##### 



Exhibit 13.1
 This Managements Discussion and Analysis of Financial Condition and Results of Operations
should be read in conjunction with the consolidated financial statements, the notes thereto and the
historical summary appearing elsewhere in this annual report. Historical results and percentage
relationships set forth in the consolidated financial statements, including trends that might
appear, should not be taken as indicative of future operations. The following discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from those discussed in such forward-looking statements as a result of various factors,
including those described under the section Cautionary Statements for Safe Harbor Purposes
included elsewhere in this annual report.
  
   ®




---



##### 



® ® ®




---



##### 



LUBRICANT ADDITIVES SEGMENT
  
    
    Consolidation of the additive industry and capacity reductions in recent years, which
has tightened the supply of lubricant additive components and packages.
    
    Frequent product specification changes primarily driven by original equipment
manufacturers (OEMs) and the impact of environmental and fuel economy regulations on the
OEMs. The specification changes require us to incur product development and testing costs,
but also enable us to apply our technology know-how to create products and solve problems.
We believe our technology, and our expertise in applying it, are key strengths.
    
    Improved engine design, which can result in longer lubricant drain intervals. Longer
drain intervals reduce demand for finished lubricants.
    
    New vehicle production levels, which affect our specialty driveline fluids in particular
because the initial factory fill is an important market factor in that product line.
    
    Raw material costs have been changing more rapidly than we have been able to respond
through pricing of our products in the market place.
    
    In recent years, especially in 2005, a general tightening of supplies leading to
significant increases in raw material and energy costs.
  SPECIALTY CHEMICALS SEGMENT




---



##### 



PRIMARY FACTORS AFFECTING 2005 RESULTS
  
    
    increased raw material and utility costs;
    
    our ability to raise selling prices;
    
    spot volumes in the Lubricant Additives segment;
    
    integration of Noveon International;
    
    cost control initiatives, including restructuring programs; and
    
    our ability to reduce interest costs through debt reduction.
     
 2005 RESULTS OF OPERATIONS COMPARED WITH 2004




---



##### 



ANALYSIS OF REVENUES
 Excluding Acquisitions(In Millions of Dollars)
    
    2005
    
    2004
    
    $ Change
    
    % Change
    
    $ Change
    
    % ChangeNet sales
    
    $
    4,039.2
    
    
    $
    3,108.9
    
    
    $
    930.3
    
    
    
    30
    %
    
    $
    344.8
    
    
    
    11
    %Royalties and other revenues
    
    
    3.5
    
    
    
    3.9
    
    
    
    (0.4
    )
    
    
    (10
    %)
    
    
    (0.4
    )
    
    
    (9
    %)Total revenues
    
    $
    4,042.7
    
    
    $
    3,112.8
    
    
    $
    929.9
    
    
    
    30
    %
    
    $
    344.4
    
    
    
    11
    %
   ANALYSIS
OF VOLUME  2005 VS. 2004
 Excluding2005
    
    
    
    
    
    AcquisitionsVolume
    
    % Change
    
    % ChangeNorth America
    
    
    50
    %
    
    
    12
    %
    
    
    (5
    %)Europe
    
    
    25
    %
    
    
    8
    %
    
    
    2
    %Asia-Pacific / Middle East
    
    
    20
    %
    
    
    15
    %
    
    
    8
    %Latin America
    
    
    5
    %
    
    
    9
    %
    
    
    Total
    
    
    100
    %
    
    
    11
    %
    
    
    (1
    %)




---



##### 



ANALYSIS OF COSTS AND EXPENSES
 Excluding Acquisitions(In Millions of Dollars)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % Change
    
    $ Change
    
    
    % ChangeCost of sales
    
    $
    3,048.9
    
    
    $
    2,327.2
    
    
    $
    721.7
    
    
    
    31
    %
    
    $
    295.8
    
    
    
    13
    %Selling and administrative expenses
    
    
    367.7
    
    
    
    297.1
    
    
    
    70.6
    
    
    
    24
    %
    
    
    10.8
    
    
    
    4
    %Research, testing and
development expenses
    
    
    204.8
    
    
    
    188.9
    
    
    
    15.9
    
    
    
    8
    %
    
    
    (6.0
    )
    
    
    (3
    %)Amortization of intangible assets
    
    
    25.2
    
    
    
    18.0
    
    
    
    7.2
    
    
    
    40
    %
    
    
    
    
    
    
    *Write-off of acquired in-process
research and development
    
    
    
    
    
    
    34.0
    
    
    
    (34.0
    )
    
    
    *
    
    
    
    (34.0
    )
    
    
    *Restructuring and impairment
charges
    
    
    22.2
    
    
    
    37.9
    
    
    
    (15.7
    )
    
    
    *
    
    
    
    (17.5
    )
    
    
    *Total costs and expenses
    
    $
    3,668.8
    
    
    $
    2,903.1
    
    
    $
    765.7
    
    
    
    26
    %
    
    $
    249.1
    
    
    
    9
    %
 
 *
    Calculation not meaningful




---



##### 



Asset
    
    
    Other Plant(In Millions of Dollars)
    
    Impairments
    
    
    Exit Costs
    
    
    Severance
    
    
    TotalSpecialty Chemicals plant closures and
workforce reductions
    
    $
    4.2
    
    
    $
    1.0
    
    
    $
    3.8
    
    
    $
    9.0Bromborough, U.K. closure
    
    
    0.7
    
    
    
    1.7
    
    
    
    3.7
    
    
    
    6.1Corporate / other workforce reductions
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    0.7European facility impairment
    
    
    6.2
    
    
    
    
    
    
    
    
    
    
    
    6.2Noveon International restructuring liabilities
assumed
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2Total restructuring and impairment charges
    
    $
    11.1
    
    
    $
    2.7
    
    
    $
    8.4
    
    
    $
    22.2




---



##### 








---



##### 



ANALYSIS OF OTHER ITEMS AND NET INCOME
 Excluding Acquisitions(In Millions of Dollars)
    
    2005
    
    2004
    
    $ Change
    
    % Change
    
    $ Change
    
    % ChangeOther (expense) income  net
    
    $
    (2.0
    )
    
    $
    5.3
    
    
    $
    7.3
    
    
    
    *
    
    
    $
    7.9
    
    
    
    *Interest expense  net
    
    
    97.0
    
    
    
    72.3
    
    
    
    24.7
    
    
    
    *
    
    
    
    (8.8
    )
    
    
    *Income from continuing operations
before income taxes
    
    
    274.9
    
    
    
    142.7
    
    
    
    132.2
    
    
    
    93
    %
    
    
    96.2
    
    
    
    67
    %Provision for income taxes
    
    
    93.6
    
    
    
    52.1
    
    
    
    41.5
    
    
    
    80
    %
    
    
    29.4
    
    
    
    56
    %Income from continuing operations
    
    
    181.3
    
    
    
    90.6
    
    
    
    90.7
    
    
    
    100
    %
    
    
    66.8
    
    
    
    74
    %Discontinued operations  net of tax
    
    
    8.0
    
    
    
    2.9
    
    
    
    5.1
    
    
    
    *
    
    
    
    4.1
    
    
    
    *Net income
    
    $
    189.3
    
    
    $
    93.5
    
    
    $
    95.8
    
    
    
    102
    %
    
    $
    70.9
    
    
    
    76
    %
 
 *
    Calculation not meaningful




---



##### 



2004 RESULTS OF OPERATIONS COMPARED WITH 2003
  ANALYSIS OF REVENUES
 Excluding Acquisitions(In Millions of Dollars)
    
    2004
    
    
    2003
    
    
    $ Change
    
    
    % Change
    
    
    $ Change
    
    
    % ChangeNet sales
    
    $
    3,108.9
    
    
    $
    2,017.3
    
    
    $
    1,091.6
    
    
    
    54%
    
    
    $
    263.0
    
    
    
    13%Royalties and other revenues
    
    
    3.9
    
    
    
    3.0
    
    
    
    0.9
    
    
    
    30%
    
    
    
    0.5
    
    
    
    18%Total revenues
    
    $
    3,112.8
    
    
    $
    2,020.3
    
    
    $
    1,092.5
    
    
    
    54%
    
    
    $
    263.5
    
    
    
    13%
   ANALYSIS
OF VOLUME  2004 VS. 2003
 Excluding2004
    
    
    
    
    
    AcquisitionsVolume
    
    % Change
    
    % ChangeNorth America
    
    
    49
    %
    
    
    39
    %
    
    
    4
    %Europe
    
    
    26
    %
    
    
    22
    %
    
    
    9
    %Asia-Pacific / Middle East
    
    
    19
    %
    
    
    31
    %
    
    
    16
    %Latin America
    
    
    6
    %
    
    
    8
    %
    
    
    (8
    %)Total
    
    
    100
    %
    
    
    30
    %
    
    
    7
    %




---



##### 



ANALYSIS OF COSTS AND EXPENSES
 Excluding Acquisitions(In Millions of Dollars)
    
    2004
    
    
    2003
    
    
    $ Change
    
    
    % Change
    
    
    $ Change
    
    
    % ChangeCost of sales
    
    $
    2,327.2
    
    
    $
    1,484.4
    
    
    $
    842.8
    
    
    
    57
    %
    
    $
    221.4
    
    
    
    15
    %Selling and administrative expenses
    
    
    297.1
    
    
    
    196.7
    
    
    
    100.4
    
    
    
    51
    %
    
    
    14.1
    
    
    
    7
    %Research, testing and
development expenses
    
    
    188.9
    
    
    
    165.3
    
    
    
    23.6
    
    
    
    14
    %
    
    
    (9.7
    )
    
    
    (6
    %)Amortization of intangible assets
    
    
    18.0
    
    
    
    4.9
    
    
    
    13.1
    
    
    
    *
    
    
    
    0.1
    
    
    
    2
    %Write-off of acquired in-process
research and development
    
    
    34.0
    
    
    
    
    
    
    
    34.0
    
    
    
    *
    
    
    
    
    
    
    
    *Restructuring and impairment charges
    
    
    37.9
    
    
    
    22.5
    
    
    
    15.4
    
    
    
    *
    
    
    
    (1.0
    )
    
    
    *Total costs and expenses
    
    $
    2,903.1
    
    
    $
    1,873.8
    
    
    $
    1,029.3
    
    
    
    55
    %
    
    $
    224.9
    
    
    
    12
    %
 
 *
    Calculation not meaningful




---



##### 



Severance /Asset
    
    
    Pension(In Millions of Dollars)
    
    Impairments
    
    
    Settlement
    
    
    TotalBromborough, U.K. closure
    
    $
    17.0
    
    
    $
    
    
    
    $
    17.0Corporate / other workforce reductions
    
    
    
    
    
    18.8
    
    
    
    18.8PuriNOxTM asset impairment
    
    
    2.1
    
    
    
    
    
    
    2.1Total restructuring and impairment charges
    
    $
    19.1
    
    
    $
    18.8
    
    
    $
    37.9




---



##### 



ANALYSIS OF OTHER ITEMS AND NET INCOME
 Excluding Acquisitions(In Millions of Dollars)
    
    2004
    
    2003
    
    $ Change
    
    % Change
    
    $ Change
    
    % ChangeOther income  net
    
    $
    5.3
    
    
    $
    3.3
    
    
    $
    2.0
    
    
    
    *
    
    
    $
    0.1
    
    
    
    *Interest expense  net
    
    
    72.3
    
    
    
    21.3
    
    
    
    51.0
    
    
    
    *
    
    
    
    (4.4
    )
    
    
    *Income from continuing operations
before income taxes
    
    
    142.7
    
    
    
    128.5
    
    
    
    14.2
    
    
    
    11%
    
    
    
    43.1
    
    
    
    34%Provision for income taxes
    
    
    52.1
    
    
    
    37.9
    
    
    
    14.2
    
    
    
    37%
    
    
    
    23.9
    
    
    
    63%Income from continuing operations
    
    
    90.6
    
    
    
    90.6
    
    
    
    
    
    
    
    
    
    
    
    19.2
    
    
    
    21%Discontinued operations  net of
tax
    
    
    2.9
    
    
    
    0.2
    
    
    
    2.7
    
    
    
    *
    
    
    
    2.7
    
    
    
    *Net income
    
    $
    93.5
    
    
    $
    90.8
    
    
    $
    2.7
    
    
    
    3%
    
    

    $
    21.9
    
    
    
    24%
 
 *
    Calculation not meaningful




---



##### 



SEGMENT ANALYSIS
   OPERATING RESULTS BY SEGMENT
 2005 vs. 2004
    
    

2004 vs. 2003Excluding Acquisitions
    
    Excluding Acquisitions%(In Millions of Dollars)
    
    2005
    
    2004
    
    2003
    
    $ Change
    
    Change
    
    $ Change
    
    % Change
    
    $ Change
    
    % ChangeRevenues:Lubricant Additives
    
    $
    2,280.1
    
    
    $
    1,998.6
    
    
    $
    1,767.1
    
    
    $
    281.5
    
    
    
    14%
    
    
    $
    281.5
    
    
    
    14%
    
    
    $
    231.5
    
    
    
    13
    %Specialty Chemicals
    
    
    1,762.6
    
    
    
    1,114.2
    
    
    
    253.2
    
    
    
    648.4
    
    
    
    *
    
    
    
    62.9
    
    
    
    6%
    
    
    
    31.9
    
    
    
    13
    %Total
    
    $
    4,042.7
    
    
    $
    3,112.8
    
    
    $
    2,020.3
    
    
    $
    929.9
    
    
    
    30%
    
    
    $
    344.4
    
    
    
    11%
    
    
    $
    263.4
    
    
    
    13
    %Gross Profit:Lubricant Additives
    
    $
    531.2
    
    
    $
    508.4
    
    
    $
    472.9
    
    
    $
    22.8
    
    
    
    4%
    
    
    $
    22.8
    
    
    
    4%
    
    
    $
    35.5
    
    
    
    8
    %Specialty Chemicals
    
    
    459.1
    
    
    
    273.3
    
    
    
    60.0
    
    
    
    185.8
    
    
    
    *
    
    
    
    26.1
    
    
    
    10%
    
    
    
    5.9
    
    
    
    10
    %Total
    
    $
    990.3
    
    
    $
    781.7
    
    
    $
    532.9
    
    
    $
    208.6
    
    
    
    27%
    
    
    $
    48.9
    
    
    
    6%
    
    
    $
    41.4
    
    
    
    8
    %Segment Operating Income:Lubricant Additives
    
    $
    266.6
    
    
    $
    240.9
    
    
    $
    200.9
    
    
    $
    25.7
    
    
    
    11%
    
    
    $
    25.7
    
    
    
    11%
    
    
    $
    40.0
    
    
    
    20
    %Specialty Chemicals
    
    
    193.6
    
    
    
    83.9
    
    
    
    0.9
    
    
    
    109.7
    
    
    
    *
    
    
    
    38.3
    
    
    
    *
    
    
    
    6.2
    
    
    
    *Total
    
    $
    460.2
    
    
    $
    324.8
    
    
    $
    201.8
    
    
    $
    135.4
    
    
    
