##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-5263
 THE LUBRIZOL CORPORATION
  Ohio
(State or other jurisdiction of 
incorporation or organization)
    
    34-0367600
(I.R.S.Employer
Identification No.)
 
 
  þ o
  þ o o
 o þ




---



##### Table of Contents



EXPLANATORY NOTE
  
    
    Part I - Item 1. Financial Statements
    
    Part I - Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    Part I - Item 4. Controls and Procedures
      -2-




---



##### 



THE LUBRIZOL CORPORATION  Quarterly Report on Form 10-Q/A  Quarter Ended March 31, 2007
 Table of Contents
 Page NumberPART I. FINANCIAL INFORMATIONItem 1
    
    Financial Statements (unaudited)
    
    
    4Consolidated Statements of Income (as restated)
    
    
    4Consolidated Balance Sheets (as restated)
    
    
    5Consolidated Statements of Cash Flows (as restated)
    
    
    6Notes to Consolidated Financial Statements (as restated)
    
    
    7Item 2
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    27Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4
    
    Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    42Item 1A
    
    Risk Factors
    
    
    42Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 6
    
    Exhibits
    
    
    43Signatures
    
    
    44EX-31.1EX-31.2EX-32.1
  -3-




---



##### Table of Contents



PART
I. FINANCIAL INFORMATION
 
 Item 1.
Financial Statements
 THE LUBRIZOL CORPORATION
 
  
 Three Months EndedMarch 31,(In Millions of Dollars Except Per Share Data)
    
    2007
    
    2006(as restated, see
    
    (as restated, seeNote 16)
    
    Note 16)Net sales
    
    
    $
    1,075.8
    
    
    
    $
    983.5Royalties and other revenues
    
    
    
    0.9
    
    
    
    
    0.6Total revenues
    
    
    
    1,076.7
    
    
    
    
    984.1Cost of sales
    
    
    

    798.3
    
    
    
    
    739.3Selling and administrative expenses
    
    
    
    102.3
    
    
    
    
    93.3Research, testing and development expenses
    
    
    
    51.7
    
    
    
    
    49.6Amortization of intangible assets
    
    
    
    6.0
    
    
    
    
    5.8Restructuring and impairment (credits) charges
    
    
    
    (2.4
    )
    
    
    
    1.8Total costs and expenses
    
    
    
    955.9
    
    
    
    
    889.8Other income (expense)  net
    
    
    
    5.7
    
    
    
    
    (1.5
    )Interest income
    
    
    
    7.1
    
    
    
    
    2.2Interest expense
    
    
    
    (24.2
    )
    
    
    
    (25.3
    )Income from continuing operations before income taxes
    
    
    

    109.4
    
    
    
    

    69.7Provision for income taxes
    
    
    
    38.1
    
    
    
    
    24.4Income from continuing operations
    
    
    
    71.3
    
    
    
    
    45.3Discontinued operations  net of tax
    
    
    
    
    
    
    
    
    (60.7
    )Net income (loss)
    
    
    $
    71.3
    
    
    
    $
    (15.4
    )Basic earnings (loss) per share:Continuing operations
    
    
    $
    1.03
    
    
    
    $
    0.66Discontinued operations
    
    
    
    
    
    
    
    
    (0.89
    )Net income (loss) per share, basic
    
    
    $
    1.03
    
    
    
    $
    (0.23
    )Diluted earnings (loss) per share:Continuing operations
    
    
    $
    1.02
    
    
    
    $
    0.65Discontinued operations
    
    
    
    
    
    
    
    
    (0.88
    )Net income (loss) per share, diluted
    
    
    $
    1.02
    
    
    
    $
    (0.23
    )Dividends per share
    
    
    $
    0.26
    
    
    
    $
    0.26
 Amounts shown are unaudited.
 See accompanying notes to the financial statements.
 -4-




---



##### Table of Contents



THE LUBRIZOL CORPORATION
 
  
 March 31,
    
    December 31,(In Millions of Dollars Except Share Data)
    
    2007
    
    2006(as restated, seeNote 16)ASSETSCash and short-term investments
    
    
    $
    582.8
    
    
    
