of
    $7.5 million and $84.5 million, respectively, related
    to the shareholder lawsuits. 2003 also includes restructuring
    charges of $6.3 million. 2002 includes restructuring
    charges of $37.0 million.
|   
|(d) | Net sales attributed to the geographic area are based on the
    location of the manufacturing facility, except for Japan, which
    is a sales office.                                                                                                                   

T. Guarantor and Non-Guarantor Subsidiary Information




56



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |            |          |   |   |           |         | 
|------------------------------------------------- | --------------------------------- | ----------------- | --------- | -------- | ------------ | - | -------- | ------------- |  | - | ------------ | ------- |  | ----- | ---------- | -------- | - | - | --------- | ------- | 
|                                                  |                                   | December 31, 2004 |          
|                                                  |                                   |                   |          
|                                                  |                                   |                   |           | Combined |              |   | Combined |               |  |  
|                                                  |                                   | The               |           |          | Guarantor    |   |          | Non-guarantor |  |   |             
|                                                  |                                   | Company           |           |          | Subsidiaries |   |          | Subsidiaries  |  |   | Eliminations |         |  | Total |           
|Balance Sheet Data                                |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           
|Current assets:                                   |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |            |          |   |   |           |        
|                                                  | Cash and cash equivalents         |                   | $         | 8,533    |              |   | $        | 1,197         |  |   | $            | 17,049  |  |       |            |         |   |   | $         | 26,779  | 
|                                                  | Accounts receivable               |                   |           | 496,692  |              |   |          | 79,383        |  |   |              | 531,902 |  |       | $          | (946,631 | ) |   |           | 161,346 | 
|                                                  | Inventories                       |                   |           |         |              |   |          | 58,450        |  |   |              | 357,067 |  |       |            |         |   |   |           | 415,517 | 
|                                                  | Other assets                      |                   |           |         |              |   |          | 6,291         |  |   |              | 78,926  |  |       |            |         |   |   |           | 85,217  | 
|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           
|Total current assets                              |                                   |                   | 505,225   |          |              |   | 145,321  |               |  |   | 984,944      |         |  |       | (946,631   | )        |   |   | 688,859   |        
|Property, plant and equipment  net               |                                   |                   |          |          |              |   | 35,542   |               |  |   | 354,270      |         |  |       |           |          |   |   | 389,812   |        
|Goodwill                                          |                                   |                   | 75,830    |          |              |   | 68,908   |               |  |   | 37,133       |         |  |       |           |          |   |   | 181,871   |        
|Intercompany receivables                          |                                   |                   | 334,598   |          |              |   |         |               |  |   | 935,132      |         |  |       | (1,269,730 | )        |   |   |          |        
|Investment in subsidiaries                        |                                   |                   | 92,347    |          |              |   |         |               |  |   | 2,160,526    |         |  |       | (2,252,873 | )        |   |   |          |        
|Other assets                                      |                                   |                   | 11,120    |          |              |   | 12,166   |               |  |   | 50,873       |         |  |       |           |          |   |   | 74,159    |        
|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           
|Total assets                                      |                                   | $                 | 1,019,120 |          |              | $ | 261,937  |               |  | $ | 4,522,878    |         |  | $     | (4,469,234 | )        |   | $ | 1,334,701 |        
|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           
|Current liabilities:                              |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |            |          |   |   |           |        
|                                                  | Current portion of long-term debt |                   |           |         |              |   |          |              |  |   | $            | 5,750   |  |       |            |         |   |   | $         | 5,750   | 
|                                                  | Long-term debt in default         |                   | $         | 400,000  |              |   |          |              |  |   |              |        |  |       |            |         |   |   |           | 400,000 | 
|                                                  | Accounts payable                  |                   |           | 100      |              |   | $        | 76,262        |  |   |              | 571,394 |  |       | $          | (515,444 | ) |   |           | 132,312 | 
|                                                  | Other accrued expenses            |                   |           | 97,671   |              |   |          | 18,811        |  |   |              | 47,252  |  |       |            |         |   |   |           | 163,734 | 
|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           
|Total current liabilities                         |                                   |                   | 497,771   |          |              |   | 95,073   |               |  |   | 624,396      |         |  |       | (515,444   | )        |   |   | 701,796   |        
|Long-term debt                                    |                                   |                   | 7,433     |          |              |   |         |               |  |   | 17,250       |         |  |       |           |          |   |   | 24,683    |        
|Deferred income taxes                             |                                   |                   |          |          |              |   |         |               |  |   | 31,033       |         |  |       |           |          |   |   | 31,033    |        
|Other long-term liabilities and minority interest |                                   |                   | 26,884    |          |              |   | 14,157   |               |  |   | 49,116       |         |  |       |           |          |   |   | 90,157    |        
|Intercompany payables                             |                                   |                   |          |          |              |   | 497,038  |               |  |   | 1,189,735    |         |  |       | (1,686,773 | )        |   |   |          |        
|Stockholders equity                              |                                   |                   | 487,032   |          |              |   | (344,331 | )             |  |   | 2,611,348    |         |  |       | (2,267,017 | )        |   |   | 487,032   |        
|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           
|Total liabilities & stockholders equity          |                                   | $                 | 1,019,120 |          |              | $ | 261,937  |               |  | $ | 4,522,878    |         |  | $     | (4,469,234 | )        |   | $ | 1,334,701 |        
|                                                  |                                   |                   |           |          |              |   |          |               |  |   |              |         |  |       |           

57



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |          |   |  |   |           |  
|------------------------------------------------------- |  | ----------------- | ------- | -------- | ------------ | - | -------- | ------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | --------- | -
|                                                        |  | December 31, 2004 |        
|                                                        |  |                   |        
|                                                        |  |                   |         | Combined |              |   | Combined |               |  |  
|                                                        |  | The               |         |          | Guarantor    |   |          | Non-guarantor |  |   |             
|                                                        |  | Company           |         |          | Subsidiaries |   |          | Subsidiaries  |  |   | Eliminations |   |  | Total |         
|Income Statement                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Net sales                                               |  |                   |        |          |              | $ | 217,458  |               |  | $ | 1,684,273    |   |  | $     | (554,393 | ) |  | $ | 1,347,338 |  
|Cost of products sold                                   |  |                   |        |          |              |   | 160,036  |               |  |   | 1,411,248    |   |  |       | (554,393 | ) |  |   | 1,016,891 |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|                                                        |  |                   |        |          |              |   | 57,422   |               |  |   | 273,025      |   |  |       |         |   |  |   | 330,447   |  
|Selling, general and administrative expenses            |  |                   |        |          |              |   | 74,665   |               |  |   | 54,410       |   |  |       |         |   |  |   | 129,075   |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) from operations                           |  |                   |        |          |              |   | (17,243  | )             |  |   | 218,615      |   |  |       |         |   |  |   | 201,372   |  
|Interest expense                                        |  | $                 | (37,835 | )        |              |   | (6,021   | )             |  |   | (56,130      | ) |  |       | 60,148   |   |  |   | (39,838   | )
|Investment and other income, net                        |  |                   | 7,271   |          |              |   | 690      |               |  |   | 58,223       |   |  |       | (60,148  | ) |  |   | 6,036     |  
|Foreign exchange gain (loss)                            |  |                   | (375    | )        |              |   | 49       |               |  |   | (4,984       | ) |  |       |         |   |  |   | (5,310    | )
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) before income taxes and minority interest |  |                   | (30,939 | )        |              |   | (22,525  | )             |  |   | 215,724      |   |  |       |         |   |  |   | 162,260   |  
|Income tax expense                                      |  |                   |        |          |              |   |         |               |  |   | 35,068       |   |  |       |         |   |  |   | 35,068    |  
|Minority interest gains                                 |  |                   |        |          |              |   |         |               |  |   | 1,442        |   |  |       |         |   |  |   | 1,442     |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) from continuing operations                |  |                   | (30,939 | )        |              |   | (22,525  | )             |  |   | 179,214      |   |  |       |         |   |  |   | 125,750   |  
|Income from discontinued operations, net of tax         |  |                   | 1,019   |          |              |   | 1,875    |               |  |   |             |   |  |       |         |   |  |   | 2,894     |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Net income (loss)                                       |  | $                 | (29,920 | )        |              | $ | (20,650  | )             |  | $ | 179,214      |   |  | $     |         |   |  | $ | 128,644   |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         

58



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                             |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |   |   |  |   |         |         |  
|------------------------------------------------------------ | --------------------------------------------------- | ----------------- | ------ | -------- | ------------ | - | -------- | ------------- | - | - | ------------ | ------- | ----- | - | - | - |  | - | ------- | ------- | -
|                                                             |                                                     | December 31, 2004 |       
|                                                             |                                                     |                   |       
|                                                             |                                                     |                   |        | Combined |              |   | Combined |               |   |  
|                                                             |                                                     | The               |        |          | Guarantor    |   |          | Non-guarantor |   |   |             
|                                                             |                                                     | Company           |        |          | Subsidiaries |   |          | Subsidiaries  |   |   | Eliminations |         | Total |  
|Cash Flow Data                                               |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |  
|Net cash provided by (used in) operating activities          |                                                     | $                 | 6,409  |          |              | $ | (302     | )             |   | $ | (10,064      | )       |       | $ |  |   |  | $ | (3,957  | )      
|Investing activities:                                        |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |   |   |  |   |         |        
|                                                             | Expenditures for property plant and equipment  net |                   |        |         |              |   |          | (3,054        | ) |   |              | (15,363 | )     |   |   |  |  |   |         | (18,417 | )
|                                                             | Acquisition of businesses                           |                   |        | (6,715   | )            |   |          |              |   |   |              |        |       |   |   |  |  |   |         | (6,715  | )
|                                                             |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |  
|Net cash used in investing activities                        |                                                     |                   | (6,715 | )        |              |   | (3,054   | )             |   |   | (15,363      | )       |       |   |  |   |  |   | (25,132 | )      
|Financing activities:                                        |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |   |   |  |   |         |        
|                                                             | Long-term borrowings                                |                   |        |         |              |   |          |              |   |   |              | 23,000  |       |   |   |  |  |   |         | 23,000  |  
|                                                             | Payments of long-term debt                          |                   |        |         |              |   |          |              |   |   |              | (22,919 | )     |   |   |  |  |   |         | (22,919 | )
|                                                             |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |  
|Net cash provided by financing activities                    |                                                     |                   |       |          |              |   |         |               |   |   | 81           |         |       |   |  |   |  |   | 81      |        
|Effect of exchange rate changes on cash and cash equivalents |                                                     |                   |       |          |              |   |         |               |   |   | 1,068        |         |       |   |  |   |  |   | 1,068   |        
|                                                             |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |  
|Decrease in cash and cash equivalents                        |                                                     |                   | (306   | )        |              |   | (3,356   | )             |   |   | (24,278      | )       |       |   |  |   |  |   | (27,940 | )      
|Cash and cash equivalents at beginning of the year           |                                                     |                   | 8,839  |          |              |   | 4,553    |               |   |   | 41,327       |         |       |   |  |   |  |   | 54,719  |        
|                                                             |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |  
|Cash and cash equivalents at end of the year                 |                                                     | $                 | 8,533  |          |              | $ | 1,197    |               |   | $ | 17,049       |         |       | $ |  |   |  | $ | 26,779  |        
|                                                             |                                                     |                   |        |          |              |   |          |               |   |   |              |         |       |   |  