    42%
    
    
    $
    64.0
    
    
    
    20%
    
    
    $
    46.2
    
    
    
    23
    %
 
 * Calculation not meaningful




---



##### 



LUBRICANT ADDITIVES SEGMENT
 2005 COMPARED WITH 2004
  2005Volume
    
    % ChangeNorth America
    
    
    38
    %
    
    
    (5
    %)Europe
    
    
    31
    %
    
    
    3
    %Asia-Pacific / Middle East
    
    
    25
    %
    
    
    9
    %Latin America
    
    
    6
    %
    
    
    2
    %Total
    
    
    100
    %
    
    
    1
    %




---



##### 



2004 COMPARED WITH 2003
  2004Volume
    
    % ChangeNorth America
    
    
    41
    %
    
    
    4
    %Europe
    
    
    30
    %
    
    
    8
    %Asia-Pacific / Middle East
    
    
    23
    %
    
    
    16
    %Latin America
    
    
    6
    %
    
    
    (9
    %)Total
    
    
    100
    %
    
    
    7
    %




---



##### 



SPECIALTY CHEMICALS SEGMENT
 2005 COMPARED WITH 2004
  Excluding2005
    
    
    
    
    
    AcquisitionsVolume
    
    % Change
    
    % ChangeNorth America
    
    
    72
    %
    
    
    36
    %
    
    
    (6
    %)Europe
    
    
    14
    %
    
    
    32
    %
    
    
    (6
    %)Asia-Pacific / Middle East
    
    
    10
    %
    
    
    50
    %
    
    
    (2
    %)Latin America
    
    
    4
    %
    
    
    32
    %
    
    
    (9
    %)Total
    
    
    100
    %
    
    
    37
    %
    
    
    (6
    %)




---



##### 



2004 COMPARED WITH 2003
  Excluding2004
    
    
    
    
    
    AcquisitionsVolume
    
    % Change
    
    % ChangeNorth America
    
    
    72
    %
    
    
    173
    %
    
    
    6
    %Europe
    
    
    15
    %
    
    
    224
    %
    
    
    13
    %Asia-Pacific / Middle East
    
    
    9
    %
    
    
    825
    %
    
    
    21
    %Latin America
    
    
    4
    %
    
    
    184
    %
    
    
    8
    %Total
    
    
    100
    %
    
    
    200
    %
    
    
    7
    %




---



##### 



PRO FORMA ANALYSIS




---



##### 








---



##### 



Actual
    
    Pro Forma(In Millions of Dollars)
    
    2005
    
    2004Consolidated DataTotal revenues
    
    $
    4,042.7
    
    
    $
    3,645.3Gross profit
    
    $
    990.3
    
    
    $
    939.0Income before income taxes
    
    $
    274.9
    
    
    $
    172.5Income from continuing operations
    
    $
    181.3
    
    
    $
    110.4Net income
    
    $
    189.3
    
    
    $
    114.3Depreciation expense
    
    $
    154.0
    
    
    $
    162.4Amortization of intangible assets
    
    $
    25.2
    
    
    $
    24.9Capital expenditures
    
    $
    136.3
    
    
    $
    155.8Segment DataLubricant Additives segment:Total revenues
    
    $
    2,280.1
    
    
    $
    1,998.6Gross profit
    
    $
    531.2
    
    
    $
    508.4Segment operating income
    
    $
    266.6
    
    
    $
    240.9Depreciation expense
    
    $
    79.7
    
    
    $
    86.1Amortization of intangible assets
    
    $
    3.0
    
    
    $
    3.0Capital expenditures
    
    $
    70.1
    
    
    $
    82.4Specialty Chemicals segment:Total revenues
    
    $
    1,762.6
    
    
    $
    1,646.7Gross profit
    
    $
    459.1
    
    
    $
    430.6Segment operating income
    
    $
    193.6
    
    
    $
    152.8Depreciation expense
    
    $
    73.6
    
    
    $
    75.1Amortization of intangible assets
    
    $
    22.2
    
    
    $
    21.9Capital expenditures
    
    $
    65.6
    
    
    $
    73.3Unallocated corporate depreciation
expense
    
    $
    0.7
    
    
    $
    1.0Corporate capital expenditures
    
    $
    0.6
    
    
    $
    0.1




---



##### 



COMPARATIVE PRO FORMA DATA (continued)
 ProActual
    
    
    Forma(In Millions of Dollars)
    
    2005
    
    
    2004Reconciliation of Segment Operating Income to
Income from Continuing Operations before
Income TaxesSegment operating income:Lubricant Additives
    
    $
    266.6
    
    
    $
    240.9Specialty Chemicals
    
    
    193.6
    
    
    
    152.8Total segment operating income
    
    
    460.2
    
    
    
    393.7Corporate expenses
    
    
    (62.3
    )
    
    
    (44.1
    )Corporate
other (expense) income  net
    
    
    (3.8
    )
    
    
    6.2Write-off of acquired IPR&D
    
    
    
    
    
    
    (34.0
    )Restructuring and impairment charges
    
    
    (22.2
    )
    
    
    (41.1
    )Interest
expense  net
    
    
    (97.0
    )
    
    
    (108.2
    )Income from continuing operations before income taxes
    
    $
    274.9
    
    
    $
    172.5
 RETURN ON AVERAGE SHAREHOLDERS EQUITY
  WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
 SELECTED MEASURES OF LIQUIDITY AND CAPITAL RESOURCES
 2005
    
    2004Cash and short-term investments (in millions of dollars)
    
    $
    262.4
    
    
    $
    335.9Working capital (in millions of dollars)
    
    $
    907.4
    
    
    $
    940.7Current ratio
    
    
    2.4
    
    
    
    2.4Debt as a % of capitalization
    
    
    51.6
    %
    
    
    56.2
    %Net debt as a % of capitalization
    
    
    47.3
    %
    
    
    51.6
    %




---



##### 



SUMMARY OF CASH FLOWS
 (In Millions of Dollars)
    
    2005
    
    
    2004
    
    
    2003Cash provided by (used for):Operating activities
    
    $
    362.2
    
    
    $
    328.2
    
    
    $
    194.8Investing activities
    
    
    (106.8
    )
    
    
    (1,088.8
    )
    
    
    (155.9
    )Financing activities
    
    
    (312.8
    )
    
    
    811.9
    
    
    
    (59.5
    )Effect of exchange-rate changes on cash
    
    
    (16.1
    )
    
    
    25.9
    
    
    
    12.9Net (decrease) increase in cash and short-term investments
    
    $
    (73.5
    )
    
    $
    77.2
    
    
    $
    (7.7
    )
 OPERATING ACTIVITIES
   INVESTING ACTIVITIES
    FINANCING ACTIVITIES
  




---



##### 



CAPITALIZATION AND CREDIT FACILITIES
     
 .




---



##### 



CONTRACTUAL CASH OBLIGATIONS
  Payments Due by Period2011 and(In Millions of Dollars)
    
    Total
    
    
    2006
    
    
    2007  2008
    
    
    2009 - 2010
    
    
    AfterTotal debt (1)
    
    $
    1,675.6
    
    
    $
    7.9
    
    
    $
    200.5
    
    
    $
    615.8
    
    
    $
    851.4Interest (2)
    
    
    1,039.0
    
    
    
    81.9
    
    
    
    163.5
    
    
    
    121.5
    
    
    
    672.1Operating leases
    
    
    82.5
    
    
    
    22.7
    
    
    
    30.9
    
    
    
    15.4
    
    
    
    13.5Non-cancelable purchase
commitments (3)
    
    
    153.7
    
    
    
    55.9
    
    
    
    66.6
    
    
    
    24.8
    
    
    
    6.4Other long-term liabilities (4)(5)
    
    
    56.8
    
    
    
    27.1
    
    
    
    16.9
    
    
    
    5.9
    
    
    
    6.9Total contractual cash obligations
    
    $
    3,007.6
    
    
    $
    195.5
    
    
    $
    478.4
    
    
    $
    783.4
    
    
    $
    1,550.3
 (1)
    
    Total debt includes both the current and long-term portions of debt as reported in Note
7 to the consolidated financial statements, excluding original issue discounts and
unrealized gains on derivative instruments designated as fair-value hedges of fixed-rate
debt.(2)
    
    Represents estimated contractual interest payments for fixed-rate debt only. We are
not able to estimate reasonably the cash payments for interest associated with
variable-rate debt due to the significant estimation required relating to both market
interest rates as well as projected principal payments.(3)
    
    Non-cancelable purchase commitments primarily include raw materials purchased under
take-or-pay contracts, drumming, warehousing and service contracts, utility purchase
agreements, terminal agreements and toll processing arrangements.(4)
    
    Other long-term liabilities disclosed in the table represent long-term liabilities
reported in our consolidated balance sheet at December 31, 2005 under noncurrent
liabilities, excluding pension, postretirement, postemployment, environmental and other
non-contractual liabilities.(5)
    
    We are required to make minimum contributions to our U.S. defined benefit pension plans
pursuant to the minimum funding requirements of the Internal Revenue Code of 1986, as
amended, and the Employee Retirement Income Security Act of 1974, as amended. Funding
requirements for plans outside the United States are subject to applicable local
regulations. In 2006, we expect to make employer contributions of approximately $15.3
million to the qualified plans to satisfy these minimum statutory funding requirements. In
2006, we expect to make payments of approximately $6.9 million relating to our unfunded
pension plans. The expected payments associated with the unfunded plans represent an
actuarial estimate of future assumed payments based upon retirement and payment patterns.
Actual amounts paid could differ from this estimate. In addition, non-pension
postretirement benefit payments are expected to approximate $4.9 million in 2006. We have
included these expected contributions of $27.1 million in the above table. Due to
uncertainties regarding significant assumptions involved in estimating future required
contributions to our defined benefit pension and other plans, such as interest rate levels,
the amount and timing of asset returns and future restructurings, if any, we are not able
to reasonably estimate our contributions beyond 2006.
  




---



##### 




 CRITICAL ACCOUNTING POLICIES
  ACCOUNTING FOR RESERVES AND CONTINGENCIES
  ACCOUNTING FOR SALES DISCOUNTS AND REBATES
  DETERMINATION OF NET PERIODIC PENSION COST




---



##### 



Effect on net periodic pension cost from change in the rate of return
 100 Basis Point(In Millions of Dollars)
    
    Increase
    
    
    DecreaseU.S. pension plans
    
    $
    (2.0
    )
    
    $
    2.0International pension plans
    
    
    (1.5
    )
    
    
    1.5All pension plans
    
    $
    (3.5
    )
    
    $
    3.5
  Effect on net periodic pension cost from change in the discount rate
 100 Basis Point(In Millions of Dollars)
    
    Increase
    
    
    DecreaseU.S. pension plans
    
    $
    (4.6
    )
    
    $
    7.3International pension plans
    
    
    (4.1
    )
    
    
    5.1All pension plans
    
    $
    (8.7
    )
    
    $
    12.4




---



##### 



DETERMINATION OF POSTRETIREMENT BENEFIT COST
   Effect on postretirement benefit cost from change in the discount rate
 100 Basis Point(In Millions of Dollars)
    
    Increase
    
    
    DecreaseU.S. postretirement plans
    
    $
    (0.6
    )
    
    $
    0.8International postretirement plans
    
    
    (0.1
    )
    
    
    0.1All postretirement plans
    
    $
    (0.7
    )
    
    $
    0.9




---



##### 



Effect
on postretirement benefit cost from change in assumed health care cost trend rate
 100 Basis Point(In Millions of Dollars)
    
    Increase
    
    
    DecreaseU.S. postretirement plans
    
    $
    1.1
    
    
    $
    (0.9
    )International postretirement plans
    
    
    0.1
    
    
    
    (0.1
    )All postretirement plans
    
    $
    1.2
    
    
    $
    (1.0
    )
 ACCOUNTING FOR BUSINESS COMBINATIONS
  ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
   DISCONTINUED OPERATIONS
  
    
    we commit to a plan to sell the disposal group;




---



##### 




    
    the disposal group is available for immediate sale in its present condition, subject
only to the terms that are usual and customary for sales of such disposal groups;
    
    an active program to locate a buyer, and other actions required to complete the plan to
sell have been initiated;
    
    the sale of the disposal group is probable and the transfer is expected to qualify for
recognition as a completed sale within one year;
    
    the disposal group is being actively marketed for sale at a price that is reasonable in
relation to its current fair value; and
    
    actions necessary to complete the plan indicate that it is unlikely that significant
changes to the plan will be made or that the plan will be withdrawn.
  ACCOUNTING FOR GOODWILL IMPAIRMENT
  NEW ACCOUNTING STANDARDS
 SFAS No. 154
 FIN No.
47
 SFAS No. 123R




---



##### 



SFAS No. 151




---



##### 



CAUTIONARY STATEMENTS FOR SAFE HARBOR PURPOSES
   
    
    the cost, availability and quality of raw materials, including petroleum-based products;
    
    our ability to increase the prices of our products in a competitive environment;
    
    the effect of required principal and interest payments on our ability to fund capital expenditures and acquisitions and
to meet operating needs;
    
    the overall global economic environment and the overall demand for our products on a worldwide basis;
    
    technology developments that affect longer-term trends for our products;
    
    the extent to which we are successful in expanding our business in new and existing markets;
    
    our ability to identify, complete and integrate acquisitions for profitable growth and operating efficiencies;
    
    our success at continuing to develop proprietary technology to meet or exceed new industry performance standards and
individual customer expectations;
    
    our ability to continue to reduce complexities and conversion costs and modify our cost structure to maintain and
enhance our competitiveness;
    
    our success in retaining and growing the business that we have with our largest customers;
    
    the cost and availability of energy, including natural gas and electricity;
    
    the effect of interest rate fluctuations on our interest expense;
    
    the effects of fluctuations in currency exchange rates upon our reported results from international operations,
together with non-currency risks of investing in and conducting significant operations in foreign countries, including
those relating to political, social, economic and regulatory factors;
    
    the extent to which we achieve market acceptance of our commercial development programs;
    
    significant changes in government regulations affecting environmental compliance;
    
    the ability to identify, understand and manage risks inherent in new markets in which we choose to expand; and
    
    our ability to maintain operating continuity for those businesses identified as divestiture candidates.




---



##### 



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




---



##### 








---



##### 



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
   Internal ControlIntegrated Framework.
  