    $
    575.7Receivables
    
    
    
    625.5
    
    
    
    

    573.6Inventories
    
    
    
    573.0
    
    
    
    
    589.0Other current assets
    
    
    

    86.7
    
    
    
    

    98.0Total current assets
    
    
    
    1,868.0
    
    
    
    
    1,836.3Property and equipment  at cost
    
    
    
    2,580.3
    
    
    
    
    2,546.0Less accumulated depreciation
    
    
    
    1,496.5
    
    
    
    
    1,464.7Property and equipment  net
    
    
    
    1,083.8
    
    
    
    
    1,081.3Goodwill
    
    
    
    1,092.9
    
    
    
    
    1,076.1Intangible assets  net
    
    
    
    325.4
    
    
    
    
    322.8Investments in non-consolidated companies
    
    
    
    7.2
    
    
    
    
    7.7Other assets
    
    
    
    71.7
    
    
    
    
    66.7TOTAL
    
    
    $
    4,449.0
    
    
    
    $
    4,390.9LIABILITIES AND SHAREHOLDERS EQUITYShort-term debt and current portion of long-term debt
    
    
    $
    6.1
    
    
    
    $
    3.7Accounts payable
    
    
    
    360.2
    
    
    
    
    340.5Accrued expenses and other current liabilities
    
    
    
    229.7
    
    
    
    
    290.2Total current liabilities
    
    
    
    596.0
    
    
    
    

    634.4Long-term debt
    
    
    
    1,507.1
    
    
    
    
    1,538.0Pension obligations
    
    
    
    226.7
    
    
    
    
    237.9Other postretirement benefit obligations
    
    
    
    93.0
    
    
    
    

    93.5Noncurrent liabilities
    
    
    
    141.0
    
    
    
    
    72.3Deferred income taxes
    
    
    
    76.1
    
    
    
    
    80.4Total liabilities
    
    
    
    2,639.9
    
    
    
    
    2,656.5Minority interest in consolidated companies
    
    
    
    51.7
    
    
    
    
    51.3Contingencies and commitmentsShareholders 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 sharesOutstanding  69,024,228 shares as of March 31, 2007 after deducting
17,171,666 treasury shares; 69,020,569 shares as of December 31, 2006
after deducting 17,175,325 treasury shares
    
    
    
    728.5
    
    
    
    
    710.1Retained earnings
    
    
    
    1,077.5
    
    
    
    

    1,033.8Accumulated other comprehensive loss
    
    
    
    (48.6
    )
    
    
    

    (60.8
    )Total shareholders equity
    
    
    
    1,757.4
    
    
    
    
    1,683.1TOTAL
    
    
    $
    4,449.0
    
    
    
    $
    4,390.9
 Amounts shown are unaudited.
 See accompanying notes to the financial statements.
 -5-




---



##### Table of Contents



THE LUBRIZOL CORORATION
 
  
 Three
Months EndedMarch 31,(In Millions of Dollars)
    
    2007
    
    2006(as restated, see
    
    (as restated, seeNote 16)
    
    Note 16)CASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income (loss)
    
    
    $
    71.3
    
    
    

    $
    (15.4
    )Adjustments to reconcile net income (loss) to cash provided by
operating activities:Depreciation and amortization
    
    
    
    39.2
    
    
    
    
    42.9Deferred income taxes
    
    
    
    10.7
    
    
    
    
    7.9Deferred compensation
    
    
    
    8.0
    
    
    
    
    3.8Restructuring and impairment charges
    
    
    
    
    
    
    
    
    61.0(Gain) loss from divestitures and sales of property and equipment
    
    
    
    (7.9
    )
    
    
    
    0.9Change in current assets and liabilities, net of acquisitions and divestitures:Receivables
    
    
    
    (46.3
    )
    
    
    
    (38.1
    )Inventories
    
    
    
    18.8
    
    
    
    
    (13.2
    )Accounts payable, accrued expenses and other current liabilities
    
    
    
    16.5
    
    
    
    
    (31.2
    )Other current assets
    
    
    
    (1.1
    )
    
    
    
    0.9(12.1
    )
    
    
    