59



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |            |          |   |   |           |         | 
|------------------------------------------------- | ------------------------- | ----------------- | ------- | -------- | ------------ | - | -------- | ------------- |  | - | ------------ | ------- |  | ----- | ---------- | -------- | - | - | --------- | ------- | 
|                                                  |                           | December 31, 2003 |        
|                                                  |                           |                   |        
|                                                  |                           |                   |         | Combined |              |   | Combined |               |  |  
|                                                  |                           | The               |         |          | Guarantor    |   |          | Non-guarantor |  |   |             
|                                                  |                           | Company           |         |          | Subsidiaries |   |          | Subsidiaries  |  |   | Eliminations |         |  | Total |           
|Balance Sheet Data                                |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           
|Current assets:                                   |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |            |          |   |   |           |        
|                                                  | Cash and cash equivalents |                   | $       | 8,839    |              |   | $        | 4,553         |  |   | $            | 41,327  |  |       |            |         |   |   | $         | 54,719  | 
|                                                  | Accounts receivable       |                   |         | 424,455  |              |   |          | 45,979        |  |   |              | 511,343 |  |       | $          | (845,077 | ) |   |           | 136,700 | 
|                                                  | Inventories               |                   |         |         |              |   |          | 33,151        |  |   |              | 236,050 |  |       |            |         |   |   |           | 269,201 | 
|                                                  | Other assets              |                   |         | 166      |              |   |          | 4,712         |  |   |              | 60,191  |  |       |            |         |   |   |           | 65,069  | 
|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           
|Total current assets                              |                           |                   | 433,460 |          |              |   | 88,395   |               |  |   | 848,911      |         |  |       | (845,077   | )        |   |   | 525,689   |        
|Property, plant and equipment  net               |                           |                   |        |          |              |   | 37,606   |               |  |   | 373,754      |         |  |       |           |          |   |   | 411,360   |        
|Goodwill                                          |                           |                   | 75,830  |          |              |   | 68,908   |               |  |   | 33,940       |         |  |       |           |          |   |   | 178,678   |        
|Intercompany receivables                          |                           |                   | 287,620 |          |              |   |         |               |  |   | 1,027,343    |         |  |       | (1,314,963 | )        |   |   |          |        
|Investment in subsidiaries                        |                           |                   | 55,124  |          |              |   |         |               |  |   | 2,160,526    |         |  |       | (2,215,650 | )        |   |   |          |        
|Other assets                                      |                           |                   | 11,711  |          |              |   | 9,804    |               |  |   | 74,196       |         |  |       |           |          |   |   | 95,711    |        
|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           
|Total assets                                      |                           | $                 | 863,745 |          |              | $ | 204,713  |               |  | $ | 4,518,670    |         |  | $     | (4,375,690 | )        |   | $ | 1,211,438 |        
|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           
|Current liabilities:                              |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |            |          |   |   |           |        
|                                                  | Accounts payable          |                   | $       | (5,290   | )            |   | $        | 76,677        |  |   | $            | 571,427 |  |       | $          | (506,624 | ) |   | $         | 136,190 | 
|                                                  | Other accrued expenses    |                   |         | 14,513   |              |   |          | 28,303        |  |   |              | 66,120  |  |       |            |          |   |   |           | 108,936 | 
|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           
|Total current liabilities                         |                           |                   | 9,223   |          |              |   | 104,980  |               |  |   | 637,547      |         |  |       | (506,624   | )        |   |   | 245,126   |        
|Long-term debt                                    |                           |                   | 407,547 |          |              |   |         |               |  |   | 22,919       |         |  |       |           |          |   |   | 430,466   |        
|Deferred income taxes                             |                           |                   | 5,265   |          |              |   |         |               |  |   | 23,777       |         |  |       |           |          |   |   | 29,042    |        
|Other long-term liabilities and minority interest |                           |                   | 91,258  |          |              |   | 15,415   |               |  |   | 49,679       |         |  |       |           |          |   |   | 156,352   |        
|Intercompany payables                             |                           |                   |        |          |              |   | 419,566  |               |  |   | 1,220,445    |         |  |       | (1,640,011 | )        |   |   |          |        
|Stockholders equity                              |                           |                   | 350,452 |          |              |   | (335,248 | )             |  |   | 2,564,303    |         |  |       | (2,229,055 | )        |   |   | 350,452   |        
|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           
|Total liabilities & stockholders equity          |                           | $                 | 863,745 |          |              | $ | 204,713  |               |  | $ | 4,518,670    |         |  | $     | (4,375,690 | )        |   | $ | 1,211,438 |        
|                                                  |                           |                   |         |          |              |   |          |               |  |   |              |         |  |       |           

60



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |          |   |  |   |         |  
|------------------------------------------------------- |  | ----------------- | ------- | -------- | ------------ | - | -------- | ------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | ------- | -
|                                                        |  | December 31, 2003 |        
|                                                        |  |                   |        
|                                                        |  |                   |         | Combined |              |   | Combined |               |  |  
|                                                        |  | The               |         |          | Guarantor    |   |          | Non-guarantor |  |   |             
|                                                        |  | Company           |         |          | Subsidiaries |   |          | Subsidiaries  |  |   | Eliminations |   |  | Total |         
|Income Statement                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Net sales                                               |  |                   |        |          |              | $ | 166,462  |               |  | $ | 1,008,933    |   |  | $     | (263,250 | ) |  | $ | 912,145 |  
|Cost of products sold                                   |  |                   |        |          |              |   | 128,806  |               |  |   | 866,592      |   |  |       | (263,250 | ) |  |   | 732,148 |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|                                                        |  |                   |        |          |              |   | 37,656   |               |  |   | 142,341      |   |  |       |         |   |  |   | 179,997 |  
|Selling, general and administrative expenses            |  |                   |        |          |              |   | 159,338  |               |  |   | 37,685       |   |  |       |         |   |  |   | 197,023 |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) from operations                           |  |                   |        |          |              |   | (121,682 | )             |  |   | 104,656      |   |  |       |         |   |  |   | (17,026 | )
|Interest expense                                        |  | $                 | (69,116 | )        |              |   | (12,031  | )             |  |   | (31,214      | ) |  |       | 71,309   |   |  |   | (41,052 | )
|Investment and other income, net                        |  |                   | 14,202  |          |              |   | 6,268    |               |  |   | 63,231       |   |  |       | (71,309  | ) |  |   | 12,392  |  
|Foreign exchange gain (loss)                            |  |                   | (4,236  | )        |              |   | 194      |               |  |   | 7,065        |   |  |       |         |   |  |   | 3,023   |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) before income taxes and minority interest |  |                   | (59,150 | )        |              |   | (127,251 | )             |  |   | 143,738      |   |  |       |         |   |  |   | (42,663 | )
|Income tax expense                                      |  |                   |        |          |              |   |         |               |  |   | 14,534       |   |  |       |         |   |  |   | 14,534  |  
|Minority interest losses                                |  |                   |        |          |              |   |         |               |  |   | (914         | ) |  |       |         |   |  |   | (914    | )
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) from continuing operations                |  |                   | (59,150 | )        |              |   | (127,251 | )             |  |   | 130,118      |   |  |       |         |   |  |   | (56,283 | )
|Income (loss) from discontinued operations, net of tax  |  |                   | 120,042 |          |              |   | (47,155  | )             |  |   | 67,060       |   |  |       |         |   |  |   | 139,947 |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Net income (loss)                                       |  | $                 | 60,892  |          |              | $ | (174,406 | )             |  | $ | 197,178      |   |  | $     |         |   |  | $ | 83,664  |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         

61



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                             |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |   |   |  |   |          |          |  
|------------------------------------------------------------ | --------------------------------------------------- | ----------------- | -------- | -------- | ------------ | - | -------- | ------------- | - | - | ------------ | ------ | ----- | - | - | - |  | - | -------- | -------- | -
|                                                             |                                                     | December 31, 2003 |         
|                                                             |                                                     |                   |         
|                                                             |                                                     |                   |          | Combined |              |   | Combined |               |   |  
|                                                             |                                                     | The               |          |          | Guarantor    |   |          | Non-guarantor |   |   |             
|                                                             |                                                     | Company           |          |          | Subsidiaries |   |          | Subsidiaries  |   |   | Eliminations |        | Total |  
|Cash Flow Data                                               |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |  
|Net cash provided by (used in) operating activities          |                                                     | $                 | (57,964  | )        |              | $ | 7,919    |               |   | $ | 78,310       |        |       | $ |  |   |  | $ | 28,265   |         
|Investing activities:                                        |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |   |   |  |   |          |         
|                                                             | Expenditures for property plant and equipment  net |                   |          |         |              |   |          | (5,074        | ) |   |              | (5,836 | )     |   |   |  |  |   |          | (10,910  | )
|                                                             | Acquisition of businesses                           |                   |          | (11,151  | )            |   |          |              |   |   |              |       |       |   |   |  |  |   |          | (11,151  | )
|                                                             | Proceeds from sale of businesses                    |                   |          | 871,281  |              |   |          |              |   |   |              |       |       |   |   |  |  |   |          | 871,281  |  
|                                                             |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |  
|Net cash provided by (used in) investing activities          |                                                     |                   | 860,130  |          |              |   | (5,074   | )             |   |   | (5,836       | )      |       |   |  |   |  |   | 849,220  |         
|Financing activities:                                        |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |   |   |  |   |          |         
|                                                             | Long-term borrowings                                |                   |          |         |              |   |          |              |   |   |              | 22,919 |       |   |   |  |  |   |          | 22,919   |  
|                                                             | Payments of long-term debt                          |                   |          | (794,400 | )            |   |          |              |   |   |              |       |       |   |   |  |  |   |          | (794,400 | )
|                                                             | Proceeds from exercise of stock options             |                   |          | 406      |              |   |          |              |   |   |              |       |       |   |   |  |  |   |          | 406      |  
|Net cash provided by (used in) financing activities          |                                                     |                   | (793,994 | )        |              |   |         |               |   |   | 22,919       |        |       |   |  |   |  |   | (771,075 | )       
|Effect of exchange rate changes on cash and cash equivalents |                                                     |                   |         |          |              |   |         |               |   |   | 6,238        |        |       |   |  |   |  |   | 6,238    |         
|                                                             |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |  
|Cash provided by continuing operations                       |                                                     |                   | 8,172    |          |              |   | 2,845    |               |   |   | 101,631      |        |       |   |  |   |  |   | 112,648  |         
|Cash used in discontinuing operations                        |                                                     |                   |         |          |              |   |         |               |   |   | (70,399      | )      |       |   |  |   |  |   | (70,399  | )       
|                                                             |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |  
|Increase in cash and cash equivalents                        |                                                     |                   | 8,172    |          |              |   | 2,845    |               |   |   | 31,232       |        |       |   |  |   |  |   | 42,249   |         
|Cash and cash equivalents at beginning of the year           |                                                     |                   | 667      |          |              |   | 1,708    |               |   |   | 10,095       |        |       |   |  |   |  |   | 12,470   |         
|                                                             |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |  
|Cash and cash equivalents at end of the year                 |                                                     | $                 | 8,839    |          |              | $ | 4,553    |               |   | $ | 41,327       |        |       | $ |  |   |  | $ | 54,719   |         
|                                                             |                                                     |                   |          |          |              |   |          |               |   |   |              |        |       |   |  