 
 
 
 
 
  NEW YORK STOCK EXCHANGE CERTIFICATIONS




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework




---



##### 



Internal ControlIntegrated Framework Internal ControlIntegrated Framework




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework




---



##### 



Consolidated Statements of Income
 Year Ended December 31(In Millions of Dollars Except Per Share Data)
    
    2005
    
    
    2004
    
    
    2003Net sales
    
    $
    4,039.2
    
    
    $
    3,108.9
    
    
    $
    2,017.3Royalties and other revenues
    
    
    3.5
    
    
    
    3.9
    
    
    
    3.0Total revenues
    
    
    4,042.7
    
    
    
    3,112.8
    
    
    
    2,020.3Cost of sales
    
    
    3,048.9
    
    
    
    2,327.2
    
    
    
    1,484.4Selling and administrative expenses
    
    
    367.7
    
    
    
    297.1
    
    
    
    196.7Research, testing and development expenses
    
    
    204.8
    
    
    
    188.9
    
    
    
    165.3Amortization of intangible assets
    
    
    25.2
    
    
    
    18.0
    
    
    
    4.9Write-off of acquired in-process research and development
    
    
    
    
    
    
    34.0
    
    
    
    Restructuring and impairment charges
    
    
    22.2
    
    
    
    37.9
    
    
    
    22.5Total costs and expenses
    
    
    3,668.8
    
    
    
    2,903.1
    
    
    
    1,873.8Other
(expense) income  net
    
    
    (2.0
    )
    
    
    5.3
    
    
    
    3.3Interest income
    
    
    8.1
    
    
    
    4.8
    
    
    
    3.8Interest expense
    
    
    (105.1
    )
    
    
    (77.1
    )
    
    
    (25.1
    )Income from continuing operations
before income taxes
    
    
    274.9
    
    
    
    142.7
    
    
    
    128.5Provision for income taxes
    
    
    93.6
    
    
    
    52.1
    
    
    
    37.9Income from continuing operations
    
    
    181.3
    
    
    
    90.6
    
    
    
    90.6Discontinued
operations  net of tax
    
    
    8.0
    
    
    
    2.9
    
    
    
    0.2Net income
    
    $
    189.3
    
    
    $
    93.5
    
    
    $
    90.8Basic earnings per share:Continuing operations
    
    $
    2.67
    
    
    $
    1.63
    
    
    $
    1.76Discontinued operations
    
    
    0.12
    
    
    
    0.05
    
    
    
    Net income per share, basic
    
    $
    2.79
    
    
    $
    1.68
    
    
    $
    1.76Diluted earnings per share:Continuing operations
    
    $
    2.63
    
    
    $
    1.62
    
    
    $
    1.75Discontinued operations
    
    
    0.12
    
    
    
    0.05
    
    
    
    Net income per share, diluted
    
    $
    2.75
    
    
    $
    1.67
    
    
    $
    1.75Dividends per share
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
 The accompanying notes are an integral part of these consolidated financial statements.




---



##### 



Consolidated Balance Sheets
 December 31(In Millions of Dollars)
    
    2005
    
    
    2004ASSETSCash and short-term investments
    
    $
    262.4
    
    
    $
    335.9Receivables
    
    
    585.6
    
    
    
    582.8Inventories
    
    
    586.0
    
    
    
    568.7Other current assets
    
    
    138.3
    
    
    
    110.6Total current assets
    
    
    1,572.3
    
    
    
    1,598.0Property and equipment  at cost
    
    
    2,621.5
    
    
    
    2,731.3Less accumulated depreciation
    
    
    1,437.1
    
    
    
    1,413.4Property and equipment  net
    
    
    1,184.4
    
    
    
    1,317.9Goodwill
    
    
    1,138.8
    
    
    
    1,153.8Intangible assets  net
    
    
    404.6
    
    
    
    437.1Investments in non-consolidated companies
    
    
    7.6
    
    
    
    7.4Other assets
    
    
    58.6
    
    
    
    52.1TOTAL
    
    $
    4,366.3
    
    
    $
    4,566.3LIABILITIES AND SHAREHOLDERS EQUITYShort-term debt and current portion of long-term debt
    
    $
    7.9
    
    
    $
    8.2Accounts payable
    
    
    372.2
    
    
    
    342.3Accrued expenses and other current liabilities
    
    
    284.8
    
    
    
    306.8Total current liabilities
    
    
    664.9
    
    
    
    657.3Long-term debt
    
    
    1,662.9
    
    
    
    1,964.1Postretirement health care obligations
    
    
    102.6
    
    
    
    106.4Noncurrent liabilities
    
    
    204.0
    
    
    
    170.7Deferred income taxes
    
    
    113.7
    
    
    
    90.7Total liabilities
    
    
    2,748.1
    
    
    
    2,989.2Minority interest in consolidated companies
    
    
    51.0
    
    
    
    53.6Contingencies and commitmentsPreferred stock without par value  unissued
    
    
    
    
    
    
    Common shares without par value  68,043,241 and 66,778,865
outstanding shares at December 31, 2005 and 2004,
respectively
    
    
    663.7
    
    
    
    610.6Retained earnings
    
    
    1,016.0
    
    
    
    897.4Accumulated other comprehensive (loss) income
    
    
    (112.5
    )
    
    
    15.5Total shareholders equity
    
    
    1,567.2
    
    
    
    1,523.5TOTAL
    
    $
    4,366.3
    
    
    $
    4,566.3
 The accompanying notes are an integral part of these consolidated financial statements.




---



##### 



Consolidated Statements of Cash Flows
 Year Ended December 31(In Millions of Dollars)
    
    2005
    
    
    2004
    
    
    2003CASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income
    
    $
    189.3
    
    
    $
    93.5
    
    
    $
    90.8Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    179.8
    
    
    
    154.7
    
    
    
    100.4Write-off of acquired in-process research and development
    
    
    
    
    
    
    34.0
    
    
    
    Deferred income taxes
    
    
    10.3
    
    
    
    5.9
    
    
    
    1.5Restructuring and impairment charges
    
    
    11.1
    
    
    
    27.5
    
    
    
    3.3Change in current assets and liabilities, net of acquisitions
and divestitures:Receivables
    
    
    (52.9
    )
    
    
    (38.4
    )
    
    
    4.7Inventories
    
    
    (47.5
    )
    
    
    (50.0
    )
    
    
    17.4Accounts payable, accrued expenses and
other current liabilities
    
    
    56.0
    
    
    
    80.5
    
    
    
    (26.8
    )Other current assets
    
    
    6.9
    
    
    
    2.5
    
    
    
    (4.3
    )(37.5
    )
    
    
    (5.4
    )
    
    
    (9.0
    )Change in noncurrent liabilities
    
    
    5.4
    
    
    
    9.0
    
    
    
    11.7Other items
 net
    
    
    3.8
    
    
    
    9.0
    
    
    
    (3.9
    )Total operating activities
    
    
    362.2
    
    
    
    328.2
    
    
    
    194.8INVESTING ACTIVITIESCapital expenditures
    
    
    (136.7
    )
    
    
    (133.2
    )
    
    
    (88.5
    )Acquisitions
 net of cash received and liabilities assumed
    
    
    
    
    
    
    (958.4
    )
    
    
    (68.6
    )Net proceeds from divestitures and sales of property and equipment
    
    
    30.1
    
    
    
    3.0
    
    
    
    2.2Other items
 net
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (1.0
    )Total investing activities
    
    
    (106.8
    )
    
    
    (1,088.8
    )
    
    
    (155.9
    )FINANCING ACTIVITIESChanges in short-term debt, net
    
    
    (4.0
    )
    
    
    (72.6
    )
    
    
    (5.8
    )Repayments of long-term debt
    
    
    (512.2
    )
    
    
    (1,193.0
    )
    
    
    (9.2
    )Proceeds from the issuance of long-term debt
    
    
    235.8
    
    
    
    1,743.3
    
    
    
    4.5Dividends paid
    
    
    (70.4
    )
    
    
    (57.6
    )
    
    
    (53.6
    )Proceeds from sale of common shares, net of underwriting
commissions and offering expenses of $20.2 million
    
    
    
    
    
    
    470.0
    
    
    
    Payment of debt issuance costs
    
    
    (0.8
    )
    
    
    (16.8
    )
    
    
    Payment of Treasury rate lock upon settlement
    
    
    
    
    
    
    (73.9
    )
    
    
    Payment on termination of interest rate swaps
    
    
    
    
    
    
    (2.9
    )
    
    
    Proceeds from the exercise of stock options
    
    
    38.8
    
    
    
    15.4
    
    
    
    4.6Total financing activities
    
    
    (312.8
    )
    
    
    811.9
    
    
    
    (59.5
    )Effect of exchange rate changes on cash
    
    
    (16.1
    )
    
    
    25.9
    
    
    
    12.9Net (decrease) increase in cash and short-term investments
    
    
    (73.5
    )
    
    
    77.2
    
    
    
    (7.7
    )Cash and short-term investments at the beginning of year
    
    
    335.9
    
    
    
    258.7
    
    
    
    266.4Cash and short-term investments at the end of year
    
    $
    262.4
    
    
    $
    335.9
    
    
    $
    258.7
 The accompanying notes are an integral part of these consolidated financial statements.




---



##### 



Consolidated Statements of Shareholders Equity
 Shareholders EquityAccumulatedNumber of
    
    
    
    
    
    
    
    
    
    OtherShares
    
    
    
    
    
    
    Retained
    
    
    Comprehensive(In Millions)
    
    Outstanding
    
    
    Common Shares
    
    
    Earnings
    
    
    (Loss) Income
    
    
    TotalBALANCE, JANUARY 1, 2003
    
    
    51.5
    
    
    $
    119.0
    
    
    $
    828.3
    
    
    $
    (78.1
    )
    
    $
    869.2Comprehensive income:Net income 2003
    
    
    
    
    
    
    
    
    
    
    90.8
    
    
    
    
    
    
    
    90.8Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42.1
    
    
    
    42.1Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132.9Dividends declared
    
    
    
    
    
    
    
    
    
    
    (53.6
    )
    
    
    
    
    
    
    (53.6
    )Deferred stock compensation
    
    
    
    
    
    
    1.1
    
    
    
    
    
    
    
    
    
    
    
    1.1Common shares  treasury:Shares issued upon exercise of stock options and awards
    
    
    0.1
    
    
    
    3.7
    
    
    
    
    
    
    
    
    
    
    
    3.7BALANCE, DECEMBER 31, 2003
    
    
    51.6
    
    
    
    123.8
    
    
    
    865.5
    
    
    
    (36.0
    )
    
    
    953.3Comprehensive income:Net income 2004
    
    
    
    
    
    
    
    
    
    
    93.5
    
    
    
    
    
    
    
    93.5Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51.5
    
    
    
    51.5Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145.0Dividends declared
    
    
    
    
    
    
    
    
    
    
    (61.6
    )
    
    
    
    
    
    
    (61.6
    )Common shares  issued in public offerings
    
    
    14.7
    
    
    
    470.0
    
    
    
    
    
    
    
    
    
    
    
    470.0Deferred stock compensation
    
    
    
    
    
    
    3.4
    
    
    
    
    
    
    
    
    
    
    
    3.4Common shares  treasury:Shares issued upon exercise of
stock options and awards
    
    
    0.5
    
    
    
    13.4
    
    
    
    
    
    
    
    
    
    
    
    13.4BALANCE, DECEMBER 31, 2004
    
    
    66.8
    
    
    
    610.6
    
    
    
    897.4
    
    
    
    15.5
    
    
    
    1,523.5Comprehensive income:Net income 2005
    
    
    
    
    
    
    
    
    
    
    189.3
    
    
    
    
    
    
    
    189.3Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128.0
    )
    
    
    (128.0
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61.3Dividends declared
    
    
    
    
    
    
    
    
    
    
    (70.7
    )
    
    
    
    
    
    
    (70.7
    )Deferred stock compensation
    
    
    
    
    
    
    8.8
    
    
    
    
    
    
    
    
    
    
    
    8.8Common shares  treasury:Shares issued upon exercise of
stock options and awards
    
    
    1.2
    
    
    
    44.3
    
    
    
    
    
    
    
    
    
    
    
    44.3BALANCE, DECEMBER 31, 2005
    
    
    68.0
    
    
    $
    663.7
    
    
    $
    1,016.0
    
    
    $
    (112.5
    )
    
    $
    1,567.2
 The accompanying notes are an integral part of these consolidated financial statements.




---



##### 



Notes To Financial Statements  (In Millions Except Per Share Data)
 Note 1  NATURE OF OPERATIONS
   Note 2  SIGNIFICANT ACCOUNTING POLICIES




---



##### 








---



##### 








---



##### 



2005
    
    
    2004
    
    
    2003Numerator:Income from continuing operations
    
    $
    181.3
    
    
    $
    90.6
    
    
    $
    90.6Discontinued
operations  net of tax
    
    
    8.0
    
    
    
    2.9
    
    
    
    0.2Net income
    
    $
    189.3
    
    
    $
    93.5
    
    
    $
    90.8Denominator:Weighted-average common shares
outstanding
    
    
    67.9
    
    
    
    55.7
    
    
    
    51.7Dilutive effect of stock options and
awards
    
    
    0.9
    
    
    
    0.3
    
    
    
    0.2Denominator for net income per
share, diluted
    
    
    68.8
    
    
    
    56.0
    
    
    
    51.9Basic earnings per share:Continuing operations
    
    $
    2.67
    
    
    $
    1.63
    
    
    $
    1.76Discontinued operations
    
    
    0.12
    
    
    
    0.05
    
    
    
    Net income per share, basic
    
    $
    2.79
    
    
    $
    1.68
    
    
    $
    1.76Diluted earnings per share:Continuing operations
    
    $
    2.63
    
    
    $
    1.62
    
    
    $
    1.75Discontinued operations
    
    
    0.12
    
    
    
    0.05
    
    
    
    Net income per share, diluted
    
    $
    2.75
    
    
    $
    1.67
    
    
    $
    1.75




---



##### 



2005
    
    
    2004
    
    
    2003Reported net income
    
    $
    189.3
    
    
    $
    93.5
    
    
    $
    90.8Plus: stock-based employee
compensation (net of tax)
included in net income
    
    
    5.5
    
    
    
    2.1
    
    
    
    0.3Less: stock-based employee
compensation (net of tax)
using the fair-value method
    
    
    (6.5
    )
    
    
    (6.0
    )
    
    
    (4.4
    )Pro forma net income
    
    $
    188.3
    
    
    $
    89.6
    
    
    $
    86.7Reported net income per share, basic
    
    $
    2.79
    
    
    $
    1.68
    
    
    $
    1.76Pro forma net income per share, basic
    
    $
    2.77
    
    
    $
    1.61
    
    
    $
    1.68Reported net income per share, diluted
    
    $
    2.75
    
    
    $
    1.67
    
    
    $
    1.75Pro forma net income per share, diluted
    
    $
    2.74
    
    
    $
    1.60
    
    
    $
    1.67




---



##### 




    
    The accumulated postretirement benefit obligation determined as of January 1, 2005 and 2004
has been reduced by approximately $5.8 million in both years. This reduction caused an
actuarial gain in accordance with FSP No. 106-2.
    
    The effect of the above gain is to reduce the annual amortization of unrecognized actuarial
loss by approximately $0.4 million.
    