    (81.6
    )Change in noncurrent liabilities
    
    
    
    (8.5
    )
    
    
    
    4.1Other items  net
    
    
    
    (2.7
    )
    
    
    
    2.1Total operating activities
    
    
    
    98.0
    
    
    
    
    25.7INVESTING ACTIVITIESCapital expenditures
    
    
    
    (31.9
    )
    
    
    
    (30.3
    )Acquisitions
    
    
    
    (15.7
    )
    
    
    
    Net proceeds from divestitures and sales of property and equipment
    
    
    
    11.4
    
    
    
    
    8.5Other items  net
    
    
    
    (0.1
    )
    
    
    
    Total investing activities
    
    
    
    (36.3
    )
    
    
    
    (21.8
    )FINANCING ACTIVITIESChanges in short-term debt  net
    
    
    
    2.4
    
    
    
    
    0.3Repayments of long-term debt
    
    
    
    (32.5
    )
    
    
    
    (23.7
    )Dividends paid
    
    
    
    (18.0
    )
    
    
    
    (17.7
    )Common shares purchased
    
    
    
    (19.3
    )
    
    
    
    Proceeds from the exercise of stock options
    
    
    
    11.7
    
    
    
    
    7.3Total financing activities
    
    
    
    (55.7
    )
    
    
    
    (33.8
    )Effect of exchange rate changes on cash
    
    
    
    1.1
    
    
    
    
    0.8Net increase (decrease) in cash and short-term investments
    
    
    
    7.1
    
    
    
    
    (29.1
    )Cash and short-term investments at the beginning of period
    
    
    
    575.7
    
    
    
    
    262.4Cash and short-term investments at the end of period
    
    
    $
    582.8
    
    
    
    $
    233.3
 Amounts shown are unaudited.
 See accompanying notes to the financial statements.
 -6-




---



##### Table of Contents



THE
LUBRIZOL CORPORATION
 
 Notes
to Consolidated Financial Statements
 March 31,
2007
  1. Basis of Presentation
   2. Significant Accounting Policies
 Net Income Per Share
  Three Months EndedMarch 31,2007
    
    2006Numerator:Income from continuing operations
    
    
    $
    71.3
    
    
    
    $
    45.3Denominator:Weighted-average common shares outstanding
    
    
    
    69.3
    
    
    
    
    68.4Dilutive effect of stock options and awards
    
    
    
    0.8
    
    
    
    
    0.7Denominator for income from continuing operations
per share, diluted
    
    
    
    70.1
    
    
    
    
    69.1Income from continuing operations per share, basic
    
    
    $
    1.03
    
    
    
    $
    0.66Income from continuing operations per share, diluted
    
    
    $
    1.02
    
    
    
    $
    0.65
  -7-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 New Accounting Standards
   Use of Estimates
  Reclassifications
  3. Stock-Based Compensation
  -8-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
  Risk-free interest rate
    
    
    4.8
    %Dividend yield
    
    
    2.0
    %Volatility
    
    
    17.8
    %Expected life (years)
    
    
    10.0Weighted-average fair value of
options granted during the period
    
    $
    14.68
     Expected
    
    AverageNumber of Units
    
    Stock Price onAward
    
    to be Issued
    
    Date of Grant2005-2007
    
    
    268,881
    
    
    $
    39.442006-2008
    
    
    298,034
    
    
    $
    43.072007-2009
    
    
    162,414
    
    
    $
    53.07
  -9-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Weighted-AverageShare
    
    
    Grant DateUnits
    
    
    Fair ValueNonvested at January 1, 2007
    
    
    
    370,448
    
    
    
    $
    40.95Granted
    
    
    
    129,930
    
    
    
    $
    53.07Performance increase
    
    
    
    228,981
    
    
    
    $
    43.66Vested
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    Nonvested at March 31, 2007
    
    
    
    729,359
    
    
    
    $
    43.96
  Three Months EndedMarch 31,2007

    
    
    2006Restricted share units:Long-term incentive program
    
    
    
    $   6.6
    
    
    
    
    $  1.7Other plans
    
    
    
    2.9
    
    
    
    
    1.7Stock options
    
    
    