62



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |          |   |  |   |          |  
|------------------------------------------------------- |  | ----------------- | ------- | -------- | ------------ | - | -------- | ------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | -------- | -
|                                                        |  | December 31, 2002 |        
|                                                        |  |                   |        
|                                                        |  |                   |         | Combined |              |   | Combined |               |  |  
|                                                        |  | The               |         |          | Guarantor    |   |          | Non-guarantor |  |   |             
|                                                        |  | Company           |         |          | Subsidiaries |   |          | Subsidiaries  |  |   | Eliminations |   |  | Total |         
|Income Statement Data                                   |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Net sales                                               |  | $                 |        |          |              | $ | 163,746  |               |  | $ | 783,979      |   |  | $     | (208,797 | ) |  | $ | 738,928  |  
|Cost of products sold                                   |  |                   |        |          |              |   | 133,226  |               |  |   | 766,425      |   |  |       | (208,797 | ) |  |   | 690,854  |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|                                                        |  |                   |        |          |              |   | 30,520   |               |  |   | 17,554       |   |  |       |         |   |  |   | 48,074   |  
|Selling, general and administrative expense             |  |                   |        |          |              |   | 102,222  |               |  |   | 33,800       |   |  |       |         |   |  |   | 136,022  |  
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Loss from operations                                    |  |                   |        |          |              |   | (71,702  | )             |  |   | (16,246      | ) |  |       |         |   |  |   | (87,948  | )
|Interest expense                                        |  | $                 | (77,964 | )        |              |   | (13,273  | )             |  |   | (15,781      | ) |  |       | 67,328   |   |  |   | (39,690  | )
|Investment and other income, net                        |  |                   | 15,910  |          |              |   | 527      |               |  |   | 52,507       |   |  |       | (67,328  | ) |  |   | 1,616    |  
|Foreign exchange gain (loss)                            |  |                   | 819     |          |              |   | 4        |               |  |   | (7,340       | ) |  |       |         |   |  |   | (6,517   | )
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) before income taxes and minority interest |  |                   | (61,235 | )        |              |   | (84,444  | )             |  |   | 13,140       |   |  |       |         |   |  |   | (132,539 | )
|Income tax benefit                                      |  |                   |        |          |              |   |         |               |  |   | (13,591      | ) |  |       |         |   |  |   | (13,591  | )
|Minority interest losses                                |  |                   |        |          |              |   |         |               |  |   | (8,215       | ) |  |       |         |   |  |   | (8,215   | )
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Income (loss) from continuing operations                |  |                   | (61,235 | )        |              |   | (84,444  | )             |  |   | 34,946       |   |  |       |         |   |  |   | (110,733 | )
|Income (loss) from discontinued operations, net of tax  |  |                   | (14,073 | )        |              |   | 37,667   |               |  |   | (121,617     | ) |  |       |         |   |  |   | (98,023  | )
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         
|Net loss                                                |  | $                 | (75,308 | )        |              | $ | (46,777  | )             |  | $ | (86,671      | ) |  | $     |         |   |  | $ | (208,756 | )
|                                                        |  |                   |         |          |              |   |          |               |  |   |              |   |  |       |         

63



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued


|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |   |   |  |   |         |          |  
|------------------------------------------------------------ | --------------------------------------------------- | ----------------- | ------- | -------- | ------------ | - | -------- | ------------- | - | - | ------------ | ------- | ----- | - | - | - |  | - | ------- | -------- | -
|                                                             |                                                     | December 31, 2002 |        
|                                                             |                                                     |                   |        
|                                                             |                                                     |                   |         | Combined |              |   | Combined |               |   |  
|                                                             |                                                     | The               |         |          | Guarantor    |   |          | Non-guarantor |   |   |             
|                                                             |                                                     | Company           |         |          | Subsidiaries |   |          | Subsidiaries  |   |   | Eliminations |         | Total |  
|Cash Flow Data                                               |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |  
|Net cash provided by (used in) operating activities          |                                                     | $                 | (78,949 | )        |              | $ | 7,452    |               |   | $ | 70,896       |         |       | $ |  |   |  | $ | (601    | )       
|Investing activities:                                        |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |   |   |  |   |         |         
|                                                             | Expenditures for property plant and equipment  net |                   |         |         |              |   |          | (6,151        | ) |   |              | (55,359 | )     |   |   |  |  |   |         | (61,510  | )
|                                                             | Acquisitions of businesses                          |                   |         | (13,275  | )            |   |          |              |   |   |              |        |       |   |   |  |  |   |         | (13,275  | )
|                                                             | Proceeds from sale of businesses                    |                   |         | 4,000    |              |   |          |              |   |   |              |        |       |   |   |  |  |   |         | 4,000    |  
|                                                             | Investments in nonconsolidated joint ventures       |                   |         | (3,566   | )            |   |          |              |   |   |              |        |       |   |   |  |  |   |         | (3,566   | )
|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |  
|Net cash used in investing activities                        |                                                     |                   | (12,841 | )        |              |   | (6,151   | )             |   |   | (55,359      | )       |       |   |  |   |  |   | (74,351 | )       
|Financing activities:                                        |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |   |   |  |   |         |         
|                                                             | Long-term borrowings                                |                   |         | 99,910   |              |   |          |              |   |   |              |        |       |   |   |  |  |   |         | 99,910   |  
|                                                             | Payments of long-term debt                          |                   |         | (226,205 | )            |   |          |              |   |   |              |        |       |   |   |  |  |   |         | (226,205 | )
|                                                             | Proceeds from exercise of stock options             |                   |         | 3,808    |              |   |          |              |   |   |              |        |       |   |   |  |  |   |         | 3,808    |  
|                                                             | Proceeds from sale of common shares                 |                   |         | 226,205  |              |   |          |              |   |   |              |        |       |   |   |  |  |   |         | 226,205  |  
|                                                             | Dividend payments                                   |                   |         | (11,899  | )            |   |          |              |   |   |              |        |       |   |   |  |  |   |         | (11,899  | )
|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |  
|Net cash provided by financing activities                    |                                                     |                   | 91,819  |          |              |   |         |               |   |   |             |         |       |   |  |   |  |   | 91,819  |         
|Effect of exchange rate changes on cash and cash equivalents |                                                     |                   |        |          |              |   |         |               |   |   | 1,092        |         |       |   |  |   |  |   | 1,092   |         
|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |  
|Cash provided by continuing operations                       |                                                     |                   | 29      |          |              |   | 1,301    |               |   |   | 16,629       |         |       |   |  |   |  |   | 17,959  |         
|Cash used in discontinuing operations                        |                                                     |                   |        |          |              |   | (1,241   | )             |   |   | (23,805      | )       |       |   |  |   |  |   | (25,046 | )       
|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |  
|Increase (decrease) in cash and cash equivalents             |                                                     |                   | 29      |          |              |   | 60       |               |   |   | (7,176       | )       |       |   |  |   |  |   | (7,087  | )       
|Cash and cash equivalents at beginning of the year           |                                                     |                   | 638     |          |              |   | 1,648    |               |   |   | 17,271       |         |       |   |  |   |  |   | 19,557  |         
|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |  
|Cash and cash equivalents at end of the year                 |                                                     | $                 | 667     |          |              | $ | 1,708    |               |   | $ | 10,095       |         |       | $ |  |   |  | $ | 12,470  |         
|                                                             |                                                     |                   |         |          |              |   |          |               |   |   |              |         |       |   |  

64



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued




|   |                           
|-- | --------------------------
|U. | Quarterly Data (Unaudited)

|                                    |                                   |               |          |               |         |  |          |               |  |  |             |               |  |       |          |               |  |  |            |       | 
|----------------------------------- | --------------------------------- | ------------- | -------- | ------------- | ------- |  | -------- | ------------- |  |  | ----------- | ------------- |  | ----- | -------- | ------------- |  |  | ---------- | ----- | 
|                                    |                                   | Quarter Ended |          |               |        
|                                    |                                   |               |          |               |        
|                                    |                                   | March 31      |          |               | June 30 |  |          | September 30  |  |  | December 31 |               |  | Total |         
|                                    |                                   |               |          |               |         |  |          |               |  |  |             |               |  |       |         
|2004                                |                                   |               |          |               |         |  |          |               |  |  |             |               |  |       |          |               |  |  |            |      
|Net sales                           |                                   |               | $366,630 |               |         |  | $313,738 |               |  |  | $311,902    |               |  |       | $355,068 |               |  |  | $1,347,338 |      
|Gross profit                        |                                   |               | 112,668  |               |         |  | 69,980   |               |  |  | 77,296      |               |  |       | 70,503   |               |  |  | 330,447    |      
|Income from continuing operations   |                                   |               | 48,275   |               |         |  | 17,658   |               |  |  | 29,790      |               |  |       | 30,027   |               |  |  | 125,750    |      
|Net income                          |                                   |               | 48,275   |               |         |  | 17,658   |               |  |  | 29,790      |               |  |       | 32,921   |               |  |  | 128,644    |      
|Basic net income per common share:  |                                   |               |          |               |         |  |          |               |  |  |             |               |  |       |          |               |  |  |            |      
|                                    | Income from continuing operations |               |          | $1.70         |         |  |          | $0.62         |  |  |             | $1.05         |  |       |          | $1.05         |  |  |            | $4.42 | 
|                                    | Net income                        |               |          | $1.70         |         |  |          | $0.62         |  |  |             | $1.05         |  |       |          | $1.16         |  |  |            | $4.52 | 
|Diluted net income per common share |                                   |               |          |               |         |  |          |               |  |  |             |               |  |       |          |               |  |  |            |      
|                                    | Income from continuing operations |               |          | $1.69         |         |  |          | $0.62         |  |  |             | $1.04         |  |       |          | $1.05         |  |  |            | $4.39 | 
|                                    | Net income                        |               |          | $1.69         |         |  |          | $0.62         |  |  |             | $1.04         |  |       |          | $1.15         |  |  |            | $4.49 | 
|Market price:                       |                                   |               |          |               |         |  |          |               |  |  |             |               |  |       |          |               |  |  |            |      
|                                    | High-low                          |               |          | $35.20-$26.16 |         |  |          | $33.04-$24.25 |  |  |             | $36.56-$27.30 |  |       |          | $37.38-$29.58 |  |  |            |       | 
|Dividends paid per share            |                                   |               | $       |               |         |  | $       |               |  |  | $          |               |  |       | $       |               |  |  |            |      

|                                         |                                          |               |         |            |         |   |         |              |  |   |             |              |  |       |         |              |   |   |         |       |  
|---------------------------------------- | ---------------------------------------- | ------------- | ------- | ---------- | ------- | - | ------- | ------------ |  | - | ----------- | ------------ |  | ----- | ------- | ------------ | - | - | ------- | ----- | -
|                                         |                                          | Quarter Ended |         |            |        
|                                         |                                          |               |         |            |        
|                                         |                                          | March 31      |         |            | June 30 |   |         | September 30 |  |   | December 31 |              |  | Total |        
|                                         |                                          |               |         |            |         |   |         |              |  |   |             |              |  |       |        
|2003                                     |                                          |               |         |            |         |   |         |              |  |   |             |              |  |       |         |              |   |   |         |      
|Net sales                                |                                          | $             | 214,456 |            |         | $ | 200,814 |              |  | $ | 238,506     |              |  | $     | 258,369 |              |   | $ | 912,145 |      
|Gross profit                             |                                          |               | 33,012  |            |         |   | 35,676  |              |  |   | 50,909      |              |  |       | 60,400  |              |   |   | 179,997 |      
|Income (loss) from continuing operations |                                          |               | 1,802   |            |         |   | 3,974   |              |  |   | 7,260       |              |  |       | (69,319 | )            |   |   | (56,283 | )    
|Net income (loss)                        |                                          |               | (2,969  | )          |         |   | 2,959   |              |  |   | 154,816     |              |  |       | (71,142 | )            |   |   | 83,664  |      
|Basic net income per common share:       |                                          |               |         |            |         |   |         |              |  |   |             |              |  |       |         |              |   |   |         |      
|                                         | Income (loss) from continuing operations |               | $       | 0.06       |         |   | $       | 0.14         |  |   | $           | 0.26         |  |       | $       | (2.44        | ) |   | $       | (1.99 | )
|                                         | Net income (loss)                        |               | $       | 0.06       |         |   | $       | 0.14         |  |   | $           | 5.46         |  |       | $       | (2.51        | ) |   | $       | 2.95  |  
|Diluted net income per common share:     |                                          |               |         |            |         |   |         |              |  |   |             |              |  |       |         |              |   |   |         |      
|                                         | Income (loss) from continuing operations |               | $       | (0.10      | )       |   | $       | 0.10         |  |   | $           | 0.26         |  |       | $       | (2.44        | ) |   | $       | (1.99 | )
|                                         | Net income (loss)                        |               | $       | (0.10      | )       |   | $       | 0.10         |  |   | $           | 5.46         |  |       | $       | (2.51        | ) |   | $       | 2.95  |  
|Market price:                            |                                          |               |         |            |         |   |         |              |  |   |             |              |  |       |         |              |   |   |         |      
|                                         | High-low                                 |               | $       | 9.90-$6.27 |         |   | $       | 16.83-$9.16  |  |   | $           | 15.73-$12.00 |  |       | $       | 26.55-$14.85 |   |   |         |       |  
|Dividends paid per share                 |                                          | $             |        |            |         | $ |        |              |  | $ |            |              |  | $     |        |              |   |   |         |      