    The interest and service cost components of the related periodic expense for fiscal year
2004 have been reduced by approximately $0.6 million.
   Note 3  ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
 ® ® ®




---



##### 



Pro FormaActual
    
    
    (unaudited)2005
    
    
    2004Total revenues
    
    $
    4,042.7
    
    
    $
    3,645.3Income from continuing operations
    
    $
    181.3
    
    
    $
    110.4Discontinued operations
    
    
    8.0
    
    
    
    3.9Net income
    
    $
    189.3
    
    
    $
    114.3Basic earnings per share:Continuing operations
    
    $
    2.67
    
    
    $
    1.79Discontinued operations
    
    
    0.12
    
    
    
    0.06Net income per share, basic
    
    $
    2.79
    
    
    $
    1.85Diluted earnings per share:Continuing operations
    
    $
    2.63
    
    
    $
    1.78Discontinued operations
    
    
    0.12
    
    
    
    0.06Net income per share, diluted
    
    $
    2.75
    
    
    $
    1.84




---



##### 



® ® ®
  Fair Value of Net Assets Acquired in 2004Noveon
    
    
    Hyper-International
    
    
    dispersants
    
    
    Other
    
    
    TotalReceivables
    
    $
    187.7
    
    
    $
    7.3
    
    
    $
    
    
    
    $
    195.0Inventories
    
    
    180.6
    
    
    
    10.5
    
    
    
    
    
    
    
    191.1Other current assets
    
    
    51.2
    
    
    
    
    
    
    
    
    
    
    
    51.2Property and equipment
    
    
    559.5
    
    
    
    5.5
    
    
    
    
    
    
    
    565.0Goodwill
    
    
    862.7
    
    
    
    76.4
    
    
    
    
    
    
    
    939.1Intangible assets
    
    
    379.0
    
    
    
    42.7
    
    
    
    
    
    
    
    421.7Other assets
    
    
    19.4
    
    
    
    
    
    
    
    0.1
    
    
    
    19.5Total assets
    
    
    2,240.1
    
    
    
    142.4
    
    
    
    0.1
    
    
    
    2,382.6Accounts payable
    
    
    129.4
    
    
    
    7.0
    
    
    
    
    
    
    
    136.4Accrued expenses
    
    
    107.2
    
    
    
    
    
    
    
    
    
    
    
    107.2Current and long-term debt
    
    
    1,103.1
    
    
    
    
    
    
    
    
    
    
    
    1,103.1Noncurrent liabilities
    
    
    71.8
    
    
    
    5.7
    
    
    
    
    
    
    
    77.5Total liabilities
    
    
    1,411.5
    
    
    
    12.7
    
    
    
    
    
    
    
    1,424.2Increase in net assets
from acquisitions
    
    $
    828.6
    
    
    $
    129.7
    
    
    $
    0.1
    
    
    $
    958.4
 TM




---



##### 



Fair Value ofNet AssetsAcquiredin 2003Receivables
    
    $
    0.4Inventories
    
    
    7.8Property and equipment
    
    
    1.8Goodwill
    
    
    36.2Intangible assets
    
    
    23.4Other assets
    
    
    0.2Total assets
    
    
    69.8Accrued expenses
    
    
    1.0Deferred taxes noncurrent
    
    
    0.2Total liabilities
    
    
    1.2Increase in net assets from acquisitions
    
    $
    68.6
 Note 4  DIVESTITURES
  ®




---



##### 



Note 5  INVENTORIES
 2005
    
    
    2004Finished products
    
    $
    319.6
    
    
    $
    311.2Products in process
    
    
    86.9
    
    
    
    75.9Raw materials
    
    
    151.2
    
    
    
    153.1Supplies and engine test parts
    
    
    28.3
    
    
    
    28.5Total inventory
    
    $
    586.0
    
    
    $
    568.7
   Note 6  GOODWILL AND INTANGIBLE ASSETS
 Goodwill
 st
 Lubricant
    
    
    SpecialtyAdditives
    
    
    Chemicals
    
    
    TotalBalance, January 1, 2004
    
    $
    99.3
    
    
    $
    109.4
    
    
    $
    208.7Goodwill acquired
    
    
    
    
    
    
    906.5
    
    
    
    906.5Translation
and other adjustments
    
    
    1.6
    
    
    
    37.0
    
    
    
    38.6Balance, December 31, 2004
    
    
    100.9
    
    
    
    1,052.9
    
    
    
    1,153.8Goodwill acquired
    
    
    
    
    
    
    32.9
    
    
    
    32.9Translation
and other adjustments
    
    
    (5.1
    )
    
    
    (42.8
    )
    
    
    (47.9
    )Balance, December 31, 2005
    
    $
    95.8
    
    
    $
    1,043.0
    
    
    $
    1,138.8
 Intangible Assets




---



##### 



st
  2005
    
    
    2004Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized intangible assets:Customer lists
    
    $
    151.5
    
    
    $
    15.8
    
    
    $
    151.9
    
    
    $
    6.4Technology
    
    
    144.4
    
    
    
    35.6
    
    
    
    144.4
    
    
    
    25.4Trademarks
    
    
    24.5
    
    
    
    4.2
    
    
    
    24.4
    
    
    
    2.3Patents
    
    
    11.8
    
    
    
    2.5
    
    
    
    13.2
    
    
    
    1.5Land-use rights
    
    
    7.3
    
    
    
    1.0
    
    
    
    7.1
    
    
    
    0.8Non-compete agreements
    
    
    9.1
    
    
    
    5.9
    
    
    
    8.9
    
    
    
    3.8Other
    
    
    5.4
    
    
    
    0.7
    
    
    
    11.3
    
    
    
    0.9Total amortized
intangible assets
    
    
    354.0
    
    
    
    65.7
    
    
    
    361.2
    
    
    
    41.1Non-amortized intangible
assets:Non-amortized trademarks
    
    
    116.3
    
    
    
    
    
    
    
    117.0
    
    
    
    Total
    
    $
    470.3
    
    
    $
    65.7
    
    
    $
    478.2
    
    
    $
    41.1




---



##### 



Note 7  SHORT-TERM AND LONG-TERM DEBT
  2005
    
    
    2004Short-term debt consists of:Yen
denominated, at weighted-average rates of 0.5% and 0.6%
    
    $
    2.5
    
    
    $
    7.8Other
    
    
    0.8
    
    
    
    Current portion of long-term debt
    
    
    4.6
    
    
    
    0.4Total
    
    $
    7.9
    
    
    $
    8.2Long-term debt consists of:5.875% notes, due 2008, including fair
value adjustments of $(0.6) million and
$4.8 million in 2005 and 2004,
respectively for unrealized (loss) gain
on derivative hedge instruments and
remaining unamortized gain on
termination of swaps of $8.0 million
and $10.7 million in 2005 and 2004,
respectively
    
    $
    207.4
    
    
    $
    215.54.625% notes, due 2009, net of original
issue discount of $0.3 million in 2005
and 2004 and fair value adjustments of
$(4.3) million and $(0.1) million for
realized losses on derivative hedge
instruments in 2005 and 2004,
respectively
    
    
    395.4
    
    
    
    399.65.5% notes, due 2014, net of original
issue discount of $2.7 million and
$2.9 million in 2005 and 2004,
respectively
    
    
    447.3
    
    
    
    447.17.25% debentures, due 2025
    
    
    100.0
    
    
    
    100.06.5% debentures, due 2034, net of
original issue discount of $4.9 million
and $5.0 million in 2005 and 2004,
respectively
    
    
    295.1
    
    
    
    295.0




---



##### 



2005
    
    
    2004Debt supported by long-term banking
arrangements:Term loans, at LIBOR plus 1.25% (3.7% at
December 31, 2004)
    
    
    
    
    
    
    500.0Euro revolving credit borrowing, at
EURIBOR plus 0.4% (2.9% at December 31,
2005)
    
    
    215.6
    
    
    
    Other
    
    
    6.7
    
    
    
    7.31,667.5
    
    
    
    1,964.5Less current portion
    
    
    4.6
    
    
    
    0.4Total
    
    $
    1,662.9
    
    
    $
    1,964.1




---



##### 








---



##### 



Note 8  FINANCIAL INSTRUMENTS




---



##### 



Note 9  OTHER BALANCE SHEET INFORMATION
 Receivables:
    
    2005
    
    
    2004Customers
    
    $
    533.9
    
    
    $
    519.8Affiliates
    
    
    8.1
    
    
    
    9.1Other
    
    
    43.6
    
    
    
    53.9Total
    
    $
    585.6
    
    
    $
    582.8




---



##### 



Property and equipment  at cost:
    
    2005
    
    
    2004Land and improvements
    
    $
    178.0
    
    
    $
    171.3Buildings and improvements
    
    
    456.2
    
    
    
    494.1Machinery and equipment
    
    
    1,912.2
    
    
    
    1,960.6Construction in progress
    
    
    75.1
    
    
    
    105.3Total
    
    $
    2,621.5
    
    
    $
    2,731.3
  Accrued expenses and other current liabilities:
    
    2005
    
    
    2004Employee compensation
    
    $
    99.4
    
    
    $
    109.7Income taxes
    
    
    56.3
    
    
    
    55.9Taxes other than income
    
    
    31.2
    
    
    
    35.2Sales allowances and rebates
    
    
    30.3
    
    
    
    32.2Restructuring liabilities
    
    
    6.4
    
    
    
    8.8Other
    
    
    61.2
    
    
    
    65.0Total
    
    $
    284.8
    
    
    $
    306.8
  Noncurrent Liabilities:
    
    2005
    
    
    2004Pensions
    
    $
    121.3
    
    
    $
    96.9Employee benefits
    
    
    51.2
    
    
    
    45.8Other
    
    
    31.5
    
    
    
    28.0Total
    
    $
    204.0
    
    
    $
    170.7
 Note 10  SHAREHOLDERS EQUITY




---



##### 



UnrealizedGainsForeign
    
    
    
    
    
    
    (Losses)
    
    
    Pension
    
    
    AccumulatedCurrency
    
    
    Treasury
    
    
    on
    
    
    Plan
    
    
    OtherTranslation
    
    
    Rate
    
    
    Interest
    
    
    Minimum
    
    
    ComprehensiveAdjustment
    
    
    Locks
    
    
    Rate Swaps
    
    
    Liability
    
    
    (Loss) IncomeBalance, January 1, 2003
    
    $
    (53.2
    )
    
    $
    
    
    
    $
    (3.2
    )
    
    $
    (21.7
    )
    
    $
    (78.1
    )Other comprehensive
income (loss):Pre-tax
    
    
    51.5
    
    
    
    
    
    
    
    2.2
    
    
    
    (12.0
    )
    
    
    41.7Tax benefit (provision)
    
    
    (2.4
    )
    
    
    
    
    
    
    (0.8
    )
    
    
    3.6
    
    
    
    0.4Total
    
    
    49.1
    
    
    
    
    
    
    
    1.4
    
    
    
    (8.4
    )
    
    
    42.1Balance, December 31, 2003
    
    
    (4.1
    )
    
    
    
    
    
    
    (1.8
    )
    
    
    (30.1
    )
    
    
    (36.0
    )Other comprehensive
(loss) income:Pre-tax
    
    
    97.5
    
    
    
    (72.9
    )
    
    
    3.2
    
    
    
    1.9
    
    
    
    29.7Tax benefit (provision)
    
    
    (1.9
    )
    
    
    25.5
    
    
    
    (1.1
    )
    
    
    (0.7
    )
    
    
    21.8Total
    
    
    95.6
    
    
    
    (47.4
    )
    
    
    2.1
    
    
    
    1.2
    
    
    
    51.5Balance, December 31, 2004
    
    
    91.5
    
    
    
    (47.4
    )
    
    
    0.3
    
    
    
    (28.9
    )
    
    
    15.5Other comprehensive
(loss) income:Pre-tax
    
    
    (119.1
    )
    
    
    4.4
    
    
    
    
    
    
    
    (19.1
    )
    
    
    (133.8
    )Tax benefit (provision)
    
    
    1.9
    
    
    
    (1.5
    )
    
    
    
    
    
    
    5.4
    
    
    
    5.8Total
    
    
    (117.2
    )
    
    
    2.9
    
    
    
    
    
    
    
    (13.7
    )
    
    
    (128.0
    )Balance, December 31, 2005
    
    $
    (25.7
    )
    
    $
    (44.5
    )
    
    $
    0.3
    
    
    $
    (42.6
    )
    
    $
    (112.5
    )




---



##### 



Note 11  OTHER (EXPENSE) INCOME  NET
 2005
    
    
    2004
    
    
    2003Currency
exchange / transaction (loss) gain
    
    $
    (0.6
    )
    
    $
    6.6
    
    
    $
    3.5Equity earnings of nonconsolidated companies
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.1Other  net
    
    
    (2.2
    )
    
    
    (2.1
    )
    
    
    (0.3
    )Total
    
    $
    (2.0
    )
    
    $
    5.3
    
    
    $
    3.3
  Note 12  INCOME TAXES
  2005
    
    
    2004
    
    
    2003United States
    
    $
    76.9
    
    
    $
    37.4
    
    
    $
    39.4Foreign
    
    
    198.0
    
    
    
    105.3
    
    
    
    89.1Total
    
    $
    274.9
    
    
    $
    142.7
    
    
    $
    128.5
  2005
    
    
    2004
    
    
    2003Current:United States
    
    $
    16.5
    
    
    $
    4.6
    
    
    $
    6.1Foreign
    
    
    66.5
    
    
    
    41.1
    
    
    
    30.683.0
    
    
    
    45.7
    
    
    
    36.7Deferred:United States
    
    
    15.6
    
    
    
    16.5
    
    
    
    3.0Foreign
    
    
    (5.0
    )
    
    
    (10.1
    )
    
    
    (1.8
    )10.6
    
    
    
    6.4
    
    
    
    1.2Total
    
    $
    93.6
    
    
    $
    52.1
    
    
    $
    37.9




---



##### 



2005
    
    
    2004
    
    
    2003Tax at statutory rate of 35%
    
    $
    96.2
    
    
    $
    49.9
    
    
    $
    45.0U.S. and foreign tax on foreign dividends
    
    
    8.1
    
    
    
    13.8
    
    
    
    3.5U.S. tax benefit on exports
    
    
    (5.1
    )
    
    
    (1.8
    )
    
    
    (3.7
    )State and local income taxes
    
    
    4.6
    
    
    
    0.3
    
    
    
    0.3Untaxed translation gains
    
    
    (0.8
    )
    
    
    (2.5
    )
    
    
    (5.4
    )Foreign rate differences
    
    
    (10.5
    )
    
    
    (7.5
    )
    
    
    (0.5
    )Other  net
    
    
    1.1
    
    
    
    (0.1
    )
    
    
    (1.3
    )Provision for income taxes
    
    $
    93.6
    
    
    $
    52.1
    
    
    $
    37.9
  2005
    
    
    2004Deferred tax assets:Accrued compensation and benefits
    
    $
    131.5
    
    
    $
    120.7Intercompany profit in inventory
    
    
    10.6
    
    
    
    11.5Net operating losses and tax credits carried forward
    
    
    92.1
    
    
    
    146.0Other
    
    
    29.3
    
    
    
    22.2Total gross deferred tax assets
    
    
    263.5
    
    
    
    300.4Less valuation allowance
    
    
    (18.1
    )
    
    
    (18.8
    )Net deferred tax assets
    
    
    245.4
    
    
    
