<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2004

                                       OR

              [ ] 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
             (Exact name of registrant as specified in its charter)

                Ohio                                       34-0367600
   (State or other jurisdiction of                      (I.R.S.Employer
    incorporation or organization)                    Identification No.)

                            29400 Lakeland Boulevard
                           Wickliffe, Ohio 44092-2298
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (440) 943-4200
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Number of the registrant's common shares, without par value, outstanding, as of
June 30, 2004: 51,734,424.

<PAGE>

                            THE LUBRIZOL CORPORATION
                          Quarterly Report on Form 10-Q
                           Quarter Ended June 30, 2004

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                                Page Number
                                                                                                                -----------
<S>                                                                                                             <C>
PART I.  FINANCIAL INFORMATION

Item 1   Financial Statements

         Consolidated Statements of Income                                                                            3

         Consolidated Balance Sheets                                                                                  4

         Consolidated Statements of Cash Flows                                                                        5

         Notes to Consolidated Financial Statements                                                                   6

Item 2   Management's Discussion and Analysis of Financial Condition and Results of Operations                       29

Item 3   Quantitative and Qualitative Disclosures about Market Risk                                                  48

Item 4   Controls and Procedures                                                                                     49


PART II. OTHER INFORMATION

Item 2   Changes in Securities and Use of Proceeds                                                                   50

Item 4   Submission of Matters to a Vote of Security Holders                                                         50

Item 6   Exhibits and Reports on Form 8-K                                                                            50

         Signatures                                                                                                  51
</TABLE>

                                       2

<PAGE>

                          PART I. FINANCIAL INFORMATION

                           Item 1 Financial Statements

                            THE LUBRIZOL CORPORATION

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                  Three Month Period             Six Month Period
                                                     Ended June 30                 Ended June 30
                                                -----------------------     ---------------------------
(In Millions Except Per Share Data)                2004          2003           2004            2003
-----------------------------------             -----------------------     ---------------------------
<S>                                             <C>           <C>           <C>             <C>
Net sales                                       $   720.2     $   514.3     $   1,298.1     $   1,021.3
Royalties and other revenues                          1.3           0.4             2.1             1.6
                                                ---------     ---------     -----------     -----------
    Total revenues                                  721.5         514.7         1,300.2         1,022.9

Cost of sales                                       529.5         372.6           955.8           740.9
Selling and administrative expenses                  70.2          50.2           122.0           101.0
Research, testing and development expenses           45.5          40.6            86.3            82.2
Amortization of intangible assets                     4.5           1.2             6.4             2.3
Write-off of acquired in-process research
 and development                                     35.0                          35.0
Restructuring charge                                  8.0           3.5             8.0             7.0
                                                ---------     ---------     -----------     -----------
    Total costs and expenses                        692.7         468.1         1,213.5           933.4

Other income (expense) - net                         (1.9)          1.1             2.4             2.0
Interest income                                       1.0           1.1             1.9             2.1
Interest expense                                    (18.1)         (6.2)          (24.3)          (12.1)
                                                ---------     ---------     -----------     -----------

Income before income taxes                            9.8          42.6            66.7            81.5
Provision for income taxes                            5.9          13.2            25.2            26.1
                                                ---------     ---------     -----------     -----------
Net income                                      $     3.9     $    29.4     $      41.5     $      55.4
                                                =========     =========     ===========     ===========

Net income per share                            $    0.08     $    0.57     $      0.80     $      1.07
                                                =========     =========     ===========     ===========

Net income per share, diluted                   $    0.08     $    0.57     $      0.80     $      1.07
                                                =========     =========     ===========     ===========
Dividends per share                             $    0.26     $    0.26     $      0.52     $      0.52
                                                =========     =========     ===========     ===========
Weighted average common shares outstanding           51.9          51.7            51.8            51.7
</TABLE>

Amounts shown are unaudited.

See accompanying notes to the financial statements.

                                       3

<PAGE>

                            THE LUBRIZOL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           June 30        December 31
(In Millions of Dollars)                                                                     2004            2003
------------------------                                                                  ----------      ----------
<S>                                                                                       <C>             <C>
ASSETS

Cash and short-term investments                                                           $    227.3      $    258.7
Receivables                                                                                    589.7           324.6
Inventories:
    Finished products                                                                          271.2           150.7
    Products in process                                                                         71.4            62.3
    Raw materials                                                                              132.9            78.9
    Supplies and engine test parts                                                              26.2            20.0
                                                                                          ----------      ----------
                                                                                               501.7           311.9
                                                                                          ----------      ----------
Other current assets                                                                           102.0            42.7
                                                                                          ----------      ----------
                 Total current assets                                                        1,420.7           937.9

Property and equipment - net                                                                 1,348.6           690.0
Goodwill                                                                                     1,022.6           208.7
Intangible assets - net                                                                        591.0            62.4
Investments in non-consolidated companies                                                        7.1             6.3
Other assets                                                                                    37.3            37.0
                                                                                          ----------      ----------
                     TOTAL                                                                $  4,427.3      $  1,942.3
                                                                                          ==========      ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term debt and current portion of long-term debt                                     $  1,988.1      $      2.9
Accounts payable                                                                               236.1           143.1
Accrued expenses and other current liabilities                                                 320.0           153.5
                                                                                          ----------      ----------
                 Total current liabilities                                                   2,544.2           299.5
                                                                                          ----------      ----------
Long-term debt                                                                                 392.2           386.7
Postretirement health care obligations                                                         103.0            98.4
Noncurrent liabilities                                                                         177.4           100.3
Deferred income taxes                                                                          184.3            52.8
                                                                                          ----------      ----------
                 Total liabilities                                                           3,401.1           937.7
                                                                                          ----------      ----------

Minority interest in consolidated companies                                                     52.1            51.3
Shareholders' equity:
    Preferred stock without par value - authorized and unissued:
           Serial Preferred Stock - 2,000,000 shares
           Serial Preference Shares - 25,000,000 shares
    Common shares without par value:
           Authorized 120,000,000 shares
           Outstanding - 51,734,424 shares as of June 30, 2004 after deducting
              34,461,470 treasury shares, 51,588,190 shares as of December 31, 2003
              after deducting 34,607,704 treasury shares                                       129.7           123.8
    Retained earnings                                                                          893.5           865.5
    Accumulated other comprehensive loss                                                       (49.1)          (36.0)
                                                                                          ----------      ----------
                 Total shareholders' equity                                                    974.1           953.3
                                                                                          ----------      ----------
                     TOTAL                                                                $  4,427.3      $  1,942.3
                                                                                          ==========      ==========
</TABLE>

Amounts shown are unaudited.

See accompanying notes to the financial statements.

                                       4

<PAGE>

                            THE LUBRIZOL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                              Six Month Period
                                                                               Ended June 30
                                                                           -----------------------
(In Millions of Dollars)                                                      2004           2003
------------------------                                                   ----------      -------
<S>                                                                        <C>             <C>
Cash provided from (used for):
Operating activities:
    Net income                                                             $     41.5      $  55.4
    Adjustments to reconcile net income to cash provided
       by operating activities:
           Depreciation and amortization                                         60.9         48.8
           Write-off of acquired in-process research and development             35.0
           Deferred income taxes                                                  1.2          1.3
           Restructuring charge                                                   1.6          3.3

           Change in current assets and liabilities:
              Receivables                                                       (77.0)       (26.6)
              Inventories                                                        (1.8)       (20.2)
              Accounts payable, accrued expenses and other
                 current liabilities                                             19.9        (18.8)
              Other current assets                                               (2.1)         1.2
           Other items - net                                                     17.0          0.1
                                                                           ----------      -------
                     Total operating activities                                  96.2         44.5
Investing activities:
    Capital expenditures                                                        (42.2)       (36.8)
    Acquisitions, net of cash acquired                                         (960.7)
    Other - net                                                                                0.3
                                                                           ----------      -------
                     Total investing activities                              (1,002.9)       (36.5)
Financing activities:
    Short-term borrowings(repayments)- net                                    1,800.1         (4.2)
    Long-term repayments                                                       (934.9)        (0.2)
    Long-term borrowings                                                         25.0
    Dividends paid                                                              (26.8)       (26.7)
    Stock options exercised                                                       5.5          2.1
                                                                           ----------      -------
                     Total financing activities                                 868.9        (29.0)
Effect of exchange rate changes on cash                                           6.4          4.5
                                                                           ----------      -------
Net decrease in cash and short-term
    investments                                                                 (31.4)       (16.5)
Cash and short-term investments at beginning of period                          258.7        266.4
                                                                           ----------      -------
Cash and short-term investments at end of period                           $    227.3      $ 249.9
                                                                           ==========      =======
</TABLE>

Amounts shown are unaudited.

See accompanying notes to the financial statements.

                                       5

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

1.    BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements
      have been prepared in accordance with generally accepted accounting
      principles for interim financial information and Article 10 of Regulation
      S-X. Accordingly, they do not include all of the information and footnotes
      required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments
      (consisting of normal recurring accruals unless otherwise noted)
      considered necessary for a fair presentation have been included. Operating
      results for the three months and six months ended June 30, 2004 are not
      necessarily indicative of the results that may be expected for the year
      ending December 31, 2004.

      The balance sheet at December 31, 2003 has been derived from the audited
      financial statements at that date but does not include all of the
      information and footnotes required by accounting principles generally
      accepted in the United States for complete financial statements.

2.    ACQUISITIONS

      On June 3, 2004, the company consummated its acquisition of Noveon
      International, Inc. (Noveon) for cash of $920.2 million plus transaction
      costs of $10.5 million less certain seller expenses of $32.9 million and
      less cash acquired of $103.0 million. In addition, the company assumed
      $1,103.1 million of long-term indebtedness from Noveon. Noveon had 2003
      revenues of $1,135.9 million. Similar to Lubrizol, Noveon is a global
      producer and marketer of technologically advanced specialty materials and
      chemicals used in a broad range of consumer and industrial applications.
      Noveon's businesses include a number of industry-leading product
      franchises marketed under some of the industry's most recognized brand
      names. These global brands include Carbopol(R) acrylic thickeners for
      personal care, TempRite(R) chlorinated polyvinyl chloride resins and
      compounds, Estane(R) thermoplastic polyurethane and Hycar(R) reactive
      liquid polymers for engineering adhesives and water-borne acrylic
      emulsions for performance coatings. The acquisition of Noveon
      significantly expands the company's products and technologies for the
      global coatings and personal care markets.

      The acquisition and related costs were financed with the proceeds of a
      $2,450.0 million 364-day bridge credit facility (see Note 9). Shortly
      after the acquisition, the company repaid substantially all of the assumed
      long-term debt with proceeds of the temporary bridge loan. The temporary
      bridge loan is expected to be replaced with the proceeds of permanent
      financing to be obtained by the end of the third quarter of 2004 in the
      form of a term loan, debt securities and an equity issuance. At June 30,
      2004, there was $1,797.0 million outstanding on the temporary bridge loan.

      The consolidated balance sheet of the company as of June 30, 2004 reflects
      the acquisition of Noveon under the purchase method of accounting. Various
      assets acquired and liabilities assumed, primarily working capital
      accounts, of Noveon have been recorded at estimated fair values as
      determined by the company's management based on the information currently
      available. Appraisals of long-lived assets and identifiable intangible
      assets, including an evaluation of in-process research and development
      projects, are currently underway and will be completed at various times
      within the next twelve months. In addition, the valuations of the
      company's projected pension and other post-employment benefit obligations
      are also in process and estimates have been reflected in the preliminary
      allocation of purchase price. Such amounts are subject to adjustment based
      on the completion of

                                       6

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      the valuations and appraisals. Accordingly, the preliminary purchase price
      allocation is subject to revision.

      The purchase price includes the estimated fair value of research and
      development projects totaling $35.0 million that, as of the acquisition
      date, had not reached technological feasibility and had no alternative
      future use. As a result, this amount was immediately expensed in the
      consolidated statement of income in the second quarter of 2004. The
      inventory step-up to fair value totaled $24.2 million and the company
      expensed $4.9 million of the inventory step-up to cost of sales in the
      second quarter of 2004. The company estimates that $4.9 million of
      inventory step-up will be expensed to cost of sales in the third quarter
      of 2004. As the remaining step-up relates to inventories accounted for on
      the LIFO (last-in, first-out) method of accounting, the company does not
      anticipate that additional amounts of the step-up will be expensed through
      cost of sales in 2004.

      The following unaudited pro forma data summarizes the results of
      operations for the three-month and six-month periods ended June 30, 2004
      and 2003 as if the Noveon acquisition had been completed as of the
      beginning of the periods presented. The pro forma data gives effect to
      actual operating results prior to the acquisition. Adjustments to cost of
      sales for the inventory step-up charge, intangible asset amortization,
      interest expense and income taxes related to the acquisition are reflected
      in the pro forma data. In addition, the company has assumed the bridge
      loan used to finance the acquisition at the beginning of the period was
      replaced with long-term financing, consisting of both debt and equity, at
      the end of the fourth month of the six-month periods ended June 30, 2004
      and 2003. These pro forma amounts do not purport to be indicative of the
      results that would have actually been obtained if the acquisition had
      occurred as of the beginning of the periods presented or that may be
      obtained in the future.

<TABLE>
<CAPTION>
                                 Three Month Period             Six Month Period
                                   Ended June 30                  Ended June 30
                              ------------------------      -------------------------
                                2004            2003           2004           2003
                              ---------      ---------      ---------      ----------
<S>                           <C>            <C>            <C>            <C>
Total revenues                $   939.0      $   807.1      $ 1,837.9      $  1,596.4
                              =========      =========      =========      ==========
Income before cumulative
 effect of change in
 accounting principle         $     9.1      $     0.0      $    48.2      $     27.4
                              =========      =========      =========      ==========
Net income                    $     9.1      $     0.0      $    48.2      $     26.7
                              =========      =========      =========      ==========
Income per share before
 cumulative effect of
 change in accounting
 principle                    $    0.18      $    0.00      $    0.85      $     0.49
                              =========      =========      =========      ==========
Income per share before
 cumulative effect of
 change in accounting
 principle, diluted           $    0.17      $    0.00      $    0.85      $     0.48
                              =========      =========      =========      ==========
Net income per share          $    0.18      $    0.00      $    0.85      $     0.47
                              =========      =========      =========      ==========
Net income per share,
 diluted                      $    0.17      $    0.00      $    0.85      $     0.47
                              =========      =========      =========      ==========
</TABLE>

                                        7

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

      In January 2004, the company completed the acquisition of the coatings
      hyperdispersants business of Avecia for cash totaling $133.0 million. This
      additives business is headquartered in Blackley, United Kingdom, and
      develops, manufactures and markets high-value additives that are based on
      polymeric dispersion technology and used in coatings and inks. These
      products enrich and strengthen color while reducing production costs and
      solvent emissions, and are marketed under the brand names Solsperse(TM),
      Solplus(TM) and Solthix(TM). Historical annualized revenues of this
      business are approximately $50.0 million. The company is currently in the
      process of finalizing the allocation of the purchase price for the
      hyperdispersants business purchased from Avecia, so it is possible the
      amount of intangible asset amortization or the preliminary purchase price
      allocation may change.