65



---



##### 



Notes to Consolidated Financial Statements


OM Group, Inc. and
Subsidiaries 
Continued










66



---



##### 






Item 9.     Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure







Item 9A.     Controls and
Procedures


Evaluation of Disclosure Controls and Procedures












Managements Report on Internal Control over Financial
Reporting




67



---



##### 









Changes in Internal Controls
















68



---



##### 














Item 9B. Other Information




69



---



##### 






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant





|  |                                                                                                
|- | -----------------------------------------------------------------------------------------------
| | Chairman, August 2005                                                                          
| | Chief Executive Officer, June 2005                                                             
| | President, Chief Operating Officer and Board Member, The
    Sherwin-Williams Company 1999-2005



|  |                                                                       
|- | ----------------------------------------------------------------------
| | Chief Financial Officer, February 2004                                
| | Chairman, Royal Appliance, 1995-2003                                  
| | Chief Financial Officer and Board Member, Olympic Steel,
    1987-2000



|  |                                                                                         
|- | ----------------------------------------------------------------------------------------
| | Vice President and General Manager, Nickel Group, January 2003                          
| | President, OMG Harjavalta Nickel Oy, October 2002 
    January 2003                    
| | Vice President and General Manager, OMG Powdered Metals, January
    2000  October 2002
| | Vice President-Operations, OMG Americas, December
    1997  January 2000               



|  |                                                                  
|- | -----------------------------------------------------------------
| | Vice President and General Manager, Cobalt Group, August 2003    
| | Corporate Vice President of Technology, 2000  August
    2003   
| | Director of Research & Development, OMG Americas,
    1998  2000

Directors










70



---



##### 







Audit Committee and Financial Experts




Section 16(a) Beneficial Ownership Reporting
Compliance






Code of Conduct and Ethics, Governance Principles and
Committee Charters




NYSE Certification




71



---



##### 






Item 11. Executive Compensation


Executive Compensation




Summary Compensation Table


|                            |                             |      |      |                     |        |              |            |            |            |                        |                 |         |         |           |        |         |          |           |   |           |  |  |                 |        |  |  |   |   |  |   |         |           | 
|--------------------------- | --------------------------- | ---- | ---- | ------------------- | ------ | ------------ | ---------- | ---------- | ---------- | ---------------------- | --------------- | ------- | ------- | --------- | ------ | ------- | -------- | --------- | - | --------- |  |  | --------------- | ------ |  |  | - | - |  | - | ------- | --------- | 
|                            |                             |      |      |                     |        |              |            |            |            | Long-Term Compensation |                 |         |        
|                            |                             |      |      |                     |        |              |            |            |            |                        |                 |         |        
|                            |                             |      |      |                     |        |              |            |            |            | Awards                 |                 |         | Payouts |           |        |        
|                            |                             |      |      |                     |        |              |            |            |            |                        |                 |         |         |           |        |        
|                            |                             |      |      |                     |        |              |            | Securities |            |                        |                 |         |        
|                            |                             |      |      | Annual Compensation |        |              |            |            | Underlying |                        |                 |         |         |          
|                            |                             |      |      |                     |        |              | Restricted |            |            | Stock                  |                 |         |         |           |       
|                            |                             |      |      |                     |        | Other Annual |            |            | Stock      |                        |                 | Options |         |           | LTIP   |         |          | All Other |  
|Name and Principal Position |                             | Year |      |                     | Salary |              |            | Bonus(1)   |            |                        | Compensation(2) |         |         | Awards(3) |        |         | (Shares) |           |   | Payouts   |  |  | Compensation(4) |       
|                            |                             |      |      |                     |        |              |            |            |            |                        |                 |         |         |           |        |         |          |           |   |           |  |  |                 |       
|James P. Mooney             |                             |      | 2004 |                     |        | $            | 1,140,000  |            |            |                        |                |         |         | $         | 87,060 |         |          |           |  |           |  |  |                |        |  |  |  |   |  | $ | 350,456 |          
|                            | Chairman & CEO(5)           |      |      | 2003                |        |              |            | 1,140,000  |            |                        | $               | 570,000 |         |           |        | 86,145  |          |           | $ | 570,000   |  |  |                 |       |  |  |   |  |  |   |         | 179,456   | 
|                            |                             |      |      | 2002                |        |              |            | 1,140,000  |            |                        |                 |        |         |           |        | 68,323  |          |           |   |          |  |  |                 | 30,000 |  |  |   |  |  |   |         | 12,950    | 
|R. Louis Schneeberger       |                             |      | 2004 |                     |        |              | 311,863    |            |            |                        | 210,000         |         |         |           |       |         |          |           |  |           |  |  | 45,000          |        |  |  |  |   |  |   | 46,779  |          
|                            | CFO(5)                      |      |      |                     |        |              |            |            |            |                        |                 |         |         |           |        |         |          |           |   |           |  |  |                 |        |  |  |   |   |  |   |         |           | 
|Marcus P. Bak               |                             |      | 2004 |                     |        |              | 325,000    |            |            |                        | 162,500         |         |         |           |       |         |          |           |  |           |  |  | 30,000          |        |  |  |  |   |  |   | 72,833  |          
|                            | Vice President and          |      |      | 2003                |        |              |            | 243,008    |            |                        |                 | 120,000 |         |           |        |        |          |           |   |          |  |  |                 | 30,000 |  |  |   |  |  |   |         | 36,645    | 
|                            | General Manager  Nickel(5) |      |      |                     |        |              |            |            |            |                        |                 |         |         |           |        |         |          |           |   |           |  |  |                 |        |  |  |   |   |  |   |         |           | 
|Stephen D. Dunmead          |                             |      | 2004 |                     |        |              | 330,000    |            |            |                        | 150,000         |         |         |           |       |         |          |           |  |           |  |  | 30,000          |        |  |  |  |   |  |   | 65,250  |          
|                            | Vice President and          |      |      | 2003                |        |              |            | 189,827    |            |                        |                 | 105,000 |         |           |        |        |          |           |   |          |  |  |                 | 30,000 |  |  |   |  |  |   |         | 28,474    | 
|                            | General Manager  Cobalt(5) |      |      |                     |        |              |            |            |            |                        |                 |         |         |           |        |         |          |           |   |           |  |  |                 |        |  |  |   |   |  |   |         |           | 
|Thomas R. Miklich           |                             |      | 2004 |                     |        |              | 197,917    |            |            |                        |                |         |         |           |       |         |          |           |  |           |  |  |                |        |  |  |  |   |  |   |        |          
|                            | Former CFO(5)               |      |      | 2003                |        |              |            | 475,000    |            |                        |                 |        |         |           |        |        |          |           |   |          |  |  |                 |       |  |  |   |  |  |   |         | 2,523,750 | 
|                            |                             |      |      | 2002                |        |              |            | 316,667    |            |                        |                 | 156,000 |         |           |        | 106,254 |          |           |   | 1,860,600 |  |  |                 | 21,000 |  |  |   |  |  |   |         | 107,840   | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amount awarded to the named executive officer under the
    Companys bonus program for key executives and middle
    management.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | For 2004 and 2003, the amounts in this column reflect
    Mr. Mooneys personal use of the Companys
    aircraft of $50,060 and $49,426, respectively and a tax gross-up
    related to Mr. Mooneys personal use of the Company
    aircraft of $37,000 and $36,719, respectively. For 2002, the
    amounts in this column reflect Mr. Mooneys personal
    use of the Companys aircraft and a tax gross-up related to
    an inducement payment made to Mr. Miklich in connection
    with entering into his employment agreement.                                                                                                                                                                                                                                                                                                                                                       
|   
|(3) | For 2003, the Company awarded Mr. Mooney 21,789 shares
    of restricted stock. The dollar amount shown for Mr. Mooney
    equals the 21,789 shares granted multiplied by the stock
    price on the grant date ($26.16). Mr. Mooneys
    restricted stock vested on January 11, 2005, the date upon
    which he ceased to be employed by the Company. For 2002,
    pursuant to Mr. Miklichs employment agreement with
    the Company, the Company awarded him 28,000 shares of
    restricted stock in connection with the commencement of his
    employment. The dollar amount shown for Mr. Miklich equals
    the 28,000 shares granted multiplied by the stock price on
    the grant date ($66.45). All of Mr. Miklichs
    restricted stock vested on July 31, 2003. As of
    December 31, 2004, Mr. Mooney held 21,789 shares
    of restricted stock with a value of $683,511.
|   
|(4) | For 2004, this column includes amounts contributed under the
    Companys qualified Profit-sharing Plan (Mr.
    Mooney  $30,750; Mr. Schneeberger 
    $30,750; Mr. Bak  $30,750; and
    Mr. Dunmead  $30,750), amounts accrued under the
    OM Group, Inc. Benefit Restoration Plan
    (Mr. Mooney  $311,250;
    Mr. Schneeberger  $16,029;
    Mr. Bak  $41,889; and
    Mr. Dunmead  $34,500) and the insurance premiums
    paid by the Company with respect to supplemental life insurance
    (Mr. Mooney  $8,456 and Mr. Bak 
    $194).                                                                                                                                                                                                                                                                                                                                
|   
|(5) | Mr. Schneeberger joined the Company as an executive officer
    of the Company on February 17, 2004. Mr. Bak and
    Mr. Dunmead became executive officers of the Company on
    October 23, 2003. Mr. Miklich joined the Company as an
    executive officer of the Company on May 1, 2002 and ceased
    to be employed by the Company effective April 30, 2004.
    Mr. Mooney ceased to be employed by the Company effective
    January 11, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                         

72



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##### 





Option Grants in 2004


|                      |  |                   |        |  |                      |  |                       |             |  |                  |            |  |  |    |           |  |     |   |         |  |  |   |           | 
|--------------------- |  | ----------------- | ------ |  | -------------------- |  | --------------------- | ----------- |  | ---------------- | ---------- |  |  | -- | --------- |  | --- | - | ------- |  |  | - | --------- | 
|                      |  | Individual Grants |        |  | Potential Realizable | 
|                      |  |                   |        |  | Value at Assumed     | 
|                      |  | Number of         |        |  |                      |  | Annual Rates of Stock |            
|                      |  | Securities        |        |  | Percentage of Total  |  |                       |             |  | Appreciation for |           
|                      |  | Underlying        |        |  | Options Granted      |  |                       |             |  | Option Term      |           
|                      |  | Options           |        |  | to Employees in      |  |                       | Exercise or |  |                  | Expiration |  |  |    |          
|Name                  |  | Granted           |        |  | 2004                 |  |                       | Base Price  |  |                  | Date       |  |  | 5% |           |  | 10% |  
|                      |  |                   |        |  |                      |  |                       |             |  |                  |            |  |  |    |           |  |     |  
|James P. Mooney       |  |                   |       |  |                      |  |                      |             |  |                  |           |  |  |    |          |  |     |   |        |  |  |   |          | 
|R. Louis Schneeberger |  |                   | 45,000 |  |                      |  | 13                    | %           |  | $                | 31.38      |  |  |    | 11/8/2014 |  |     | $ | 885,137 |  |  | $ | 2,243,149 | 
|Marcus P. Bak         |  |                   | 30,000 |  |                      |  | 9                     | %           |  | $                | 31.38      |  |  |    | 11/8/2014 |  |     |   | 592,041 |  |  |   | 1,500,349 | 
|Stephen D. Dunmead    |  |                   | 30,000 |  |                      |  | 9                     | %           |  | $                | 31.38      |  |  |    | 11/8/2014 |  |     |   | 592,041 |  |  |   | 1,500,349 | 
|Thomas R. Miklich     |  |                   |       |  |                      |  |                      |             |  |                  |           |  |  |    |          |  |     |   |        |  |  |   |          | 

