OM Group 11-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 11-K
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ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: December 31, 2005
OR
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TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
file number: 001-12515
OMG Profit Sharing and Retirement Savings Plan
(Full Title of the plan
and the address of the plan,
if different from that of issuer named below)
OM Group, Inc. 127 Public Square, 1500 Key Tower, Cleveland, Ohio 44114
(Name of Issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
OMG Profit-Sharing and Retirement Savings Plan
Audited Financial Statements and Supplemental Schedule
December 31, 2005 and 2004 and
Year ended December 31, 2005
Contents
Report of Independent Registered Public Accounting Firm
Plan Administrator
OMG Profit-Sharing and Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits of the OMG
Profit-Sharing and Retirement Savings Plan (the Plan) as of December 31, 2005, and the related
statement of changes in net assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Plan is not required to have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31, 2005, and the
changes in its net assets available for benefits for the year then ended, in conformity with U.S.
generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the financial statements taken as
a whole. The supplemental schedule of assets (held at end of year) of the Plan is presented for the
purpose of additional analysis and is not a required part of the financial statements but is
supplementary information required by the Department of Labor’s Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act of 1974, as amended. This
supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has
been subjected to the auditing procedures applied in the audit of the financial statements and, in
our opinion, is fairly stated in all material respects in relation to the financial statements
taken as a whole.
Cleveland, Ohio
June 26, 2006
1
Report of Independent Registered Public Accounting Firm
Plan Administrator
OMG Profit-Sharing and Retirement Savings Plan
Cleveland, Ohio
We have audited the accompanying statement of net assets available for benefits of the OMG
Profit-Sharing and Retirement Savings Plan as of December 31, 2004. This financial statement is the
responsibility of the Plan’s management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material misstatement. We
were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Plan’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statement referred to above presents fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 2004 in conformity
with U.S. generally accepted accounting principles.
June 20, 2005
2
OMG Profit-Sharing and Retirement Savings Plan
Statements of Net Assets Available for Benefits
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December 31, |
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2005 |
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2004 |
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Assets |
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Cash, non-interest bearing |
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$ |
19,053 |
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$ |
— |
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Investments, at fair value |
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39,218,404 |
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39,661,643 |
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Receivables: |
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Company contribution receivable |
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1,592,096 |
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1,166,227 |
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Accrued interest and dividends |
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8,064 |
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7,629 |
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Pending settlements |
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45 |
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92 |
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Total receivables |
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1,600,205 |
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1,173,948 |
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Net assets available for benefits |
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$ |
40,837,662 |
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$ |
40,835,591 |
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See notes to financial statements.
3
OMG Profit-Sharing and Retirement Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2005
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Additions |
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Investment income: |
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Net depreciation in fair value of investments |
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$ |
(22,969 |
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Dividends |
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760,617 |
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Interest |
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27,447 |
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765,095 |
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Contributions: |
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Participants |
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828,683 |
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Company |
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1,592,096 |
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2,420,779 |
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Total Additions |
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3,185,874 |
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Deductions |
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Benefit payments |
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3,182,423 |
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Fees |
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1,380 |
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Total Deductions |
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3,183,803 |
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Net increase |
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2,071 |
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Net assets available for benefits: |
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Beginning of year |
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40,835,591 |
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End of year |
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$ |
40,837,662 |
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See notes to financial statements.
4
OMG Profit-Sharing and Retirement Savings Plan
Notes to Financial Statements
1. Description of the Plan
The following description of the OMG Profit-Sharing and Retirement Savings Plan (the “Plan”)
provides only general information. Participants should refer to the Plan Document for a more
complete description of the Plan’s provisions.
General
The Plan
is a defined contribution plan covering all eligible employees of OMG Americas, Inc. and OMG
Fidelity, Inc., both of which are wholly-owned subsidiaries of OM Group, Inc. (the “Company” and
“Plan Sponsor”). The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”). There are no requirements of age but six months of service are
required for eligibility.
Contributions
Company contributions are made at the discretion of the Company’s Board of Directors to all
employees with six months of service.
Active participants may elect to receive as cash payment 50% of the Company’s contribution, which
is otherwise allocated to the Trust on their behalf. If the election of the cash option is not
exercised, the amount is credited to their 401(k) deferral account balance in accordance with their
investment elections.
Participants may contribute from 1% to 10% of their after-tax annual compensation, as defined in
the Plan and subject to Internal Revenue Service (“IRS”) limitations, in the form of salary
deduction or direct contributions. In addition, the Plan allows participants to make pre-tax
contributions to the Plan, provided that the sum of employee contributions and any other elective
deferrals made under all qualified plans maintained by the Company do not exceed 50% of the
participant’s compensation, as defined in the Plan and subject to the limitations set forth in the
Internal Revenue Code of 1986, as amended (the “Code”). The contribution percentage increased from
40% to 50% due to a Plan amendment executed on May 26, 2005 that was effective as of July 1, 2002.