      The fair value of assets acquired and liabilities assumed in 2004
      acquisitions is as follows:

<TABLE>
<CAPTION>
                                    Fair Value of Assets Acquired in 2004
                                 --------------------------------------------
                                   Noveon      Hyperdispersants      Total
                                 ----------    ----------------    ----------
<S>                              <C>           <C>                 <C>
Receivables                      $    186.1       $      8.0       $    194.1
Inventories                           179.8              9.9            189.7
Other current assets                   54.8              0.1             54.9
Property and equipment                664.5              5.4            669.9
Goodwill                              738.7             74.8            813.5
Intangible assets                     527.5             42.7            570.2
Other non-current assets               21.0                              21.0
                                 ----------       ----------       ----------
 Total Assets                       2,372.4            140.9          2,513.3

Accounts payable                      164.1              2.8            166.9
Accrued expenses                      107.7              0.1            107.8
Current and long-term
 debt                               1,103.1                           1,103.1
Noncurrent liabilities                202.7              5.0            207.7
                                 ----------       ----------       ----------
Total liabilities                   1,577.6              7.9          1,585.5
                                 ----------       ----------       ----------
Increase in net assets
 from acquisitions               $    794.8       $    133.0       $    927.8
                                 ==========       ==========       ==========
</TABLE>

3.    SIGNIFICANT ACCOUNTING POLICIES

      GENERAL

      The accounting policies of Noveon are consistent, in general, with the
      accounting policies of the company. However, two more policies are being
      described due to their increased significance: acquired in-process
      research and development (IPR&D) and debt issuance costs.

      ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

      Costs to acquire IPR&D projects that have no alternative future use and
      that have not reached technological feasibility at the date of acquisition
      are expensed upon acquisition (see Note 2).

                                       8

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      DEBT ISSUANCE COSTS

      Costs incurred with the issuance of debt and credit facilities are
      capitalized and amortized over the life of the associated debt using the
      effective interest method of amortization. In June 2004, the company
      financed the Noveon acquisition with a bridge facility. Fees associated
      with the bridge facility were capitalized and are being amortized over the
      bridge financing period. A total of $11.2 million was incurred in bridge
      facility fees in June 2004 and these fees are being expensed ratably
      through September 2004 when a long-term financing arrangement is expected
      to be completed.

      NET INCOME PER SHARE

      Net income per share is computed by dividing net income by average common
      shares outstanding during the period, including contingently issuable
      shares. Net income per diluted share includes the dilutive effect
      resulting from outstanding stock options and stock awards.

      Per share amounts are computed as follows:

<TABLE>
<CAPTION>
                                          Three-Month Period                Six-Month Period
                                            Ended June 30                     Ended June 30
                                      --------------------------        --------------------------
                                        2004             2003             2004              2003
                                      ---------        ---------        ---------        ---------
<S>                                   <C>              <C>              <C>              <C>
      Numerator:
       Net income                     $     3.9        $    29.4        $    41.5        $    55.4
                                      =========        =========        =========        =========
      Denominator:
       Weighted average common
        shares outstanding                 51.9             51.7             51.8             51.7
       Dilutive effect of stock
        options and awards                  0.3              0.2              0.3              0.1
                                      ---------        ---------        ---------        ---------
       Denominator for net income
        per share, diluted                 52.2             51.9             52.1             51.8
                                      =========        =========        =========        =========

      Net income per share            $    0.08        $    0.57        $    0.80        $    1.07
                                      =========        =========        =========        =========

      Net income per share, diluted   $    0.08        $    0.57        $    0.80        $    1.07
                                      =========        =========        =========        =========
</TABLE>

      Weighted average shares issuable upon the exercise of stock options that
      were excluded from the diluted earnings per share calculations because
      they were antidilutive for the three-month and six-month periods ended
      June 30, 2004 were 1.7 million and 1.8 million, respectively, and for the
      three-month and six-month periods ended June 30, 2003 were 2.1 million and
      3.0 million, respectively.

                                       9

<PAGE>
\
                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      STOCK-BASED COMPENSATION

      The company has elected the intrinsic value method to account for employee
      stock options. The following table shows the pro forma effect on net
      income per share if the company had applied the fair value recognition
      provisions of Statement of Financial Accounting Standard No. 123,
      "Accounting for Stock-Based Compensation" (SFAS 123), to stock-based
      employee compensation.

<TABLE>
<CAPTION>
                                        Three-Month Period          Six-Month Period
                                          Ended June 30               Ended June 30
                                      --------     ---------     ---------     ---------
                                        2004         2003          2004           2003
                                      --------     ---------     ---------     ---------
<S>                                   <C>          <C>           <C>           <C>
Reported net income                   $    3.9     $    29.4     $    41.5     $    55.4
Plus: Stock-based employee
 compensation (net of tax)
 included in net income                    0.8           0.2           0.9           0.4
Less: Stock-based employee
 compensation (net of tax)
 using the fair value method              (1.4)         (1.4)         (2.4)         (2.8)
                                      --------     ---------     ---------     ---------
Pro forma net income                  $    3.3     $    28.2     $    40.0     $    53.0
                                      ========     =========     =========     =========

Reported net income per share         $   0.08     $    0.57     $    0.80     $    1.07
                                      ========     =========     =========     =========
Pro forma net income per share        $   0.06     $    0.55     $    0.77     $    1.03
                                      ========     =========     =========     =========
Reported net income per share,
 diluted                              $   0.08     $    0.57     $    0.80     $    1.07
                                      ========     =========     =========     =========
Pro forma net income per share,
 diluted                              $   0.06     $    0.54     $    0.77     $    1.02
                                      ========     =========     =========     =========
</TABLE>

      MEDICARE PRESCRIPTION DRUG IMPROVEMENT AND MODERNIZATION ACT

      In December 2003, the Medicare Prescription Drug, Improvement and
      Modernization Act was enacted, which introduced a Medicare prescription
      drug benefit and a federal subsidy to sponsors of retiree health-care
      plans that provide a benefit at least actuarially equivalent to the
      Medicare benefit. In accordance with the Financial Accounting Standards
      Board (FASB) Staff Position (FSP) SFAS 106-2, "Accounting and Disclosure
      Requirements Related to the Medicare Prescription Drug, Improvement and
      Modernization Act of 2003," the company has elected to defer recognition
      of the effects of the new Medicare Act. The accumulated postretirement
      benefit obligation and net periodic postretirement benefit cost do not
      reflect the provisions of the Act. The company estimates the annual cash
      flows from the federal subsidy to be in the range of $0.6 million to $0.8
      million, beginning in 2006. The company has not yet determined the income
      statement effect.

                                       10

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

4.    COMPREHENSIVE INCOME

      Total comprehensive income for the three-month and six-month periods ended
      June 30, 2004 and 2003 is comprised as follows:

<TABLE>
<CAPTION>
                                        Three-Month Period          Six-Month Period
                                          Ended June 30              Ended June 30
                                      ---------------------       ---------------------
                                        2004         2003          2004          2003
                                      -------       -------       -------       -------
<S>                                   <C>           <C>           <C>           <C>
Net income                            $   3.9       $  29.4       $  41.5       $  55.4
Foreign currency translation
  adjustment                            (17.5)         18.7         (18.5)         19.6
Pension plan minimum liability                                        (.3)
Treasury rate locks                       8.0                         8.0
Unrealized gains (losses)
  natural gas hedges                                   (0.5)         (0.2)         (0.5)
Unrealized gains (losses)
  interest rate swaps                    (1.7)          0.3          (2.1)          0.6
                                      -------       -------       -------       -------
Total comprehensive income (loss)     $  (7.3)      $  47.9       $  28.4       $  75.1
                                      =======       =======       =======       =======
</TABLE>

5.    SEGMENT REPORTING

      Beginning in the second quarter of 2004, the company reorganized as a
      result of the Noveon acquisition into two operating segments: lubricant
      additives and specialty chemicals. The lubricant additives segment, also
      referred to as Lubrizol Additives, comprises approximately 55% of the
      company's annualized consolidated revenues and is comprised of the
      company's previous businesses in fluid technologies for transportation,
      advanced fluid systems, emulsified products and the former industrial
      additives product group of fluid technologies for industry. The specialty
      chemicals segment, also referred to as the Noveon segment, comprises
      approximately 45% of the company's annualized consolidated revenues and is
      comprised of the businesses of the acquired Noveon International and the
      former performance chemicals group of fluid technologies for industry.

      Lubricant additives consists of three product lines: engine additives;
      specialty driveline and industrial additives; and services and equipment.
      Engine additives is comprised of additives for lubricating engine oils,
      such as for gasoline, diesel, marine and stationary gas engines and
      additive components, additives for fuel products and refinery and oil
      field chemicals and PuriNOx((TM)) low-emissions diesel fuel. In addition,
      this segment sells additive components and viscosity improvers within its
      lubricant and fuel additives product lines. Driveline and industrial
      additives is comprised of additives for driveline oils, such as automatic
      transmission fluids, gear oils and tractor lubricants and industrial
      additives, such as additives for hydraulic, grease and metalworking
      fluids, as well as compressor lubricants. Services and equipment is
      comprised of outsourcing strategies for supply chain and knowledge center
      management, fluid metering devices, particulate emission trap devices and
      FluiPak((TM)) sensor systems. The company's lubricant additives product
      lines are generally produced in shared manufacturing facilities and sold
      largely to a common customer base.

      The specialty chemicals segment consists of consumer specialties,
      specialty materials and performance coatings product lines. The consumer
      specialties product line is characterized by global production of acrylic
      thickeners, specialty monomers, film formers, fixatives, emollients,
      silicones, surfactants, botanicals, active pharmaceutical ingredients and
      intermediates, process chemicals, benzoate preservatives, fragrances,
      defoamers, synthetic food dyes and natural colorants. The company markets

                                       11

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      products in the consumer specialties product line to the following primary
      end-use industries: personal care, pharmaceuticals, textiles and food and
      beverage. The consumer specialties products are sold to customers
      worldwide and these customers include major manufacturers of cosmetics,
      personal care products, water soluble polymers, household products, soft
      drinks and food products. The specialty materials product line is
      characterized as the largest global supplier of chlorinated polyvinyl
      chloride (CPVC) resins and compounds and reactive liquid polymers (RLP),
      and as a leading North American producer of rubber and lubricant
      antioxidants and rubber accelerators. The specialty materials product line
      is also a leading producer of thermoplastic polyurethane (TPU) and
      cross-linked polyethylene compounds (PEX). The company markets products of
      specialty materials through the primary product categories of specialty
      plastics and polymer additives. Specialty materials products are sold to a
      diverse customer base comprised of major manufacturers in the
      construction, automotive, telecommunications, electronics, recreation and
      aerospace industries. The performance coatings product line includes
      high-performance polymers for specialty paper, printing and packaging,
      industrial and architectural specialty coatings and textile applications.
      The company markets the performance coatings products through the primary
      product categories of performance polymers and coatings and textile
      performance chemicals. Performance coatings products serve major companies
      in the specialty paper, printing and packaging, paint and coatings, and
      textile industries.

      The company primarily evaluates performance and allocates resources based
      on segment operating income, defined as revenues less expenses
      identifiable to the product lines included within each segment, as well as
      projected future returns. The company has reclassified certain
      administrative expenses that were previously deducted in arriving at
      segment operating income and are now classified as unallocated corporate
      expenses. Segment operating income will reconcile to consolidated income
      before tax by deducting the write-off of acquired IPR&D projects,
      restructuring charges, net interest expense, corporate expenses and
      corporate other income (expense) that are not directly attributable to the
      operating segments.

      The following table presents a summary of the company's segments for the
      three-month and six-month periods ended June 30, 2004 and 2003 based on
      the current reporting structure. Current year and prior year amounts have
      been restated to reflect the new reporting classifications of products
      between the two operating segments and the new definition of segment
      operating income.

                                       12

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                         Three-Month Period             Six-Month Period
                                           Ended  June 30                Ended June 30
                                       ----------------------      --------------------------
                                         2004          2003           2004            2003
                                       --------      --------      ----------      ----------
<S>                                    <C>           <C>           <C>             <C>
Revenues from external
 customers:
 Lubricant additives                   $  522.1      $  453.3      $  1,013.3      $    903.2
 Specialty chemicals                      199.4          61.4           286.9           119.7
                                       --------      --------      ----------      ----------
  Total revenues                       $  721.5      $  514.7      $  1,300.2      $  1,022.9
                                       ========      ========      ==========      ==========

Segment operating income (loss):
 Lubricant additives                   $   72.8      $   58.6      $    135.5      $    114.2
 Specialty chemicals                       11.4            .6            16.4             1.4
                                       --------      --------      ----------      ----------
  Segment operating
   income                                  84.2          59.2           151.9           115.6

 Corporate expenses                       (12.3)        (10.1)          (21.6)          (20.4)
 Corporate other income
  (expense)                                (2.0)          2.1             1.8             3.3
 Write-off of acquired
  in-process research
  and development                         (35.0)                        (35.0)
 Restructuring charges                     (8.0)         (3.5)           (8.0)           (7.0)
 Interest expense - net                   (17.1)         (5.1)          (22.4)          (10.0)
                                       --------      --------      ----------      ----------
 Income before income taxes            $    9.8      $   42.6      $     66.7      $     81.5
                                       ========      ========      ==========      ==========
</TABLE>

<TABLE>
<CAPTION>
                                            As of                As of
                                        June 30, 2004       December 31, 2003
                                       ---------------      -----------------
<S>                                    <C>                  <C>
Segment total assets:
 Lubricant additives                      $  1,460.8           $  1,168.1
 Specialty chemicals                         2,632.1                403.6
                                          ----------           ----------
  Total segment assets                       4,092.9              1,571.7

Corporate assets                               334.4                370.6
                                          ----------           ----------
Total consolidated assets                 $  4,427.3           $  1,942.3
                                          ==========           ==========
</TABLE>

                                       13

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

6.    GOODWILL AND INTANGIBLE ASSETS

      The major components of the company's identifiable intangible assets are
      technology, land use rights, non-compete agreements, distributor networks,
      trademarks, customer lists and patents. Excluding the non-amortized
      trademarks, which are indefinite and will not be amortized, the intangible
      assets are amortized over the lives of the agreements or other periods of
      value, which range between five and forty years. The following table shows
      the components of the company's identifiable intangible assets as of June
      30, 2004 and December 31, 2003.

<TABLE>
<CAPTION>
                                         As of June 30, 2004     As of December 31, 2003
                                     -------------------------   ------------------------
                                      Gross                       Gross
                                     Carrying     Accumulated    Carrying    Accumulated
                                      Amount      Amortization    Amount     Amortization
                                     --------     ------------   --------    ------------
<S>                                  <C>          <C>            <C>         <C>
Amortized intangible assets:
  Customer lists                     $  253.7       $   1.6
  Technology                            178.7          20.7       $  38.7       $  18.3
  Trademarks                             87.2           1.8           2.2           1.1
  Patents                                12.6           0.8           1.0           0.3
  Non-compete agreements                  9.4           2.8           6.9           2.0
  Land use rights                         7.1           0.7           7.1           0.6
  Distributor networks                    3.4           0.3           3.3           0.3
  Other                                  10.7           0.6          10.6           0.4
                                     --------       -------       -------       -------
   Total amortized
     intangible assets                  562.8          29.3          69.8          23.0

Non-amortized trademarks                 57.5                        15.6
                                     --------       -------       -------       -------
Total                                $  620.3       $  29.3       $  85.4       $  23.0
                                     ========       =======       =======       =======
</TABLE>

      The fair value of intangible assets acquired in acquisitions during 2004
      as of the acquisition date is shown below by major asset class. The
      intangible assets will be amortized over periods ranging from three to
      twenty years. The company is currently in the process of finalizing the
      allocation of the purchase price for the Noveon acquisition and the
      hyperdispersants business purchased from Avecia, so it is possible the
      amount of amortization or the purchase price allocation may change.