Aggregated Option Exercises During 2004 and


Fiscal Year-End Option Value


|                      |  |             |   |  |          |                        |                     |             |                         |             |               |     |  |             |        |  |               |   |           |  |  |   |         | 
|--------------------- |  | ----------- | - |  | -------- | ---------------------- | ------------------- | ----------- | ----------------------- | ----------- | ------------- | --- |  | ----------- | ------ |  | ------------- | - | --------- |  |  | - | ------- | 
|                      |  |             |   |  |          | Number of Securities   |                     |             | Value of Unexercised    |            
|                      |  |             |   |  |          | Underlying Unexercised |                     |             | In-the-Money Options at |            
|                      |  | Shares      |   |  |          |                        | Options at 12/31/04 |             |                         | 12/31/04(1) |              
|                      |  | Acquired on |   |  | Value    |                        |                     |             |                         |             |               |    
|Name                  |  | Exercised   |   |  | Realized |                        |                     | Exercisable |                         |             | Unexercisable |     |  | Exercisable |        |  | Unexercisable |  
|                      |  |             |   |  |          |                        |                     |             |                         |             |               |     |  |             |        |  |               |  
|James P. Mooney       |  |             |  |  |          |                        |                    |             |                         |             | 532,554       | (2) |  |             |       |  |               | $ | 2,137,001 |  |  |   |        | 
|R. Louis Schneeberger |  |             |  |  |          |                        |                    |             |                         |             |              |     |  |             | 45,000 |  |               |   |          |  |  | $ | 60,750  | 
|Marcus P. Bak         |  |             |  |  |          |                        |                    |             |                         |             | 43,440        |     |  |             | 50,000 |  |               |   | 158,905   |  |  |   | 315,200 | 
|Stephen D. Dunmead    |  |             |  |  |          |                        |                    |             |                         |             | 16,000        |     |  |             | 50,000 |  |               |   | 142,000   |  |  |   | 315,200 | 
|Thomas R. Miklich     |  |             |  |  |          |                        |                    |             |                         |             |              |     |  |             |       |  |               |   |          |  |  |   |        | 






|    |                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | An option is considered in-the-money when the fair market value
    of the shares is greater than the exercise price of the option.                                                                                                                                                                                                                    
|   
|(2) | Includes 392,554 shares subject to stock options that were
    transferred in accordance with the terms of the Companys
    1998 Long-Term Incentive Compensation Plan to a limited
    partnership in which Mr. Mooney is the general partner. As
    of June 30, 2005, all of Mr. Mooneys exercisable
    options had terminated or been exercised.

Compensation of Directors




Employment and Separation Agreements




73



---



##### 















74



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##### 





Supplemental Executive Retirement Plan









|         |                                                                                                         
|-------- | --------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and 
     Related Stockholder Matters



Amount and Nature of Beneficial Ownership (1)


as of August 9, 2005


|                                                                              |  |                    |         |  |                |  |       |             |  |  |        |  |  |  |         | 
|----------------------------------------------------------------------------- |  | ------------------ | ------- |  | -------------- |  | ----- | ----------- |  |  | ------ |  |  |  | ------- | 
|                                                                              |  | Direct or Indirect |         |  | Profit-Sharing |  |       | Exercisable |  |  |       
|Name of Beneficial Owner                                                      |  | Ownership          |         |  | Plan           |  |       | Options     |  |  | Total  | 
|                                                                              |  |                    |         |  |                |  |       |             |  |  |        | 
|Marcus P. Bak                                                                 |  |                    | 360     |  |                |  | 1,670 |             |  |  | 43,440 |  |  |  | 45,470  | 
|Leo J. Daley                                                                  |  |                    |        |  |                |  |      |             |  |  |       |  |  |  |        | 
|Stephen D. Dunmead                                                            |  |                    | 2,000   |  |                |  | 210   |             |  |  | 16,000 |  |  |  | 18,210  | 
|Thomas R. Miklich                                                             |  |                    | 21,000  |  |                |  |      |             |  |  |       |  |  |  | 21,000  | 
|James P. Mooney                                                               |  |                    | 31,986  |  |                |  | 1,723 |             |  |  |       |  |  |  | 33,709  | 
|Katharine L. Plourde                                                          |  |                    | 1,000   |  |                |  |      |             |  |  | 2,700  |  |  |  | 3,700   | 
|William J. Reidy                                                              |  |                    |        |  |                |  |      |             |  |  | 3,220  |  |  |  | 3,220   | 
|Joseph M. Scaminace                                                           |  |                    | 166,194 |  |                |  |      |             |  |  |       |  |  |  | 166,194 | 
|R. Louis Schneeberger                                                         |  |                    |        |  |                |  |      |             |  |  | 5,000  |  |  |  | 5,000   | 
|                                                                              |  |                    |         |  |                |  |       |             |  |  |        | 
|All Directors and Executive Officers as a Group (consisting of
    9 persons) |  |                    | 222,540 |  |                |  | 3,603 |             |  |  | 70,360 |  |  |  | 296,503 | 






|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(1) | Each person has sole voting and investment power with respect to
    all shares shown.

75



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##### 





|                                     |                                |                      |           |  |                  |  |      |  | 
|------------------------------------ | ------------------------------ | -------------------- | --------- |  | ---------------- |  | ---- |  | 
|                                     |                                | Amount and Nature of |           |  |                 
|Name and Address of Beneficial Owner |                                | Beneficial Ownership |           |  | Percent of Class | 
|                                     |                                |                      |           |  |                  | 
|FMR Corporation                      |                                |                      | 2,750,000 |  |                  |  | 9.7% | 
|                                     | 82 Devonshire Street           |                      |           |  |                  |  |      |  | 
|                                     | Boston, Massachusetts 02109(1) |                      |           |  |                  |  |      |  | 
|LSV Asset Management                 |                                |                      | 1,744,822 |  |                  |  | 6.1% | 
|                                     | 1 North Wacker Dr. Suite 4000  |                      |           |  |                  |  |      |  | 
|                                     | Chicago, Illinois 60606(2)     |                      |           |  |                  |  |      |  | 
|Barclays Global Investors, N.A       |                                |                      | 1,735,042 |  |                  |  | 6.1% | 
|                                     | 45 Fremont Street              |                      |           |  |                  |  |      |  | 
|                                     | San Francisco, CA 94105(3)     |                      |           |  |                  |  |      |  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Information regarding share ownership was obtained from the
    Schedule 13G filed jointly on February 14, 2005 by FMR
    Corp., Edward C. Johnson 3d, Abigail P. Johnson, Fidelity
    Management & Research Company (Fidelity)
    and Fidelity Low Priced Stock Fund. The ownership of Fidelity
    Low Priced Stock Fund amounted to 2,750,000 shares or
    9.699% of the common stock outstanding. Fidelity Low Priced
    Stock Fund has its principal business office at 82 Devonshire
    Street, Boston, Massachusetts 02109. Edward C. Johnson 3d, FMR
    Corp., through its control of Fidelity, and the Fidelity Funds
    each has sole power to dispose of the 2,750,000 shares
    owned by the Fidelity Funds. Neither FMR Corp. nor Edward C.
    Johnson 3d, Chairman of FMR Corp., has the sole power to vote or
    direct the voting of the shares owned directly by the Fidelity
    Funds, which power resides with the Funds Boards of
    Trustees. Fidelity carries out the voting of the shares under
    written guidelines established by the Funds Boards of
    Trustees. Members of the Edward C. Johnson 3d family are the
    predominant owners of Class B shares of common stock of FMR
    Corp., representing approximately 49% of the voting power of FMR
    Corp. Mr. Johnson 3d owns 12.0% and Abigail Johnson owns
    24.5% of the aggregate outstanding voting stock of FMR Corp.
    Mr. Johnson 3d is Chairman of FMR Corp. and Abigail P.
    Johnson is a Director of FMR Corp. The Johnson family group and
    all other Class B shareholders have entered into a
    shareholders voting agreement under which all Class B
    shares will be voted in accordance with the majority vote of
    Class B shares. Accordingly, through their ownership of
    voting common stock and the execution of the shareholders
    voting agreement, members of the Johnson family may be deemed,
    under the Investment Company Act of 1940, to form a controlling
    group with respect to FMR Corp.
|   
|(2) | Information regarding share ownership was obtained from the
    Schedule 13G filed on February 11, 2005 by LSV Asset
    Management, which is an investment advisor registered under the
    Investment Advisors Act of 1940. LSV Asset Management has sole
    voting power with respect to 1,134,522 of the shares listed
    above and has sole dispositive power with respect to all
    1,744,822 shares shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) | Information regarding share ownership was obtained from the
    Schedule 13G filed jointly on February 14, 2005 by
    Barclays Global Investors, NA., Barclays Global
    Fund Advisors, Barclays Global Investors, Ltd., Barclays
    Global Investors Japan Trust and Banking Company Limited,
    Barclays Life Assurance Company Limited, Barclays Bank Plc,
    Barclays Capital Securities Limited, Barclays Capital Inc.,
    Barclays Private Bank & Trust (Isle of Man) Limited,
    Barclays Private Bank and Trust (Jersey) Limited, Barclays Bank
    Trust Company Limited, Barclays Bank (Suisse) SA, Barclays
    Private Bank Limited, Bronco (Barclays Cayman) Limited, Palomino
    Limited, and HYMF Limited. Barclays Global Investors, NA. has
    sole voting power with respect to 760,628 of the shares shown
    above and sole dispositive power with respect to 933,169 of the
    shares shown. Barclays Global Fund Advisors, which has its
    principal business address at 45 Fremont Street,
    San Francisco, CA 94105, has sole voting power with respect
    to 760,106 of the shares shown above and sole dispositive power
    with respect to 763,673 of the shares shown. Barclays Bank Plc,
    which has its principal business address at 54 Lombard
    Street, London, England EC3P 3AH, has sole voting and
    dispositive power with respect to 17,100 of the shares shown
    above. Palomino Limited, which has its principal business
    address at Walker House Mary Street, P.O. Box 908 GT,
    George Town, Grand Cayman (Cayman Islands), has sole voting and
    dispositive power with respect to 21,100 of the shares shown
    above.                                                                                                                                                                                                                                                                                                                                                         

Equity Compensation Plan Information




|                                                           |  |                      |           |  |                     |   |                      |                           |  |  |    |  
|---------------------------------------------------------- |  | -------------------- | --------- |  | ------------------- | - | -------------------- | ------------------------- |  |  | -- | -
|                                                           |  | Number of Securities |           |  |                     |   | Number of Securities |                          
|                                                           |  | to be Issued Upon    |           |  | Outstanding Options |   |                      | Remaining Available for   | 
|                                                           |  | Exercise of          |           |  | Exercise Price of   |   |                      | Future Issuance Under     | 
|                                                           |  | Outstanding Options  |           |  | Weighted-Average    |   |                      | Equity Compensation Plans | 
|                                                           |  |                      |           |  |                     |   |                      |                           | 
|Equity Compensation Plans Approved by the Shareholders     |  |                      | 1,613,191 |  |                     | $ | 32.60                |                           |  |  | (a | )
|Equity Compensation Plans Not Approved by the Shareholders |  |                      |          |  |                     |   |                     |                           |  |  |   |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The Company maintains two equity compensation plans approved by
    shareholders. The 2002 Stock Incentive Plan permits the issuance
    of up to 1,400,000 shares, all of which were available at
    December 31, 2004 for awards under the plan. The 1998
    Long-Term Incentive Compensation Plan provides that awards may
    be granted annually in the amount of 1.5% of the Companys
    common stock outstanding on the prior December 31, plus
    unused shares and shares relating to terminated awards from
    prior years, subject to an overall annual maximum of 2% of
    outstanding common stock. At December 31, 2004, there were
    28,480,073 outstanding shares of common stock of the Company.
    The Companys 1995 Non-Employee Directors Equity
    Compensation Plan, which expired in March 2005, has
    authorized the grant of options to non-employee members of the
    Board of Directors for up to 250,000 shares of the
    Companys common stock.