    281.6Deferred tax liabilities:Depreciation and other basis differences
    
    
    229.3
    
    
    
    255.7Foreign subsidiary and affiliate undistributed earnings
    
    
    6.9
    
    
    
    30.0Other
    
    
    9.6
    
    
    
    10.3Total gross deferred tax liabilities
    
    
    245.8
    
    
    
    296.0Net deferred tax liabilities
    
    $
    (0.4
    )
    
    $
    (14.4
    )




---



##### 



Note 13  PENSION, PROFIT SHARING AND OTHER POSTRETIREMENT BENEFIT PLANS




---



##### 



Percentage of PlanAssetsat December 312005
    
    2004Asset category:Equity securities
    
    
    72
    %
    
    
    70
    %Debt securities
    
    
    28
    %
    
    
    27
    %Real estate
    
    
    
    
    
    
    3
    %Total
    
    
    100
    %
    
    
    100
    %




---



##### 



Pension Plans
    
    
    Other Benefits2005
    
    
    2004
    
    
    2005
    
    
    2004Change in Projected Benefit Obligation:Projected benefit obligation at
beginning of year
    
    $
    558.5
    
    
    $
    419.3
    
    
    $
    122.5
    
    
    $
    113.2Service cost
    
    
    28.1
    
    
    
    22.0
    
    
    
    1.8
    
    
    
    2.5Interest cost
    
    
    31.5
    
    
    
    27.9
    
    
    
    6.0
    
    
    
    6.9Plan participants contributions
    
    
    0.6
    
    
    
    0.4
    
    
    
    3.3
    
    
    
    2.9Actuarial loss (gain)
    
    
    74.2
    
    
    
    37.0
    
    
    
    (9.0
    )
    
    
    (0.5
    )Currency exchange rate change
    
    
    (27.0
    )
    
    
    17.0
    
    
    
    (0.2
    )
    
    
    0.4Plan amendments
    
    
    2.3
    
    
    
    0.9
    
    
    
    (22.1
    )
    
    
    Settlements
/ curtailments
    
    
    (1.0
    )
    
    
    (39.4
    )
    
    
    
    
    
    
    Acquisitions
    
    
    
    
    
    
    84.9
    
    
    
    
    
    
    
    3.9Benefits paid
    
    
    (25.4
    )
    
    
    (11.5
    )
    
    
    (8.5
    )
    
    
    (6.8
    )Benefit obligation at end of year
    
    
    641.8
    
    
    
    558.5
    
    
    
    93.8
    
    
    
    122.5Change in Plan Assets:Fair value of plan assets at beginning
of year
    
    
    357.2
    
    
    
    306.5
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    46.1
    
    
    
    39.5
    
    
    
    
    
    
    
    Acquisitions
/ divestitures
    
    
    
    
    
    
    32.8
    
    
    
    
    
    
    
    Employer contributions
    
    
    38.2
    
    
    
    19.9
    
    
    
    5.2
    
    
    
    3.9Settlements
    
    
    (0.9
    )
    
    
    (37.0
    )
    
    
    
    
    
    
    Plan participantscontributions
    
    
    0.6
    
    
    
    0.4
    
    
    
    3.3
    
    
    
    2.9Currency exchange rate change
    
    
    (15.3
    )
    
    
    10.5
    
    
    
    
    
    
    
    Adjustments
    
    
    
    
    
    
    (3.9
    )
    
    
    
    
    
    
    Benefits paid
    
    
    (25.4
    )
    
    
    (11.5
    )
    
    
    (8.5
    )
    
    
    (6.8
    )Fair value of plan assets at end of
year
    
    
    400.5
    
    
    
    357.2
    
    
    
    
    
    
    
    Reconciliation of Funded Status:Plan assets less than projected
benefit obligation
    
    
    (241.3
    )
    
    
    (201.3
    )
    
    
    (93.8
    )
    
    
    (122.5
    )Unrecognized net loss
    
    
    147.5
    
    
    
    104.4
    
    
    
    34.9
    
    
    
    46.1Unrecognized net transition
obligation
    
    
    0.5
    
    
    
    0.7
    
    
    
    
    
    
    
    Unrecognized prior service cost
(credit)
    
    
    22.7
    
    
    
    23.3
    
    
    
    (48.3
    )
    
    
    (33.7
    )Net amounts recognized
    
    $
    (70.6
    )
    
    $
    (72.9
    )
    
    $
    (107.2
    )
    
    $
    (110.1
    )




---



##### 



Pension Plans
    
    
    Other Benefits2005
    
    
    2004
    
    
    2005
    
    
    2004Net amounts recognized in the
consolidated balance sheets:Prepaid benefit cost
    
    $
    0.3
    
    
    $
    0.6
    
    
    $
    
    
    
    $
    Accrued benefit liability
    
    
    (136.5
    )
    
    
    (120.6
    )
    
    
    (107.2
    )
    
    
    (110.1
    )Accumulated other comprehensive
loss
    
    
    60.7
    
    
    
    41.6
    
    
    
    
    
    
    
    Intangible asset
    
    
    4.9
    
    
    
    5.5
    
    
    
    
    
    
    
    Net amounts recognized
    
    $
    (70.6
    )
    
    $
    (72.9
    )
    
    $
    (107.2
    )
    
    $
    (110.1
    )
    2005
    
    
    2004
    
    
    2003Service cost  benefits earned during period
    
    $
    28.1
    
    
    $
    22.0
    
    
    $
    14.5Interest cost on projected benefit obligation
    
    
    31.5
    
    
    
    27.9
    
    
    
    22.3Expected return on plan assets
    
    
    (26.9
    )
    
    
    (27.4
    )
    
    
    (26.4
    )Amortization of prior service costs
    
    
    2.2
    
    
    
    1.6
    
    
    
    3.3Amortization of initial net obligation (asset)
    
    
    0.2
    
    
    
    (0.7
    )
    
    
    (0.7
    )Recognized net actuarial loss
    
    
    5.5
    
    
    
    3.8
    
    
    
    0.8Settlement / curtailment loss
    
    
    0.3
    
    
    
    7.7
    
    
    
    0.3Net periodic pension cost
    
    $
    40.9
    
    
    $
    34.9
    
    
    $
    14.1
   2005
    
    
    2004
    
    
    2003Service cost  benefits earned during period
    
    $
    1.8
    
    
    $
    2.5
    
    
    $
    2.0Interest cost on projected benefit obligation
    
    
    6.0
    
    
    
    6.9
    
    
    
    7.0Amortization of prior service credits
    
    
    (7.5
    )
    
    
    (6.1
    )
    
    
    (5.6
    )Recognized net actuarial loss
    
    
    2.1
    
    
    
    2.5
    
    
    
    2.2Net non-pension postretirement benefit cost
    
    $
    2.4
    
    
    $
    5.8
    
    
    $
    5.6




---



##### 



Pension Plans
    
    Other Benefits2005
    
    2004
    
    2005
    
    2004The weighted-average assumptions used to
determine benefit obligations at
December 31:Measurement date
    
    
    12/31/05
    
    
    
    12/31/04
    
    
    
    12/31/05
    
    
    
    12/31/04Discount rate
    
    
    5.28%
    
    

    
    5.74%
    
    

    
    5.50%
    
    

    
    6.20%Rate of compensation increase
    
    
    3.94%
    
    

    
    4.08%
    
    

    
    *
    
    
    
    *The weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31:Discount rate
    
    
    5.74%
    
    
    
    5.94%
    
    

    
    6.20%
    
    

    
    6.24%Expected long-term return on
plan assets
    
    
    7.72%
    
    

    
    7.82%
    
    

    
    *
    
    
    
    *Rate of compensation increase
    
    
    4.08%
    
    

    
    3.86%
    
    
    

    *
    
    
    
    *
   Pension
    
    OtherEmployer contributions:
    
    Plans
    
    Plans
    
    Total2004
    
    $
    19.9
    
    
    $
    3.9
    
    
    $
    23.82005
    
    $
    38.2
    
    
    $
    5.2
    
    
    $
    43.42006 (expected)
    
    $
    22.2
    
    
    $
    4.9
    
    
    $
    27.1
    Pension
    
    Other
    
    TotalEstimated future benefit payments:
    
    Benefits
    
    Benefits
    
    Benefits2006
    
    $
    23.6
    
    
    $
    4.9
    
    
    $
    28.52007
    
    
    22.1
    
    
    
    5.1
    
    
    
    27.22008
    
    
    23.2
    
    
    
    5.3
    
    
    
    28.52009
    
    
    26.7
    
    
    
    5.6
    
    
    
    32.32010
    
    
    30.1
    
    
    
    6.0
    
    
    
    36.12011-2015
    
    
    183.5
    
    
    
    34.5
    
    
    
    218.0




---



##### 



One-Percentage-PointIncrease
    
    DecreaseEffect on postretirement benefit
obligation
    
    $
    9.7
    
    
    $
    (8.4
    )Effect on total service and interest cost
components
    
    $
    1.2
    
    
    $
    (1.0
    )
  Note 14  LEASES
  Note 15  SEGMENT AND GEOGRAPHIC INFORMATION




---



##### 



2005
    
    
    2004
    
    
    2003Lubricant Additives:Revenues from external customers
    
    $
    2,280.1
    
    
    $
    1,998.6
    
    
    $
    1,767.0Equity earnings
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.1Amortization of intangibles
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.0Segment operating income
    
    
    266.6
    
    
    
    240.9
    
    
    
    200.9Segment total assets
    
    
    1,319.1
    
    
    
    1,337.1
    
    
    
    1,168.1Capital expenditures
    
    
    70.1
    
    
    
    82.4
    
    
    
    74.3Depreciation
    
    
    79.7
    
    
    
    86.1
    
    
    
    84.2Specialty Chemicals:Revenues from external customers
    
    $
    1,762.6
    
    
    $
    1,114.2
    
    
    $
    253.3Amortization of intangibles
    
    
    22.2
    
    
    
    15.0
    
    
    
    1.9Segment operating income
    
    
    193.6
    
    
    
    83.9
    
    
    
    0.9Segment total assets
    
    
    2,536.8
    
    
    
    2,733.3
    
    
    
    403.6Capital expenditures
    
    
    65.6
    
    
    
    50.2
    
    
    
    13.9Depreciation
    
    
    73.6
    
    
    
    48.9
    
    
    
    9.4




---



##### 



2005
    
    
    2004
    
    
    2003Corporate:Total assets
    
    $
    510.4
    
    
    $
    495.9
    
    
    $
    370.6Capital expenditures
    
    
    0.6
    
    
    
    0.1
    
    
    
    Depreciation
    
    
    0.7
    
    
    
    1.0
    
    
    
    1.1Discontinued Operations:Capital expenditures
    
    $
    0.4
    
    
    $
    0.5
    
    
    $
    0.3Depreciation
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.8Reconciliation to income from continuing
operations before income taxes:Segment operating income
    
    $
    460.2
    
    
    $
    324.8
    
    
    $
    201.8Corporate expenses
    
    
    (62.3
    )
    
    
    (44.1
    )
    
    
    (33.6
    )Corporate
other (expense) income  net
    
    
    (3.8
    )
    
    
    6.2
    
    
    
    4.1Write-off of acquired IPR&D
    
    
    
    
    
    
    (34.0
    )
    
    
    Restructuring and impairment charges
    
    
    (22.2
    )
    
    
    (37.9
    )
    
    
    (22.5
    )Interest expense  net
    
    
    (97.0
    )
    
    
    (72.3
    )
    
    
    (21.3
    )Income from continuing operations
before income taxes
    
    $
    274.9
    
    
    $
    142.7
    
    
    $
    128.5
  2005
    
    
    2004
    
    
    2003Engine additives
    
    $
    1,404.4
    
    
    $
    1,222.4
    
    
    $
    1,126.9Specialty driveline / industrial oil
additives
    
    
    835.2
    
    
    
    743.7
    
    
    
    623.0Services
    
    
    40.5
    
    
    
    32.5
    
    
    
    17.1Total Lubricant Additives
    
    
    2,280.1
    
    
    
    1,998.6
    
    
    
    1,767.0Consumer specialties
    
    
    738.2
    
    
    
    482.1
    
    
    
    145.8Performance coatings
    
    
    583.9
    
    
    
    391.5
    
    
    
    107.5Specialty materials
    
    
    440.5
    
    
    
    240.6
    
    
    
    Total Specialty Chemicals
    
    
    1,762.6
    
    
    
    1,114.2
    
    
    
    253.3Total revenues from external customers
    
    $
    4,042.7
    
    
    $
    3,112.8
    
    
    $
    2,020.3
  2005
    
    
    2004
    
    
    2003United States
    
    $
    1,789.7
    
    
    $
    1,333.3
    
    
    $
    809.9Other North America
    
    
    198.9
    
    
    
    162.6
    
    
    
    86.7Europe
    
    
    1,090.9
    
    
    
    866.5
    
    
    
    591.0Asia-Pacific / Middle East
    
    
    741.6
    
    
    
    578.7
    
    
    
    402.3Latin America
    
    
    221.6
    
    
    
    171.7
    
    
    
    130.4Total revenues from external customers
    
    $
    4,042.7
    
    
    $
    3,112.8
    
    
    $
    2,020.3




---



##### 



2005
    
    
    2004United States
    
    $
    1,827.8
    
    
    $
    1,860.0Belgium
    
    
    346.1
    
    
    
    402.0United Kingdom
    
    
    152.5
    
    
    
    180.2France
    
    
    79.3
    
    
    
    84.5Hong Kong
    
    
    78.7
    
    
    
    83.2Germany
    
    
    31.6
    
    
    
    65.3Other
    
    
    211.8
    
    
    
    233.6Total long-lived assets
    
    $
    2,727.8
    
    
    $
    2,908.8
  Note 16  STOCK COMPENSATION PLANS




---



##### 








---



##### 



2005
    
    2004
    
    20032005 Plan:Risk-free interest rate
    
    
    4.3
    %
    
    
    n/a
    
    
    
    n/aDividend yield
    
    
    2.5
    %
    
    
    n/a
    
    
    
    n/aVolatility
    
    
    21.2
    %
    
    
    n/a
    
    
    
    n/aExpected life (years)
    
    
    8.0
    
    
    
    n/a
    
    
    
    n/a




---



##### 



2005
    
    2004
    
    20031991 Plan:Risk-free interest rate
    
    
    n/a
    
    
    
    3.7
    %
    
    
    3.9
    %Dividend yield
    
    
    n/a
    
    
    
    3.5
    %
    
    
    3.4
    %Volatility
    
    
    n/a
    
    
    
    24.0
    %
    
    
    24.0
    %Expected life (years)
    
    
    n/a
    
    
    
    10.0
    
    
    
    10.0Restricted Share Plan:Risk-free interest rate
    
    
    n/a
    
    
    
    n/a
    
    
    
    2.7
    %Dividend yield
    
    
    n/a
    
    
    
    n/a
    
    
    
    3.3
    %Volatility
    
    
    n/a
    
    
    
    n/a
    
    
    
