##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission file number 1-5263
 THE LUBRIZOL CORPORATION
  OHIO
    
    34-0367600(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 
 
 Title of each class
    
    Name of each exchange on which registeredCommon Shares without par value
    
    New York Stock ExchangeCommon Share purchase rights
    
    New York Stock Exchange
   þ o
  o þ
 þ o
 o
  þ o o
 o þ
   Documents Incorporated by Reference




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEX-10.26EX-12.1EX-13.1EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
  Overview
  ® ® ® ®
    www.lubrizol.com
 Acquisitions and Divestitures
  2




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®
    Business Segments
  3




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Lubrizol Additives Segment
    
    
    antioxidants that retard oil thickening;
    
    anti-wear agents that prevent surfaces metal-to-metal contact;
    
    corrosion inhibitors that prevent rust;
 4




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
    
    detergents that prevent deposit build-up;
    
    dispersants that protect equipment by suspending contaminant particles;
    
    friction modifiers that control friction at surfaces;
    
    polymer-based viscosity modifiers that allow lubricants to operate over broad
temperature ranges; and
    
    pour point depressants that control low temperature fluid thickening.
   Engine Additives.
  Category
    
    Product/Brand
    
    DescriptionEngine Additives
    
    Passenger car motor oils,
heavy-duty diesel engine
oils, marine diesel,
small engines, stationery
gas and viscosity
modifiers
    
    Additives that extend
engine life, lower
emissions and enhance
fuel economy.Fuel, refinery and
oilfield products and
other components
    
    Additives designed to
eliminate deposits and
provide fuel system
cleanliness, prevent rust
and corrosion, enhance
fuel economy, provide
anti-knock, lower
volatility and improve
storage stability.
 Driveline and Industrial Additives.
 Driveline Additives
  5




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Industrial Additives
   Category
    
    Product/Brand
    
    DescriptionDriveline and
Industrial Additives
    
    Driveline additives
for automatic
transmission fluids,
gear oils and farm
tractor fluids
    
    Additives that
provide multiple and
complex performance
properties, including
reducing friction in
order to prevent wear
of transmissions,
gears and farm
tractor components.Additives for
industrial fluids,
including hydraulics,
metalworking,
industrial gear,
grease and compressor
fluids
    
    A wide range of
additives to meet the
lubricant performance
requirements of
industrial equipment.
 Lubrizol Advanced Materials Segment
    Noveon Consumer Specialties .
  
    
    Carbopol acrylic thickener, which is a global leader in synthetic thickeners due to
its efficient stabilizing properties and superior thickening capabilities. Primary
end-uses in the personal care industry include hair care, skin care and personal and
oral hygiene products. Pharmaceutical primary end-uses include topical and
controlled-release applications.
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
    
    Methyl glucoside and lanolin derivatives that enhance the functional and aesthetic
properties of personal care products by delivering characteristics such as
emulsification, thickening and moisturizing, as well as imparting the elegant feel to
lotions and creams.
    
    AMPS® specialty monomers that are used in the manufacture of polymers for
a variety of applications such as dishwashing detergents to reduce spotting, skin
creams to improve lubricity and feel, medical gels for defibrillator pads to enhance
conductivity, and coatings and adhesives to improve adhesion.
    
    Specialty surfactants and additives that enhance the functional and aesthetic
properties of personal care products and household and industrial cleaners by improving
characteristics such as foaming, cleansing, conditioning and mildness. Surfactants
primarily are used in hair care products, such as shampoos and body washes.
  Category
    
    Product/Brand
    
    DescriptionPersonal Care and
Pharmaceuticals
    
    Carbopol®
    
    Acrylic thickener, which imparts stability
and improves aesthetics. Often used as a
controlled release agent.Pemulen®
    
    Polymeric emulsifier reducing formulation
irritancy and providing unique sensory
properties.Avalure®
    
    Polymers for color cosmetics and skin care.Specialty silicones
    
    Polymers affecting slip-and-feel.Fixate®
    
    Resin for hair styling.Emollients
    
    Improve skin feel and appearance.Botanical extracts
    
    Specialty additives for cosmetic and skin
care formulations.Methyl glucoside
derivatives, including
Glucamate®
    
    Natural thickeners, emulsifiers and
moisturizers for shampoos, liquid
cleansers, face and body creams and
lotions.Lanolin derivatives
    
    Natural emollients, emulsifiers and
conditioners for creams, lotions and color
cosmetics.AMPS® monomers
    
    Specialty monomer for high performance
polymers.Specialty surfactants,
including
Sulfochem®
    
    Enhance cleansing, foaming and
moisturizing of shampoos, body washes and
industrial and household cleaners.Polycarbophil
    
    Active agent for bulk laxatives.Cassia gum
    
    Gelling agents for human food (Japan) and
pet food.
 Performance Coatings.
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Specialty Resins and Polymers
 ®
  Category
    
    Product-line
    
    DescriptionSpecialty Resins and
Polymers
    
    Acrylic Emulsions,
Polyurethane
Dispersions and Other
Water-based Systems,
Hycar®,
Sancure®,
Algan®,
Performax®
    
    Provide superior
gloss and durability
properties to paints
and coatings. End
markets include wood,
paper, metal,
concrete, plastic and
textiles.Acrylic and Other
Polymer Resins,
Doresco®
    