76



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##### 








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions










|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



|                   |  |      |           |  |      |   |            | 
|------------------ |  | ---- | --------- |  | ---- | - | ---------- | 
|                   |  | 2004 |           |  | 2003 |  
|                   |  |      |           |  |      |  
|Audit Fees         |  | $    | 1,969,400 |  |      | $ | 6,595,300  | 
|Audit-Related Fees |  |      | 349,400   |  |      |   | 1,762,851  | 
|Tax Fees           |  |      | 1,497,093 |  |      |   | 2,219,534  | 
|All Other Fees     |  |      |          |  |      |   |           | 
|                   |  |      |           |  |      |  
|Total              |  | $    | 3,815,893 |  |      | $ | 10,577,685 | 
|                   |  |      |           |  |      |  



Audit Fees




Audit-Related Fees




Tax Fees




All Other Fees




77



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##### 



PART IV




|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Consolidated Balance Sheets at December 31, 2004 and 2003                                               
|
| | Statements of Consolidated Operations for the years ended
    December 31, 2004, 2003 and 2002          
|
| | Statements of Consolidated Cash Flows for the years ended
    December 31, 2004, 2003 and 2002          
|
| | Statements of Consolidated Stockholders Equity for the
    years ended December 31, 2004, 2003 and 2002
|
| | Notes to Consolidated Financial Statements                                                              





| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All other schedules are omitted because they are not applicable
    or because the information required is included in the
    consolidated financial statements or the notes thereto.







| |                                          
| | -----------------------------------------
| | (3) Articles of Incorporation and By-laws

| |     |  |  |                                                                  |  |  
| | --- |  |  | ---------------------------------------------------------------- |  | -
| | 3.1 |  |  | Amended and Restated Certificate of Incorporation of the Company |  | 
| | 3.2 |  |  | Amended and Restated Bylaws of the Company                       |  | 



| |                                                                              
| | -----------------------------------------------------------------------------
| | (4) Instruments defining rights of security holders
    including indentures.

| |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  
| | --- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
| | 4.1 |  |  | Form of Common Stock Certificate of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 
| | 4.2 |  |  | Stockholder Rights Agreement dated as of November 5, 1996
    between OM Group, Inc. and National City Bank (incorporated by
    reference to Exhibit 4.2 to the Companys Registration
    Statement on Form S-4 (No. 333-84128) filed on
    March 11, 2002).                                                                                                                                                                                                                                                                                                                                                            |  |  
| | 4.3 |  |  | Indenture, dated as of December 12, 2001, among OM Group,
    Inc., the Guarantors (as defined therein) and The Bank of New
    York, as Trustee (incorporated by reference to Exhibit 4.3
    to the Companys Registration Statement on Form S-1/A
    (No. 333-74566) filed on January 14, 2002).                                                                                                                                                                                                                                                                                                                       |  |  
| | 4.4 |  |  | Purchase Agreement, dated as of December 7, 2001, among OM
    Group, Inc., the Guarantors (as defined therein) and Credit
    Suisse First Boston Corporation, as the representatives of the
    Several Purchasers (as defined therein) (incorporated by
    reference to Exhibit 4.4 to the Companys Registration
    Statement on Form S-1/A (No. 333-74566) filed on
    January 14, 2002).                                                                                                                                                                                                                          |  |  
| | 4.5 |  |  | Registration Rights Agreement, dated as of December 12,
    2001, among OM Group, Inc., the Guarantors (as defined therein)
    and Credit Suisse First Boston Corporation, as the
    representatives of the Several Purchasers (as defined therein)
    (incorporated by reference to Exhibit 4.5 to the
    Companys Registration Statement on Form S-1/A
    (No. 333-74566) filed on January 14, 2002).                                                                                                                                                                                                              |  |  
| | 4.6 |  |  | Revolving Credit Agreement, dated as of August 1, 2003,
    among OM Group, Inc. as the borrower, the lending institutions
    named therein as lenders; National City Bank, as a Lender, the
    Swing Line Lender, the Letter of Credit Issuer, the
    Administrative Agent, the Collateral Agent, the Lead Arranger,
    and the Book Running Manager, KeyBank National Association and
    LaSalle Bank National Association as Co-Syndication Agents
    (filed as Exhibit(4) to the Companys Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003 and
    incorporated herein by reference). |  |  

78



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##### 





| |                        
| | -----------------------
| | (10) Material Contracts

| |         |  |  |                                                                                                                                                                                                                                                                                                                                                                              |  |  
| | ------- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
| | 10.1    |  |  | Technology Agreement among Outokumpu Oy, Outokumpu Engineering
    Contractors Oy, Outokumpu Research Oy, Outokumpu Harjavalta
    Metals Oy and Kokkola Chemicals Oy dated March 24, 1993.                                                                                                                                                                                  |  | 
| | *10.2   |  |  | OM Group, Inc. 1992 Long-Term Incentive Compensation Plan.                                                                                                                                                                                                                                                                                                                   |  | 
| | *10.3   |  |  | Amendment to OM Group, Inc. Long-Term Incentive Compensation
    Plan (filed as Exhibit 99(b) to the Companys
    Registration Statement on Form S-8 filed on
    February 1, 1994, and incorporated herein by reference).                                                                                                                                                  |  |  
| | *10.4   |  |  | Amendment to OM Group, Inc. Long-Term Incentive Compensation
    Plan (filed as Exhibit 99 to the OM Group, Inc.
    Form S-8 Registration Statement filed on July 3, 1996,
    and incorporated herein by reference).                                                                                                                                                       |  |  
| | *10.5   |  |  | Mooney Chemicals, Inc. Welfare Benefit Plan.                                                                                                                                                                                                                                                                                                                                 |  | 
| | *10.6   |  |  | Mooney Chemicals, Inc. Profit Sharing Plan.                                                                                                                                                                                                                                                                                                                                  |  | 
| | *10.7   |  |  | Amendment to Mooney Chemicals, Inc. Profit Sharing Plan.                                                                                                                                                                                                                                                                                                                     |  | 
| | *10.8   |  |  | OMG/Mooney Chemicals, Inc. Employee Profit Sharing Plan, as
    amended (incorporated by reference to Exhibit 10.8 to the
    Companys Registration Statement on Form S-4
    (No. 333-84128) filed on March 11, 2002).                                                                                                                                                     |  |  
| | *10.9   |  |  | OM Group, Inc. Benefit Restoration Plan, effective
    January 1, 1995 (incorporated by reference to
    Exhibit 10.9 to the Companys Registration Statement
    on Form S-4 (No. 333-84128) filed on March 11,
    2002).                                                                                                                                                  |  |  
| | *10.10  |  |  | Trust under OM Group, Inc. Benefit Restoration Plan, effective
    January 1, 1995 (incorporated by reference to
    Exhibit 10.10 to the Companys Registration Statement
    on Form S-4 (No. 333-84128) filed on March 11, 2002).                                                                                                                                         |  |  
| | *10.11  |  |  | Amendment to OMG Americas, Inc. Profit-Sharing Plan (filed as
    Exhibit 99 to the OM Group, Inc. Form S-8 Registration
    Statement filed on July 3, 1996, and incorporated herein by
    reference).                                                                                                                                                                     |  |  
| | 10.12   |  |  | OM Group, Inc. Non-employee Directors Equity Compensation
    Plan (incorporated by reference to Exhibit 10.12 to the
    Companys Registration Statement on Form S-4
    (No. 333-84128) filed on March 11, 2002).                                                                                                                                                        |  |  
| | *10.13  |  |  | OM Group, Inc. Bonus Program for Key Executives and Middle
    Management.                                                                                                                                                                                                                                                                                                   |  | 
| | *10.14  |  |  | Employment Agreement between Mooney Acquisition Corporation and
    James P. Mooney dated September 30, 1991.                                                                                                                                                                                                                                                                |  | 
| | *10.15  |  |  | Amendment to Employment Agreement between OM Group, Inc. and
    James P. Mooney dated August 19, 1992.                                                                                                                                                                                                                                                                      |  | 
| | *10.16  |  |  | Employment Agreement between OM Group, Inc. and Michael J. Scott
    (incorporated by reference to Exhibit 10.17 to the
    Companys Registration Statement on Form S-4 (No.
    333-84128) filed on March 11, 2002).                                                                                                                                                       |  |  
| | +10.17  |  |  | Joint Venture Agreement among OMG B.V., Groupe George Forrest
    S.A., La Generale Des Carrieres Et Des Mines and OM Group,
    Inc. to partially or totally process the slag located in the
    site of Lubumbashi, Democratic Republic of Congo (incorporated
    by reference to Exhibit 10.17 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005). |  |  
| | ++10.18 |  |  | Agreement for Sale of concentrate production between Kokkola
    Chemicals Oy and La Generale Des Carriers Et Des Mines
    dated April 21, 1997, including amendments dated
    August 27, 2003 (incorporated by reference to
    Exhibit 10.18 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                                                   |  |  
| | +10.19  |  |  | Long term Slag Sales Agreement between La Generale Des
    Carriers Et Des Mines and J.V. Groupement Pour Le Traitement Du
    Terril De Lubumbashi (filed as an Annex to Exhibit 10.17).                                                                                                                                                                                    |  |  

79



---



##### 



| |        |  |  |                                                                                                                                                                                                                                                                                           |  | 
| | ------ |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
| | +10.20 |  |  | Long Term Cobalt Alloy Sales Agreement between J.V. Groupement
    Pour Le Traitement Du Terril De Lubumbashi and OMG Kokkola
    Chemicals Oy (filed as an Annex to Exhibit 10.17).                                                                                                      |  | 
| | +10.21 |  |  | Tolling Agreement between Groupement Pour Le Traitement Du
    Terril De Lubumbashi and Societe De Traitement Due Terril De
    Lubumbashi (filed as an Annex to Exhibit 10.17).                                                                                                          |  | 
| | *10.22 |  |  | OM Group, Inc. 1998 Long-Term Incentive Compensation Plan,
    Including form of stock option agreement (incorporated by
    reference to Exhibit 10.22 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005).                                                         |  | 
| | *10.23 |  |  | Separation Agreement between OM Group, Inc. and Edward W. Kissel
    dated July 2, 2003 (incorporated by reference to
    Exhibit 10.23 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                                                                         |  | 
| | 10.24  |  |  | Lease agreement between Outokumpu Harjavalta Metals Oy and
    Outokumpu Nickel Oy (filed as Exhibit 10.27 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 2000 and incorporated herein by
    reference).                                     |  | 
| | 10.25  |  |  | Purchase Agreement (as amended and restated) as of
    August 10, 2001 by and between dmc2 Degussa Metals
    Catalysts Cerdec AG, Degussa AG and OM Group, Inc. (incorporated
    by reference to Exhibit 2.1 to the Companys Current
    Report on Form 8-K filed on August 24, 2001). |  | 
| | 10.26  |  |  | Heads of Agreement as of April 23, 2001 between OM Group,
    Inc. and Ferro Corporation (incorporated by reference to
    Exhibit 2.2 to the Companys Current Report on
    Form 8-K filed on August 24, 2001).                                                                         |  | 
| | 10.27  |  |  | OMG-Ferro Purchase Agreement dated as of August 31, 2001 by
    and between OM Group, Inc. and Ferro Corporation (incorporated
    by reference to Exhibit 2.1 to the Companys Current
    Report on Form 8-K filed on September 21, 2001).                                              |  | 
| | *10.28 |  |  | Employment Agreement between OM Group, Inc. and Thomas R.
    Miklich dated May 1, 2002 (filed as Exhibit 10.1 to
    the Companys Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2002 and incorporated herein by
    reference).                                      |  | 
| | *10.29 |  |  | OM Group, Inc. 2002 Stock Incentive Plan (incorporated by
    reference to Appendix A to the Companys Proxy Statement
    filed April 5, 2002).                                                                                                                                          |  | 
| | *10.30 |  |  | Amendment to Employment Agreement between OM Group, Inc. and
    James P. Mooney dated December 20, 2002 (incorporated by
    reference to Exhibit 10.29 to the Companys Annual
    Report on Form 10-K filed on March 25, 2003).                                                        |  | 
| | *10.31 |  |  | Amendment to Employment Agreement between OM Group, Inc. and
    Thomas R. Miklich dated December 1, 2002 (incorporated by
    reference to Exhibit 10.30 to the Companys Annual
    Report on Form 10-K filed on March 25, 2003).                                                       |  | 
| | *10.32 |  |  | Agreement by and between OM Group, Inc. and Michael J. Scott
    dated September 11, 2003 (incorporated by reference to
    Exhibit 10.32 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                                                                       |  | 
| | *10.33 |  |  | Separation Agreement by and between OM Group, Inc. and Thomas R.
    Miklich dated October 17, 2003 (incorporated by reference
    to Exhibit 10.33 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                                                             |  | 
| | *10.34 |  |  | Employment Agreement by and between OM Group, Inc. and R. Louis
    Schneeberger dated February 16, 2004 (incorporated by
    reference to Exhibit 10.34 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005).                                                        |  | 
| | *10.35 |  |  | Employment Agreement by and between OM Group, Inc. and Frank E
    Butler dated February 9, 2005 (incorporated by reference to
    Exhibit 1 to the Companys Current Report on
    Form 8-K filed on February 5, 2005).                                                                  |  | 
| | *10.36 |  |  | Supplemental Retirement Plan for James P. Mooney (incorporated
    by reference to Exhibit 10.36 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005).                                                                                                                |  | 