    24.0
    %Expected life (years)
    
    
    n/a
    
    
    
    n/a
    
    
    
    5.0
   Weighted-AverageExerciseShares
    
    
    PriceOutstanding, January 1, 2005
    
    
    5,025,148
    
    
    $
    31.09Granted
    
    
    614,000
    
    
    
    41.18Exercised
    
    
    (1,331,829
    )
    
    
    31.64Forfeited
    
    
    (23,402
    )
    
    
    33.30Outstanding, December 31, 2005
    
    
    4,283,917
    
    
    $
    32.35Options exercisable, December 31, 2005
    
    
    3,332,851
    
    
    $
    30.93Weighted-average fair value of options granted
during the year
    
    
    
    
    
    $
    9.87Outstanding, January 1, 2004
    
    
    5,393,042
    
    
    $
    31.28Granted
    
    
    508,896
    
    
    
    30.20Exercised
    
    
    (556,582
    )
    
    
    29.01Forfeited
    
    
    (320,208
    )
    
    
    36.44Outstanding, December 31, 2004
    
    
    5,025,148
    
    
    $
    31.09Options exercisable, December 31, 2004
    
    
    4,170,614
    
    
    $
    31.10Weighted-average fair value of options granted
during the year
    
    
    
    
    
    $
    6.50




---



##### 



Weighted-AverageExerciseShares
    
    
    PriceOutstanding, January 1, 2003
    
    
    5,272,723
    
    
    $
    31.38Granted
    
    
    525,401
    
    
    
    30.35Exercised
    
    
    (151,112
    )
    
    
    27.87Forfeited
    
    
    (253,970
    )
    
    
    33.60Outstanding, December 31, 2003
    
    
    5,393,042
    
    
    $
    31.28Options exercisable, December 31, 2003
    
    
    4,173,632
    
    
    $
    31.18Weighted-average fair value of options granted
during the year
    
    
    
    
    
    $
    6.78
  SharesOutstanding, January 1, 2003
    
    
    60,750Granted
    
    
    Forfeited
    
    
    Common
shares issued / deferred
    
    
    (60,750
    )Outstanding, December 31, 2003
    
    
    
  Options Outstanding
    
    
    
    Options ExercisableRange of
    
    Number
    
    
    Weighted-Average
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-Exercise
    
    Outstanding
    
    
    Remaining
    
    
    Average
    
    
    Exercisable
    
    
    AveragePrices
    
    at 12/31/05
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    at 12/31/05
    
    
    Exercise Price$19 - $25
    
    
    151,287
    
    
    
    2.9 years
    
    $
    21.35
    
    
    
    151,287
    
    
    $
    21.3525 -   31
    
    
    2,492,798
    
    
    
    5.8
    
    
    
    29.88
    
    
    
    2,157,732
    
    
    
    29.8231
-   38
    
    
    1,019,832
    
    
    
    5.0
    
    
    
    34.67
    
    
    
    1,017,832
    
    
    
    34.6738
-   45
    
    
    620,000
    
    
    
    9.5
    
    
    
    41.15
    
    
    
    6,000
    
    
    
    38.254,283,917
    
    
    
    6.0
    
    
    
    32.35
    
    
    
    3,332,851
    
    
    
    30.93




---



##### 



Note 17  RESTRUCTURING AND IMPAIRMENT CHARGES
   Liability
    
    
    Restructuring
    
    
    
    
    
    
    Restructuring
    
    
    LiabilityJanuary 1,
    
    
    and Impairment
    
    
    
    
    
    
    Asset
    
    
    December 31,2005
    
    
    Charges
    
    
    Cash Paid
    
    
    Impairments
    
    
    2005Specialty Chemicals
plant closures and
workforce
reductions
    
    $
    
    
    
    $
    9.0
    
    
    $
    (2.3
    )
    
    $
    (4.2
    )
    
    $
    2.5Bromborough, U.K. closure
    
    
    
    
    
    
    6.1
    
    
    
    (3.1
    )
    
    
    (0.7
    )
    
    
    2.3Corporate / other workforce
reductions
    
    
    2.7
    
    
    
    0.7
    
    
    
    (3.1
    )
    
    
    
    
    
    
    0.3European facility impairment
    
    
    
    
    
    
    6.2
    
    
    
    
    
    
    
    (6.2
    )
    
    
    Noveon International
restructuring liabilities
assumed
    
    
    6.1
    
    
    
    0.2
    
    
    
    (5.0
    )
    
    
    
    
    
    
    1.3$
    8.8
    
    
    $
    22.2
    
    
    $
    (13.5
    )
    
    $
    (11.1
    )
    
    $
    6.4
 RestructuringLiability
    
    
    Restructuring
    
    
    
    
    
    
    Asset
    
    
    LiabilityJanuary 1,
    
    
    and Impairment
    
    
    
    
    
    
    Impairments and
    
    
    December 31,2004
    
    
    Charges
    
    
    Cash Paid
    
    
    Other Adjustments*
    
    
    2004Bromborough, U.K. closure
    
    $
    
    
    
    $
    17.0
    
    
    $
    
    
    
    $
    (17.0
    )
    
    $
    Bromborough, U.K. workforce
reductions
    
    
    0.2
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    Corporate / other workforce
reductions
    
    
    12.2
    
    
    
    11.1
    
    
    
    (20.6
    )
    
    
    
    
    
    
    2.7Pension settlement
    
    
    
    
    
    
    7.7
    
    
    
    
    
    
    
    (7.7
    )
    
    
    Noveon International
restructuring liabilities
assumed
    
    
    
    
    
    
    
    
    
    
    (1.1
    )
    
    
    7.2
    
    
    
    6.1PuriNOx asset impairment**
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    (2.1
    )
    
    
    $
    12.4
    
    
    $
    37.9
    
    
    $
    (21.9
    )
    
    $
    (19.6
    )
    
    $
    8.8
 
 *
    
    Restructuring asset impairments and other adjustments include $7.2 million in restructuring
liabilities assumed with acquisitions during 2004 and $7.7 million of pension settlement charges
included in the accrued pension liability account.**
    
    The PuriNOx asset impairment charge amounted to $2.8 million consisting of $2.1 million from
continuing operations and $0.7 million from discontinued operations.




---



##### 



Liability
    
    
    Restructuring
    
    
    
    
    
    
    Restructuring
    
    
    LiabilityJanuary 1,
    
    
    and Impairment
    
    
    
    
    
    
    Asset
    
    
    December 31,2003
    
    
    Charges
    
    
    Cash Paid
    
    
    Impairments
    
    
    2003Bromborough,
U.K. workforce
reductions
    
    $
    
    
    
    $
    7.0
    
    
    $
    (3.5
    )
    
    $
    (3.3
    )
    
    $
    0.2Corporate / other
workforce
reductions
    
    
    
    
    
    
    15.5
    
    
    
    (3.3
    )
    
    
    
    
    
    
    12.2$
    
    
    
    $
    22.5
    
    
    $
    (6.8
    )
    
    $
    (3.3
    )
    
    $
    12.4




---



##### 



Note 18  CONTINGENCIES
  General




---



##### 



Environmental




---



##### 



Note 19  GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION
  Condensed Consolidating Statement of IncomeYear Ended December 31, 2005Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    1,351.1
    
    
    $
    1,307.2
    
    
    $
    1,980.4
    
    
    $
    (599.5
    )
    
    $
    4,039.2Royalties and other revenues
    
    
    3.1
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    
    
    
    
    3.5Total revenues
    
    
    1,354.2
    
    
    
    1,307.5
    
    
    
    1,980.5
    
    
    
    (599.5
    )
    
    
    4,042.7Cost of sales
    
    
    1,083.2
    
    
    
    1,012.1
    
    
    
    1,553.1
    
    
    
    (599.5
    )
    
    
    3,048.9Selling and administrative expenses
    
    
    149.8
    
    
    
    115.5
    
    
    
    102.4
    
    
    
    
    
    
    
    367.7Research, testing and development
expenses
    
    
    92.6
    
    
    
    38.9
    
    
    
    73.3
    
    
    
    
    
    
    
    204.8Amortization of intangible assets
    
    
    2.9
    
    
    
    16.2
    
    
    
    6.1
    
    
    
    
    
    
    
    25.2Restructuring and impairment
charges
    
    
    4.8
    
    
    
    2.9
    
    
    
    14.5
    
    
    
    
    
    
    
    22.2Total costs and expenses
    
    
    1,333.3
    
    
    
    1,185.6
    
    
    
    1,749.4
    
    
    
    (599.5
    )
    
    
    3,668.8Other (expense) income  net
    
    
    21.5
    
    
    
    19.8
    
    
    
    (41.3
    )
    
    
    (2.0
    )
    
    
    (2.0
    )Interest (expense) income  net
    
    
    (125.2
    )
    
    
    24.4
    
    
    
    3.8
    
    
    
    
    
    
    
    (97.0
    )Equity in income of subsidiaries
    
    
    227.5
    
    
    
    63.5
    
    
    
    
    
    
    
    (291.0
    )
    
    
    Income from continuing operations
before income taxes
    
    
    144.7
    
    
    
    229.6
    
    
    
    193.6
    
    
    
    (293.0
    )
    
    
    274.9Provision (benefit) for income
taxes
    
    
    (44.2
    )
    
    
    82.0
    
    
    
    55.8
    
    
    
    
    
    
    
    93.6Income from continuing operations
    
    
    188.9
    
    
    
    147.6
    
    
    
    137.8
    
    
    
    (293.0
    )
    
    
    181.3Discontinued operations  net of
tax
    
    
    0.4
    
    
    
    3.1
    
    
    
    4.5
    
    
    
    
    
    
    
    8.0Net income
    
    $
    189.3
    
    
    $
    150.7
    
    
    $
    142.3
    
    
    $
    (293.0
    )
    
    $
    189.3




---



##### 



Condensed Consolidating Statement of IncomeYear Ended December 31, 2004Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    1,213.1
    
    
    $
    804.4
    
    
    $
    1,548.7
    
    
    $
    (457.3
    )
    
    $
    3,108.9Royalties and other revenues
    
    
    3.0
    
    
    
    0.8
    
    
    
    0.1
    
    
    
    
    
    
    
    3.9Total revenues
    
    
    1,216.1
    
    
    
    805.2
    
    
    
    1,548.8
    
    
    
    (457.3
    )
    
    
    3,112.8Cost of sales
    
    
    915.6
    
    
    
    640.7
    
    
    
    1,228.2
    
    
    
    (457.3
    )
    
    
    2,327.2Selling and administrative
expenses
    
    
    149.7
    
    
    
    57.2
    
    
    
    90.2
    
    
    
    
    
    
    
    297.1Research, testing and
development expenses
    
    
    105.7
    
    
    
    34.2
    
    
    
    49.0
    
    
    
    
    
    
    
    188.9Amortization of intangible
assets
    
    
    2.9
    
    
    
    10.4
    
    
    
    4.7
    
    
    
    
    
    
    
    18.0Write-off of acquired in-process research and development
    
    
    
    
    
    
    34.0
    
    
    
    
    
    
    
    
    
    
    
    34.0Restructuring and impairment
charges
    
    
    16.3
    
    
    
    0.6
    
    
    
    21.0
    
    
    
    
    
    
    
    37.9Total costs and
expenses
    
    
    1,190.2
    
    
    
    777.1
    
    
    
    1,393.1
    
    
    
    (457.3
    )
    
    
    2,903.1Other income (expense)  net
    
    
    37.2
    
    
    
    15.7
    
    
    
    (46.0
    )
    
    
    (1.6
    )
    
    
    5.3Interest (expense) income  net
    
    
    (86.9
    )
    
    
    12.7
    
    
    
    1.9
    
    
    
    
    
    
    
    (72.3
    )Equity in income of subsidiaries
    
    
    116.7
    
    
    
    69.9
    
    
    
    
    
    
    
    (186.6
    )
    
    
    Income from continuing
operations before income taxes
    
    
    92.9
    
    
    
    126.4
    
    
    
    111.6
    
    
    
    (188.2
    )
    
    
    142.7Provision (benefit) for income
taxes
    
    
    (0.6
    )
    
    
    13.3
    
    
    
    39.4
    
    
    
    
    
    
    
    52.1Income from continuing
operations
    
    
    93.5
    
    
    
    113.1
    
    
    
    72.2
    
    
    
    (188.2
    )
    
    
    90.6Discontinued operations  net
of tax
    
    
    
    
    
    
    0.3
    
    
    
    2.6
    
    
    
    
    
    
    
    2.9Net income
    
    $
    93.5
    
    
    $
    113.4
    
    
    $
    74.8
    
    
    $
    (188.2
    )
    
    $
    93.5




---



##### 



Condensed Consolidating Statement of IncomeYear Ended December 31, 2003Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    1,044.3
    
    
    $
    198.6
    
    
    $
    1,091.6
    
    
    $
    (317.2
    )
    
    $
    2,017.3Royalties and other revenues
    
    
    2.7
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    3.0Total revenues
    
    
    1,047.0
    
    
    
    198.9
    
    
    
    1,091.6
    
    
    
    (317.2
    )
    
    
    2,020.3Cost of sales
    
    
    768.4
    
    
    
    157.0
    
    
    
    880.5
    
    
    
    (321.5
    )
    
    
    1,484.4Selling and administrative
expenses
    
    
    135.3
    
    
    
    20.7
    
    
    
    40.7
    
    
    
    
    
    
    
    196.7Research, testing and
development expenses
    
    
    114.0
    
    
    
    6.3
    
    
    
    45.0
    
    
    
    
    
    
    
    165.3Amortization of intangible
assets
    
    
    2.8
    
    
    
    1.9
    
    
    
    0.2
    
    
    
    
    
    
    
    4.9Restructuring and impairment
charges
    
    
    12.5
    
    
    
    0.2
    
    
    
    9.8
    
    
    
    
    
    
    
    22.5Total costs and
expenses
    
    
    1,033.0
    
    
    
    186.1
    
    
    
    976.2
    
    
    
    (321.5
    )
    
    
    1,873.8Other
 income (expense)  net
    
    
    16.2
    
    
    
    16.5
    
    
    
    (28.4
    )
    
    
    (1.0
    )
    
    
    3.3Interest (expense) income  net
    
    
    (32.0
    )
    
    
    9.8
    
    
    
    0.9
    
    
    
    
    
    
    
    (21.3
    )Equity in income of subsidiaries
    
    
    84.5
    
    
    
    55.5
    
    
    
    
    
    
    
    (140.0
    )
    
    
    Income from continuing
operations before income taxes
    
    
    82.7
    
    
    
    94.6
    
    
    
    87.9
    
    
    
    (136.7
    )
    
    
    128.5Provision (benefit) for income
taxes
    
    
    (5.3
    )
    
    
    14.6
    
    
    
    27.1
    
    
    
    1.5
    
    
    
    37.9Income from continuing
operations
    
    
    88.0
    
    
    
    80.0
    
    
    
    60.8
    
    
    
    (138.2
    )
    
    
    90.6Discontinued operations  net
of tax
    
    
    