    0.7
    
    
    
    

0.8Total
    
    
    
    $ 10.2
    
    
    
    
    $  4.2Tax benefit
    
    
    
    $  3.6
    
    
    
    
    $  1.5
 4. Acquisitions
  5. Divestitures
  ®
 -10-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
   6.    Inventories
  March 31,
    
    December 31,2007
    
    2006Finished products
    
    
    
    
    
    
    $ 310.7
    
    
    
    $ 315.0Products in process
    
    
    
    
    
    
    87.7
    
    
    
    108.2Raw materials
    
    
    
    
    
    
    146.3
    
    
    
    138.2Supplies and engine test parts
    
    
    
    
    
    
    28.3
    
    
    
    27.6Total inventory
    
    
    
    
    
    
    $ 573.0
    
    
    
    $ 589.0
 7.    Goodwill and Intangible Assets
   LubrizolAdvanced
    
    LubrizolMaterials
    
    Additives
    
    TotalBalance, January 1, 2007
    
    
    $ 978.3
    
    
    
    $   97.8
    
    
    
    $ 1,076.1Additions
    
    
    
    
    
    
    8.1
    
    
    
    8.1Translation & other adjustments
    
    
    8.6
    
    
    
    0.1
    
    
    
    8.7Balance, March 31, 2007
    
    
    $ 986.9
    
    
    
    $ 106.0
    
    
    
    $ 1,092.9
   -11-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 March 31, 2007
    
    December 31, 2006Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Customer lists
    
    
    $ 150.1
    
    
    
    $ 26.3
    
    
    
    $ 145.0
    
    
    
    $ 24.0Technology
    
    
    141.5
    
    
    
    47.4
    
    
    
    139.8
    
    
    
    44.9Trademarks
    
    
    21.9
    
    
    
    5.8
    
    
    
    20.7
    
    
    
    5.5Patents
    
    
    14.1
    
    
    
    4.5
    
    
    
    14.0
    
    
    
    4.2Land-use rights
    
    
    7.5
    
    
    
    1.2
    
    
    
    7.5
    
    
    
    1.2Non-compete agreements
    
    
    8.4
    
    
    
    7.8
    
    
    
    8.2
    
    
    
    7.2Other
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.7Total amortized intangible assets
    
    
    344.4
    
    
    
    93.9
    
    
    
    336.1
    
    
    
    87.7Non-amortized trademarks
    
    
    74.9
    
    
    
    
    
    
    
    74.4
    
    
    
    Total
    
    
    $ 419.3
    
    
    
    $ 93.9
    
    
    
    $ 410.5
    
    
    
    $ 87.7
  8.    Income Taxes
     -12-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
    9.    Comprehensive Income (Loss)
  Three Months EndedMarch 31,2007
    
    2006Net income (loss)
    
    
    $ 71.3
    
    
    
    $ (15.4
    )Foreign currency translation adjustment
    
    
    10.0
    
    
    
    6.7Pension and other postretirement benefit plans
    
    
    
    
    
    
    (0.8
    )Unrealized gain (loss) - natural gas hedges
    
    
    1.5
    
    
    
    (0.8
    )Amortization of treasury rate locks
    
    
    0.7
    
    
    
    0.7Total comprehensive income (loss)
    
    
    $ 83.5
    
    
    
    $ (9.6
    )
 10.    Segment Reporting
   -13-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 ® ®
   -14-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Three Months EndedMarch 31,2007

    
    2006Revenues from external customers:Lubrizol Additives
    
    $
    696.0
    
    
    $
    627.5Lubrizol Advanced Materials
    
    
    380.7
    
    
    
    356.6Total revenues
    
    $
    1,076.7
    
    
    $
    984.1Segment operating income:Lubrizol Additives
    
    $
    100.9
    
    
    $
    73.5Lubrizol Advanced Materials
    
    
    45.4
    
    
    
    44.6Segment operating income
    
    
    146.3
    
    
    
    118.1Corporate expenses
    
    
    (21.7
    )
    
    
    (21.3
    )Corporate other expense  net
    
    
    (0.5
    )
    