80



---



##### 



| |        |  |  |                                                                                                                                                                                                                                   |  | 
| | ------ |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
| | *10.37 |  |  | Form of Stock Option Agreement between OM Group, Inc. and
    Joseph M. Scaminace.                                                                                                                                                |  | 
| | *10.38 |  |  | Form of Restricted Stock Agreement between OM Group, Inc.
    and Joseph M. Scaminace.                                                                                                                                            |  | 
| | *10.39 |  |  | Employment Agreement by and between OM Group, Inc. and Joseph M.
    Scaminace dated May 26, 2005 (incorporated by reference to
    Exhibit 99 to the Companys Current Report of
    Form 8-K filed on June 2, 2005).            |  | 
| | *10.40 |  |  | Form of Change in Control Agreement (incorporated by reference
    to Exhibit 99.1 to the Companys Current Report on
    Form 8-K filed on June 14, 2005).                                                                       |  | 
| | *10.41 |  |  | Change in Control Agreement by and between OM Group, Inc. and
    Joseph M. Scaminace dated June 13, 2005 (incorporated by
    reference to Exhibit 99.1 to the Companys Current
    Report on Form 8-K filed on June 17, 2005). |  | 
| | *10.42 |  |  | Form of Indemnification Agreement between OM Group, Inc. and its
    directors and certain officers.                                                                                                                              |  | 



| |      |                                                  
| | ---- | -------------------------------------------------
| | (12) | Computation of Ratio of Earnings to Fixed Charges
|
| | (21) | List of Subsidiaries                             



| |                                  
| | ---------------------------------
| | (23) Consent of Ernst & Young LLP



| |      |                   
| | ---- | ------------------
| | (24) | Powers of Attorney



| |        |                                                                                       
| | ------ | --------------------------------------------------------------------------------------
| | (31.1) | Certification of Principal Executive Officer Pursuant to
    Rule 13a-14(a)/15d-14(a) 
|
| | (31.2) | Certification of Principal Financial Officer Pursuant to
    Rule 13a-14(a)/15-d-14(a)



| |      |                                                                                                            
| | ---- | -----------------------------------------------------------------------------------------------------------
| | (32) | Certification of Principal Executive Officer and Principal
    Financial Officer Pursuant to 18 U.S.C. 1350

| |    |  |  |                                                                                                                                                                                                                                                                  |  | 
| | -- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
| | *  |  |  | Indicates a management contract, executive compensation plan or
    arrangement.                                                                                                                                                                                 |  | 
| | +  |  |  | Portions of Exhibit have been omitted and filed separately with
    the Securities and Exchange Commission in reliance on
    Rule 24b-2 and an Order from the Commission granting the
    Companys request for confidential treatment dated
    June 26, 1998. |  | 
| | ++ |  |  | Portions of Exhibit have been omitted and filed separately with
    the Securities and Exchange Commission in reliance upon the
    Companys request for confidential treatment pursuant to
    Rule 24b-2.                                                     |  | 
| |   |  |  | These documents were filed as exhibits to the Companys
    Form S-1 Registration Statement (Registration
    No. 33-60444) which became effective on October 12,
    1993, and are incorporated herein by reference.                                            |  | 

81



---



##### 



Signatures






| |               
| | --------------
| | OM GROUP, INC.



| |     |                        
| | --- | -----------------------
| | By: | /s/ Joseph M. Scaminace

| |                                     
| | ------------------------------------
| |                                     
| | Joseph M. Scaminace                 
| | Chairman and Chief Executive Officer



|                                                   |  |                                                                          |  | 
|-------------------------------------------------- |  | ------------------------------------------------------------------------ |  | 
|Signature                                          |  | Title                                                                   
|                                                   |  |                                                                         
|                                                  
|/s/ Joseph M. Scaminace*Joseph
    M. Scaminace    |  | Chairman and Chief Executive Officer (Principal Executive
    Officer)  
|                                                  
|/s/ R. Louis SchneebergerR.
    Louis Schneeberger |  | Chief Financial Officer (Principal Financial and Accounting
    Officer)
|                                                  
|/s/ Leo J. Daley*Leo
    J. Daley                  |  | Director                                                                
|                                                  
|James
    P. Mooney                                |  | Director                                                                
|                                                  
|/s/ Katharine L. Plourde*Katharine
    L. Plourde  |  | Director                                                                
|                                                  
|/s/ William J. Reidy*William
    J. Reidy          |  | Director                                                                
|                                                  
|*By                                                |  | /s/ R. Louis SchneebergerR.
    Louis Schneeberger
    Attorney-in-Fact  |  | 



---



##### 



OM Group, Inc.


Schedule II  Valuation and Qualifying
Accounts


Years Ended December 31, 2004, 2003 and 2002


(Dollars in Millions)


|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |       |      |  |   |       | 
|------------------------------- |  | --------- | ----- |  | -------- | - | ----- | -------- |  | - | ---------- | --- | ---------- | ---- | ----- | ---- |  | - | ----- | 
|                                |  | Balance   |       |  | Charged  |   |       |          |  |   |            |    
|                                |  | at        |       |  | to Costs |   |       | Charged  |  |   |            |     | Balance at |     
|                                |  | Beginning |       |  | and      |   |       | to Other |  |   |            |     | End of     |     
|Classifications                 |  | of Year   |       |  | Expenses |   |       | Accounts |  |   | Deductions |     |            | Year |      
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      
|2004:                           |  |           |       |  |          |   |       |          |  |   |            |     |            |      |       |      |  |   |       | 
|Allowance for doubtful accounts |  | $         | 2.0   |  |          |   | 1.4   | (1)      |  |   |           |     |            |      | (1.4  | )(6) |  | $ | 2.0   | 
|Income tax valuation allowance  |  |           | 154.1 |  |          |   |      |          |  |   |           |     |            |      | (19.5 | )(2) |  |   | 134.6 | 
|Environmental reserve(8)        |  |           | 14.2  |  |          |   | 0.8   | (3)      |  |   |           |     |            |      | (5.5  | )(7) |  |   | 9.5   | 
|Shareholder litigation accrual  |  |           | 84.5  |  |          |   | 7.5   | (4)      |  |   |           |     |            |      |      |      |  |   | 92.0  | 
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      
|                                |  | $         | 254.8 |  |          | $ | 9.7   |          |  | $ |           |     |            | $    | (26.4 | )    |  | $ | 238.1 | 
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      
|2003:                           |  |           |       |  |          |   |       |          |  |   |            |     |            |      |       |      |  |   |       | 
|Allowance for doubtful accounts |  | $         | 2.4   |  |          | $ | 1.2   | (1)      |  | $ |           |     |            | $    | (1.6  | )(6) |  | $ | 2.0   | 
|Income tax valuation allowance  |  |           | 91.2  |  |          |   | 39.8  | (2)      |  | $ | 23.1       | (5) |            |      |      |      |  |   | 154.1 | 
|Environmental reserve(8)        |  |           | 12.5  |  |          |   | 3.7   | (3)      |  |   |           |     |            |      | (2.0  | )(7) |  |   | 14.2  | 
|Shareholder litigation accrual  |  |           |      |  |          |   | 84.5  | (4)      |  |   |           |     |            |      |      |      |  |   | 84.5  | 
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      
|                                |  | $         | 106.1 |  |          | $ | 129.2 |          |  | $ | 23.1       |     |            | $    | (3.6  | )    |  | $ | 254.8 | 
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      
|2002:                           |  |           |       |  |          |   |       |          |  |   |            |     |            |      |       |      |  |   |       | 
|Allowance for doubtful accounts |  | $         | 2.7   |  |          | $ | 1.0   | (1)      |  |   |           |     |            | $    | (1.3  | )(6) |  | $ | 2.4   | 
|Income tax valuation allowance  |  |           | 73.0  |  |          |   | 18.2  | (2)      |  |   |           |     |            |      |      |      |  |   | 91.2  | 
|Environmental reserve(8)        |  |           | 3.2   |  |          |   | 10.8  | (3)      |  |   |           |     |            |      | (1.5  | )(7) |  |   | 12.5  | 
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      
|                                |  | $         | 78.9  |  |          | $ | 30.0  |          |  | $ |           |     |            | $    | (2.8  | )    |  | $ | 106.1 | 
|                                |  |           |       |  |          |   |       |          |  |   |            |     |            |      |      






|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Provision for uncollectible accounts included in selling,
    general and administrative expenses.                                                                              
|   
|(2) | Increase (decrease) in valuation allowance is recorded as a
    component of the provision for income taxes.                                                                    
|   
|(3) | Provision for environmental costs included in expenses.                                                                                                                         
|   
|(4) | Provision for shareholder class action lawsuits. See Note O
    to the Consolidated Financial Statements included in Item 8
    of this Annual Report.                          
|   
|(5) | Valuation allowance for deferred tax assets previously
    classified in discontinued operations. Related deferred tax
    asset was also reclassified to continuing operations.
|   
|(6) | Actual accounts written-off against the allowance 
    net of recoveries.                                                                                                      
|   
|(7) | Actual cash expenditures charged against the accrual.                                                                                                                           
|   
|(8) | Includes reserves related to the Companys continuing and
    discontinued operations.                                                                                          



---



##### 



ANNUAL REPORT OF FORM 10-K


OM GROUP, INC.