<TABLE>
<CAPTION>
                                        Fair Value of Assets Acquired in 2004
                                      ----------------------------------------
                                       Noveon     Hyperdispersants      Total
                                      --------    ----------------    --------
<S>                                   <C>         <C>                 <C>
Amortized intangible assets:
  Customer lists                      $  230.0        $   24.0        $  254.0
  Technology                             140.0                           140.0
  Trademarks                              85.0                            85.0
  Acquired in-process
    research and development              35.0                            35.0
  Patents                                                 11.6            11.6
  Non-compete agreements                   2.5                             2.5
  Other                                                    0.1             0.1
                                      --------        --------        --------
   Total amortized
     Intangible assets                   492.5            35.7           528.2

Non-amortized trademarks                  35.0             7.0            42.0
                                      --------        --------        --------
Total                                 $  527.5        $   42.7        $  570.2
                                      ========        ========        ========
</TABLE>

                                       14

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      Based on current estimates of the fair value of intangible assets for
      recent acquisitions, annual intangible amortization expense for the next
      five years will approximate $25.4 million in 2004, $37.4 million in 2005,
      $37.0 million in 2006, $35.5 million in 2007 and $8.5 million in 2008.

      The carrying amount of goodwill by reporting segment is as follows:

<TABLE>
<CAPTION>
                                            Lubricant        Specialty
                                            Additives        Chemicals         Total
                                            ---------        ---------       ----------
<S>                                         <C>              <C>             <C>
Balance, December 31, 2002                  $    95.8        $    72.6       $    168.4
  Goodwill acquired                                               36.2             36.2
  Translation and other adjustments               3.5              0.6              4.1
                                            ---------        ---------       ----------
Balance, December 31, 2003                       99.3            109.4            208.7


  Goodwill acquired                                              813.1            813.1
  Translation and other adjustments              (0.4)             1.2               .8
                                            ---------        ---------       ----------
Balance, June 30, 2004                      $    98.9        $   923.7       $  1,022.6
                                            =========        =========       ==========
</TABLE>

7.    PENSION AND POSTRETIREMENT BENEFITS

      The components of net periodic pension cost and post-employment benefits
      costs consisted of the following:

<TABLE>
<CAPTION>
                                        Three-Month Period          Six-Month Period
                                          Ended June 30              Ended June 30
                                       -------------------       ---------------------
                                        2004         2003         2004          2003
                                       ------       ------       -------       -------
<S>                                    <C>          <C>          <C>           <C>
Pension Benefits:
 Service cost - benefits earned
  during period                        $  5.2       $  3.6       $   8.7       $   7.2
 Interest cost on projected
  benefit obligation                      8.1          5.6          12.9          11.2
 Expected return on plan assets          (7.9)        (6.6)        (13.2)        (13.2)
 Amortization of prior service
  costs                                   0.6          0.8           1.0           1.6
 Amortization of initial net
  asset obligation                       (0.2)        (0.2)         (0.4)         (0.4)

 Settlements (gain) loss                               0.1                         0.2
 Recognized net actuarial
  (gain)loss                              1.5          0.2           1.8           0.4
                                       ------       ------       -------       -------
 Net periodic pension cost             $  7.3       $  3.5       $  10.8       $   7.0
                                       ======       ======       =======       =======

Other Benefits:
 Service cost - benefits earned
  during period                        $  0.7       $  0.5       $   1.3       $   1.0
 Interest cost on projected
  benefit obligation                      1.8          1.7           3.5           3.4
 Amortization of prior service
  costs                                  (1.5)        (1.4)         (3.1)         (2.8)
 Recognized net actuarial
  (gain)loss                              0.6          0.6           1.3           1.2
                                       ------       ------       -------       -------
 Net periodic benefit cost             $  1.6       $  1.4       $   3.0       $   2.8
                                       ======       ======       =======       =======
</TABLE>

                                       15

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      Expected employer contributions for pension benefits in 2004 consist of
      $10.5 million to the United States qualified plans including Noveon, $2.5
      million to the United States non-qualified plan and a range of $5.0
      million to $6.0 million for the United Kingdom plan. The expected
      contribution to the non-qualified U.S. plan, which is unfunded, represents
      an actuarial estimate of future assumed payments based on historic
      retirement and payment patterns. Actual amounts to be paid could differ
      from this estimate. Cash payments to the U.K. plan were $1.7 million for
      the second quarter of 2004 and $2.5 million for the first six months of
      2004. No cash payments were made to the U.S. plans in 2004.

      The company anticipates recording an estimated $6.0 million settlement
      charge for the U.S. pension plans in the third quarter of 2004 associated
      with workforce reductions announced in June 2004.

8.    RESTRUCTURING CHARGE

      In June 2004, the company recorded a restructuring charge of $8.0 million,
      or $0.10 per share, related to workforce reductions and asset impairments
      as a result of the Noveon acquisition. The reductions are estimated to
      result in annual pre-tax savings of approximately $16.0 million.

      The restructuring charge consisted of $6.4 million for workforce
      reductions and a write-off of $1.6 million of impaired assets related to
      PuriNOx(TM) technology. The company eliminated 95 positions, primarily at
      the company's Wickliffe, Ohio headquarters. These reductions are expected
      to be completed by the end of the third quarter in 2004. Cash expenditures
      through June 30, 2004 were $1.3 million, with a remaining accrued
      liability of $5.1 million at June 30, 2004 relating to employee severance
      costs.

      The second-half 2004 pre-tax restructuring charge will include an
      estimated $6.0 million non-cash pension benefit settlement charge and the
      remainder of the employee severance costs associated with the workforce
      reductions, approximating $3.0 million.

      At December 31, 2003, there was a liability recorded of $12.4 million,
      primarily related to the 2003 workforce reductions in the United States
      that occurred in November 2003. Cash expenditures were $0.4 million for
      the second quarter of 2004 and $11.8 million for the first six months of
      2004. An accrued liability of $0.6 million remains at June 30, 2004.

      The following table shows the reconciliation of the June 30, 2004
liability.

<TABLE>
<CAPTION>
                            Three-Month Period        Six-Month Period
                            Ended June 30, 2004      Ended June 30, 2004
                            -------------------      -------------------
<S>                         <C>                      <C>
Beginning balance                 $  1.0                   $  12.4
Restructuring charge                 8.0                       8.0
Less cash paid                      (1.7)                    (13.1)
Less asset impairments              (1.6)                     (1.6)
                                  ------                   -------
Balance, June 30, 2004            $  5.7                   $   5.7
                                  ======                   =======
</TABLE>

                                       16

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

9.    DEBT AND FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
                                                          As of               As of
                                                       June 30, 2004     December 31, 2003
                                                       -------------     -----------------
<S>                                                    <C>               <C>
Short-term debt consists of:
  Short-term debt expected to be refinanced:
    Borrowings under bridge credit facilities           $  1,797.0
  Seller notes, at 13%                                       186.4
  Yen denominated, at weighted-average rates
    of .7% and .8%                                             4.6           $    2.8
  Current portion of long-term debt                            0.1                0.1
                                                        ----------           --------
Total                                                   $  1,988.1           $    2.9
                                                        ==========           ========

Long-term debt consists of:
  Borrowings under revolving credit
    facilities                                          $     75.0
  5.875% notes, due 2008, including remaining
    unamortized gain on termination of swaps
    of $12.1 and $13.4                                       212.1           $  213.4
  7.25% debentures, due 2025                                 100.0              100.0
  Debt supported by long-term banking
    arrangements:
   Commercial paper at a weighted-average
    rate of 1.1%                                                                 50.0
   Marine terminal refunding revenue bonds,
    at 1.3%, due 2018                                                            18.4
   Other                                                       5.2                5.0
                                                        ----------           --------
                                                             392.3              386.8
Less current portion                                           0.1                0.1
                                                        ----------           --------
Total                                                   $    392.2           $  386.7
                                                        ==========           ========
</TABLE>

      Amounts due on total debt are $191.1 million in 2004, $1,797.1 million in
      2005, $79.7 million in 2006, $0.1 million in 2007, $212.3 million in 2008
      and $100.0 million thereafter. While the company intends to refinance the
      bridge loan in 2004, the bridge loan is not due and payable until May
      2005.

      In May 2004, the company obtained a 364-day credit facility of $2,450.0
      million for the purpose of bridge financing the Noveon acquisition (see
      Note 2). This credit facility enables the company to borrow at or below
      the U.S. prime rate. In June 2004, the company borrowed $1,797.0 million
      to finance the Noveon acquisition and repay a portion of the assumed
      Noveon debt. In addition, in July 2004, the company borrowed $175.0
      million to repay the outstanding seller notes also assumed as part of the
      Noveon acquisition. The seller notes were classified as short-term debt as
      they were paid with proceeds of the bridge financing in July 2004. The
      company plans to replace the bridge credit facility with permanent
      financing in the near-term. The permanent financing is expected to include
      the issuance of approximately $425.0 million in new common equity,
      $1,100.0 million in unsecured public bonds, with the remainder being
      financed through bank loans.

      As of June 30, 2004, the company had a committed revolving credit facility
      of $350.0 million that expires on July 17, 2006. This facility permits the
      company to borrow at or below the United States prime rate. As of June 30,
      2004, there were outstanding borrowings under these facilities of $75.0
      million, the proceeds of which were used to fund the repayment of
      previously outstanding commercial paper and marine terminal bonds, and
      liabilities associated with the termination of various floating-to-fixed
      rate swaps. In

                                       17

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      addition, prior to the closing of the Noveon acquisition, the company
      obtained an amendment to this facility to revise the financial covenant
      restrictions until September 30, 2004. This facility also permits the
      company to refinance beyond one year $350.0 million of debt which by its
      terms is due within one year. As a result, the company had classified as
      long-term, at December 31, 2003, both the portion of commercial paper
      borrowings then expected to remain outstanding throughout the following
      year and the amount due under the marine terminal refunding revenue bonds,
      whose bondholders had the right to put the bonds back to the company.

      In January 2004, the company obtained a revolving credit facility of euro
      50 million for the purpose of financing acquisitions. On June 30, 2004,
      the company repaid the outstanding euro 43.0 million borrowed under this
      facility in January 2004 to finance a portion of the hyperdispersants
      acquisition. The company cancelled this credit facility effective June 30,
      2004.

      In May 2000, the company borrowed $18.4 million through the issuance of
      marine terminal refunding revenue bonds, the proceeds of which were used
      to repay previously issued marine terminal refunding revenue bonds. The
      bonds had a stated maturity of July 1, 2018; however, the company called
      the bonds, at par, effective June 1, 2004.

      In July 2002, the company terminated its interest rate swap agreements
      expiring December 2008, which converted fixed rate interest on $100.0
      million of its 5.875% debentures to a variable rate. In terminating the
      swaps, the company received cash of $18.1 million, which is being
      amortized as a reduction of interest expense through December 1, 2008, the
      due date of the underlying debt. Gains and losses on terminations of
      interest rate swap agreements designated as fair value hedges are deferred
      as an adjustment to the carrying amount of the outstanding obligation and
      amortized as an adjustment to interest expense related to the obligation
      over the remaining term of the original contract life of the terminated
      swap agreement. In the event of early extinguishment of the outstanding
      obligation, any unamortized gain or loss from the swaps would be
      recognized in the consolidated statement of income at the time of such
      extinguishment. In 2002, the company recorded a $17.3 million unrealized
      gain, net of accrued interest, on the termination of the interest rate
      swaps as an increase in the underlying long-term debt. The remaining
      unrealized gain is $12.1 million and $13.4 million at June 30, 2004 and
      December 31, 2003, respectively.

      In June 2004, the company entered into interest rate swap agreements that
      effectively convert the interest on $200.0 million of outstanding 5.875%
      notes due 2008 to a variable rate of six-month LIBOR plus 111 basis
      points. These swaps are designated as fair value hedges of underlying
      fixed rate debt obligations and are recorded as an increase in noncurrent
      assets and long-term debt. These interest rate swaps qualify for the
      short-cut method for assessing hedge effectiveness per SFAS 133,
      "Accounting for Derivative Instruments and Hedging Activities."  The
      change in fair value of the interest rate swaps at June 30, 2004 was $1.4
      million.

      The company also has an interest rate swap agreement that expires in
      October 2006 that exchanges variable rate interest obligations on a
      notional principal amount of Japanese yen 500 million for a fixed rate of
      2.0%. This interest rate swap is designated as a cash flow hedge.

                                       18

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      After the announcement of the Noveon acquisition, the company's long-term
      debt and commercial paper credit ratings were reduced. The credit rating
      change eliminated the company's access to the commercial paper market. As
      a result, in April 2004, the company terminated its interest rate swap
      agreements expiring in March 2005, which exchanged variable rate interest
      obligations on a notional principal amount of $50.0 million for a fixed
      rate of 7.6%. The termination of the swap agreements resulted in a $2.9
      million pre-tax charge recognized in the second quarter 2004.

      In June 2004, the company entered into several Treasury rate lock
      agreements with an aggregate notional principal amount of $900.0 million,
      all maturing September 30, 2004, whereby the company has locked in
      Treasury rates relating to a portion of its anticipated $1,100.0 million
      public bond issuance. These rate locks are designated as cash flow hedges
      of the forecasted semi-annual interest payments associated with the
      expected debt issuance. Accordingly, the change in fair value of these
      contracts of $12.2 million ($8.0 million net of tax) was recorded in other
      comprehensive income at June 30, 2004.

10.   CONTINGENCIES

      The company has numerous purchase commitments for materials, supplies and
      energy in the ordinary course of business. The company has numerous sales
      commitments for product supply contracts in the ordinary course of
      business.

      GENERAL. There are pending or threatened claims, lawsuits and
      administrative proceedings against the company or its subsidiaries, all
      arising from the ordinary course of business with respect to commercial,
      product liability and environmental matters, which seek remedies or
      damages. The company believes that any liability that may finally be
      determined with respect to commercial and product liability claims should
      not have a material adverse effect on the company's consolidated financial
      position, results of operations or cash flows. From time to time, the
      company is also involved in legal proceedings as a plaintiff involving
      contract, patent protection, environmental and other matters. Gain
      contingencies, if any, are recognized when they are realized.

      ENVIRONMENTAL. The company and its subsidiaries are generators of both
      hazardous and non-hazardous wastes, the treatment, storage, transportation
      and disposal of which are regulated by various laws and governmental
      regulations. Although the company believes past operations were in
      substantial compliance with the then-applicable regulations, either the
      company or the predecessor company of Noveon, Performance Materials
      Segment of Goodrich, have been designated as a potentially responsible
      party (PRP) by the U.S. Environmental Protection Agency (EPA), or similar
      state agencies, in connection with several disposal sites. These laws and
      regulations, including the Comprehensive Environmental Response,
      Compensation and Liability Act of 1980 and similar state laws, generally
      impose liability for costs to investigate and remediate contamination
      without regard to fault and under certain circumstances liability may be
      joint and several resulting in one responsible party being held
      responsible for the entire obligation. Liability may also include damages
      to natural resources.

      The company initiates corrective and/or preventive environmental projects
      to ensure environmental compliance and safe and lawful activities at its
      current operations. The company also conducts a compliance and management
      systems audit program.

                                       19

<PAGE>

                            THE LUBRIZOL CORPORATION
                   Notes to Consolidated Financial Statements
                  Amounts in millions (except per share data)
                                  June 30, 2004

      The company's environmental engineers and consultants review and monitor
      environmental issues at past and existing operating sites, as well as
      off-site disposal sites at which the company has been identified as a PRP.
      This process includes investigation and remedial action selection and
      implementation, as well as negotiations with other PRPs and governmental
      agencies. Our estimates of environmental liabilities are based on the
      results of this process.

      The company's environmental reserves totaled $30.6 million at June 30,
      2004 and $9.8 million at December 31, 2003. Of these amounts, $3.7 million
      and $1.2 million were included in current liabilities at June 30, 2004 and
      December 31, 2003, respectively.