    
    
    
    (0.1
    )
    
    
    0.3
    
    
    
    
    
    
    
    0.2Net income
    
    $
    88.0
    
    
    $
    79.9
    
    
    $
    61.1
    
    
    $
    (138.2
    )
    
    $
    90.8




---



##### 



Condensed Consolidating Balance SheetDecember 31, 2005Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and short-term investments
    
    $
    83.2
    
    
    $
    3.6
    
    
    $
    175.6
    
    
    $
    
    
    
    $
    262.4Receivables
    
    
    143.8
    
    
    
    137.0
    
    
    
    304.8
    
    
    
    
    
    
    
    585.6Inventories
    
    
    122.4
    
    
    
    175.1
    
    
    
    316.4
    
    
    
    (27.9
    )
    
    
    586.0Other current assets
    
    
    91.5
    
    
    
    25.9
    
    
    
    11.2
    
    
    
    9.7
    
    
    
    138.3Total current assets
    
    
    440.9
    
    
    
    341.6
    
    
    
    808.0
    
    
    
    (18.2
    )
    
    
    1,572.3Property and equipment  net
    
    
    383.4
    
    
    
    458.2
    
    
    
    342.8
    
    
    
    
    
    
    
    1,184.4Goodwill
    
    
    27.1
    
    
    
    664.1
    
    
    
    447.6
    
    
    
    
    
    
    
    1,138.8Intangible assets  net
    
    
    9.8
    
    
    
    262.8
    
    
    
    132.0
    
    
    
    
    
    
    
    404.6Investments in subsidiaries and intercompany
balances
    
    
    2,554.3
    
    
    
    2,508.2
    
    
    
    1,354.0
    
    
    
    (6,416.5
    )
    
    
    Investments in non-consolidated companies
    
    
    6.2
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    7.6Other assets
    
    
    33.9
    
    
    
    3.4
    
    
    
    21.3
    
    
    
    
    
    
    
    58.6Total
    
    $
    3,455.6
    
    
    $
    4,239.7
    
    
    $
    3,105.7
    
    
    $
    (6,434.7
    )
    
    $
    4,366.3LIABILITIES AND SHAREHOLDERS
EQUITYShort-term debt and current portion of
long-term debt
    
    $
    
    
    
    $
    0.1
    
    
    $
    7.8
    
    
    $
    
    
    
    $
    7.9Accounts payable
    
    
    143.5
    
    
    
    142.8
    
    
    
    85.9
    
    
    
    
    
    
    
    372.2Accrued expenses and other current liabilities
    
    
    38.9
    
    
    
    113.6
    
    
    
    132.3
    
    
    
    
    
    
    
    284.8Total current liabilities
    
    
    182.4
    
    
    
    256.5
    
    
    
    226.0
    
    
    
    
    
    
    
    664.9Long-term debt
    
    
    1,445.2
    
    
    
    
    
    
    
    217.7
    
    
    
    
    
    
    
    1,662.9Postretirement health care obligations
    
    
    91.4
    
    
    
    4.8
    
    
    
    6.4
    
    
    
    
    
    
    
    102.6Noncurrent liabilities
    
    
    63.5
    
    
    
    41.3
    
    
    
    99.2
    
    
    
    
    
    
    
    204.0Deferred income taxes
    
    
    87.6
    
    
    
    1.4
    
    
    
    24.7
    
    
    
    
    
    
    
    113.7Total liabilities
    
    
    1,870.1
    
    
    
    304.0
    
    
    
    574.0
    
    
    
    
    
    
    
    2,748.1Minority interest in consolidated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51.0
    
    
    
    51.0Total shareholders equity
    
    
    1,585.5
    
    
    
    3,935.7
    
    
    
    2,531.7
    
    
    
    (6,485.7
    )
    
    
    1,567.2Total
    
    $
    3,455.6
    
    
    $
    4,239.7
    
    
    $
    3,105.7
    
    
    $
    (6,434.7
    )
    
    $
    4,366.3




---



##### 



Condensed Consolidating Balance SheetDecember 31, 2004Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and short-term investments
    
    $
    40.3
    
    
    $
    (0.1
    )
    
    $
    295.7
    
    
    $
    
    
    
    $
    335.9Receivables
    
    
    128.3
    
    
    
    158.9
    
    
    
    295.6
    
    
    
    
    
    
    
    582.8Inventories
    
    
    115.7
    
    
    
    174.3
    
    
    
    309.6
    
    
    
    (30.9
    )
    
    
    568.7Other current assets
    
    
    67.7
    
    
    
    20.7
    
    
    
    11.6
    
    
    
    10.6
    
    
    
    110.6Total current assets
    
    
    352.0
    
    
    
    353.8
    
    
    
    912.5
    
    
    
    (20.3
    )
    
    
    1,598.0Property and equipment  net
    
    
    401.0
    
    
    
    498.3
    
    
    
    418.6
    
    
    
    
    
    
    
    1,317.9Goodwill
    
    
    27.1
    
    
    
    633.1
    
    
    
    493.6
    
    
    
    
    
    
    
    1,153.8Intangible
assets  net
    
    
    11.4
    
    
    
    286.1
    
    
    
    139.6
    
    
    
    
    
    
    
    437.1Investments in subsidiaries and intercompany
balances
    
    
    3,087.0
    
    
    
    1,968.0
    
    
    
    (238.0
    )
    
    
    (4,817.0
    )
    
    
    Investments in non-consolidated companies
    
    
    5.7
    
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    7.4Other assets
    
    
    33.6
    
    
    
    5.5
    
    
    
    13.0
    
    
    
    
    
    
    
    52.1Total
    
    $
    3,917.8
    
    
    $
    3,746.5
    
    
    $
    1,739.3
    
    
    $
    (4,837.3
    )
    
    $
    4,566.3LIABILITIES AND SHAREHOLDERS
EQUITYShort-term debt and current portion of
long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    8.2
    
    
    $
    
    
    
    $
    8.2Accounts payable
    
    
    118.3
    
    
    
    102.1
    
    
    
    121.9
    
    
    
    
    
    
    
    342.3Accrued expenses and other
current liabilities
    
    
    145.0
    
    
    
    52.1
    
    
    
    109.7
    
    
    
    
    
    
    
    306.8Total current liabilities
    
    
    263.3
    
    
    
    154.2
    
    
    
    239.8
    
    
    
    
    
    
    
    657.3Long-term debt
    
    
    1,957.2
    
    
    
    
    
    
    
    6.9
    
    
    
    
    
    
    
    1,964.1Postretirement health care obligations
    
    
    96.3
    
    
    
    3.9
    
    
    
    6.2
    
    
    
    
    
    
    
    106.4Noncurrent liabilities
    
    
    47.5
    
    
    
    40.5
    
    
    
    82.7
    
    
    
    
    
    
    
    170.7Deferred income taxes
    
    
    16.0
    
    
    
    41.7
    
    
    
    33.0
    
    
    
    
    
    
    
    90.7Total liabilities
    
    
    2,380.3
    
    
    
    240.3
    
    
    
    368.6
    
    
    
    
    
    
    
    2,989.2Minority interest in consolidated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53.6
    
    
    
    53.6Total shareholders equity
    
    
    537.5
    
    
    
    3,506.2
    
    
    
    1,370.7
    
    
    
    (4,890.9
    )
    
    
    1,523.5Total
    
    $
    3,917.8
    
    
    $
    3,746.5
    
    
    $
    1,739.3
    
    
    $
    (4,837.3
    )
    
    $
    4,566.3




---



##### 



Condensed Consolidating Statement of Cash FlowsYear Ended December 31, 2005Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income
    
    $
    189.3
    
    
    $
    150.7
    
    
    $
    142.3
    
    
    $
    (293.0
    )
    
    $
    189.3Adjustments to reconcile net income to
cash provided by (used for) operating
activities
    
    
    (48.8
    )
    
    
    199.1
    
    
    
    (270.4
    )
    
    
    293.0
    
    
    
    172.9Total operating
activities
    
    
    140.5
    
    
    
    349.8
    
    
    
    (128.1
    )
    
    
    
    
    
    
    362.2INVESTING ACTIVITIESCapital expenditures
    
    
    (41.0
    )
    
    
    (45.6
    )
    
    
    (50.1
    )
    
    
    
    
    
    
    (136.7
    )Net proceeds from divestitures and sales of
property and equipment
    
    
    2.2
    
    
    
    13.9
    
    
    
    14.0
    
    
    
    
    
    
    
    30.1Other items  net
    
    
    (0.3
    )
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    (0.2
    )Total investing activities
    
    
    (39.1
    )
    
    
    (31.7
    )
    
    
    (36.0
    )
    
    
    
    
    
    
    (106.8
    )FINANCING ACTIVITIESChanges in short-term debt, net
    
    
    
    
    
    
    0.1
    
    
    
    (4.1
    )
    
    
    
    
    
    
    (4.0
    )Repayments of long-term debt
    
    
    (500.0
    )
    
    
    
    
    
    
    (12.2
    )
    
    
    
    
    
    
    (512.2
    )Proceeds from the issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    235.8
    
    
    
    
    
    
    
    235.8Dividends paid
    
    
    
    
    
    
    
    
    
    
    (70.4
    )
    
    
    
    
    
    
    (70.4
    )Changes in intercompany activities
    
    
    473.1
    
    
    
    (315.1
    )
    
    
    (158.0
    )
    
    
    
    
    
    
    Payment of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.8
    )Proceeds from the exercise of stock options
    
    
    38.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38.8Total financing
activities
    
    
    (58.5
    )
    
    
    (315.0
    )
    
    
    60.7
    
    
    
    
    
    
    
    (312.8
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    0.6
    
    
    
    (16.7
    )
    
    
    
    
    
    
    (16.1
    )Net (decrease) increase in cash and
short-term investments
    
    
    42.9
    
    
    
    3.7
    
    
    
    (120.1
    )
    
    
    
    
    
    
    (73.5
    )Cash and short-term investments at the
beginning of year
    
    
    40.3
    
    
    
    (0.1
    )
    
    
    295.7
    
    
    
    
    
    
    
    335.9Cash and short-term investments at the
end of year
    
    $
    83.2
    
    
    $
    3.6
    
    
    $
    175.6
    
    
    $
    
    
    
    $
    262.4




---



##### 



Condensed Consolidating Statement of Cash FlowsYear Ended December 31, 2004Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income
    
    $
    93.5
    
    
    $
    113.4
    
    
    $
    74.8
    
    
    $
    (188.2
    )
    
    $
    93.5Adjustments to reconcile net income to cash
provided by (used for) operating activities
    
    
    8.7
    
    
    
    (88.5
    )
    
    
    126.3
    
    
    
    188.2
    
    
    
    234.7Total operating activities
    
    
    102.2
    
    
    
    24.9
    
    
    
    201.1
    
    
    
    
    
    
    
    328.2INVESTING ACTIVITIESCapital expenditures
    
    
    (54.4
    )
    
    
    (31.4
    )
    
    
    (47.4
    )
    
    
    
    
    
    
    (133.2
    )Acquisitions
 net of cash received and liabilities
assumed
    
    
    (3.7
    )
    
    
    (829.1
    )
    
    
    (125.6
    )
    
    
    
    
    
    
    (958.4
    )Other items  net
    
    
    0.6
    
    
    
    0.2
    
    
    
    2.0
    
    
    
    
    
    
    
    2.8Total investing activities
    
    
    (57.5
    )
    
    
    (860.3
    )
    
    
    (171.0
    )
    
    
    
    
    
    
    (1,088.8
    )FINANCING ACTIVITIESChanges in short-term debt, net
    
    
    
    
    
    
    (78.2
    )
    
    
    5.6
    
    
    
    
    
    
    
    (72.6
    )Repayments of long-term debt
    
    
    (168.4
    )
    
    
    (1,024.6
    )
    
    
    
    
    
    
    
    
    
    
    (1,193.0
    )Proceeds from the issuance of long-term debt
    
    
    1,741.7
    
    
    
    0.1
    
    
    
    1.5
    
    
    
    
    
    
    
    1,743.3Dividends paid
    
    
    (57.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57.6
    )Changes in intercompany activities
    
    
    (1,974.6
    )
    
    
    1,936.3
    
    
    
    38.3
    
    
    
    
    
    
    
    Proceeds from the sale of common shares
    
    
    470.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470.0Payment of debt issuance costs
    
    
    (16.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.8
    )Payment of Treasury rate lock upon settlement
    
    
    (73.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73.9
    )Payment on termination of interest rate swaps
    
    
    (2.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )Proceeds from the exercise of stock options
    
    
    15.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.4Total financing activities
    
    
    (67.1
    )
    
    
    833.6
    
    
    
    45.4
    
    
    
    
    
    
    
    811.9Effect of exchange rate changes on cash
    
    
    6.4
    
    
    
    2.7
    
    
    
    16.8
    
    
    
    
    
    
    
    25.9Net (decrease) increase in cash and short-term
investments
    
    
    (16.0
    )
    
    
    0.9
    
    
    
    92.3
    
    
    
    
    
    
    
    77.2Cash and short-term investments at the
beginning of year
    
    
    56.3
    
    
    
    (1.0
    )
    
    
    203.4
    
    
    
    
    
    
    
    258.7Cash and short-term investments at the end of year
    
    $
    40.3
    
    
    $
    (0.1
    )
    
    $
    295.7
    
    
    $
    
    
    
    $
    335.9




---



##### 



Condensed Consolidating Statement of Cash FlowsYear Ended December 31, 2003Parent
    
    
    Subsidiary
    
    
    Other
    
    
    
    
    
    
    TotalCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income
    
    $
    88.0
    
    
    $
    79.9
    
    
    $
    61.1
    
    
    $
    (138.2
    )
    
    $
    90.8Adjustments to reconcile net income to cash
provided by (used for) operating activities
    
    
    10.6
    
    
    
    45.6
    
    
    
    (90.4
    )
    
    
    138.2
    
    
    
    104.0Total operating activities
    
    
    98.6
    
    
    
    125.5
    
    
    
    (29.3
    )
    
    
    
    
    
    
    194.8INVESTING ACTIVITIESCapital expenditures
    
    
    (45.8
    )
    
    
    (12.3
    )
    
    
    (30.4
    )
    
    
    
    
    
    
    (88.5
    )Acquisitions
 net of cash received and
liabilities assumed
    
    
    (4.2
    )
    
    
    (62.8
    )
    
    
    (1.6
    )
    
    
    
    
    
    
    (68.6
    )Other items
 net
    
    
    0.9
    
    
    
    (0.3
    )
    
    
    0.6
    
    
    
    
    
    
    
    1.2Total investing activities
    
    
    (49.1
    )
    
    
    (75.4
    )
    
    
    (31.4
    )
    
    
    
    
    
    
    (155.9
    )FINANCING ACTIVITIESChanges in short-term debt, net
    
    
    
    
    
    
    (0.2
    )
    
    
    (5.6
    )
    
    
    
    
    
    
    (5.8
    )Repayments of long-term debt
    
    
    
    
    
    
    
    
    
    
    (9.2
    )
    