    Function as carriers
for pigments, and
provide surface
protection and
adhesion properties.
End-markets include
paint and coatings,
printing ink,
laminating, adhesives
and sealants.
 Coating Additives
  
    
    High-performance hyperdispersants for coatings, inks, thermoplastics and thermoset
composites. We are a world leader in polymeric hyperdispersant technology, sold under
the Solsperse® and Solplus® trade names. Hyperdispersants
improve the dispersion of almost any solid particulate (including pigments, fillers,
flame retardants and fibers) into almost any liquid medium (water, solvents and
resins). They are primarily used to achieve even color saturation. They enrich and
strengthen color, while reducing production costs and solvent emissions. We also
produce Ircosperse® pigment dispersants for coatings and COLORBURST pigment
dispersants for printing inks.
    
    Surface modifiers improve the performance of industrial, architectural, can, coil,
wood and powder coatings by enhancing and protecting surfaces. Lanco®,
Lanco® Glidd, Lanco® Matt and Aquaslip surface modifiers impart
a variety of properties to a coating, including enhanced slip, improved abrasion and
scratch resistance, matting, texturing and a silky, soft feel.
    
    Rheology control additives improve the performance of coatings by providing
thickening, sag control, pigment anti-settling and improved surface appearance.
Rheology control additives are sold under the brand names Ircothix®,
Ircogel® and Solthix®.
    
    Specialized additives for inks improve rub resistance properties and film
characteristics.
  8




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Category
    
    Product/Brand
    
    DescriptionCoating Additives
    
    Dispersants,Solsperse®
Ircosperse®,
COLORBURST
    
    Improve the dispersion
of solid particulates
into liquid mediums.
End-markets include
paints and printing
inks.Surface Modifiers
Lanco®,
Lanco®
Glidd, Lanco® Matt, Aquaslip
    
    Impart a variety of
properties to a coating,
including enhanced slip,
improved abrasion and
scratch resistance,
matting and texturing.
End markets include
industrial,
architectural, can and
coil, wood and powder
coatings.Rheology Control
Additives,
Ircothix®,
Ircogel® and
Solthix®
    
    Provide thickening, sag
control and improved
surface appearance of
coatings.Specialized Additives for Inks,
Duotron®,
Liquitron®, Fluotron®
    
    Improve the processing,
performance and rub
resistance properties.
 Engineered Polymers.
 TempRite Engineered Polymers
 ® ® ® ®
  ®
  Category
    
    Product/Brand
    
    DescriptionEP
    
    TempRite®
    
    Residential plumbingFlowGuard®
    
    Residential and commercial plumbingFlowGuard Gold®
    
    Residential and commercial plumbingCorzan®
    
    Industrial and commercial pipingBlazeMaster®
    
    Fire sprinkler pipingPEX
    
    TempRite®
    
    Flexible piping systems
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Estane Engineered Polymers
 ® ®
  Category
    
    Product/Brand
    
    DescriptionTPU
    
    Estane®
    
    Aromatic grades for film and sheet,
wire and cable insulation, athletic
equipment, medical applications,
pneumatic tubing, automotive molded
parts and adhesives.Estaloc®
    
    Automotive trim, sporting goods,
agricultural equipment and other
mechanical components.Stat-Rite®
    
    Packaging of semiconductors, sensitive
electronic components, disk drive
heads and cell phone components.Tecoflex®
    
    Aliphatic grades for optical film,
medical tubing and general industrial
applications.
 Competition
   Product Line
    
    Principal CompetitorsNoveon consumer specialties
    
    Cognis, Croda, Degussa Goldschmidt,
ISP, NK Chemicals, Rhodia, Rohm and
Haas, Stepan, Sumitomo Seika, 3V
Sigma, Toagosei, VinatiPerformance coatings
    
    BASF, Bayer, Byk, Ciba, Clariant,
Cytec, Dow Chemical, DSM, Eastman,
OMNOVA, Parachem, Reichhold, Rohm
and Haas, TegoEngineered polymers
    
    Atofina, BASF, Bayer, Dow, Georgia
Gulf, Huntsman, Kaneka, Merquinsa, Sekisui Chemical, SK, Vanguard, Victaulic, Wirsbo
 10




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Sales and Marketing
     Backlog
  Research, Development and Technology
  Lubrizol Additives
   11




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Lubrizol Advanced Materials.
  Patents
 Research, Testing and Development Expenditures
  Raw Materials
   Environmental Matters
  12




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Employees
  Manufacturing and Properties
  Geographic Area Information
  13




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ITEM 1A. RISK FACTORS
 If any of the events contemplated by the following discussion of risks should occur, our
business, results of operations and financial condition could suffer significantly. The risks
described below are not the only risks that we face. Additional risks not currently known to us or
that we currently deem immaterial may also impair our business.
 Financial Risks
 The limits imposed on us by the restrictive covenants contained in our credit facilities could
prevent us from making acquisitions or capital improvements or cause us to lose access to these
facilities.
  