5
OMG Profit-Sharing and Retirement Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Also, participants who will have attained at least age 50 before December 31 of the current year
can make certain catch-up contributions to the Plan, subject to the Code limitations.
Effective April 28, 2004, the Plan was amended to prohibit participants from allocating or
transferring contributions into the OMG Stock Fund.
Participant Accounts
Each participant’s account is credited with the participant’s 401(k) deferral contribution (if
any), the participant’s pre-tax and after-tax contribution (if any), the participant’s share of any
Company contribution, forfeitures of non-vested contributions and earnings, and investment income
earned on their account balance. The benefit to which a participant is entitled is the benefit that
can be provided from the participant’s account. Participants direct the investment of their account
and their share of the Company’s annual contribution into the available investment options.
Vesting
Participants are immediately vested in their 401(k) deferral contributions plus actual earnings
thereon. Participants vest ratably over a five-year period in the company contributions, becoming
100% vested after five years of service.
Forfeitures
Upon termination of employment, a participant’s nonvested portion of Company contributions and
related earnings are forfeited, with such forfeitures allocated to participants as additional
contributions. Any forfeitures are allocated to participants’ accounts based upon the ratio of each
participant’s compensation to the total of all participants’ compensation for the year. For the
year ended December 31, 2005, forfeited amounts totaled $13,638.
6
OMG Profit-Sharing and Retirement Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Participant Loans/Hardship Withdrawals
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the
lesser of $50,000 less the highest outstanding balance of a loan made in the prior twelve-month
period, or 50% of their vested account balance. The maximum number of years permitted for repayment
is five years. The loans are secured by the balance in the participant’s account and bear interest
at a rate commensurate with local prevailing rates (currently Prime Rate plus 0.5%) as determined
by the Plan Administrator. Interest rates ranged from 4.5% to 8.0%. Principal and interest is
paid ratably through monthly payroll deductions.
Participants who prove financial hardship may withdraw a portion of their account balance for
medical, educational, or housing reasons, as determined by the Plan Administrator, provided any
such withdrawal meets the requirements of Section 401(k) of the Code.
Payment of Benefits
Upon termination of employment prior to normal retirement, participants may elect distribution of
their account balance or maintain the account balance until retirement. At retirement, participants
may elect distribution of their account balance or maintain the account until the age of 70 1/2.
Distributions may be made in the following forms: lump-sum distribution; equal monthly installments
not to exceed a period equivalent to a participant’s life expectancy; or equal monthly installments
not to exceed a period equivalent to a participant’s life expectancy and that of their designated
beneficiary.
Plan Termination
The Company has the right under the Plan to discontinue its contributions at any time and although
it has not expressed an intent to do so, to terminate the Plan, subject to the provisions of ERISA.
In the event of termination, the accounts of all participants shall become fully vested and the
assets of the Plan will be distributed to the participants on the basis of individual account
balances at the date of termination.
New Accounting Pronouncement
On December 29, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position
(“FSP”) AAG INV-1 and Statement of Position (“SOP”) 94-4-1, “Reporting of Fully Benefit —
Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA
Investment Company Guide and Defined — Contribution Health and Welfare and Pension Plans” (“FSP AAG
INV-1 and SOP 94-1-1”), which revised the definition of fully benefit-responsive in SOP 94-4. The
adoption of FSP AAG INV-1 and SOP 94-4-1 is not expected to have a material impact on the Plan’s
net assets available for benefits or changes in net assets available for benefits.
7
OMG Profit-Sharing and Retirement Savings Plan
Notes to Financial Statements (continued)
2. Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
The Plan’s investments are recorded at fair value. The shares of registered investment companies
are valued at quoted market prices which represent the net asset values of shares held by the Plan
at year-end. Securities traded on a national securities exchange are valued at the last reported
sales price on the last business day of the Plan year. Common trust funds are stated at fair value
as determined by the Merrill Lynch Trust Company (“Trustee”), an affiliate of Merrill Lynch,
Pierce, Fenner, & Smith Incorporated (“Merrill Lynch”). Loans to participants are valued at their
outstanding balances, which approximate fair value. Purchases and sales of securities are recorded
on a trade-date basis. Interest and dividend income is recorded on the accrual basis.
Net realized gains and losses from the sale of investments and the changes in the difference
between fair value and the cost of investments are reflected in the statement of changes in net
assets available for benefits as net appreciation (depreciation) in fair value of investments.
Administrative Charges
The Plan Sponsor pays Trustee fees and other Plan expenses, except for brokers’ fees, on behalf of
the Plan. Fees paid during the year to the Trustee were based on customary and reasonable rates for
such services. Brokers’ fees are reflected in the net investment return in each participant’s
account.
Payment of Benefits
Benefits are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates that affect the amounts of assets and liabilities and changes
therein, and disclosure of contingent assets and liabilities. Actual results could differ from
these estimates.