      The increase in the company's environmental reserves at June 30, 2004
      compared with December 31, 2003, primarily was due to the Noveon
      acquisition. The company's June 30, 2004 balance sheet includes
      liabilities, measured on an undiscounted basis, of $19.4 million to cover
      future environmental expenditures either payable by Noveon or
      indemnifiable by Goodrich. Accordingly, the current portion of the
      environmental obligations of $1.2 million is recorded in accrued expenses
      and $1.4 million of the recovery due from Goodrich is recorded in accounts
      receivable. Non-current liabilities include $18.2 million and other
      non-current assets include $6.7 million reflecting the recovery due from
      Goodrich.

      Goodrich provided Noveon with an indemnity for various environmental
      liabilities. The company estimates Goodrich's share of such currently
      identified liabilities under the indemnity, which extends to 2011, to be
      about $8.1 million. In addition to Goodrich's indemnity, several other
      indemnities from third parties such as past owners relate to specific
      environmental liabilities. Goodrich and other third party indemnitors are
      currently indemnifying Noveon for several environmental remediation
      projects. Goodrich's share of all of these liabilities may increase to the
      extent such third parties fail to honor their indemnity obligations
      through 2011.

      The company believes that its environmental accruals are adequate based on
      currently available information. The company believes that it is
      reasonably possible that additional costs may be incurred beyond the
      amounts accrued as a result of new information, newly discovered
      conditions or a change in the law. Additionally, as the indemnification
      from Goodrich extends through 2011, changes in assumptions regarding when
      costs will be incurred may result in additional expenses to the company.
      However, the additional costs, if any, cannot currently be estimated.

11.   GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION

      The repayment of the debt securities is expected to be unconditionally
      guaranteed on a joint and several basis by the company and its direct and
      indirect, 100 percent-owned, domestic subsidiaries. The following
      supplemental consolidating condensed financial information presents the
      balance sheets of the company as of June 30, 2004 and December 31, 2003
      and its statements of income for the three-month and six-month periods
      ended June 30, 2004 and 2003 and its statements of cash flows for the
      six-month periods ended June 30, 2004 and 2003.

                                       20

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                      Condensed Consolidating Statement of Income
                                                         Three-Month Period Ended June 30, 2004
                                        --------------------------------------------------------------------------
                                        Parent         Subsidiary        Other                           Total
                                        Company        Guarantors     Subsidiaries    Eliminations    Consolidated
                                        --------       ----------     ------------    ------------    ------------
<S>                                     <C>            <C>            <C>             <C>             <C>
Net sales                               $  319.0        $  135.8        $  368.7        $ (103.3)       $  720.2
Royalties and other revenues                 0.9             0.4                                             1.3
                                        --------        --------        --------        --------        --------
Total revenues                             319.9           136.2           368.7          (103.3)          721.5
                                        --------        --------        --------        --------        --------

Cost of sales                              234.9           108.7           289.2          (103.3)          529.5
Selling and administrative
  expenses                                  40.2            10.8            19.2                            70.2
Research, testing and
  development expenses                      27.7             5.6            12.2                            45.5
Amortization of intangible
  assets                                     0.5             3.0             1.0                             4.5
Write-off of acquired in-process
  research and development                                  35.0                                            35.0
Restructuring charge                         5.7             0.6             1.7                             8.0
                                        --------        --------        --------        --------        --------
Total cost and expenses                    309.0           163.7           323.3          (103.3)          692.7

Other income (expense) - net                 7.0             3.7           (11.7)           (0.9)           (1.9)
Interest income (expense) - net            (14.0)           (3.3)            0.2                           (17.1)
Equity in income of subsidiaries             1.4             6.8                            (8.2)
                                        --------        --------        --------        --------        --------
Income (loss) before income taxes            5.3           (20.3)           33.9            (9.1)            9.8
Provision for (benefit from)
  income taxes                               1.5            (3.8)            8.2                             5.9
                                        --------        --------        --------        --------        --------
Net income (loss)                       $    3.8        $  (16.5)       $   25.7        $   (9.1)       $    3.9
                                        ========        ========        ========        ========        ========
</TABLE>

                                       21

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                                Condensed Consolidating Statement of Income
                                                                    Six-Month Period Ended June 30, 2004
                                          ------------------------------------------------------------------------------------
                                            Parent             Subsidiary          Other                              Total
                                           Company             Guarantors       Subsidiaries      Eliminations     Consolidated
                                          ----------           ----------       ------------      ------------     ------------
<S>                                       <C>                  <C>              <C>               <C>              <C>
Net sales                                 $    615.8           $    198.4        $    682.1        $   (198.2)      $  1,298.1
Royalties and other revenues                     1.6                  0.4               0.1                                2.1
                                          ----------           ----------        ----------        ----------       ----------
Total revenues                                 617.4                198.8             682.2            (198.2)         1,300.2
                                          ----------           ----------        ----------        ----------       ----------

Cost of sales                                  452.4                156.5             545.1            (198.2)           955.8
Selling and administrative
  expenses                                      72.8                 16.6              32.6                              122.0
Research, testing and
  development expenses                          55.2                  7.1              24.0                               86.3
Amortization of intangible
  assets                                         1.5                  3.6               1.3                                6.4
Write-off of acquired in-process
  research and development                                           35.0                                                 35.0
Restructuring charge                             5.7                  0.6               1.7                                8.0
                                          ----------           ----------        ----------        ----------       ----------
Total cost and expenses                        587.6                219.4             604.7            (198.2)         1,213.5

Other income (expense) - net                    19.9                  6.8             (23.0)             (1.3)             2.4
Interest income (expense) - net                (19.6)                (3.3)              0.5                              (22.4)
Equity in income of subsidiaries                21.4                  8.4                               (29.8)
                                          ----------           ----------        ----------        ----------       ----------
Income (loss) before income taxes               51.5                 (8.7)             55.0             (31.1)            66.7
Provision for (benefit from)
  income taxes                                  10.0                 (0.2)             15.4                               25.2
                                          ----------           ----------        ----------        ----------       ----------
Net income (loss)                         $     41.5           $     (8.5)       $     39.6        $    (31.1)      $     41.5
                                          ==========           ==========        ==========        ==========       ==========
</TABLE>

                                       22

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                          Condensed Consolidating Statement of Income
                                                             Three-Month Period Ended June 30, 2003
                                        -----------------------------------------------------------------------------
                                          Parent         Subsidiary        Other                            Total
                                          Company        Guarantors     Subsidiaries     Eliminations    Consolidated
                                        ----------       ----------     ------------     ------------    ------------
<S>                                     <C>              <C>            <C>              <C>             <C>
Net sales                               $    277.4       $     49.7      $    279.0       $    (91.8)     $    514.3
Royalties and other revenues                   0.7              0.1            (0.4)                             0.4
                                        ----------       ----------      ----------       ----------      ----------
Total revenues                               278.1             49.8           278.6            (91.8)          514.7
                                        ----------       ----------      ----------       ----------      ----------

Cost of sales                                198.4             41.3           222.8            (89.9)          372.6
Selling and administrative
  expenses                                    33.9              5.4            10.9                             50.2
Research, testing and
  development expenses                        28.7              1.6            10.3                             40.6
Amortization of intangible
  assets                                       0.7              0.4             0.1                              1.2
Restructuring charge                                                            3.5                              3.5
                                        ----------       ----------      ----------       ----------      ----------
Total cost and expenses                      261.7             48.7           247.6            (89.9)          468.1

Other income (expense) - net                   4.6              6.1            (9.8)             0.2             1.1
Interest income (expense) - net               (5.4)                             0.3                             (5.1)
Equity in income of subsidiaries              19.7              3.4                            (23.1)
                                        ----------       ----------      ----------       ----------      ----------
Income before income taxes                    35.3             10.6            21.5            (24.8)           42.6
Provision for income taxes                     4.7              2.6             6.5             (0.6)           13.2
                                        ----------       ----------      ----------       ----------      ----------
Net income                              $     30.6       $      8.0      $     15.0       $    (24.2)     $     29.4
                                        ==========       ==========      ==========       ==========      ==========
</TABLE>

                                       23

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                            Condensed Consolidating Statement of Income
                                                               Six-Month Period Ended June 30, 2003
                                        ------------------------------------------------------------------------------
                                          Parent        Subsidiary         Other                             Total
                                          Company       Guarantors      Subsidiaries    Eliminations      Consolidated
                                        ----------      ----------      ------------    ------------      ------------
<S>                                     <C>             <C>             <C>             <C>               <C>
Net sales                               $    534.5      $     97.0       $    557.4      $   (167.6)       $  1,021.3
Royalties and other revenues                   1.4             0.2                                                1.6
                                        ----------      ----------       ----------      ----------        ----------
Total revenues                               535.9            97.2            557.4          (167.6)          1,022.9
                                        ----------      ----------       ----------      ----------        ----------

Cost of sales                                388.8            77.5            443.2          (168.6)            740.9
Selling and administrative
  expenses                                    68.2            11.0             21.8                             101.0
Research, testing and
  development expenses                        57.5             3.0             21.7                              82.2
Amortization of intangible
  assets                                       1.4             0.8              0.1                               2.3
Restructuring charge                                                            7.0                               7.0
                                        ----------      ----------       ----------      ----------        ----------
Total cost and expenses                      515.9            92.3            493.8          (168.6)            933.4

Other income (expense) - net                   9.5             9.6            (16.6)           (0.5)              2.0
Interest income (expense) - net              (10.8)                             0.8                             (10.0)
Equity in income of subsidiaries              41.3             5.2                            (46.5)
                                        ----------      ----------       ----------      ----------        ----------
Income before income taxes                    60.0            19.7             47.8           (46.0)             81.5
Provision for income taxes                     5.3             5.0             15.4             0.4              26.1
                                        ----------      ----------       ----------      ----------        ----------
Net income                              $     54.7      $     14.7       $     32.4      $    (46.4)       $     55.4
                                        ==========      ==========       ==========      ==========        ==========
</TABLE>

                                       24

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                                    Condensed Consolidating Balance Sheet
                                                                                June 30, 2004
                                                 -------------------------------------------------------------------------
                                                   Parent         Subsidiary      Other                           Total
                                                   Company        Guarantors   Subsidiaries    Eliminations    Consolidated
                                                 ----------       ----------   ------------    ------------    ------------
<S>                                              <C>              <C>          <C>             <C>             <C>
ASSETS
Cash and short-term investments                  $     34.4       $      6.2    $    186.7                      $    227.3
Receivables                                           138.1            146.3         305.3                           589.7
Inventories                                            84.8            162.5         283.2      $    (28.8)          501.7
Other current assets                                   31.2             51.1          10.6             9.1           102.0
                                                 ----------       ----------    ----------      ----------      ----------
Total current assets                                  288.5            366.1         785.8           (19.7)        1,420.7
                                                 ----------       ----------    ----------      ----------      ----------
Property and equipment-at cost                      1,180.5            548.2         926.6                         2,655.3
Less accumulated depreciation                         777.4             21.2         508.1                         1,306.7
                                                 ----------       ----------    ----------      ----------      ----------
Property and equipment - net                          403.1            527.0         418.5                         1,348.6
                                                 ----------       ----------    ----------      ----------      ----------
Goodwill                                               26.6            683.0         313.0                         1,022.6
Intangible assets - net                                12.1            466.3         112.6                           591.0
Investments in subsidiaries
  and intercompany balances                         2,753.1            911.7        (148.2)       (3,516.6)
Investments in non-consolidated
  companies                                             5.4              1.7                                           7.1
Other assets                                           14.5              9.4          13.4                            37.3
                                                 ----------       ----------    ----------      ----------      ----------
TOTAL                                            $  3,503.3       $  2,965.2    $  1,495.1      $ (3,536.3)     $  4,427.3
                                                 ==========       ==========    ==========      ==========      ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current
  portion of long-term debt                      $  1,797.1       $    186.2    $      4.8                      $  1,988.1
Accounts payable                                       66.4             54.9         114.8                           236.1
Accrued expenses and other
  current liabilities                                  99.4            155.9          64.7                           320.0
                                                 ----------       ----------    ----------      ----------      ----------
Total current liabilities                           1,962.9            397.0         184.3                         2,544.2
                                                 ----------       ----------    ----------      ----------      ----------
Long-term debt                                        387.0                            5.2                           392.2
Postretirement health care
  obligations                                          93.5              3.8           5.7                           103.0
Noncurrent liabilities                                 45.4             59.4          72.6                           177.4
Deferred income taxes                                  20.8            117.9          45.6                           184.3
                                                 ----------       ----------    ----------      ----------      ----------
Total liabilities                                   2,509.6            578.1         313.4                         3,401.1
                                                 ----------       ----------    ----------      ----------      ----------

Minority interest in
  consolidated companies                                                                        $     52.1            52.1

Total shareholders' equity
 (deficiency)                                         993.7          2,387.1       1,181.7        (3,588.4)          974.1
                                                 ----------       ----------    ----------      ----------      ----------
               TOTAL                             $  3,503.3       $  2,965.2    $  1,495.1      $ (3,536.3)     $  4,427.3
                                                 ==========       ==========    ==========      ==========      ==========
</TABLE>

                                       25

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                                Condensed Consolidating Balance Sheet
                                                                          December 31, 2003
                                             ------------------------------------------------------------------------------
                                               Parent         Subsidiary         Other                            Total
                                               Company        Guarantors     Subsidiaries    Eliminations      Consolidated
                                             ----------       ----------     ------------    ------------      ------------
<S>                                          <C>              <C>            <C>             <C>               <C>
ASSETS
Cash and short-term investments              $     56.3       $     (1.0)     $    203.4                        $    258.7
Receivables                                       100.9             39.2           184.5                             324.6
Inventories                                        76.8             44.3           216.6      $    (25.8)            311.9
Other current assets                               26.4              0.7             6.6             9.0              42.7
                                             ----------       ----------      ----------      ----------        ----------
Total current assets                              260.4             83.2           611.1           (16.8)            937.9
                                             ----------       ----------      ----------      ----------        ----------
Property and equipment-at cost                  1,156.7             71.5           732.3                           1,960.5
Less accumulated depreciation                     757.1             14.2           499.2                           1,270.5
                                             ----------       ----------      ----------      ----------        ----------
Property and equipment - net                      399.6             57.3           233.1                             690.0
                                             ----------       ----------      ----------      ----------        ----------
Goodwill                                           24.9            124.8            59.0                             208.7
Intangible assets - net                            12.2             32.8            17.4                              62.4
Investments in subsidiaries
  and intercompany balances                       934.2            811.0           (96.9)       (1,648.3)
Investments in non-consolidated
  companies                                         5.6              0.7                                               6.3
Other assets                                       20.5              3.4            13.1                              37.0
                                             ----------       ----------      ----------      ----------        ----------
TOTAL                                        $  1,657.4       $  1,113.2      $    836.8      $ (1,665.1)       $  1,942.3
                                             ==========       ==========      ==========      ==========        ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current
  portion of long-term debt                                                   $      2.9                        $      2.9
Accounts payable                                   64.0             17.4            61.7                             143.1
Accrued expenses and other
  current liabilities                              79.9             20.7            52.9                             153.5
                                             ----------       ----------      ----------      ----------        ----------
Total current liabilities                         143.9             38.1           117.5                             299.5
                                             ----------       ----------      ----------      ----------        ----------
Long-term debt                                    381.8                              4.9                             386.7
Postretirement health care
  obligations                                      92.9                              5.5                              98.4
Noncurrent liabilities                             44.7                             55.6                             100.3
Deferred income taxes                              24.0              6.9            21.9                              52.8
                                             ----------       ----------      ----------      ----------        ----------
Total liabilities                                 687.3             45.0           205.4                             937.7
                                             ----------       ----------      ----------      ----------        ----------

Minority interest in
  consolidated companies                                                                      $     51.3              51.3