    
    borrow money or guarantee the debts of others;
    
    use assets as security in other transactions;
    
    change our business or enter into new lines of business; and
    
    sell assets or merge with or into other companies.
   We may not have access to capital in the future.
  We could be adversely affected if our debt is downgraded.
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Risks Relating to our Business
 Volatility in raw material prices could reduce our profitability and reductions in the availability
of raw material supplies could disrupt our operations.
   We face competition from other chemical companies, which could adversely affect our revenue and
financial condition.
   Failure to make continued improvements in our technology and productivity could hurt our
competitive position.
  Our and our suppliers production facilities are subject to operating risks that may adversely
affect our operations.
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Some of our businesses are cyclical and demand by our customers for our products weakens during
economic downturns.
  Failure to implement our common information system platform successfully could negatively impact
our ability to integrate our core business processes.
   We face numerous risks relating to our foreign operations, including foreign currency exchange rate
fluctuations, exchange controls and currency devaluations, that may adversely affect our results of
operations.
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International social, political and economic conditions may adversely affect our operating
performance.
  Our production facilities are of the type that may attract terrorist attacks, and any attack may
disrupt our operations and cause us to incur significant costs and liabilities.
  Certain of our employees are covered by collective bargaining agreements, and the failure to renew
these agreements could result in labor disruptions and increased labor costs.
  The applicability of numerous environmental laws to our manufacturing facilities could cause us to
incur significant costs and liabilities.
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If we are unable to protect our intellectual property rights, our product sales and financial
performance could be adversely affected.
   
 ITEM 1B. UNRESOLVED STAFF COMMENTS
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ITEM 2. PROPERTIES
  Reporting SegmentsLubrizolOwned/
    
    Laboratory (R&D/Testing)
    
    Lubrizol
    
    AdvancedLocation
    
    Leased
    
    or Manufacturing
    
    Additives
    
    MaterialsSydney, Australia
    
    Owned
    
    Manufacturing
    
    x
    
    xAntwerp, Belgium
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xLouvaine Leneuve, Belgium
    
    Leased
    
    Laboratory
    
    
    
    xOevel, Belgium
    
    Owned
    
    Manufacturing
    
    
    
    xVilvoorde, Belgium
    
    Owned
    
    Manufacturing
    
    
    
    xRio de Janeiro, Brazil
    
    Owned
    
    Manufacturing
    
    x
    
    xSao Paulo, Brazil
    
    Leased
    
    Laboratory
    
    
    
    xNiagara Falls, Ontario, Canada
    
    Owned
    
    Manufacturing
    
    xHong Kong, China
    
    Leased
    
    Laboratory
    
    
    
    xLanzhou, China(1)
    
    Plant is owned; land is leased
    
    Manufacturing
    
    xQingpu, China
    
    Leased
    
    Laboratory, Manufacturing
    
    
    
    xShanghai, China
    
    Leased
    
    Laboratory
    
    
    
    xShanghai, China
    
    Leased
    
    Laboratory
    
    xSongjiang, China
    
    Leased
    
    Manufacturing
    
    
    
    xTianjin, China (1)
    
    Plant is owned; land is leased
    
    Manufacturing
    
    xZhejiang, China(1)
    
    Plant is owned; land is leased
    
    Manufacturing
    
    
    
    xLe Havre, France
    
    Owned
    
    Manufacturing
    
    xMourenx, France
    
    Owned
    
    Manufacturing
    
    xRouen, France
    
    Owned
    
    Manufacturing
    
    xHamburg, Germany
    
    Leased
    
    Laboratory, Manufacturing
    
    xRitterhude, Germany
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xMumbai, India(1)
    
    Plant is owned; land is leased
    
    Manufacturing
    
    xMumbai, India
    
    Leased
    
    Laboratory
    
    
    
    xVadadora, India
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xKinuura, Japan
    
    Owned
    
    Laboratory, Manufacturing
    
    x
    
    xSembilan, Malaysia
    
    Owned
    
    Manufacturing
    
    
    
    xApodaca, Mexico(1)
    
    Owned
    
    Laboratory, Manufacturing
    
    xMexico City, Mexico
    
    Leased
    
    Laboratory
    
    
    
    xDelfzijl, The Netherlands
    
    Leased
    
    Manufacturing
    
    
    
    xYanbu, Saudi Arabia(1)
    
    Owned
    
    Laboratory, Manufacturing
    
    xSingapore
    
    Plant is owned; land is leased
    
    Manufacturing
    
    xSingapore
    
    Leased
    
    Laboratory
    
    
    
    xDurban, South Africa
    
    Owned
    
    Manufacturing
    
    x
    
    xPohang, South Korea
    
    Plant is owned; land is leased
    
    Manufacturing
    
    
    
    xBarcelona, Spain
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    x
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Reporting SegmentsLubrizolOwned/
    
    Laboratory (R&D/Testing)
    
    Lubrizol
    
    AdvancedLocation
    
    Leased
    
    or Manufacturing
    
    Additives
    
    MaterialsMuang, Thailand
    
    Jointly Owned
    
    Laboratory, Manufacturing
    
    
    
    xBarnsley, United Kingdom
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xBlackley, United Kingdom
    
    Leased
    
    Laboratory
    
    
    
    xHazelwood, United Kingdom
    
    Owned
    
    Laboratory
    
    xHuddersfield, United Kingdom
    
    Plant is owned; land is leased
    
    Laboratory, Manufacturing
    
    
    
    xGrangemouth, United Kingdom
    
    Leased
    
    Laboratory
    
    
    
    xPaso Robles, CA
    
    Plant is owned; land is leased
    
    Laboratory, Manufacturing
    
    
    
    xPeachtree City, GA
    
    Owned
    
    Manufacturing
    
    
    
    xCountryside, IL
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xMcCook, IL
    