    
    
    
    
    
    (9.2
    )Proceeds from the issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    4.5
    
    
    
    
    
    
    
    4.5Dividends paid
    
    
    (53.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53.6
    )Changes in intercompany activities
    
    
    (60.7
    )
    
    
    (49.3
    )
    
    
    110.0
    
    
    
    
    
    
    
    Proceeds from the exercise of stock options
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.6Total financing activities
    
    
    (109.7
    )
    
    
    (49.5
    )
    
    
    99.7
    
    
    
    
    
    
    
    (59.5
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    0.3
    
    
    
    12.6
    
    
    
    
    
    
    
    12.9Net (decrease) increase in cash and
short-term
investments
    
    
    (60.2
    )
    
    
    0.9
    
    
    
    51.6
    
    
    
    
    
    
    
    (7.7
    )Cash and short-term investments at the
beginning of year
    
    
    116.5
    
    
    
    (1.9
    )
    
    
    151.8
    
    
    
    
    
    
    
    266.4Cash and short-term investments at the end
of year
    
    $
    56.3
    
    
    $
    (1.0
    )
    
    $
    203.4
    
    
    $
    
    
    
    $
    258.7




---



##### 



Note 20  QUARTERLY FINANCIAL DATA (UNAUDITED)
  2005First (1)(2)
    
    
    Second (1)(2)
    
    
    Third (1)
    
    
    Fourth (1)
    
    
    Full YearNet sales
    
    $
    956.8
    
    
    $
    1,048.5
    
    
    $
    1,004.5
    
    
    $
    1,032.9
    
    
    $
    4,042.7Gross profit
    
    $
    248.4
    
    
    $
    265.1
    
    
    $
    244.6
    
    
    $
    232.2
    
    
    $
    990.3Income from
continuing
operations
    
    $
    47.2
    
    
    $
    58.1
    
    
    $
    43.4
    
    
    $
    32.6
    
    
    $
    181.3Discontinued
operations
    
    
    1.3
    
    
    
    2.0
    
    
    
    5.2
    
    
    
    (0.5
    )
    
    
    8.0Net income
    
    $
    48.5
    
    
    $
    60.1
    
    
    $
    48.6
    
    
    $
    32.1
    
    
    $
    189.3Per common share 
basic:Continuing
operations
    
    $
    0.70
    
    
    $
    0.85
    
    
    $
    0.63
    
    
    $
    0.48
    
    
    $
    2.67Discontinued
operations
    
    
    0.02
    
    
    
    0.03
    
    
    
    0.08
    
    
    
    (0.01
    )
    
    
    0.12Net income
    
    $
    0.72
    
    
    $
    0.88
    
    
    $
    0.71
    
    
    $
    0.47
    
    
    $
    2.79Per common share 
diluted:Continuing
operations
    
    $
    0.69
    
    
    $
    0.84
    
    
    $
    0.63
    
    
    $
    0.47
    
    
    $
    2.63Discontinued
operations
    
    
    0.02
    
    
    
    0.03
    
    
    
    0.07
    
    
    
    (0.01
    )
    
    
    0.12Net income
    
    $
    0.71
    
    
    $
    0.87
    
    
    $
    0.70
    
    
    $
    0.46
    
    
    $
    2.75




---



##### 



2004First (3)
    
    
    Second (4)(5)(6)
    
    
    Third(4)(5)(6)
    
    
    Fourth(2)(4)(5)
    
    
    Full YearNet sales
    
    $
    570.8
    
    
    $
    712.3
    
    
    $
    909.3
    
    
    $
    920.4
    
    
    $
    3,112.8Gross profit
    
    $
    149.6
    
    
    $
    187.6
    
    
    $
    224.8
    
    
    $
    219.7
    
    
    $
    781.7Income from
continuing
operations
    
    $
    37.5
    
    
    $
    3.7
    
    
    $
    30.6
    
    
    $
    18.8
    
    
    $
    90.6Discontinued
operations
    
    
    
    
    
    
    0.2
    
    
    
    1.6
    
    
    
    1.1
    
    
    
    2.9Net income
    
    $
    37.5
    
    
    $
    3.9
    
    
    $
    32.2
    
    
    $
    19.9
    
    
    $
    93.5Per common
share - basic:Continuing
operations
    
    $
    0.72
    
    
    $
    0.07
    
    
    $
    0.58
    
    
    $
    0.28
    
    
    $
    1.63Discontinued
operations
    
    
    
    
    
    
    0.01
    
    
    
    0.03
    
    
    
    0.02
    
    
    
    0.05Net income
    
    $
    0.72
    
    
    $
    0.08
    
    
    $
    0.61
    
    
    $
    0.30
    
    
    $
    0.68Per common share -
diluted:Continuing
operations
    
    $
    0.72
    
    
    $
    0.07
    
    
    $
    0.58
    
    
    $
    0.28
    
    
    $
    1.62Discontinued
operations
    
    
    
    
    
    
    0.01
    
    
    
    0.03
    
    
    
    0.02
    
    
    
    0.05Net income
    
    $
    0.72
    
    
    $
    0.08
    
    
    $
    0.61
    
    
    $
    0.30
    
    
    $
    1.67
 
 (1)
    
    The company recorded restructuring and impairment charges of $6.1 million, $5.4 million, $7.4
million and $3.3 million in the first, second, third and fourth quarters of 2005,
respectively.(2)
    
    The company recognized a reduction in depreciation expense of $1.2 million and $1.1 million
in the first and second quarters of 2005 and $4.4 million in the fourth quarter of 2004 for
the change in estimates of fair values and asset lives for the long-lived assets of Noveon
International.(3)
    
    The company recorded a gain of $6.4 million on a currency forward contract relating to the
hyperdispersants acquisition in the first quarter of 2004.(4)
    
    The company recorded the write-off of (credit for) acquired IPR&D relating to the Noveon
International acquisition of $35.0 million, ($1.5) million and $0.5 million in the second,
third and fourth quarters of 2004, respectively.(5)
    
    The company recorded restructuring charges of $7.4 million, $10.5 million and $20.0 million
in the second, third and fourth quarters of 2004, respectively.(6)
    
    The company recorded a charge to cost of sales for $4.9 million in both the second and third
quarters of 2004 relating to the inventory step-up recorded in connection with the Noveon
International acquisition.




---



##### 



Historical Summary
 (In Millions, Except Shareholders, Employeesand Per Share Data)
    
    2005
    
    
    2004*
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000
    
    
    1999
    
    
    1998
    
    
    1997
    
    
    1996OPERATING RESULTS:Revenues
    
    $
    4,042.7
    
    
    $
    3,112.8
    
    
    $
    2,020.3
    
    
    $
    1,960.2
    
    
    $
    1,821.6
    
    
    $
    1,748.8
    
    
    $
    1,746.8
    
    
    $
    1,627.3
    
    
    $
    1,686.4
    
    
    $
    1,613.2Total cost and expenses**
    
    
    3,668.8
    
    
    
    2,903.1
    
    
    
    1,873.8
    
    
    
    1,761.1
    
    
    
    1,656.8
    
    
    
    1,576.5
    
    
    
    1,550.1
    
    
    
    1,515.8
    
    
    
    1,457.5
    
    
    
    1,420.0Gain on litigation settlements and investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.4
    
    
    
    17.6
    
    
    
    16.2
    
    
    
    
    
    
    
    53.3Net interest expense and other (expense) income  net
    
    
    (99.0
    )
    
    
    (67.0
    )
    
    
    (18.0
    )
    
    
    (18.2
    )
    
    
    (19.8
    )
    
    
    (17.6
    )
    
    
    (16.7
    )
    
    
    (6.9
    )
    
    
    2.5
    
    
    
    4.4Income from continuing operations before cumulative
effect of change in accounting principle
    
    
    181.3
    
    
    
    90.6
    
    
    
    90.6
    
    
    
    127.1
    
    
    
    100.4
    
    
    
    120.9
    
    
    
    124.5
    
    
    
    73.3
    
    
    
    155.2
    
    
    
    170.2Discontinued operations, net of tax
    
    
    8.0
    
    
    
    2.9
    
    
    
    0.2
    
    
    
    (0.8
    )
    
    
    (6.3
    )
    
    
    (2.9
    )
    
    
    (1.5
    )
    
    
    (2.1
    )
    
    
    (0.3
    )
    
    
    (0.4
    )Income before cumulative effect
of change in accounting principle
    
    
    189.3
    
    
    
    93.5
    
    
    
    90.8
    
    
    
    126.3
    
    
    
    94.1
    
    
    
    118.0
    
    
    
    123.0
    
    
    
    71.2
    
    
    
    154.9
    
    
    
    169.8Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    189.3
    
    
    
    93.5
    
    
    
    90.8
    
    
    
    118.5
    
    
    
    94.1
    
    
    
    118.0
    
    
    
    123.0
    
    
    
    71.2
    
    
    
    154.9
    
    
    
    169.8Basic earnings per share from continuing
operations before cumulative
effect of change in accounting principle
    
    
    2.67
    
    
    
    1.63
    
    
    
    1.76
    
    
    
    2.47
    
    
    
    1.96
    
    
    
    2.28
    
    
    
    2.28
    
    
    
    1.31
    
    
    
    2.68
    
    
    
    2.80Discontinued operations per share
    
    
    0.12
    
    
    
    0.05
    
    
    
    
    
    
    
    (0.02
    )
    
    
    (0.12
    )
    
    
    (0.06
    )
    
    
    (0.03
    )
    
    
    (0.04
    )
    
    
    
    
    
    
    Cumulative effect of change in
accounting principle per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic earnings per share
    
    
    2.79
    
    
    
    1.68
    
    
    
    1.76
    
    
    
    2.30
    
    
    
    1.84
    
    
    
    2.22
    
    
    
    2.25
    
    
    
    1.27
    
    
    
    2.68
    
    
    
    2.80FINANCIAL RATIOS:Gross profit percentage
    
    
    24.5
    
    
    
    25.1
    
    
    
    26.4
    
    
    
    28.5
    
    
    
    27.6
    
    
    
    27.8
    
    
    
    30.9
    
    
    
    29.2
    
    
    
    31.3
    
    
    
    32.0Percent of revenues:Selling and administrative expenses
    
    
    9.1
    
    
    
    9.5
    
    
    
    9.7
    
    
    
    9.7
    
    
    
    9.4
    
    
    
    9.2
    
    
    
    9.9
    
    
    
    10.6
    
    
    
    9.8
    
    
    
    9.5Research and testing expenses
    
    
    5.1
    
    
    
    6.1
    
    
    
    8.2
    
    
    
    8.5
    
    
    
    8.7
    
    
    
    8.6
    
    
    
    8.3
    
    
    
    9.2
    
    
    
    8.6
    
    
    
    9.9Return on average shareholders equity (%)
    
    
    12.2
    
    
    
    7.6
    
    
    
    10.0
    
    
    
    14.4
    
    
    
    12.3
    
    
    
    15.3
    
    
    
    15.8
    
    
    
    9.0
    
    
    
    19.0
    
    
    
    20.4Debt to capitalization (%)
    
    
    51.6
    
    
    
    56.2
    
    
    
    29.0
    
    
    
    31.6
    
    
    
    33.9
    
    
    
    34.5
    
    
    
    33.8
    
    
    
    35.8
    
    
    
    21.3
    
    
    
    19.5Current ratio
    
    
    2.4
    
    
    
    2.4
    
    
    
    3.1
    
    
    
    3.0
    
    
    
    2.9
    
    
    
    2.6
    
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.6OTHER INFORMATION:Dividends declared per share
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.04
    
    
    $
    1.01
    
    
    $
    0.97Average common shares outstanding
    
    
    67.9
    
    
    
    55.7
    
    
    
    51.7
    
    
    
    51.5
    
    
    
    51.2
    
    
    
    53.1
    
    
    
    54.6
    
    
    
    55.9
    
    
    
    57.8
    
    
    
    60.7Capital expenditures from continuing operations
    
    $
    136.3
    
    
    $
    132.7
    
    
    $
    88.2
    
    
    $
    65.0
    
    
    $
    65.9
    
    
    $
    85.4
    
    
    $
    63.8
    
    
    $
    92.4
    
    
    $
    100.0
    
    
    $
    93.3Depreciation expense from continuing operations
    
    
    154.0
    
    
    
    136.0
    
    
    
    94.7
    
    
    
    90.6
    
    
    
    83.8
    
    
    
    87.1
    
    
    
    87.4
    
    
    
    78.6
    
    
    
    81.7
    
    
    
    77.9At year end:Total assets
    
    $
    4,366.3
    
    
    $
    4,566.3
    
    
    $
    1,942.3
    
    
    $
    1,860.1
    
    
    $
    1,662.3
    
    
    $
    1,659.5
    
    
    $
    1,682.4
    
    
    $
    1,643.2
    
    
    $
    1,462.3
    
    
    $
    1,402.1Total debt
    
    
    1,670.8
    
    
    
    1,972.3
    
    
    
    389.6
    
    
    
    401.9
    
    
    
    397.2
    
    
    
    395.9
    
    
    
    403.0
    
    
    
    429.3
    
    
    
    220.3
    
    
    
    198.5Total shareholders equity
    
    
    1,567.2
    
    
    
    1,523.5
    
    
    
    953.3
    
    
    
    869.3
    
    
    
    773.2
    
    
    
    752.3
    
    
    
    790.1
    
    
    
    769.1
    
    
    
    815.4
    
    
    
    819.4Shareholders equity per share
    
    
    23.03
    
    
    
    22.81
    
    
    
    18.48
    
    
    
    16.89
    
    
    
    15.12
    
    
    
    14.66
    
    
    
    14.50
    
    
    
    14.10
    
    
    
    14.31
    
    
    
    14.00Common share price
    
    
    43.43
    
    
    
    36.86
    
    
    
    32.52
    
    
    
    30.50
    
    
    
    35.09
    
    
    
    25.75
    
    
    
    30.88
    
    
    
    25.69
    
    
    
    36.88
    
    
    
    31.00Number of shareholders
    
    
    3,500
    
    
    
    3,698
    
    
    
    3,903
    
    
    
    4,081
    
    
    
    4,335
    
    
    
    4,681
    
    
    
    5,126
    
    
    
    5,609
    
    
    
    5,661
    
    
    
    5,764Number of employees
    
    
    7,515
    
    
    
    7,725
    
    
    
    5,032
    
    
    
    5,231
    
    
    
    4,530
    
    
    
    4,390
    
    
    
    4,074
    
    
    
    4,324
    
    
    
    4,291
    
    
    
    4,358
 
 *
    The 2004 results include the revenues and expenses of Noveon International, Inc. since June 3, 2004, the date of acquisition.**
    Includes restructuring and impairment charges of $22.2 million in 2005, $37.9 million in 2004, $22.5 million in 2003, $18.6
million in 1999, $23.3 million in 1998, $9.4 million in 1997 and a restructuring credit of $4.5 million in 2000. Also includes
the write-off of acquired in-process research and development of $34.0 million in 2004 and $13.6 million in 1998.