    
    (2.2
    )Restructuring and impairment credits (charges)
    
    
    2.4
    
    
    
    (1.8
    )Interest expense  net
    
    
    (17.1
    )
    
    
    (23.1
    )Income from continuing operations
before income taxes
    
    $
    109.4
    
    
    $
    69.7The companys total assets by segment were as
follows:March 31,

    December 31,2007

    


2006Segment total assets:Lubrizol Additives
    
    $
    1,451.9
    
    
    $
    1,397.6Lubrizol Advanced Materials
    
    
    2,209.8
    
    
    
    2,193.7Total segment assets
    
    
    3,661.7
    
    
    
    3,591.3Corporate assets
    
    
    787.3
    
    
    
    799.6Total consolidated assets
    
    $
    4,449.0
    
    
    $
    4,390.9
 -15-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 11.    Pension and Postretirement Benefits
  Three Months EndedMarch 31,2007
    
    2006Pension benefits:Service cost - benefits earned during period
    
    
    $   7.5
    
    
    
    $   8.3Interest cost on projected benefit obligation
    
    
    9.8
    
    
    
    8.5Expected return on plan assets
    
    
    (8.6
    )
    
    
    (7.1
    )Amortization of prior service costs
    
    
    0.7
    
    
    
    0.5Amortization of initial net obligation
    
    
    
    
    
    
    0.1Settlement / curtailment loss
    
    
    
    
    
    
    3.3Recognized net actuarial loss
    
    
    1.2
    
    
    
    2.1Net periodic pension cost
    
    
    $ 10.6
    
    
    
    $ 15.7Other postretirement benefits:Service cost - benefits earned during period
    
    
    $   0.4
    
    
    
    $   0.5Interest cost on projected benefit obligation
    
    
    1.4
    
    
    
    1.4Amortization of prior service costs
    
    
    (1.6
    )
    
    
    (2.1
    )Amortization of initial net obligation
    
    
    0.1
    
    
    
    0.1Recognized net actuarial loss
    
    
    0.3
    
    
    
    0.4Net periodic non-pension postretirement
benefit cost
    
    
    $   0.6
    
    
    
    $   0.3
  12.    Restructuring and Impairment (Credits) Charges
   -16-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Liability
    
    Restructuring
    
    
    
    
    
    LiabilityJanuary 1,
    
    and Impairment
    
    
    
    
    
    March 31,2007
    
    (Credits) Charges
    
    Cash Paid
    
    2007Bromborough, U.K. plant closure and sale
    
    
    $ 1.0
    
    
    
    $ (0.8
    )
    
    
    $     
    
    
    
    $ 0.2Lubrizol Advanced Materials plant
closures and workforce reductions
    
    
    0.7
    
    
    
    0.3
    
    
    
    (0.4
    )
    
    
    0.6Corporate / other workforce reductions
    
    
    0.2
    
    
    
    0.1
    
    
    
    (0.3
    )
    
    
    Noveon International restructuring
liabilities assumed
    
    
    0.9
    
    
    
    
    
    
    
    (0.3
    )
    
    
    0.6$ 2.8
    
    
    
    $ (0.4
    )
    
    
    $ (1.0
    )
    
    
    $ 1.4
  13.    Debt
  14.    Shareholders Equity
  -17-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Shareholders EquityAccumulatedNumber of
    
    
    
    
    
    
    
    
    
    OtherShares
    
    Common
    
Retained
    
    ComprehensiveOutstanding
    
    Shares
    
    Earnings
    
    (Loss) Income
    
    TotalBalance, December 31, 2006
    
    
    69.0
    
    
    
    $ 710.1
    
    
    
    $ 1,033.8
    
    
    
    $ (60.8
    )
    
    
    $ 1,683.1Cumulative effect of a change in
accounting principle due to the
adoption of FIN No. 48
    
    
    
    
    
    
    
    
    
    
    (8.9
    )
    
    
    
    
    
    
    (8.9
    )Balance, January 1, 2007
    
    
    69.0
    
    
    
    710.1
    
    
    
    1,024.9
    
    
    
    (60.8
    )
    
    
    1,674.2Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    71.3
    
    
    