    Leased
    
    Laboratory, Manufacturing
    
    
    
    xCalvert City, KY
    
    Owned
    
    Manufacturing
    
    
    
    xLouisville, KY
    
    Owned
    
    Manufacturing
    
    
    
    xLawrence, MA
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xWilmington, MA
    
    Leased
    
    Manufacturing
    
    
    
    xMidland, MI
    
    Owned
    
    Laboratory, Manufacturing
    
    xPedricktown, NJ
    
    Owned
    
    Manufacturing
    
    
    
    xGastonia, NC
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xAvon Lake, OH
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xBowling Green, OH
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xBrecksville, OH
    
    Owned
    
    Laboratory
    
    
    
    xChagrin Falls, OH
    
    Owned
    
    Laboratory, Manufacturing
    
    
    
    xPainesville, OH
    
    Owned
    
    Manufacturing
    
    x
    
    xWickliffe, OH
    
    Owned
    
    Laboratory
    
    xSpartanburg, SC
    
    Leased
    
    Laboratory
    
    xSpartanburg, SC
    
    Owned
    
    Laboratory, Manufacturing
    
    x
    
    xBayport, TX
    
    Owned
    
    Manufacturing
    
    x
    
    xDeer Park, TX
    
    Owned
    
    Manufacturing
    
    xHouston, TX
    
    Owned
    
    Manufacturing
    
    
    
    x
 
 (1)
    
    These manufacturing plants are owned and operated by joint venture companies licensed by
Lubrizol.    20




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ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  21




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EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionJames L. Hambrick
    
    52
    
    Chairman of the Board, President and Chief Executive OfficerJoseph W. Bauer
    
    53
    
    Vice President and General CounselDonald W. Bogus
    
    59
    
    Senior Vice President and President  Lubrizol Advanced MaterialsCharles P. Cooley
    
    51
    
    Senior Vice President, Treasurer and Chief Financial OfficerW. Scott Emerick
    
    42
    
    Corporate ControllerStephen F. Kirk
    
    57
    
    Senior Vice President and President  Lubrizol AdditivesMark W. Meister
    
    52
    
    Vice President and Chief Ethics OfficerLeslie M. Reynolds
    
    46
    
    Corporate SecretaryPatrick Saunier
    
    51
    
    Vice President, Information SystemsGregory D. Taylor
    
    48
    
    Vice President, Corporate Planning, Development and CommunicationsJeffrey A. Vavruska
    
    46
    
    Chief Tax OfficerJoanne Wanstreet
    
    55
    
    Vice President, Investor Relations
 James L. Hambrick
 Joseph W. Bauer
 Donald W. Bogus
 Charles P. Cooley
 W. Scott Emerick
 Stephen F. Kirk
 Mark W. Meister
 Leslie M. Reynolds
 Patrick H. Saunier
 Gregory D. Taylor
 22




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Jeffrey A. Vavruska
 Joanne Wanstreet
  23




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
   Common Share Price History
    
    
    Dividends2006
    
    
    2005
    
    
    Per Common ShareHigh
    
    
    Low
    
    
    High
    
    
    Low
    
    
    2006
    
    
    20051st quarter
    
    $
    46.44
    
    
    $
    41.70
    
    
    $
    43.57
    
    
    $
    35.25
    
    
    $
    .26
    
    
    $
    .262nd quarter
    
    
    45.20
    
    
    
    38.52
    
    
    
    44.51
    
    
    
    36.74
    
    
    
    .26
    
    
    
    .263rd quarter
    
    
    46.25
    
    
    
    38.03
    
    
    
    44.50
    
    
    
    39.12
    
    
    
    .26
    
    
    
    .264th quarter
    
    
    50.75
    
    
    
    44.16
    
    
    
    44.16
    
    
    
    39.83
    
    
    
    .26
    
    
    
    .26$
    1.04
    
    
    $
    1.04
     Maximum NumberTotal Number
    
    (or Approximate Dollarof Shares (or Units)
    
    Value) of Shares (orTotal Number of
    
    Average Price Paid
    
    Purchased as Part of
    
    Units) that May Yet beShares (or Units)
    
    per Share
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Purchased1
    
    (or Unit)
    
    Plans or Programs
    
    Plans or ProgramsMonth #1 (Oct. 1, 2006 through Oct. 31, 2006)
    
    0 Shares
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMonth #2 (Nov. 1, 2006 through Nov. 30, 2006)
    
    12,267 Shares
    
    $
    47.84
    
    
    
    N/A
    
    
    
    N/AMonth #3 (Dec. 1, 2006 through Dec. 31, 2006)
    
    0 Shares
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    12,267 Shares
 
 1
    
    This column represents common shares that we purchased pursuant to:  24




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Performance Comparisons
    
 12/01
    
    12/02
    
    12/03
    
    12/04
    
    12/05
    
    12/06The Lubrizol Corporation
    
    
    100.00
    
    
    
    89.77
    
    
    
    98.98
    
    
    
    115.83
    
    
    
    139.99
    
    
    
    165.43S&P Chemicals Industry
    
    
    100.00
    
    
    
    96.97
    
    
    