Total shareholders' equity
 (deficiency)                                     970.1          1,068.2           631.4        (1,716.4)            953.3
                                             ----------       ----------      ----------      ----------        ----------
               TOTAL                         $  1,657.4       $  1,113.2      $    836.8      $ (1,665.1)       $  1,942.3
                                             ==========       ==========      ==========      ==========        ==========
</TABLE>

                                       26

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                             Condensed Consolidating Statement of Cash Flows
                                                                  Six-Month Period Ended June 30, 2004
                                       --------------------------------------------------------------------------------------
                                         Parent            Subsidiary           Other                                Total
                                         Company           Guarantors        Subsidiaries       Eliminations     Consolidated
                                       ----------          ----------        ------------       ------------     ------------
<S>                                    <C>                 <C>               <C>                <C>              <C>
CASH PROVIDED FROM (USED FOR):
OPERATING ACTIVITIES:
Net income                             $     41.5          $     (8.5)         $   39.6          $    (31.1)      $     41.5
Adjustments to reconcile net
  income to cash provided
  (used) by operating activities             13.2               (26.5)             36.9                31.1             54.7
                                       ----------          ----------          --------          ----------       ----------
Total operating activities                   54.7               (35.0)             76.5                                 96.2

INVESTING ACTIVITIES:
Capital expenditures                        (23.8)               (6.2)            (12.2)                               (42.2)
Acquisitions and investments
  in nonconsolidated companies              (20.3)             (827.7)           (112.7)                              (960.7)
Other - net                                  (0.1)                                  0.1
                                       ----------          ----------          --------          ----------       ----------
Total investing activities                  (44.2)             (833.9)           (124.8)                            (1,002.9)

FINANCING ACTIVITIES:
Short-term repayment                      1,797.0                 9.8              (6.7)                             1,800.1
Long-term repayment                         (18.4)             (908.5)             (8.0)                              (934.9)
Long-term borrowing                          25.0                                                                       25.0
Dividends paid                              (26.8)                                                                     (26.8)
Changes in intercompany
  activities                             (1,821.0)            1,774.6              46.4
Common shares issued upon
 exercise of stock options                    5.5                                                                        5.5
                                       ----------          ----------          --------          ----------       ----------
Total financing activities                  (38.7)              875.9              31.7                                868.9
Effect of exchange rate
  changes on cash                             6.4                 0.2              (0.2)                                 6.4
                                       ----------          ----------          --------          ----------       ----------
Net decrease in cash and
  short-term investments                    (21.8)                7.2             (16.8)                               (31.4)
Cash and short-term investments
  at the beginning of period                 56.2                (1.0)            203.5                                258.7
                                       ----------          ----------          --------          ----------       ----------
Cash and short-term investments
  at the end of period                 $     34.4          $      6.2          $  186.7                           $    227.3
                                       ==========          ==========          ========          ==========       ==========
</TABLE>

                                       27

<PAGE>

                            THE LUBRIZOL CORPORATION
                    Notes to Consolidated Finance Statements
                   Amounts in millions (except per share data)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                                        Condensed Consolidating Statement of Cash Flows
                                                             Six-Month Period Ended June 30, 2003
                                         -------------------------------------------------------------------------
                                         Parent         Subsidiary        Other                          Total
                                         Company        Guarantors     Subsidiaries    Eliminations   Consolidated
                                         --------       ----------     ------------    ------------   ------------
<S>                                      <C>            <C>            <C>             <C>            <C>
CASH PROVIDED FROM (USED FOR):
OPERATING ACTIVITIES:
Net income                               $   54.7        $   14.7        $   32.4        $  (46.4)      $   55.4
                                         --------        --------        --------        --------       --------
Adjustments to reconcile net
  income to cash provided
  (used) by operating activities            (41.3)          101.3          (117.3)           46.4          (10.9)
                                         --------        --------        --------        --------       --------
Total operating activities                   13.4           116.0           (84.9)                          44.5

INVESTING ACTIVITIES:
Capital expenditures                        (19.1)           (5.3)          (12.4)                         (36.8)
Other - net                                   0.7            (0.4)                                           0.3
                                         --------        --------        --------        --------       --------
Total investing activities                  (18.4)           (5.7)          (12.4)                         (36.5)

FINANCING ACTIVITIES:
Short-term repayment                                         (0.2)           (4.0)                          (4.2)
Long-term repayment                                                          (0.2)                          (0.2)
Dividends paid                              (26.7)                                                         (26.7)
Changes in intercompany
  activities                                (15.9)         (109.3)          125.2
Common shares issued upon
  exercise of stock options                   2.1                                                            2.1
                                         --------        --------        --------        --------       --------
Total financing activities                  (40.5)         (109.5)          121.0                          (29.0)

Effect of exchange rate
  changes on cash                                             0.3             4.2                            4.5
                                         --------        --------        --------        --------       --------
Net decrease in cash and
  short-term investments                    (45.5)            1.1            27.9                          (16.5)
Cash and short-term investments
  at the beginning of period                116.5            (1.9)          151.8                          266.4
                                         --------        --------        --------        --------       --------
Cash and short-term investments
  at the end of period                   $   71.0        $   (0.8)       $  179.7                       $  249.9
                                         ========        ========        ========        ========       ========
</TABLE>

                                       28

<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

OVERVIEW

We are a leading global producer and marketer of technologically advanced
chemicals and specialty materials for the transportation, consumer and
industrial markets. Our business is founded on technological leadership and
innovation that provides opportunities for us in growth markets and advantages
over our competitors. From a base of approximately 3,000 patents, we use our
product development and formulation expertise to sustain our leading market
positions and fuel our future growth. We create additives, ingredients, resins
and compounds that enhance the performance, quality and value of our customers'
products. Our products are used in a broad range of applications, and are sold
into stable markets such as those for engine oils, specialty driveline
lubricants and metalworking fluids, as well as higher growth markets such as
personal care and pharmaceutical products and performance coatings and inks. Our
specialty materials products are also used in a variety of industries, including
the telecommunications, construction, footwear and automotive industries. We are
an industry leader in the majority of our businesses.

On June 3, 2004, we completed the acquisition of Noveon International, Inc.
(Noveon), a leading global producer and marketer of technologically advanced
specialty materials and chemicals used in the industrial and consumer markets.
With the acquisition of Noveon, we have accelerated our program to attain a
substantial presence in the personal care and coatings markets by adding a
number of higher growth, industry-leading products under highly recognizable
brand names, including Carbopol(R) and Hycar(R), to our already strong portfolio
of lubricant and fuel additives, and consumer products. Additionally, Noveon has
a number of industry-leading and strong, cash flow-generating specialty
materials businesses, including TempRite(R) CPVC and Estane(R) TPU.

Noveon was acquired for cash of $920.2 million plus transaction costs of $10.5
million less certain seller expenses of $32.9 million and less cash acquired of
$103.0 million. In addition, we assumed $1,103.1 million of long-term
indebtedness from Noveon. Noveon had 2003 revenues of $1,135.9 million.

The acquisition and related costs were financed with the proceeds of a $2,450.0
million 364-day bridge credit facility. Shortly after the acquisition, we repaid
substantially all of the assumed long-term debt with proceeds of the temporary
bridge loan. We expect the temporary bridge loan will be replaced with the
proceeds of the permanent financing that we will obtain by the end of the third
quarter in the form of a term loan, debt securities and an equity issuance. At
June 30, 2004, there was $1,797.0 million outstanding on the temporary bridge
loan.

Our consolidated balance sheet as of June 30, 2004 reflects the acquisition of
Noveon under the purchase method of accounting. We recorded various assets
acquired and liabilities assumed, primarily working capital accounts, of Noveon
at their estimated fair values that we determined based on the information
currently available. Appraisals of long-lived assets and identifiable intangible
assets, including an evaluation of in-process research and development (IPR&D)
projects, are currently underway and will be completed at various times within
the next twelve months. In addition, we are valuing the projected pension and
other post-employment benefit obligations and we have reflected estimates of
these in the preliminary allocation of purchase price. These amounts are subject
to adjustment based on the completion of the valuations and appraisals.
Accordingly, the preliminary purchase price allocation is subject to revision.

                                       29

<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

The purchase price includes the estimated fair value of research and development
projects of $35.0 million that, as of the acquisition date, had not reached
technological feasibility and had no alternative future use. As a result, we
immediately expensed this amount in the second quarter of 2004. The inventory
step-up to fair value totaled $24.2 million. We expensed $4.9 million of the
inventory step-up to cost of sales in the second quarter and we estimate that
$4.9 million of inventory step-up will be expensed to cost of sales in the third
quarter of 2004. As the remaining step-up relates to inventories on the LIFO
(last-in, first-out) method of accounting, we do not anticipate that additional
amounts of the step-up will be expensed through cost of sales in 2004.

RESULTS OF OPERATIONS

Our revenues increased in the second quarter of 2004 as compared with the second
quarter of 2003, primarily due to acquisitions. Excluding acquisitions, revenues
increased primarily due to higher ongoing shipment volume and favorable
currency. The increased revenues partially were offset by higher raw material
costs, manufacturing expenses and selling and administrative expenses. The 2004
second quarter also included significant purchase accounting charges associated
with the acquisition of Noveon and incremental acquisition-related financing
costs. Primarily as a result of these factors, net income decreased 87% in the
second quarter of 2004, compared with the same period in 2003.

As a result of the June 3, 2004 acquisition of Noveon, we reorganized into two
operating and reporting segments: lubricant additives and specialty chemicals.
Lubricant additives comprised approximately 78% our consolidated revenues and
89% of our segment operating income for the first six months of 2004. See Note 5
to the financial statements and the "Segment Analysis" section for further
financial disclosures by reporting segment.

ANALYSIS OF REVENUES

<TABLE>
<CAPTION>
                                                                                                       Excluding
                                                                                                     Acquisitions
                                                                                                 -------------------
                                                                        $              %            $            %
(Millions of Dollars)                 2004             2003          Change          Change      Change       Change
---------------------               ---------        --------        -------         ------      -------      ------
<S>                                 <C>              <C>             <C>             <C>         <C>          <C>
SECOND QUARTER:
 Net sales                          $   720.2        $  514.3        $ 205.9           40%       $  74.5        14%
 Royalties and other
  revenues                                1.3             0.4            0.9          239%           1.0       232%
                                    ---------        --------        -------                     -------
 Total revenues                     $   721.5        $  514.7        $ 206.8           40%       $  75.5        15%
                                    =========        ========        =======                     =======

YEAR-TO-DATE:
 Net sales                          $ 1,298.1        $1,021.3        $ 276.8           27%       $ 126.6        12%
 Royalties and other
  revenues                                2.1             1.6            0.5           33%           0.5        31%
                                    ---------        --------        -------                     -------
 Total revenues                     $ 1,300.2        $1,022.9        $ 277.3           27%       $ 127.1        12%
                                    =========        ========        =======                     =======
</TABLE>

Consolidated revenues increased 40% in the second quarter of 2004 and 27% in the
first six months of 2004 compared to the same periods in 2003, primarily due to
acquisitions and higher ongoing shipment volume. Acquisitions in 2004 included
Noveon International and the hyperdispersants business purchased from Avecia.
Acquisitions in 2003 included the personal care specialty ingredients business
purchased from Amerchol Corporation, a subsidiary of The Dow Chemical Company,
and the silicone product lines purchased from BASF. The Noveon acquisition
contributed $109.9 million towards the increase in revenues in both the second
quarter of 2004 and the first six months of 2004 compared with the same periods
in 2003.

                                       30
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Excluding acquisitions, ongoing shipment volume increased 11% in the second
quarter and 7% in the first six months of 2004 compared to the same periods in
2003. Sequentially, excluding acquisitions, consolidated second quarter 2004
shipment volume was 6% higher than the first quarter of 2004.

The following table shows our shipment volume by geographic zone in the second
quarter and the first half of 2004.

<TABLE>
<CAPTION>
                               2nd QTR     YTD
                                2004       2004
                               Volume     Volume
                               ------     ------
<S>                            <C>        <C>
North America                     48%        47%
Europe                            27%        27%
Asia-Pacific / Middle East        20%        20%
Latin America                      5%         6%
                                ----       ----
Total                            100%       100%
                                ====       ====
</TABLE>

Shipment volume patterns vary in different geographic zones. The following table
shows the changes in shipment volume by geographic zone in the second quarter
and the first six months of 2004, compared with the corresponding periods in
2003.

<TABLE>
<CAPTION>
                                                     Excluding
                                                    Acquisitions
                                                    -------------
                                  2004 vs. 2003     2004 vs. 2003
                                    % Change          % Change
                                  -------------     ------------
<S>                               <C>               <C>
SECOND QUARTER:
  North America                       30%                8%
  Europe                              22%               12%
  Asia-Pacific/Middle East            30%               23%
  Latin America                        4%                0%
  Total                               26%               11%

YEAR-TO-DATE:
  North America                       18%                6%
  Europe                               9%                4%
  Asia-Pacific/Middle East            20%               16%
  Latin America                        1%               (1%)
  Total                               15%                7%
</TABLE>

Segment shipment volume variances by geographic zone as well as the factors
explaining the changes in segment revenues for the second quarter of 2004 and
the first six months of 2004 compared with the respective periods of 2003 are
contained under the "Segment Analysis" section below.

                                       31
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

ANALYSIS OF COSTS AND EXPENSES

<TABLE>
<CAPTION>
                                                                                               Excluding
                                                                                             Acquisitions
                                                                                     --------------------------
                                                           $                %           $                 %
(Millions of Dollars)         2004          2003         Change           Change      Change            Change
----------------------      --------      --------      --------         --------    --------          --------
<S>                         <C>           <C>           <C>           <C>            <C>            <C>
SECOND QUARTER:
 Cost of sales              $  529.5      $  372.6      $  156.9            42%      $   57.9             16%
 Selling and
  administrative
  expenses                      70.2          50.2          20.0            40%           6.5             13%
 Research, testing and
  development expenses          45.5          40.6           4.9            12%          (0.4)            (1%)
 Amortization of
  intangible assets              4.5           1.2           3.3             *            0.0              *
 Write-off of acquired
  in-process research
  and development               35.0                        35.0             *            0.0              *
 Restructuring charge            8.0           3.5           4.5             *            0.0              *
                            --------      --------      --------                      --------
 Total costs and
  expenses                  $  692.7      $  468.1      $  224.6            48%      $   64.0             14%
                            ========      ========      ========                     ========

YEAR-TO-DATE:
 Cost of sales              $  955.8      $  740.9      $  214.9            29%      $  103.8             14%
 Selling and
  administrative
  expenses                     122.0         101.0          21.0            21%           6.0              6%
 Research, testing and
  development expenses          86.3          82.2           4.1             5%          (2.0)            (2%)
 Amortization of
  intangible assets              6.4           2.3           4.1             *            0.5              *
 Write-off of acquired
  in-process research
  and development               35.0                        35.0             *            0.0              *
 Restructuring charge            8.0           7.0           1.0             *            0.0              *
                            --------      --------      --------                     --------
 Total costs and
  expenses                  $1,213.5      $  933.4      $  280.1            30%      $  108.3             12%
                            ========      ========      ========                     ========
</TABLE>

* Calculation not meaningful

Cost of sales increased 42% in the second quarter of 2004 and 29% in the first
six months of 2004 compared with the same periods in 2003, due to acquisitions,
higher average raw material cost and higher manufacturing expenses. Excluding
acquisitions, average raw material cost increased 8% in both the second quarter
and the first six months of 2004 compared with the same periods in 2003,
primarily due to an increase in the combination of raw material prices and
product mix along with unfavorable currency effects. Material cost included
purchase adjustments associated with the increased valuation of inventory of
$5.8 million in the second quarter of 2004 and $6.7 million in the first six
months of 2004 for the Noveon and hyperdispersants acquisitions. The Noveon
purchase adjustment for the increased valuation of inventory was $4.9 million,
or $0.06 per share, in the second quarter of 2004. Looking forward, we expect
continued upward pressure on raw material prices.