8
OMG Profit-Sharing and Retirement Savings Plan
Notes to Financial Statements (continued)
3. Investments
During 2005, the Plan’s investments (including investments purchased, sold, and held during the
year) appreciated (depreciated) in fair value as follows:
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Net Realized |
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and Unrealized |
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Appreciation/ |
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(Depreciation) |
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in Fair Value |
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of Investments |
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Shares of registered investment companies |
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$ |
740,051 |
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Common/collective trust funds |
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463,945 |
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OMG Stock Fund |
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(1,226,965 |
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$ |
(22,969 |
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Investments that represent 5% or more of the Plan’s net assets are as follows:
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December 31, |
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2005 |
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2004 |
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Merrill Lynch Equity Index Trust I |
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$ |
5,673,079 |
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$ |
6,019,806 |
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Pimco Total Return Fund Class A |
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$ |
2,600,973 |
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$ |
2,430,377 |
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BlackRock Intermediate Government Bond Portfolio, Class A
(formerly State Street Research Government Income Fund Class A) |
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$ |
3,074,831 |
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$ |
2,788,421 |
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Merrill Lynch Return Preservation Trust Fund |
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$ |
7,212,932 |
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$ |
5,908,175 |
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Merrill Lynch Fundamental Growth Fund |
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$ |
7,585,006 |
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$ |
8,434,831 |
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AllianceBernstein Growth and Income Fund 1 |
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$ |
2,236,531 |
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$ |
2,001,581 |
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OMG Stock Fund (77,893 shares in
2005 and 121,050 shares in 2004) 2 |
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$ |
1,461,272 |
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$ |
3,924,438 |
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2004 balance represents less than 5% of the Plan’s net assets. |
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2005 balance represents less than 5% of the Plan’s net assets. |
9
OMG Profit-Sharing and Retirement Savings Plan
Notes to Financial Statements (continued)
4. Related Party Transactions
The assets of the Plan are accounted for by the Trustee. Certain Plan investments are shares of
registered investment companies or units of common trust funds managed by Merrill Lynch. Therefore,
these investments qualify as party-in-interest transactions. Fees paid by the Plan for investment
services amounted to $1,380 for the year ended December 31, 2005.
During 2005, the Plan did not receive any dividends from its investment in the OMG Stock Fund.
5. Income Tax Status
The Plan has received a determination letter from the IRS dated February 3, 2003, stating that the
Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from
taxation. Subsequent to this determination by the IRS, the Plan has been amended. Once qualified,
the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan
Administrator believes the Plan is being operated in compliance with the applicable requirements of
the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is
tax exempt.
6. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various
risks such as interest rate, market and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could materially affect
participants’ account balances and the amounts reported in the statements of net assets available
for benefits.
10
OMG Profit-Sharing and Retirement Savings Plan
EIN #34-1604066 Plan #001
Schedule H, Line 4i—Schedule of Assets
(Held at End of Year)
December 31, 2005
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| Identity of Issue, Borrower, |
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Current |
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| Lessor or Similar Party |
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Description of Investment |
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Value |
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OMG Stock Fund * |
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common stock |
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$ |
1,461,272 |
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Merrill Lynch Equity Index Trust I* |
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common/collective trust |
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5,673,079 |
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Victory Diversified Stock Fund |
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mutual fund |
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639,368 |
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Thornburg International Value Fund Class A |
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mutual fund |
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1,274,170 |
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Pimco Total Return Fund Class A |
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mutual fund |
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2,600,973 |
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Evergreen Mid-Cap Growth Fund Class A |
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mutual fund |
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1,781,784 |
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JP Morgan Mid-Cap Value Fund Class A |
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mutual fund |
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1,856,786 |
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Merrill Lynch International Index Fund* |
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mutual fund |
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1,652,295 |
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Merrill Lynch Small Cap Index Fund* |
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mutual fund |
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81,728 |
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ABN AMRO/Veredus Aggressive Growth Fund |
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mutual fund |
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495,605 |
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Merrill Lynch Return Preservation Trust Fund* |
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common/collective trust |
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7,212,932 |
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Merrill Lynch Fundamental Growth Fund* |
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mutual fund |
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7,585,006 |
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AllianceBernstein Growth and Income Fund |
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mutual fund |
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2,236,531 |
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MainStay Small Cap Opportunities Fund, Class A |
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mutual fund |
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1,105,650 |
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BlackRock Intermediate Government Bond Portfolio, Class A |
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mutual fund |
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3,074,831 |
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Loans to participants * |
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Interest rates ranging from 4.50% -
8.00%; various maturities
through 2010 |
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486,394 |
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$ |
39,218,404 |
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| * |
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Indicates party-in-interest to the Plan.
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12
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly caused this annual
report to be signed on their behalf by the undersigned hereunto duly authorized.
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OMG Profit Sharing and Retirement Savings Plan |
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Date: June 29, 2006
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By:
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/s/ Kenneth Haber |
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Kenneth Haber |
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Chief Financial Officer |
13
OMG Profit Sharing and Retirement Savings Plan
FORM 11-K
INDEX TO EXHIBITS
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| EXHIBIT |
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PAGE |
| NO. |
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NO. |
23.1
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Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm
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14 |
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23.2
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Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
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15 |
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14