    123.06
    
    
    
    148.05
    
    
    
    147.91
    
    
    
    171.48S&P 500
    
    
    100.00
    
    
    
    77.90
    
    
    
    100.24
    
    
    
    111.15
    
    
    
    116.61
    
    
    
    135.03
  25




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ITEM 6. SELECTED FINANCIAL DATA
   
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
    26




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ITEM 9B. OTHER INFORMATION
  27




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  www.lubrizol.com
 
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
   Number ofSecurities to
    
    
    
    
    
    Number of Securitiesbe Issued upon
    
    
    
    
    
    Remaining AvailableExercise
    
    Weighted-Average
    
    for Future Issuance underof Outstanding
    
    Exercise Price of
    
    Equity Compensation PlansOptions,
    
    Outstanding Options,
    
    (excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    Warrants and Rights
    
    reflected in Column (a))Equity compensation plans
approved by security
holders
    
    
    3,339,329
    
    
    $
    32.72
    
    
    
    3,030,401
    (1)Equity compensation
plans not
approved by security
holders
    
    
    
    (2)
    
    
    N/A
    
    
    
    
    (2)Total
    
    
    3,339,329
    
    
    $
    32.72
    
    
    
    3,030,401
    (1)
 
 (1)
    
    The 1991 Stock Incentive Plan was terminated with respect to future grants effective
November 15, 2004. The shares shown are with respect to the 2005 Stock Incentive Plan. In
addition to the shares shown, effective January 1, 2003, pursuant to grants under the 1991
Stock Incentive Plan, Donald W. Bogus, Charles P. Cooley and Stephen F. Kirk each will be
issued 15,000 shares if the officer remains an employee until January 1, 2008. There are no
voting or dividend rights associated with these common shares unless and until they are
issued.(2)
    
    Under the Executive Council Deferred Compensation Plan, certain executive officers may
defer any amount of their variable pay under the annual incentive pay plan. Deferred amounts
are converted into share units based on the current market price of Lubrizols common shares.
There is a 25% company match. Additional share units are
credited for quarterly dividends paid on Lubrizol common shares. At the end of the deferral
period, which is at least 28




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##### Table of Contents



three years, common shares are issued equal to the number of share units in the participants
account. Amounts attributable to the company match credited after January 1, 2004 will be paid
in cash. As of December 31, 2006, there were 92,523 share units outstanding that are payable in
shares.Prior to January 1, 2004, under the Deferred Stock Compensation Plan for Outside Directors,
each director who was not a Lubrizol employee received 500 share units on each October 1st and
was credited with additional share units for quarterly dividends paid on Lubrizol common shares.
When a person is no longer a director, Lubrizol common shares are issued equal to the number of
share units in the persons account. As of December 31, 2006, there were 35,563 share units
outstanding that are payable in shares. No additional share units other than those credited for
quarterly dividends have been or will be granted after January 1, 2004.Under the Deferred Compensation Plan for Directors, each director who is not a Lubrizol
employee may defer all or any portion of his or her yearly fee and meeting attendance fees and
have these amounts credited to various cash investment accounts and/or a share unit account. The
number of share units credited to the share unit account is based on the price of Lubrizol common
shares on the day the share units are credited to the account and includes share units credited
for quarterly dividends paid on Lubrizol common shares. When a person is no longer a director,
Lubrizol shares are issued equal to the number of share units in the persons share unit account.
As of December 31, 2006, there were 65,454 share units
outstanding, 31,682 of which must be paid in Lubrizol shares and the
remainder of which may be invested in the various cash investment
accounts at the discretion of the director, and paid in cash.Under the Senior Management Deferred Compensation Plan, each executive officer and other management participants may defer all
or any portion of his or her total annual pay and have these amounts credited to various cash
investment accounts and/or a share unit account. The number of share units credited to the share
unit account is based on the price of Lubrizol common shares on the day the share units are
credited to the account and includes share units credited for quarterly dividends paid on
Lubrizol common shares. Upon the distribution date, Lubrizol common shares are issued equal to
the number of share units in the persons share unit account. As of December 31, 2006, there
were 67,398 share units outstanding.Under the Supplemental Retirement Plan for Donald W. Bogus, 500 share units are credited
each anniversary date of the officers employment to an officers account and includes share
units credited for quarterly dividends paid on Lubrizol common shares. Upon retirement, Mr.
Bogus may elect to receive cash or Lubrizol shares equal to the number of share units in the
account. As of December 31, 2006, there were 2,336 share units outstanding that could be paid in
shares. For units credited after January 1, 2004, the payment will be made in cash only. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Documents filed as part of this Annual Report:
 1.
    
    The following consolidated financial statements of The Lubrizol Corporation and its
subsidiaries, together with the reports of the independent registered public accounting firm
relating thereto, contained on pages 28 through 55, inclusive, of our 2006 Annual Report to
shareholders, and incorporated herein by reference:Managements Report on Internal Controls over Financial Reporting.Reports of Independent Registered Public Accounting Firm.Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004.Consolidated Balance Sheets at December 31, 2006 and 2005.Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004.Consolidated Statements of Shareholders Equity for the years ended December 31, 2006, 2005
and 2004.Notes to Financial Statements.2.
    