For the year Ended December 31, 2004


EXHIBIT INDEX


|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1         |  | Amended and Restated Certificate of Incorporation of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3  | .2         |  | Amended and Restated Bylaws of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4  | .1         |  | Form of Common Stock Certificate of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 4  | .2          |  | Stockholder Rights Agreement dated as of November 5, 1996
    between OM Group, Inc. and National City Bank (incorporated by
    reference to Exhibit 4.2 to the Companys Registration
    Statement on Form S-4 (No. 333-84128) filed on
    March 11, 2002).                                                                                                                                                                                                                                                                                                                                                           
|        | 4  | .3          |  | Indenture, dated as of December 12, 2001, among OM Group,
    Inc., the Guarantors (as defined therein) and The Bank of New
    York, as Trustee (incorporated by reference to Exhibit 4.3
    to the Companys Registration Statement on Form S-1/A
    (No. 333-74566) filed on January 14, 2002).                                                                                                                                                                                                                                                                                                                      
|        | 4  | .4          |  | Purchase Agreement, dated as of December 7, 2001, among OM
    Group, Inc., the Guarantors (as defined therein) and Credit
    Suisse First Boston Corporation, as the representative of the
    Several Purchasers (as defined therein) (incorporated by
    reference to Exhibit 4.4 to the Companys Registration
    Statement on Form S-1/A (No. 333-74566) filed on
    January 14, 2002).                                                                                                                                                                                                                          
|        | 4  | .5          |  | Registration Rights Agreement, dated as of December 12,
    2001, among OM Group, Inc., the Guarantors (as defined therein)
    and Credit Suisse First representatives of the Several
    Purchasers (as defined therein) (incorporated by reference to
    Exhibit 4.5 to the Companys Registration Statement on
    333-74566) filed on January 14, 2002).                                                                                                                                                                                                                                                            
|        | 4  | .6          |  | Revolving Credit Agreement, dated as of August 1, 2003,
    among OM Group, Inc. as the borrower, the lending institutions
    named therein as lenders; National City Bank, as a Lender, the
    Swing Line Lender, the Letter of Credit Issuer, the
    Administrative Agent, the Collateral Agent, the Lead Arranger,
    and the Book Running Manager, KeyBank National Association and
    LaSalle Bank National Association as Co-Syndication Agents
    (filed as Exhibit(4) to the Companys Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003 and
    incorporated herein by reference).
|        | 10 | .1         |  | Technology Agreement among Outokumpu Oy, Outokumpu Engineering
    Contractors Oy, Outokumpu Research Oy, Outokumpu Harjavalta
    Metals Oy and Kokkola Chemicals Oy dated March 24, 1993.                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .2*        |  | OM Group, Inc. 1992 Long-Term Incentive Compensation Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .3*         |  | Amendment to OM Group, Inc. Long-Term Incentive Compensation
    Plan (filed as Exhibit 99(b) to the Companys
    Registration Statement on Form S-8 filed on
    February 1, 1994, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .4*         |  | Amendment to OM Group, Inc. Long-Term Incentive Compensation
    Plan (filed as Exhibit 99 to the OM Group, Inc.
    Form S-8 Registration Statement filed on July 3, 1996,
    and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .5*        |  | Mooney Chemicals, Inc. Welfare Benefit Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 10 | .6*        |  | Mooney Chemicals, Inc. Profit Sharing Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .7*        |  | Amendment to Mooney Chemicals, Inc. Profit Sharing Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .8*         |  | OMG/Mooney Chemicals, Inc. Employee Profit Sharing Plan, as
    amended (incorporated by reference to Exhibit 10.8 to the
    Companys Registration Statement on Form S-4 (No.
    333-84128) filed on March 11, 2002).                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .9*         |  | OM Group, Inc. Benefit Restoration Plan, effective
    January 1, 1995 (incorporated by reference to
    Exhibit 10.9 to the Companys Registration Statement
    on Form S-4 (No. 333-84128) filed on March 11, 2002).                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .10*        |  | Trust under OM Group, Inc. Benefit Restoration Plan, effective
    January 1, 1995 (incorporated by reference to
    Exhibit 10.10 to the Companys Registration Statement
    on Form S-4 (No. 333-84128) filed on March 11, 2002).                                                                                                                                                                                                                                                                                                                                                                                      



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                             
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .11*        |  | Amendment to OMG Americas, Inc. Profit-Sharing Plan (filed as
    Exhibit 99 to the OM Group, Inc. Form S-8 Registration
    Statement filed on July 3, 1996, and incorporated herein by
    reference).                                                                                                                                                                    
|        | 10 | .12         |  | OM Group, Inc. Non-employee Directors Equity Compensation
    Plan (incorporated by reference to Exhibit 10.12 to the
    Companys Registration Statement on form S-4 (No.
    333-84128) filed on March 11, 2002).                                                                                                                                                       
|        | 10 | .13*       |  | OM Group, Inc. Bonus Program for Key Executives and Middle
    Management.                                                                                                                                                                                                                                                                                                  
|        | 10 | .14*       |  | Employment Agreement between Mooney Acquisition Corporation and
    James P. Mooney dated September 30, 1991.                                                                                                                                                                                                                                                               
|        | 10 | .15*       |  | Amendment to Employment Agreement between OM Group, Inc. and
    James P. Mooney dated August 19, 1992.                                                                                                                                                                                                                                                                     
|        | 10 | .16*        |  | Employment Agreement between OM Group, Inc. and Michael J. Scott
    (incorporated by reference to Exhibit 10.17 to the
    Companys Registration Statement on Form S-4 (No.
    333-84128) filed on March 11, 2002).                                                                                                                                                      
|        | 10 | .17+        |  | Joint Venture Agreement among OMG B.V., Groupe George Forrest
    S.A., La Generale Des Carrieres Et Des Mines and OM Group,
    Inc. to partially or totally process the slag located in the
    site of Lubumbashi, Democratic Republic of Congo (incorporated
    by reference to Exhibit 10.17 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005).
|        | 10 | .18++       |  | Agreement for Sale of concentrate production between Kokkola
    Chemicals Oy and La Generale Des Carriers Et Des Mines
    dated April 21, 1997, including amendments dated
    August 27, 2003 (incorporated by reference to
    Exhibit 10.18 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                                                  
|        | 10 | .19+        |  | Long term Slag Sales Agreement between La Generale Des
    Carriers Et Des Mines and J.V. Groupement Pour Le Traitement Du
    Terril De Lubumbashi (filed as an Annex to Exhibit 10.17).                                                                                                                                                                                   
|        | 10 | .20+        |  | Long Term Cobalt Alloy Sales Agreement between J.V. Groupement
    Pour Le Traitement Du Terril De Lubumbashi and IMG Kokkola
    Chemicals Oy (filed as an Annex to Exhibit 10.17).                                                                                                                                                                                        
|        | 10 | .21+        |  | Tolling Agreement betterave Groupement Pour Le Traitement Du
    Terril De Lubumbashi and Societe De Traitement Due Terril De
    Lubumbashi (filed as an Annex to Exhibit 10.17).                                                                                                                                                                                          
|        | 10 | .22*        |  | OM Group, Inc. 1998 Long-Term Incentive Compensation Plan
    (incorporated by reference to Exhibit 10.22 to the
    Companys Annual Report on Form 10-K filed on
    March 31, 2005).                                                                                                                                                                                     
|        | 10 | .23*        |  | Separation Agreement between OM Group, Inc. and Edward W. Kissel
    dated July 2, 2003 (incorporated by reference to
    Exhibit 10.23 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                                                                                                                                                           
|        | 10 | .24         |  | Lease agreement between Outokumpu Harjavalta Metals Oy and
    Outokumpu Nickel Oy (filed as Exhibit 10.27 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 2000 and incorporated herein by
    reference).                                                                                                                       
|        | 10 | .25         |  | Purchase Agreement (as amended and restated) as of
    August 10, 2001 by and between dmc2 Degussa Metals
    Catalysts Cerdec AG, Degussa AG and OM Group, Inc. (incorporated
    by reference to Exhibit 2.1 to the Companys Current
    Report on Form 8-K filed on August 24, 2001).                                                                                   
|        | 10 | .26         |  | Heads of Agreement as of April 23, 2001 between OM Group,
    Inc. and Ferro Corporation (incorporated by reference to
    Exhibit 2.2 to the Companys Current Report on
    Form 8-K filed on August 24, 2001).                                                                                                                                                           
|        | 10 | .27         |  | OMG-Ferro Purchase Agreement dated as of August 31, 2001 by
    and between OM Group, Inc. and Ferro Corporation (incorporated
    by reference to Exhibit 2.1 to the Companys Current
    Report on Form 8-K filed on September 21, 2001).                                                                                                                                
|        | 10 | .28*        |  | Employment Agreement between OM Group, Inc. and Thomas R.
    Miklich dated May 1, 2002 (filed as Exhibit 10.1 to
    the Companys Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2002 and incorporated herein by
    reference).                                                                                                                        
|        | 10 | .29*        |  | OM Group, Inc. 2002 Stock Incentive Plan (incorporated by
    reference to Appendix A to the Companys Proxy Statement
    filed April 5, 2002).                                                                                                                                                                                                                            



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                    
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .30*        |  | Amendment to Employment Agreement between OM Group, Inc. and
    James P. Mooney dated December 20, 2002 (incorporated by
    reference to Exhibit 10.29 to the Companys Annual
    Report on Form 10-K filed on March 25, 2003). 
|        | 10 | .31*        |  | Amendment to Employment Agreement between OM Group, Inc. and
    Thomas R. Miklich dated December 1, 2002 (incorporated by
    reference to Exhibit 10.30 to the Companys Annual
    Report on Form 10-K filed on March 25, 2003).
|        | 10 | .32*        |  | Agreement by and between OM Group, Inc. and Michael J. Scott
    dated September 11, 2003 (incorporated by reference to
    Exhibit 10.32 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).                
|        | 10 | .33*        |  | Separation Agreement by and between OM Group, Inc. and Thomas R.
    Miklich dated October 17, 2003 (incorporated by reference
    to Exhibit 10.33 to the Companys Annual Report on
    Form 10-K filed on March 31, 2005).      
|        | 10 | .34*        |  | Employment Agreement by and between OM Group, Inc. and R. Louis
    Schneeberger dated February 16, 2004 (incorporated by
    reference to Exhibit 10.34 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005). 
|        | 10 | .35*        |  | Employment Agreement by and between OM Group, Inc. and Frank E.
    Butler dated February 9, 2005 (incorporated by reference to
    Exhibit 1 to the Companys Current Report on
    Form 8-K filed on February 5, 2005).          
|        | 10 | .36*        |  | Supplemental Retirement Plan for James P. Mooney (incorporated
    by reference to Exhibit 10.36 to the Companys Annual
    Report on Form 10-K filed on March 31, 2005).                                                         
|        | 10 | .37*        |  | Form of Stock Option Agreement between OM Group, Inc. and Joseph
    M. Scaminace.                                                                                                                                                 
|        | 10 | .38*        |  | Form of Restricted Stock Agreement between OM Group, Inc. and
    Joseph M. Scaminace.                                                                                                                                             
|        | 10 | .39*        |  | Employment Agreement by and between OM Group, Inc. and Joseph M.
    Scaminace dated May 26, 2005 (incorporated by reference to
    Exhibit 99 to the Companys Current Report on
    Form 8-K filed on June 2, 2005).             
|        | 10 | .40*        |  | Form of Change of Control Agreement (incorporated by reference
    to Exhibit 99.1 to the Companys Current Report on
    Form 8-K filed on June 14, 2005).                                                                        
|        | 10 | .41*        |  | Change in Control Agreement by and between OM Group, Inc. and
    Joseph M. Scaminace dated June 13, 2005 (incorporated by
    reference to Exhibit 99.1 to the Companys Current
    Report on Form 8-K filed on June 17, 2005).  
|        | 10 | .42*        |  | Form of Indemnification Agreement between OM Group, Inc. and its
    directors and certain officers.                                                                                                                               
|        | 12 |             |  | Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                 
|        | 21 |             |  | List of Subsidiaries                                                                                                                                                                                                               
|        | 23 |             |  | Consent of Ernst & Young LLP                                                                                                                                                                                                       
|        | 24 |             |  | Powers of Attorney                                                                                                                                                                                                                 
|        | 31 | .1          |  | Certification of Principal Executive Officer Pursuant to
    Rule 13a-14(a)/15d-14(a)                                                                                                                                              
|        | 31 | .2          |  | Certification of Principal Financial Officer Pursuant to
    Rule 13a-14(a)/15-d-14(a)                                                                                                                                             
|        | 32 |             |  | Certification of Principal Executive Officer and Principal
    Financial Officer Pursuant to 18 U.S.C. 1350                                                                                                                        






|  |                                                                                 
|- | --------------------------------------------------------------------------------
|* | Indicates a management contract, executive compensation plan or
    arrangement.



|  |                                                                                                                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|+ | Portions of Exhibit have been omitted and filed separately with
    the Securities and Exchange Commission in reliance on
    Rule 24b-2 and an Order from the Commission granting for
    confidential treatment dated June 26, 1998.



|   |                                                                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|++ | Portions of Exhibit have been omitted and filed separately with
    the Securities and Exchange Commission in reliance on
    Rule 24b-2 and the Companys request for confidential
    treatment.



|  |                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | These documents were filed as exhibits to the Companys
    Form S-1 Registration Statement (Registration
    No. 33-60444) which became effective on October 12,
    1993, and are incorporated herein by reference.