                                       32
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Total manufacturing expenses, which are included in cost of sales, increased 32%
in the second quarter of 2004 and 24% in the first six months of 2004 compared
with the same periods in 2003, primarily due to acquisitions. Excluding
acquisitions, total manufacturing expenses increased 6% in the second quarter of
2004 and 9% in the first six months of 2004 compared with the same periods in
2003, primarily due to unfavorable currency and higher incentive compensation
expense. The first six months of manufacturing expense also included $2.0
million for an environmental accrual relating to remediation at our Texas
manufacturing facility. Excluding acquisitions, currency and the environmental
accrual adjustment, manufacturing expenses increased 3% in the second quarter of
2004 and 4% in the first six months of 2004 compared with the same periods in
2003.

Gross profit (net sales less cost of sales) increased $49.0 million, or 35%
($16.7 million, or 12%, excluding acquisitions), in the second quarter of 2004
and $61.9 million, or 22% ($22.8 million, or 8%, excluding acquisitions), in the
first six months of 2004 compared with the same periods in 2003. Excluding
acquisitions, the increase primarily was due to higher shipment volume and
favorable currency, partially offset by higher average raw material cost and
higher manufacturing costs. Our gross profit percentage (gross profit divided by
net sales) decreased to 26.5% in the second quarter of 2004 and 26.4% in the
first six months of 2004, compared to 27.5% in both the second quarter and first
half of 2003. The decrease for both periods primarily was due to higher raw
material costs. Sequentially, the gross profit percentage increased in the
second quarter of 2004 compared with 26.2% in the first quarter of 2004 and
24.9% in the fourth quarter of 2003.

Excluding acquisitions, selling and administrative expenses increased 13% in the
second quarter and 6% in the first six months of 2004 compared with the same
periods in 2003, primarily due to higher incentive compensation expense and
unfavorable currency.

Research, testing and development expenses (technology expenses), excluding
acquisitions, decreased 1% in the second quarter of 2004 and 2% in the first six
months of 2004 compared with the same periods in 2003, primarily due to lower
testing activity at outside laboratories, partially offset by unfavorable
currency and higher incentive compensation expense.

Beginning in 2004, we have reclassified amortization of intangible assets as a
separate line item of expense for all periods reported. Previously this item had
been included within other income (expense). The increased amortization expense
in the second quarter and the first six months of 2004 compared with the same
periods in 2003, primarily was due to the Noveon and hyperdispersants
acquisitions in 2004 and the personal care specialty ingredients business
acquisition in 2003.

We included a one-time, non-cash charge of $35.0 million, or $0.42 per share, in
total costs and expenses for the second quarter of 2004 and the first six months
of 2004 to write-off the estimated fair value of acquired IPR&D projects
associated with the Noveon acquisition. Costs to acquire IPR&D projects that
have no alternative future use and that have not reached technological
feasibility at the date of acquisition are expensed upon acquisition. We based
the estimated value of IPR&D projects on third-party valuations of the fair
values of IPR&D costs.

In the second quarter of 2004 we recorded a restructuring charge of $8.0
million, or $0.10 per share, consisting of workforce reductions of $6.4 million
and a write-off of $1.6 million of impaired assets related to PuriNOx(TM)
technology. We eliminated 95 positions, primarily at our Wickliffe, Ohio
headquarters. We expect these reductions will be completed by the end of the

                                       33
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

third quarter in 2004. The second-half 2004 pre-tax restructuring charge will
include an estimated $6.0 million non-cash pension benefit settlement charge and
the remainder of the employee severance costs associated with the workforce
reductions, approximating $3.0 million.

In the second quarter of 2003, we recorded a restructuring charge of $3.5
million, or $0.05 per share, primarily related to our Bromborough, England
intermediate production and blending facility. The charge was comprised of $2.8
million for asset write-offs and employee severance at our Bromborough facility
and $0.7 million for a voluntary separation program at our joint venture in
India. In the first half of 2003, the total restructuring charge was $7.0
million, or $0.09 per share, which included $6.3 million for Bromborough and
$0.7 million for India. The Bromborough charge primarily consisted of $2.8
million in employee separation benefits and $3.3 million in asset impairment
charges for production units taken out of service.

ANALYSIS OF OTHER ITEMS AND NET INCOME

<TABLE>
<CAPTION>
                                                                                      Excluding
                                                                                     Acquisitions
                                                                                ---------------------
                                                       $             %            $              %
(Millions of Dollars)       2004         2003        Change       Change        Change         Change
----------------------     ------       ------       ------       ------        ------         ------
<S>                        <C>          <C>          <C>          <C>           <C>          <C>
SECOND QUARTER:
 Other income
 (expense)                 $ (1.9)      $  1.1       $ (3.0)           *        $ (3.5)           *
 Interest expense-net       (17.1)        (5.1)       (12.0)           *           0.8            *
 Income before income
  taxes                       9.8         42.6        (32.8)         (77%)         4.2           10%
 Provision for income
  taxes                       5.9         13.2         (7.3)         (56%)        14.8          112%

 Net income                $  3.9       $ 29.4       $(25.5)         (87%)      $(10.5)         (36%)

YEAR-TO-DATE:
 Other income
  (expense)                $  2.4       $  2.0       $  0.4            *        $  0.1            *
 Interest expense-net       (22.4)       (10.0)       (12.4)           *           0.3            *
 Income before income
  taxes                      66.7         81.5        (14.8)         (18%)        18.2           22%
 Provision for income
  taxes                      25.2         26.1         (0.9)          (3%)        11.6           44%

 Net income                $ 41.5       $ 55.4       $(13.9)         (25%)      $  6.6           12%
</TABLE>

* Calculation not meaningful

The decrease in other income (expense) in the second quarter of 2004 compared to
the same period in 2003, was due to currency translation losses. Other income
for the first six months of 2004 included a gain of $6.4 million ($.08 per
share) on a currency forward contract to purchase pound sterling related to the
acquisition of the hyperdispersants business. We secured the forward contract in
December 2003 and completed the acquisition at the end of January 2004. This
gain partially was offset by other currency translation losses.

                                       34
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

The increase in net interest expense for both the second quarter and first six
months of 2004 compared to the same periods in 2003, primarily was due to the
Noveon acquisition-related financing costs of $12.2 million, or $0.14 per share,
comprised of bridge loan and Noveon interest of $6.5 million, amortization of
bridge loan fees of $2.8 million and termination of an interest rate swap of
$2.9 million.

We had an effective tax rate of 59.8% in the second quarter of 2004 and 37.8% in
the first six months of 2004, compared with 31.1% in the second quarter of 2003
and 32.0% in the first six months of 2003. The increase in the effective tax
rate for both periods in 2004 primarily was due to significant non-taxable
currency gains that occurred in 2003 but did not repeat in 2004, and the
unfavorable impact of the Noveon acquisition on our U.S. tax rate. Noveon's U.S.
tax loss carryforwards, combined with the interest expense associated with the
acquisition financing, will reduce our ability to claim U.S. foreign tax credits
and to obtain U.S. tax benefits on exports. The second quarter tax provision was
unusually high because it reflected the cumulative year-to-date impact of these
items on our effective tax rate. We estimate our 2004 effective tax rate will be
37.5%, excluding the tax effect of the restructuring charge, which had a 35% tax
rate.

Primarily as a result of the above factors, our net income per share was $0.08
for the second quarter of 2004 compared with $0.57 for the second quarter of
2003 and $0.80 for the first six months of 2004 compared with $1.07 for the
first six months of 2003. Earnings in both the second quarter and first six
months of 2004 included a one-time write-off for IPR&D projects from the Noveon
acquisition of $0.42 per share, a purchase adjustment associated with the
increased valuation of Noveon-acquired inventory of $0.06 per share, a
restructuring charge of $0.10 per share, incremental acquisition-related
financing costs of $0.14 per share and an increase in the effective tax rate
compared to the first quarter 2004 rate equivalent to $0.08 per share. Earnings
in 2004 benefited from Noveon's June operating income of $10.7 million, or $0.13
per share, before financing costs and purchase accounting adjustments. Earnings
in the first six months of 2004 also included a gain on a currency forward
contract of $0.08 per share. The 2003 restructuring charge reduced earnings
$0.05 per share in the second quarter of 2003 and $0.09 per share in the first
half of 2003.

SEGMENT ANALYSIS

Beginning in the second quarter of 2004, we reorganized our business into two
operating and reporting segments: the lubricant additives segment, also known as
Lubrizol Additives, and the specialty chemicals segment, also known as the
Noveon segment. The lubricant additives segment represents approximately 55% of
annualized consolidated revenues and is comprised of our previous business in
fluid technologies for transportation, advanced fluid systems, emulsified
products and the former industrial additives product group of fluid technologies
for industry. The specialty chemicals segment represents approximately 45% of
annualized consolidated revenues and is comprised of the businesses of the
acquired Noveon International and the former performance chemicals group of
fluid technologies for industry. Note 5 to the financial statements contains our
segment reporting disclosure including a further description of the nature of
our operations, the product lines within each of the operating segments, segment
profitability and related financial disclosures for the reportable segments.

                                       35
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

We primarily evaluate performance and allocate resources based on segment
operating income, defined as revenues less expenses identifiable to the product
lines included within each segment, as well as projected future returns. As part
of reorganizing our business into two operating segments, we have reclassified
certain administrative expenses that previously were deducted in arriving at
segment operating income and are now classified as unallocated corporate
expenses. Segment operating income will reconcile to consolidated income before
tax by deducting the write-off of acquired IPR&D projects, restructuring
charges, net interest expense, corporate expenses and corporate other income
that we do not attribute to either operating segment.

We have restated current year and prior year amounts to reflect the new
reporting classifications of products between the two operating segments and the
new definition of segment operating income.

OPERATING RESULTS BY SEGMENT
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                                         Excluding
                                                                                       Acquisitions
                                                                                  -----------------------
                                                        $             %              $             %
                           2004          2003         Change        Change         Change        Change
                         --------      --------      --------      --------       --------      --------
<S>                      <C>           <C>           <C>           <C>            <C>           <C>
REVENUES

SECOND QUARTER:

Lubricant additives      $  522.1      $  453.3      $   68.8         15%         $   68.8         15%
Specialty chemicals         199.4          61.4         138.0        225%              6.7         11%
                         --------      --------      --------                     --------
  Total                  $  721.5      $  514.7      $  206.8         40%         $   75.5         15%
                         ========      ========      ========                     ========
YEAR-TO-DATE:

Lubricant additives      $1,013.3      $  903.2      $  110.1         12%         $  110.1         12%
Specialty chemicals         286.9         119.7         167.2        140%             17.0         14%
                         --------      --------      --------                     --------
  Total                  $1,300.2      $1,022.9      $  277.3         27%         $  127.1         12%
                         ========      ========      ========                     ========

GROSS PROFIT

SECOND QUARTER:
Lubricant additives      $  143.6      $  127.2      $   16.4         13%         $   16.4         13%
Specialty chemicals          47.1          14.5          32.6        225%              0.3          2%
                         --------      --------      --------                     --------
  Total                  $  190.7      $  141.7      $   49.0         35%         $   16.7         12%
                         ========      ========      ========                     ========

YEAR-TO-DATE:

Lubricant additives      $  272.4      $  251.0      $   21.4          8%         $   21.4          8%
Specialty chemicals          69.9          29.4          40.5        138%              1.4          5%
                         --------      --------      --------                     --------
  Total                  $  342.3      $  280.4      $   61.9         22%         $   22.8          8%
                         ========      ========      ========                     ========

SEGMENT
OPERATING INCOME

SECOND QUARTER:

Lubricant additives      $   72.8      $   58.6      $   14.2         24%         $   14.2         24%
Specialty chemicals          11.4           0.6          10.8          *               0.0          *
                         --------      --------      --------                     --------
  Total                  $   84.2      $   59.2      $   25.0         42%         $   14.2         24%
                         ========      ========      ========                     ========

YEAR-TO-DATE:

Lubricant additives      $  135.5      $  114.2      $   21.3         19%         $   21.3         19%
Specialty chemicals          16.4           1.4          15.0          *               0.1          7%
                         --------      --------      --------                     --------
  Total                  $  151.9      $  115.6      $   36.3         31%         $   21.4         19%
                         ========      ========      ========                     ========
</TABLE>

* Calculation not meaningful

                                       36
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Lubricant Additives Segment

Revenues increased 15% in the second quarter of 2004 compared to the same period
in 2003, primarily due to 12% higher volume with the remainder due to higher
average selling price driven almost entirely by favorable currency. The
combination of real selling price and product mix was neutral. Revenues
increased 12% in the first six months of 2004 compared to the same period in the
prior year, primarily due to 7% higher volume, 4% favorable currency and 1%
higher product mix and price. Sequentially, shipment volume in the second
quarter of 2004 increased 7% over the first quarter of 2004 and 15% over the
fourth quarter of 2003.

The following table shows our shipment volume by geographic zone in the second
quarter and the first half of 2004.

<TABLE>
<CAPTION>
                                 2nd QTR        YTD
                                  2004          2004
                                 Volume        Volume
                                 ------        ------
<S>                              <C>           <C>
North America                      41%           41%
Europe                             30%           30%
Asia-Pacific / Middle East         23%           23%
Latin America                       6%            6%
                                  ----          ----
Total                             100%          100%
                                  ====          ====
</TABLE>


Shipment volume patterns vary in different geographic zones. The following table
shows the changes in shipment volume by geographic zone in the second quarter
and the first six months of 2004.

<TABLE>
<CAPTION>
                                    2nd QTR               YTD
                                 2004 vs. 2003       2004 vs. 2003
                                   % Change            % Change
                                 -------------       -------------
<S>                              <C>                 <C>
North America                          9%                 6%
Europe                                12%                 4%
Asia-Pacific / Middle East            23%                16%
Latin America                         (2%)               (3%)
Total                                 12%                 7%
</TABLE>

Overall, higher shipment volume in the second quarter of 2004 compared to the
same period in 2003 partially was due to market recovery for finished lubricant
demand. The shipment volume increase in North America for both periods primarily
resulted from increases in our driveline and industrial additives product lines
due to market share gains as well as market recovery. Higher shipment volume in
Europe in the second quarter primarily was due to increases in our engine
additives product lines due to lost marine diesel business that occurred after
the first quarter of 2003, which subsequently was regained late in the first
quarter of 2004. In addition, we experienced some business gains in our
industrial additives product lines. The shipment volume increase in Asia-Pacific
for both periods primarily was due to economic recovery, market share gains in
China and favorable timing of orders. The decrease in Latin America was
associated with the loss of a major international customer that we previously
disclosed in 2003.

                                       37
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Lubrizol Additives implemented a price increase in March 2004 for products
sourced from North America plants and in the second quarter 2004 for products
sourced from Asia-Pacific and Latin America. We announced a second price
increase in June 2004, which was effective beginning in mid-June for products
sourced from North America and Europe billed in U.S. dollar currency and
beginning in mid-July for products sourced from Latin America. We will also
begin implementing previously announced price increases in August for products
sourced from Asia-Pacific. The announced price increases were in response to raw
material cost increases and continuing high prices for natural gas used for
utilities in our plants.

Segment gross profit is defined as sales less cost of sales, which include
material cost and all manufacturing expenses. The 13% increase in segment gross
profit in the second quarter of 2004 and the 8% increase in the first six months
of 2004, compared with the same periods in 2003, primarily was due to higher
revenues partially offset by higher average raw material cost and manufacturing
expenses. In the second quarter of 2004, average material cost increased 7% and
manufacturing expenses increased 6%, compared to the second quarter of 2003. In
the first six months of 2004, average material cost increased 8% and
manufacturing expenses increased 10%, compared to the first six months of 2003.
The increase in manufacturing expenses for both periods primarily was due to
higher throughput, higher incentive compensation expense and unfavorable
currency.