    Schedule
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  
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SCHEDULE II   (in millions of dollars)
 ChargedBalance at
    
    Charged
    
    /(Credited) to
    
    
    
    
    
    Balance atBeginning
    
    /(Credited)
    
    Other
    
    
    
    
    
    End ofDescription
    
    of Year
    
    to Expenses
    
    Accounts*
    
    Deductions
    
    YearYear ended December 31, 2006Allowance for
uncollectible
accounts
    
    $
    10.1
    
    
    $
    0.8
    
    
    $
    (1.2
    )
    
    $
    2.2
    
    
    $
    7.5Inventory reserves
    
    $
    18.2
    
    
    $
    9.1
    
    
    $
    1.2
    )
    
    $
    12.4
    
    
    $
    16.1Deferred tax asset
valuation allowance
    
    $
    18.1
    
    
    $
    (0.1
    )
    
    $
    (0.2
    )
    
    
    
    
    
    $
    17.8Year ended December 31, 2005Allowance for
uncollectible
accounts
    
    $
    11.0
    
    
    $
    1.9
    
    
    $
    (0.9
    )
    
    $
    1.9
    
    
    $
    10.1Inventory reserves
    
    $
    19.1
    
    
    $
    10.9
    
    
    $
    (2.8
    )
    
    $
    9.0
    
    
    $
    18.2Deferred tax asset valuation
allowance
    
    $
    18.8
    
    
    $
    4.0
    
    
    $
    (4.7
    )
    
    
    
    
    
    $
    18.1Year ended December 31, 2004Allowance for
uncollectible
accounts
    
    $
    4.2
    
    
    $
    0.4
    
    
    $
    7.7
    
    
    $
    1.3
    
    
    $
    11.0Inventory reserves
    
    $
    9.0
    
    
    $
    5.4
    
    
    $
    8.5
    
    
    $
    3.8
    
    
    $
    19.1Deferred tax asset valuation
allowance
    
    $
    1.9
    
    
    $
    2.4
    
    
    $
    14.5
    
    
    
    
    
    
    $
    18.8
 
 *
    
    Valuation and qualifying accounts of acquired and divested companies.  3.
    
    Exhibits
 3.1
    
    Amended Articles of Incorporation of The Lubrizol Corporation, as adopted
September 23, 1991 (incorporated by reference to Exhibit 3.1 to The Lubrizol
Corporations Annual Report on Form 10-K for the year ended December 31, 2004).3.2
    
    Regulations of The Lubrizol Corporation, as amended effective April 27, 1992
((incorporated by reference to Exhibit 3.2 to The Lubrizol Corporations Annual Report
on Form 10-K for the year ended December 31, 2004).4.1
    
    Amendment to Article Fourth of Amended Articles of Incorporation (incorporated
by reference to Exhibit 4.1 to The Lubrizol Corporations Annual Report on Form 10-K
for the year ended December 31, 2004).4.2
    
    Amended and Restated Rights Agreement between The Lubrizol Corporation and
American Stock Transfer & Trust Company dated as of July 26, 1999 (incorporated by
reference to Exhibit 4.2 to The Lubrizol Corporations Annual Report on Form 10-K for
the year ended December 31, 2004).4.3
    
    Amended and Restated Indenture dated September 28, 2004 (originally dated June
1, 1995) by and among The Lubrizol Corporation, all of The Lubrizol Corporations
wholly owned direct and indirect domestic subsidiaries, as guarantors, and J.P. Morgan
Trust Company, National Association, as successor trustee (incorporated by reference to
Exhibit 99.1 of the Form 8-K of The Lubrizol Corporation filed with the SEC on
September 29, 2004).4.4
    
    Amended and Restated Indenture dated September 28, 2004 (originally dated
November 25, 1998), by and among The Lubrizol Corporation, all of The Lubrizol
Corporations wholly owned direct and
indirect domestic subsidiaries, as guarantors, and J.P. Morgan Trust Company,
National Association,
as successor trustee (incorporated by reference to Exhibit 99.2 of the Form 8-K of
The Lubrizol Corporation filed with the SEC on September 29, 2004).
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4.5
    
    Form of Indenture for Debt Securities of The Lubrizol Corporation (incorporated
by reference to Exhibit 4.2 of Amendment No. 2 to the Registration Statement on Form
S-3 of The Lubrizol Corporation filed with the SEC on August 24, 2004).10.1*
    
    The Lubrizol Corporation 1991 Stock Incentive Plan, as amended (incorporated
by reference to Exhibit (10)(h) to The Lubrizol Corporations Current Report on Form
8-K filed with the SEC on November 18, 2004).10.2*
    
    The Lubrizol Corporation 2005 Stock Incentive Plan, as amended (incorporated
by reference to Exhibit 10.1 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on December 12, 2006).10.3*
    
    The Lubrizol Corporation Amended Deferred Compensation Plan for Directors
(incorporated by reference to Exhibit (10)(b) to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on November 18, 2004).10.4*
    
    The Lubrizol Corporation Deferred Stock Compensation Plan for Outside
Directors, as amended (incorporated by reference to Exhibit (10)(i) to The Lubrizol
Corporations Annual Report on Form 10-K for the year ended December 31, 2003).10.5*
    
    The Lubrizol Corporation Deferred Compensation Plan for Officers, as amended
(incorporated by reference to Exhibit (10)(k) to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on November 18, 2004).10.6*
    