The gross profit percentage for the segment was 27.6% for the second quarter of
2004 compared with 28.1% for the second quarter of 2003 and 26.9% for the first
six months of 2004 compared with 27.8% in the first six months of 2003. The
decrease primarily was due to higher average raw material cost.

Selling, technical, administrative and research (STAR) expenses increased $3.3
million, or 5% for the second quarter of 2004, compared with the second quarter
of 2003, primarily due to higher incentive compensation expense and currency
effects. STAR expenses increased $1.1 million, or 1% in the first six months of
2004, compared with the same period in 2003 due to higher incentive compensation
expense and currency effects, partially offset by a $1.3 million decrease in
technical expenses, primarily due to lower outside testing expenses as a result
of higher utilization of our internal testing facilities.

Segment operating income (revenues less expenses attributable to the product
lines aggregated within each segment) increased 24% for the second quarter of
2004 and increased 19% for the first six months of 2004, compared with the same
periods in 2003, due to higher gross profit that was partially offset by higher
expenses.

                                       38
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Specialty Chemicals Segment

Revenues increased 225% in the second quarter of 2004 and 140% in the first six
months of 2004 compared with the same periods in 2003, primarily due to the 2004
acquisitions of Noveon and the hyperdispersants business and the 2003
acquisition of the personal care specialty ingredients business. Excluding
acquisitions, revenues increased 11% in the second quarter of 2004 compared to
the same period in 2003, due to 5% higher shipment volumes, 2% favorable
currency impact and 3% stronger price and product mix. Excluding acquisitions,
segment revenues increased 14% in the first six months of 2004 compared to the
same period in the prior year primarily due to 8% higher volume, 3% favorable
currency and 3% stronger price and product mix. The higher priced product mix
for both the second quarter 2004 and the first six months of 2004 primarily
occurred in our consumer specialties product line.

The following table shows our shipment volume by geographic zone in the second
quarter and the first half of 2004.

<TABLE>
<CAPTION>
                                 2nd QTR       YTD
                                  2004         2004
                                 Volume       Volume
                                 ------       ------
<S>                              <C>          <C>
North America                      74%          75%
Europe                             17%          16%
Asia-Pacific/Middle East            7%           6%
Latin America                       3%           3%
                                  ----         ----
Total                             100%         100%
                                  ====         ====
</TABLE>

Shipment volume patterns vary in different geographic zones. The following table
shows the changes in shipment volume by geographic zone in the second quarter
and the first six months of 2004, compared with the corresponding periods in
2003.

<TABLE>
<CAPTION>
                                                       Excluding
                                                     Acquisitions
                                                     -------------
                                 2004 vs. 2003       2004 vs. 2003
                                   % Change            % Change
                                 -------------       -------------
<S>                              <C>                 <C>
SECOND QUARTER:
  North America                      114%                 3%
  Europe                             161%                10%
  Asia-Pacific/Middle East           342%                 4%
  Latin America                       76%                26%
  Total                              126%                 5%

YEAR-TO-DATE:
  North America                       66%                 7%
  Europe                              92%                 9%
  Asia-Pacific/Middle East           268%                35%
  Latin America                       40%                14%
  Total                               74%                 8%
</TABLE>

Excluding acquisitions, the shipment volume increase in North America for both
periods primarily was due to market share gains and growth in the fermentation
industry in our consumer specialties product line. This product line also
benefited for the first six months of 2004 from the extension of the 2003 sugar
beet season. Additionally, the second quarter 2004 shipment volume was higher
due to improvements in the mining sector. The increase in Europe for both
periods was due to the impact of an improving European economy and market share
gains in our performance coatings product line. The increase in Asia-Pacific /

                                       39
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Middle East for both periods was due to higher shipment volume in our
performance coatings product line as approvals we have obtained in the United
States and Europe are being transferred by our customers to Asia. The first six
month comparison in this region also benefited from market share gains in our
consumer specialties product line. The increase in Latin America for both
periods primarily was due to new business and market share gains in our consumer
specialties product line.

Segment gross profit increased 225% (2% excluding acquisitions) in the second
quarter of 2004 and 138% (5% excluding acquisitions) in the first half of 2004
compared with the same periods in 2003. Excluding acquisitions, the increase in
segment gross profit for both periods was due to increased revenues as a result
of higher shipment volume and higher price and product mix partially offset by
higher raw material costs. The increase in segment gross profit for the first
six months of 2004 compared to the same period in 2003 partially was also offset
by higher manufacturing expenses. The gross profit percentage for this segment
was 23.6% in the second quarter of 2004 and 24.4% in the first half of 2004,
compared with 23.6% and 24.6% in the respective periods in 2003. Excluding
acquisitions, the gross profit percentage was 21.7% in the first quarter of 2004
and 22.5% in the first six months of 2004. The decrease in gross profit
percentage for both periods was due to higher raw material costs that partially
were offset by higher product price and mix. We began implementing price
increases during the first quarter of 2004 in the range of 3% to 5% in response
to the rising raw material costs.

STAR expenses increased $19.5 million, or 143%, for the second quarter of 2004
and increased $22.8 million, or 83%, for the first six months of 2004 compared
with the same periods in 2003, primarily due to acquisitions.

Segment operating income increased in the second quarter and first six months of
2004 compared with the same periods in 2003, primarily due to the impact of
acquisitions.

PRO FORMA INFORMATION

The following table presents major components of and information derived from
the pro forma consolidated statements of income and pro forma consolidated
statements of cash flows. The major components of the pro forma consolidated
statements of income and pro forma consolidated statements of cash flows reflect
the effect of the acquisition of Noveon International, Inc. on June 3, 2004 as
if the acquisition occurred at the beginning of each of the periods reflected in
the table. We believe that this data provides the financial statement reader
with information that is useful in understanding the impact of the acquisition
of Noveon International, Inc. on our results of operations and cash flows.


                                       40
<PAGE>

The components of and information derived from the pro forma consolidated
statements of income and the pro forma consolidated statements of cash flows for
the three-month period ended June 30, 2004 are derived from our unaudited
consolidated financial statements for the three-month period ended June 30, 2004
and the unaudited consolidated financial statements of Noveon International,
Inc. for the period from April 1, 2004 to the acquisition date. The components
of and information derived from the pro forma consolidated statements of income
and the pro forma consolidated statements of cash flows for the three-month
period ended June 30, 2003 are derived from our unaudited consolidated financial
statements for the three-month period ended June 30, 2003 and the unaudited
consolidated financial statements of Noveon International, Inc. for the
three-month period ended June 30, 2003. The components of and information
derived from the pro forma consolidated statements of income and the pro forma
consolidated statements of cash flows for the six-month period ended June 30,
2004 are derived from our unaudited consolidated financial statements for the
six-month period ended June 30, 2004 and the unaudited consolidated financial
statements of Noveon International, Inc. for the period from January 1, 2004 to
the acquisition date. The components of and information derived from the pro
forma consolidated statements of income and the pro forma consolidated
statements of cash flows for the six-month period ended June 30, 2003 are
derived from our unaudited consolidated financial statements for the six-month
period ended June 30, 2003 and the unaudited consolidated financial statements
of Noveon International, Inc. for the six-month period ended June 30, 2003.

Our consolidated balance sheet as of June 30, 2004 reflects the acquisition of
Noveon International, Inc. under the purchase method of accounting. We recorded
various assets acquired and liabilities assumed, primarily working capital
accounts, of Noveon International, Inc. at their estimated fair values that we
determined based on the information currently available. Appraisals of
long-lived assets and identifiable intangible assets, including an evaluation of
IPR&D projects, are currently underway and will be completed at various times
within the next twelve months. In addition, we are valuing the projected pension
and other post-employment benefit obligations and we have reflected estimates of
these in the preliminary allocation of purchase price. These amounts are subject
to adjustment based on the completion of the valuations and appraisals.
Accordingly, the preliminary purchase price allocation is subject to revision.

The pro forma data gives effect to actual operating results of Noveon
International, Inc. prior to the acquisition. Adjustments to cost of sales for
the inventory set-up charge of $9.8 million, the write-off of acquired IPR&D of
$35.0 million and estimated intangible asset amortization are reflected in the
pro forma data for each period in the table. The entire inventory step-up charge
is attributable to the specialty chemicals segment and is reflected in each pro
forma period of the table. This pro forma data is consistent with the pro forma
data that is disclosed in Note 2 to the unaudited consolidated financial
statements for the six-month period ended June 30, 2004. These pro forma amounts
do not purport to be indicative of the results that would have actually been
obtained if the acquisition had occurred as of the beginning of the periods
presented or that may be obtained in the future.


                                       41
<PAGE>
                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

<TABLE>
<CAPTION>

                                                          Three-Month Period                       Six-Month Period
                                                             Ended June 30                          Ended June 30
                                                       --------------------------            ----------------------------
                                                          2004              2003               2004                2003
                                                       ---------          -------            --------            --------
<S>                                                     <C>               <C>                <C>                <C>
CONSOLIDATED PRO FORMA DATA

 Total revenues                                        $   939.0          $ 807.1            $1,837.9            $1,596.4
                                                       =========          =======            ========            ========
 Gross profit                                          $   250.8          $ 212.2            $  490.5            $  427.0
                                                       =========          =======            ========            ========
 Income before income taxes and
  cumulative effect of change in
  accounting principle                                 $    14.6          $   0.0            $   77.1            $   40.0
                                                       =========          =======            ========            ========
 Income before cumulative effect of
  change in accounting principle                       $     9.1          $   0.0            $   48.2            $   27.4
                                                       =========          =======            ========            ========
 Depreciation expense                                  $    43.1          $  41.5            $   81.3            $   76.6
                                                       =========          =======            ========            ========
 Amortization of intangible assets                     $     9.3              8.4            $   20.7            $   16.7
                                                       =========          =======            ========            ========
 Capital expenditures                                  $    33.4          $  34.6            $   65.2            $   66.4
                                                       =========          =======            ========            ========

SEGMENT PRO FORMA DATA

Lubricant Additives Segment
 Total revenues                                        $   522.1          $ 453.3            $1,013.3            $  903.2
                                                       =========          =======            ========            ========
 Gross profit                                          $   143.6          $ 127.2            $  272.4            $  251.0
                                                       =========          =======            ========            ========
 Segment operating income                              $    72.8          $  58.6            $  135.5            $  114.2
                                                       =========          =======            ========            ========
 Depreciation expense                                  $    20.8          $  20.8            $   42.5            $   42.2
                                                       =========          =======            ========            ========
 Amortization of intangible assets                     $     0.8          $   0.8            $    1.5            $    1.5
                                                       =========          =======            ========            ========
 Capital expenditures                                  $    17.3          $  17.3            $   36.5            $   31.4
                                                       =========          =======            ========            ========

Specialty Chemicals Segment
 Total revenues                                        $   416.9          $ 353.8            $  824.6            $  693.2
                                                       =========          =======            ========            ========
 Gross profit                                          $   107.2          $  85.0            $  218.1            $  176.0
                                                       =========          =======            ========            ========
 Segment operating income                              $    32.5          $  19.7            $   67.9            $   45.7
                                                       =========          =======            ========            ========
 Depreciation expense                                  $    22.0          $  20.4            $   38.3            $   33.9
                                                       =========          =======            ========            ========
 Amortization of intangible assets                     $     8.5          $   7.6            $   19.2            $   15.2
                                                       =========          =======            ========            ========
 Capital expenditures                                  $    16.1          $  17.3            $   28.7            $   35.0
                                                       =========          =======            ========            ========

Unallocated corporate depreciation
expense                                                $     0.3          $   0.3            $    0.5            $    0.5
                                                       =========          =======            ========            ========

RECONCILIATION OF PRO FORMA
 SEGMENT OPERATING INCOME TO
 PRO FORMA INCOME BEFORE INCOME
 TAXES AND CUMULATIVE EFFECT OF
 CHANGE IN ACCOUNTING PRINCIPLE
Pro forma segment operating income (loss):
 Lubricant Additives                                   $    72.8          $  58.6            $  135.5            $  114.2
 Specialty Chemicals                                        32.5             19.7                67.9                45.7
                                                       ---------          -------            --------            --------
  Total segment operating income                           105.3             78.3               203.4               159.9

 Corporate expenses                                        (12.3)           (10.1)              (21.6)              (20.3)
 Corporate other income (loss)                              (2.0)             2.1                 1.8                 3.3
 Write-off of acquired
  in-process research and
  development                                              (35.0)           (35.0)              (35.0)              (35.0)
 Restructuring charges                                      (8.5)            (4.5)              (11.3)              (10.0)
 Interest expense - net                                    (32.9)           (30.8)              (60.2)              (57.9)
                                                       ---------          -------            --------            --------
 Pro forma income before income taxes
 and cumulative effect of change in
 accounting principle                                  $    14.6          $   0.0            $   77.1            $   40.0
                                                       =========          =======            ========            ========
</TABLE>



                                       42
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the major components of cash flow:

SUMMARY OF CASH FLOWS

<TABLE>
<CAPTION>
                                                Six-Month Period
                                                  Ended June 30
                                             -----------------------
(Millions of Dollars)                          2004           2003         $ Change
--------------------------------------       --------       --------       --------
<S>                                          <C>            <C>            <C>
Cash provided from(used for):
 Operating activities                        $   96.2       $   44.5       $   51.7
 Investing activities                        (1,002.9)         (36.5)        (966.4)
 Financing activities                           868.9          (29.0)         897.9
Effect of exchange-rate changes on cash           6.4            4.5            1.9
                                             --------       --------       --------
Net decrease in cash and
 short-term investments                      $  (31.4)      $  (16.5)      $  (14.9)
                                             ========       ========       ========
</TABLE>

Operating Activities:

The increase in cash provided from operating activities in the first six months
of 2004 compared with the same period in the prior year, primarily was due to an
increase in earnings after adjusting for non-cash items, specifically the $35.0
million write-off of acquired IPR&D projects from the Noveon acquisition. We
also had a working capital build-up in accounts receivable, which consumed cash
of $77.0 million. Our receivables increased by $265.1 million from the prior
year-end, primarily due to the Noveon and hyperdispersants acquisitions. Days
sales in receivables averaged 53.4 days in the first six months of 2004, which
approximates our target for 2004 of 53.5 days. Days sales in inventory averaged
88 days for the first six months of 2004 compared with our 2004 target of 90
days.

Investing Activities:

Our capital expenditures in the first six months of 2004 were $42.2 million, as
compared with $36.8 million for same period in 2003. In 2004, we estimate
capital expenditures will be in the range of $135.0 million to $140.0 million,
compared with $88.5 million in 2003. The 2004 estimate includes approximately
$40.0 million for the newly acquired Noveon business.

In June 2004, we completed the Noveon acquisition for cash of $920.2 million
plus transaction costs of $10.5 million less certain seller expenses of $32.9
million and less cash acquired of $103.0 million.

In January 2004, we completed the acquisition of the hyperdispersants business
of Avecia for cash totaling $133.0 million. This additives business is
headquartered in Blackley, United Kingdom, and develops, manufactures and
markets high-value additives that are based on polymeric dispersion technology
and used in coatings and inks. These products enrich and strengthen color while
reducing production costs and solvent emissions, and are marketed under the
brand names Solsperse(TM), Solplus(TM) and Solthix(TM). Historical annualized
revenues of this business are approximately $50.0 million. We funded the
acquisition through euro 43.0 million borrowings ($55.0 million equivalent)
under a 364-day credit facility, $5.0 million in yen borrowings and the
remainder in cash. At December 31, 2003, we had a foreign currency forward
contract of $125.0 million in order to fix the U.S. dollar price for this
acquisition. In the first quarter of 2004, we recorded a pre-tax gain of $6.4
million ($0.08 per share) upon the termination of this foreign currency forward
contract.

                                       43
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Financing Activities:

The increase in cash provided from financing activities of $868.9 million in
2004 was due to borrowings of $1,797.0 million under our $2,450.0 million
364-day bridge credit facility, the proceeds of which were used to fund the
Noveon acquisition and repay assumed Noveon debt of $1,103.1 million.

Capitalization and Credit Facilities:

Our net debt to capitalization ratio at June 30, 2004 was 69%. Net debt is the
total of short-term and long-term debt, reduced by cash and short-term
investments excluding unrealized gains and losses on derivative instruments
designated as fair value hedges of fixed-rate debt. Capitalization is
shareholders' equity plus net debt. Total debt as a percent of capitalization
was 71% at June 30, 2004.

After the announcement of the Noveon acquisition, our long-term debt and
commercial paper credit ratings were reduced. The credit rating change
eliminated our access to the commercial paper market. As a result, we repaid our
outstanding commercial paper and we terminated our existing floating-to-fixed
rate interest rate swaps with a notional value of $50.0 million effective April
29, 2004. The termination of the swaps resulted in a $2.9 million dollar pre-tax
charge that was recognized in the second quarter of 2004. In addition, we called
and repaid the outstanding $18.4 million marine terminal refunding revenue
bonds, at par, in the second quarter of 2004.

Our ratio of current assets to current liabilities, excluding $1,797.1 million
short-term debt that we expect to refinance, declined from 3.1 at December 31,
2003 to 1.9 at June 30, 2004, because of the Noveon and hyperdispersants
acquisitions.

At June 30, 2004, we had a $350.0 million revolving credit facility that matures
in July 2006, which allows us to borrow at or below the U.S. prime rate. As of
June 30, 2004, we had outstanding borrowings under this agreement of $75.0
million, the proceeds of which were used to fund the repayment of previously
outstanding commercial paper and marine terminal bonds, and liabilities
associated with the termination of various floating-to-fixed interest rate
swaps.

In May 2004, we obtained a 364-day credit facility of $2,450.0 million for the
purpose of financing the Noveon acquisition. This credit facility enables us to
borrow at or below the U.S. prime rate. In June 2004, we borrowed $1,797.0
million under this facility to finance the Noveon acquisition and repay a
portion of the assumed Noveon debt. In addition, in July 2004 we borrowed an
additional $175.0 million under this facility to repay the outstanding seller
notes also assumed as part of the Noveon acquisition.

We plan to implement a permanent capital structure in the near-term that will
replace the bridge facility. We expect the permanent financing to include
approximately $425.0 million in new common equity and $1,100.0 million in
unsecured public bonds, with the remainder being financed through bank term
loans. At the time this permanent capital structure is in place, we estimate
that our net debt to capitalization will be approximately 55%. Net debt in this
calculation consists of total debt less total cash balances. Our estimated total
debt as a percent of capitalization will be approximately 58%. We have amended
our existing credit facility agreements previously discussed to revise the
financial covenant restrictions until our permanent capital structure is in
place.

                                       44
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

In January 2004, we obtained a separate revolving credit facility that enabled
us to borrow up to euro 50 million for the purpose of financing European
acquisitions. We borrowed euro 43 million under this facility in January 2004.
This amount was repaid in June 2004 and the credit facility has been cancelled.

Contractual Cash Obligations:

The following table shows our contractual cash obligations (in millions of
dollars) under debt agreements, leases, non-cancelable purchase commitments and
other long-term liabilities at June 30, 2004. Additional information on debt can
be found in Note 9 to the financial statements.

<TABLE>
<CAPTION>
                                             Payments Due by Period
                           ------------------------------------------------------------
Contractual Cash                         Remainder    2005 &        2007 &      2009 &
Obligations                 Total        of 2004       2006          2008       After
                           --------      ---------   --------      --------    --------
<S>                        <C>           <C>         <C>           <C>         <C>
Total debt                 $2,380.3      $  191.1    $1,876.8      $  212.4    $  100.0
Operating leases               76.3          19.4        26.3          13.4        17.2
Non-cancelable
 purchase commitments         252.7         143.2        60.3          46.2         3.0
Other long-term
 liabilities                   41.6           2.2        15.0           7.7        16.7
                           --------      --------    --------      --------    --------
Total contractual
 cash obligations          $2,750.9      $  355.9    $1,978.4      $  279.7    $  136.9
                           ========      ========    ========      ========    ========
</TABLE>

Non-cancelable purchase commitments primarily include raw materials purchased
under take or pay contracts, drumming, warehousing and service contracts,
terminal agreements and toll processing arrangements. Other long-term
liabilities disclosed in the table represent long-term liabilities reported in
our consolidated balance sheet at June 30, 2004, under "other noncurrent
liabilities," excluding pension, postretirement and other non-contractual
liabilities. Total debt includes both the current and long-term portion of debt
as reported in Note 9. While we intend to refinance the bridge loan in 2004, the
bridge loan is not due and payable until May 2005.

We expect to make employer contributions for pension benefits in 2004 consisting
of $10.5 million to the United States qualified plans including Noveon, $2.5
million to the United States non-qualified plan and a range of $5.0 million to
$6.0 million for the United Kingdom plan. In addition, we expect non-pension
postretirement benefit payments in the United States to be approximately $4.2
million in 2004.

We had $2,380.3 million of debt outstanding at June 30, 2004, most of which
originated from our acquisition of Noveon, including bridge loan financing of
$1,797.0 million, which is due in May 2005. As a result, our total debt as a
percent of capitalization has increased from 29% at December 31, 2003 to 71% at
June 30, 2004. We will also incur increased interest expense. We intend to
implement a permanent capital structure in the near-term that will replace the
bridge facility and reduce our interest cost. We expect the permanent capital
structure will include approximately $425.0 million in new common equity. Our
debt level will require us to dedicate a significant portion of our cash flow to
make interest and principal payments, thereby reducing the availability of our
cash flow for acquisitions or other purposes. Nevertheless, we believe our
future operating cash flows will be sufficient to cover our debt repayments and
other obligations and that we have untapped borrowing capacity that can provide
us with additional financial resources.

                                       45
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the federal
securities laws. As a general matter, forward-looking statements are those
focused upon future plans, objectives or performance as opposed to historical
items and include statements of anticipated events or trends and expectations
and beliefs relating to matters not historical in nature. Such forward-looking
statements are subject to uncertainties and factors relating to our operations
and business environment, all of which are difficult to predict and many of
which are beyond our control. These uncertainties and factors could cause our
actual results to differ materially from those matters expressed in or implied
by such forward-looking statements.

We believe that the following factors, among others, could affect our future
performance and cause our actual results to differ materially from those
expressed or implied by forward-looking statements made in this quarterly
report:

-     the effect of interest rate fluctuations on our interest expense;

-     the conditions in the debt and equity markets at the time we implement our
      permanent financing;

-     Our ability to refinance our bridge facility by May 27, 2005, when it is
      due and payable;

-     Our indebtedness requires the use of a significant portion of our cash
      flow to make interest and principal payments, thereby reducing the
      availability of our cash flow to fund capital expenditures, acquisitions
      or other general corporate purposes;

-     the overall global economic environment and the overall demand for our
      products on a worldwide basis;

-     the demand for our products in developing regions such as China and India,
      which geographic areas are an announced focus of our activities;

-     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, especially our ability to integrate the acquisition of
      Noveon International;

-     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 do with our
      largest customers;

-     the cost, availability and quality of raw materials, including
      petroleum-based products;

-     the cost and availability of energy, including natural gas and
      electricity;

                                       46
<PAGE>

                            THE LUBRIZOL CORPORATION

                Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

-     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; and

-     the ability to identify, understand and manage risks inherent in new
      markets in which we choose to expand.

                                       47
<PAGE>

                            THE LUBRIZOL CORPORATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      We operate manufacturing and blending facilities, laboratories and offices
      around the world and utilize fixed and variable rate debt to finance our
      global operations. As a result, we are subject to business risks inherent
      in non-U.S. activities, including political and economic uncertainties,
      import and export limitations, and market risks related to changes in
      interest rates and foreign currency exchange rates. We believe the
      political and economic risks related to our foreign operations are
      mitigated due to the stability of the countries in which our largest
      foreign operations are located.

      In the normal course of business, we use derivative financial instruments
      including interest rate and commodity hedges and forward foreign currency
      exchange contracts to manage our market risks. Our objective in managing
      our exposure to changes in interest rates is to limit the impact of such
      changes on our earnings and cash flow. Our objective in managing the
      exposure to changes in foreign currency exchange rates is to reduce
      volatility on our earnings and cash flow associated with such changes. Our
      principal currency exposures are the euro, the pound sterling, the
      Japanese yen and certain Latin American currencies. Our objective in
      managing our exposure to changes in commodity prices is to reduce the
      volatility on earnings of utility expense. We do not hold derivatives for
      trading purposes.

      We measure our market risk related to our holdings of financial
      instruments based on changes in interest rates, foreign currency rates and
      commodity prices utilizing a sensitivity analysis. The sensitivity
      analysis measures the potential loss in fair value, cash flow and earnings
      based on a hypothetical 10% change (increase and decrease) in interest,
      currency exchange rates and commodity prices. We use current market rates
      on our debt and derivative portfolios to perform the sensitivity analysis.
      Certain items such as lease contracts, insurance contracts and obligations
      for pension and other postretirement benefits are not included in the
      analysis.

      Our primary interest rate exposures relate to our cash and short-term
      investments, fixed and variable rate debt and interest rate swaps. The
      calculation of potential loss in fair value is based on an immediate
      change in the net present values of our interest rate-sensitive exposures
      resulting from a 10% change in interest rates. The potential loss in cash
      flow and income before tax is based on the change in the net interest
      income/expense over a one-year period due to an immediate 10% change in
      rates. A hypothetical 10% increase in interest rates would have had a
      favorable impact and a hypothetical 10% decrease in interest rates would
      have had an unfavorable impact on fair values of $53.0 million and cash
      flows of $38.8 million in 2004. In addition, a hypothetical 10% increase
      in interest rates would have had an unfavorable impact and a hypothetical
      10% decrease in interest would have had a favorable impact on income
      before tax of $3.1 million in 2004.

      Our primary currency rate exposures are to foreign-denominated debt,
      intercompany debt, cash and short-term investments and forward foreign
      currency exchange contracts. The calculation of potential loss in fair
      value is based on an immediate change in the United States dollar
      equivalent balances of our currency exposures due to a 10% shift in
      exchange rates. The potential loss in cash flow and income before tax is
      based on the change in cash flow and income before tax over a one-year
      period resulting from an immediate 10% change in currency exchange rates.
      A hypothetical 10% increase in currency exchange rates would have had an
      unfavorable impact and a hypothetical 10% decrease in currency exchange
      rates would have had a favorable impact on fair values of $15.3 million,
      cash flows of $31.6 million and income before tax of $12.7 million in
      2003.

                                       48
<PAGE>

                            THE LUBRIZOL CORPORATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      Our primary commodity hedge exposures relate to natural gas and electric
      utility expenses. The calculation of potential loss in fair value is based
      on an immediate change in the United States dollar equivalent balances of
      our commodity exposures due to a 10% shift in the underlying commodity
      prices. The potential loss in cash flow and income before tax is based on
      the change in cash flow and income before tax over a one-year period
      resulting from an immediate 10% change in commodity prices. A hypothetical
      10% increase in commodity prices would have had a favorable impact and a
      hypothetical 10% decrease in commodity prices would have had an
      unfavorable impact on fair value of $0.3 million, cash flow of $0.3
      million, and income before tax of $0.3 million in 2003.

Item 4. Controls and Procedures

      We evaluated, under the supervision and with the participation of our
      chief executive officer and chief financial officer, the effectiveness of
      our disclosure controls and procedures (as defined in Exchange Act Rule
      13a-15(e)) as of June 30, 2004. Based on that evaluation, our chief
      executive officer and chief financial officer concluded that, as of June
      30, 2004, our disclosure controls and procedures were effective in timely
      alerting them to material information relating to Lubrizol and our
      consolidated subsidiaries required to be included in our periodic SEC
      filings. During the second quarter of 2004, we expanded our disclosure
      controls to integrate the Noveon acquisition. Otherwise, there were no
      significant changes in our internal control over financial reporting that
      occurred during the second quarter of 2004 that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.

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<PAGE>

                            THE LUBRIZOL CORPORATION

                           PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

        (c) On June 15, 2004, 210 common shares were issued in a private
            placement transaction exempt from registration under the Securities
            Act of 1933 pursuant to Section 4(2) of that Act. We issued the
            common shares to a former director pursuant to a deferred
            compensation plan for directors.

            On April 30, 2004, 177 common shares were issued in a transaction
            exempt from registration under the Securities Act of 1933 pursuant
            to Regulation S. The common shares were issued under an employee
            benefit plan to one employee of a wholly owned UK subsidiary of the
            company.

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

            Our Annual Meeting of Shareholders was held April 26, 2004. The
            following matters were voted on by the shareholders:

            1.    Election of directors:

                  a.    James L. Hambrick. The vote was 42,283,049 shares for
                        and 1,141,005 shares to withhold authority.

                  b.    Gordon D. Harnett. The vote was 42,981,920 shares for
                        and 442,134 shares to withhold authority

                  c.    Victoria F. Haynes. The vote was 42,681,550 shares for
                        and 742,504 shares to withhold authority.

                  d.    William P. Madar. The vote was 42,099,196 shares for and
                        1,324,858 shares to withhold authority.

            2.    A proposal to confirm the appointment of Deloitte & Touche LLP
                  as independent auditors. The vote was 41,483,596 shares for;
                  1,878,274 shares against; and 62,184 shares abstaining.

Item 6. Exhibits and Reports on Form 8-K

        (a) Exhibits

            (10)(k)*  The Lubrizol Corporation Deferred Compensation Plan for
                      Officers, as amended

            (31)      Rule 13a-14(a) Certifications

            (32)      Certification of Chief Executive Officer and Chief
                      Financial Officer of The Lubrizol Corporation Pursuant to
                      18 U.S.C. Section 1350

            * Indicates management contract or compensatory plan or arrangement.

        (b) Reports on Form 8-K

            On April 16, 2004, we furnished a Form 8-K to the Securities and
            Exchange Commission with respect to our news release dated April 16,
            2004, announcing the signing of a definitive agreement to acquire
            Noveon International, Inc. and providing updated earnings guidance
            for the first quarter of 2004.

                                       50
<PAGE>

                            THE LUBRIZOL CORPORATION

                           PART II. OTHER INFORMATION

            On April 23, 2004, we furnished a Form 8-K to the Securities and
            Exchange Commission with respect to our news release dated April 23,
            2004, announcing the results for the quarter ended March 31, 2004.

            On June 16, 2004, we filed a Form 8-K with the Securities and
            Exchange Commission with respect to the acquisition of Noveon
            International, Inc.

            On July 29, 2004, we filed a Form 8-K/A with the Securities and
            Exchange Commission with respect to the acquisition of Noveon
            International, Inc.

            On August 4, 2004, we filed a Form 8-K with the Securities and
            Exchange Commission to provide guarantor footnote information as the
            Company is in the process of registering debt securities using Form
            S-3 to provide funds to repay a portion of the temporary bridge loan
            which was utilized to acquire all of the outstanding common stock of
            Noveon International, Inc.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             THE LUBRIZOL CORPORATION

                                             /s/ W. Scott Emerick
                                             -----------------------------------
                                             W. Scott Emerick
                                             Chief Accounting Officer and
                                               Duly Authorized Signatory of
                                               The Lubrizol Corporation

Date: August 6, 2004

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