    The Lubrizol Corporation Executive Council Deferred Compensation Plan, as
amended (incorporated by reference to Exhibit (10)(l) to The Lubrizol Corporations
Current Report on Form 8-K filed with the SEC on November 18, 2004).10.7*
    
    The Lubrizol Corporation 2005 Deferred Compensation Plan for Directors
(incorporated by reference to Exhibit (10)(v) to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on November 18, 2004).10.8*
    
    The Lubrizol Corporation Senior Management Deferred Compensation Plan (fka The
Lubrizol Corporation 2005 Deferred Compensation Plan for Officers) (incorporated by
reference to Exhibit 10.8 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on December 13, 2005).10.9*
    
    The Lubrizol Corporation 2005 Executive Council Deferred Compensation Plan
(incorporated by reference to Exhibit 10.7 to The Lubrizol Corporations Current Report
on Form 8-K filed with the SEC on December 13, 2005).10.10*
    
    The Lubrizol Corporation Excess Defined Benefit Plan, as amended (incorporated by
reference to Exhibit (10)(d) to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on December 15, 2004).10.11*
    
    The Lubrizol Corporation Excess Defined Contribution Plan, as amended (incorporated
by reference to Exhibit (10)(e) to The Lubrizol Corporations Current Report on Form
8-K filed with the SEC on December 15, 2004).10.12*
    
    The Lubrizol Corporation Officers Supplemental Retirement Plan, as amended
(incorporated by reference to Exhibit (10)(j) to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on December 15, 2004).10.13*
    
    The Lubrizol Corporation 2005 Excess Defined Benefit Plan (incorporated by reference
to Exhibit 10.4 to The Lubrizol Corporations Current Report on Form 8-K filed with the
SEC on December 13, 2005).
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##### Table of Contents



10.14*
    
    The Lubrizol Corporation 2005 Excess Defined Contribution Plan (incorporated by
reference to Exhibit 10.3 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on December 12, 2006).10.15*
    
    The Lubrizol Corporation 2005 Officers Supplemental Retirement Plan (incorporated by
reference to Exhibit 10.5 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on December 13, 2005).10.16*
    
    Supplemental Retirement for Donald W. Bogus (incorporated by reference to Exhibit
10.6 to The Lubrizol Corporations Current Report on Form 8-K filed with the SEC on
December 13, 2005).10.17*
    
    The Lubrizol Corporation Executive Death Benefit Plan, as amended (incorporated by
reference to Exhibit 10.11 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on December 13, 2005).10.18*
    
    The Lubrizol Corporation Executive Officer Long Term Incentive Plan (incorporated by
reference to Exhibit (10)(n) to The Lubrizol Corporations Annual Report on Form 10-K
for the year ended December 31, 2003).10.19*
    
    Form of Employment Agreement between The Lubrizol Corporation and certain of its
senior executive officers (incorporated by reference to Exhibit 10.19 to The Lubrizol
Corporations Annual Report on Form 10-K for the year ended December 31, 2005).10.20*
    
    Employment Agreement effective January 1, 2003, between The Lubrizol Corporation and
Charles P. Cooley (incorporated by reference to Exhibit (10)(o) to The Lubrizol
Corporations Quarterly Report on Form 10-Q for the period ended on March 31, 2003).10.21*
    
    Employment Agreement effective January 1, 2003, between The Lubrizol Corporation and
Stephen F. Kirk (incorporated by reference to Exhibit (10)(p) to The Lubrizol
Corporations Quarterly Report on Form 10-Q for the period ended on March 31, 2003).10.22*
    
    Employment Agreement effective January 1, 2003, between The Lubrizol Corporation and
Donald W. Bogus (incorporated by reference to Exhibit (10)(r) to The Lubrizol
Corporations Quarterly Report on Form 10-Q for the period ended on March 31, 2003).10.23*
    
    The Lubrizol Corporation Annual Incentive Pay Plan (incorporated by reference to
Exhibit 10.10 to The Lubrizol Corporations Current Report on Form 8-K filed with the
SEC on December 13, 2005).10.24*
    
    The Lubrizol Corporation Annual Incentive Pay Plan Award Letter, as amended
(incorporated by reference to Exhibit 10.2 to The Lubrizol Corporations Current Report
on Form 8-K filed with the SEC on December 13, 2005).10.25*
    
    The Lubrizol Corporation Financial Planning Program (incorporated by reference to
Exhibit 10.1 to The Lubrizol Corporations Quarterly Report on Form 10-Q for the period
ended on September 30, 2006).10.26*
    
    Form of Indemnification Agreement between The Lubrizol Corporation and certain of its
senior executive officers.10.27
    
    Asset Purchase Agreement, dated March 16, 2006, by and among Noveon, Inc.,
Noveon Hilton Davis, Inc., Noveon Kalama, Inc., Noveon Textile Chemicals, Inc.,
Lubrizol Foam Control Additives, Inc., Lubrizol do Brasil Aditivos Ltda., and SPM Group
Holdings LLC (incorporated by reference to Exhibit 10.1 to The Lubrizol Corporations Current Report on Form
8-K filed with the SEC on May 5, 2006).
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##### Table of Contents



10.28
    
    Letter of Guarantee dated as of May 19, 2006 by and between Noveon, Inc. and
SK Corporation (incorporated by reference to Exhibit 10.1 to The Lubrizol Corporations
Current Report on Form 8-K filed with the SEC on May 25, 2006).10.29
    
    Credit Agreement dated as of August 24, 2004 among The Lubrizol Corporation,
the Initial Lenders named therein, Citigroup Global Markets Inc. and KeyBanc Capital
Markets, as co-lead arrangers and co-bookrunners, KeyBank National Association and ABN
Amro Bank N.V., as co-syndication agents, Wachovia Bank, National Association, as
documentation agent, and Citicorp North America, Inc., as agent (incorporated by
reference to Exhibit 10.1 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on August 30, 2004).10.30
    
    Amended and Restated Credit Agreement dated as of March 29, 2005 among The
Lubrizol Corporation, the Initial Lenders named therein, Citicorp North America, Inc.,
as administrative agent, and Citigroup Global Markets, Inc., as arranger and
syndication agent (incorporated by reference to Exhibit 10.5 to The Lubrizol
Corporations Quarterly Report on Form 10-Q for the period ended March 31, 2005).10.31
    
    Amendment No. 2 to the Credit Agreement among The Lubrizol Corporation, the
banks, financial institutions and other institutional lenders who are parties to the
Credit Agreement dated as of August 24, 2004, as amended and restated as of March 29,
2005, and as further amended as of August 23, 2005, and Citicorp North America, Inc. as
agent (incorporated by reference to Exhibit 10.1 to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on September 22, 2006).10.32
    
    Five Year Credit Agreement dated as of September 14, 2005 among Europe
Chemical Holdings C.V., Noveon Holdings France S.A.S. and Noveon Europe BVBA, The
Lubrizol Corporation, the Initial Lenders named therein, ABN AMRO Bank N.V. as
administrative agent, and ABN AMRO Bank N.V., Calyon, Citigroup Global Markets Inc.,
and Fortis Capital Corp as mandated lead arrangers and bookrunners (incorporated by
reference to Exhibit 10.1 to The Lubrizol Corporations Current Report on Form 8-K
filed with the SEC on September 16, 2005).10.33
    
    Letter Amendment dated as of September 20, 2006 among Lubrizol Holdings France
S.A.S. (formerly known as Noveon Holdings France S.A.S.) and Noveon Europe BVBA
(collectively, the Borrowers), The Lubrizol Corporation, the Lenders named therein,
ABN AMRO Bank N.V. as agent, to the Five Year Credit Agreement dated as of September
14, 2005 among the Borrowers, The Lubrizol Corporation, the Initial Lenders named
therein, ABN AMRO Bank N.V., Calyon, Citigroup Global Markets Inc. and Fortis Capital
Corp. (incorporated by reference to Exhibit 10.2 to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on September 22, 2006).12.1
    
    Computation of Ratio of Earnings to Fixed Charges.13.1
    
    The following portions of The Lubrizol Corporation 2006 Annual Report to its
shareholders (the 2006 Annual Report is available on our website at www.lubrizol.comas
a separate pdf file):
 Pages 11-27
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations.Page 28
    
    Managements Report on Internal Control Over Financial Reporting.Page 28
    
    New York Stock Exchange
Certifications.Pages 29-30
    
    Reports of Independent Registered Public Accounting Firm.Page 31
    
    Consolidated Statements of Income for the years ended December
31, 2006, 2005 and 2004.Page 32
    
    Consolidated Balance Sheets at December 31, 2006 and 2005.Page 33
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004.Page 34
    
    Consolidated Statements of Shareholders Equity for the years
ended December 31, 2006, 2005 and 2004.
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##### Table of Contents



Pages 35-55
    
    Notes to Financial Statements.Pages 56-57
    
    Historical Summary.
 21.1
    
    List of Significant Subsidiaries of The Lubrizol Corporation.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Rule 13a-14(a) Certification of the Chief Executive Officer, as created by
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Rule 13a-14(a) Certification of the Chief Financial Officer, as created by
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer of The
Lubrizol Corporation pursuant to 18 U.S.C. Section 1350, as created by Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *
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SIGNATURES
  THE LUBRIZOL CORPORATIONBY
    
    /s/ James L. HambrickJames L. Hambrick, President andChief Executive Officer
  /s/ James L. Hambrick
    
    Chairman of the Board, President and Chief Executive OfficerJames L. Hambrick
    
    (Principal Executive Officer)/s/ Charles P. Cooley
    
    Sr. Vice President, Treasurer and Chief Financial OfficerCharles P. Cooley
    
    (Principal Financial Officer)/s/ W. Scott Emerick
    
    Corporate ControllerW. Scott Emerick
    
    (Chief Accounting Officer)/s/ Robert E. Abernathy
    
    DirectorRobert E. Abernathy/s/ Jerald A. Blumberg
    
    DirectorJerald A. Blumberg/s/ Forest J. Farmer, Sr.
    
    DirectorForest J. Farmer, Sr./s/ Gordon D. Harnett
    
    DirectorGordon D. Harnett/s/ William P. Madar
    
    DirectorWilliam P. Madar/s/ Peggy Gordon Miller
    
    DirectorPeggy Gordon Miller/s/ Dominic J. Pileggi
    
    DirectorDominic J. Pileggi/s/ Daniel E. Somers
    
    DirectorDaniel E. Somers
 36