    
    
    
    
    71.3Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.2
    
    
    
    12.2Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83.5Deferred stock compensation
    
    
    
    
    
    
    7.3
    
    
    
    
    
    
    
    
    
    
    
    7.3Common shares  treasury:Common shares purchased
    
    
    (0.4
    )
    
    
    (0.6
    )
    
    
    (18.7
    )
    
    
    
    
    
    
    (19.3
    )Shares issued upon exercise
of stock options and awards
    
    
    0.4
    
    
    
    11.7
    
    
    
    
    
    
    
    
    
    
    
    11.7Balance, March 31, 2007
    
    
    69.0
    
    
    
    $ 728.5
    
    
    
    $ 1,077.5
    
    
    
    $ (48.6
    )
    
    
    $ 1,757.4
 15.    Contingencies
  General
  -18-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Environmental
      -19-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 GUARANTEES
    INDEMNIFICATIONS
  16.    Restatement of Consolidated Financial Statements
   -20-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
   -21-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Consolidated Statement of Income
 Three Months Ended(In Millions of Dollars Except Per Share
Data)
    
    March 31, 2007(as previouslyreported)
    
    (adjustments)
    
    (as restated)Net sales
    

    
    $

    1,075.8
    
    
    

    $
    
    
    
    

    $
    1,075.8Royalties and other revenues
    
    

    
    0.9
    
    
    

    
    
    
    

    

    


    0.9Total revenues
    

    

    
    1,076.7
    
    
    

    
    
    
    

    
    
    1,076.7Cost of sales
    
    
    

    797.7
    
    
    
    

    0.6
    
    
    
    

    798.3Selling and administrative expenses
    

    

    
    102.3
    
    

    

    
    
    
    
    
    

    102.3Research, testing and development expenses
    

    

    
    51.7
    
    

    

    
    
    
    
    
    

    51.7Amortization of intangible assets
    
    

    

    6.0
    
    
    
    

    
    
    
    

    
    6.0Restructuring and impairment credits
    
    

    
    (2.4
    )
    
    
    

    
    
    
    

    
    (2.4
    )Total costs and expenses
    
    
    

    955.3
    
    
    
    

    0.6
    
    

    

    
    955.9Other income (expense)  net
    
    
    

    5.6
    
    
    

    

    0.1
    
    

    
    
    5.7Interest income
    

    

    
    7.1
    

    

    
    
    
    

    

    
    
    7.1Interest expense
    


    

    
    (24.2
    )
    


    

    
    
    
    

    

    
    (24.2
    )Income from continuing operations before income taxes
    
    

    

    109.9
    
    

    

    
    (0.5
    )
    


    

    
    109.4Provision for income taxes
    
    

    
    38.3
    
    
    

    
    (0.2
    )
    
    

    
    38.1Income from continuing operations
    
    


    
    71.6
    
    

    

    
    (0.3
    )
    

    

    
    71.3Discontinued operations  net of tax
    

    

    
    
    
    

    

    
    
    
    

    

    
    Net income
    

    

    $
    71.6
    
    
    

    $
    (0.3
    )
    
    

    $
    71.3Basic earnings per share:Continuing operations
    
    

    $
    1.03
    
    

    

    $
    
    

    

    
    $
    1.03Discontinued operations
    

    

    
    
    
    

    
    
    
    
    

    
    
    Net income per share, basic
    
    

    $
    1.03
    
    


    

    $
    
    
    

    

    $
    1.03Diluted earnings per share:Continuing operations
    

    

    $
    1.02
    

    

    
    $
    
    
    

    

    $
    1.02Discontinued operations
    
    
    

    
    
    

    

    
    
    
    
    

    
    Net income per share, diluted
    
    

    $
    1.02
    
    
    

    $
    
    
    
    

    $
    1.02
 -22-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Consolidated Statement of Income
 Three Months Ended(In Millions of Dollars Except Per Share
Data)
    

March 31, 2006(as previouslyreported)
    
    (adjustments)
    
    (as restated)Net sales
    

    

    $
    983.5
    
    

    

    $
    
    
    

    

    $
    983.5Royalties and other revenues
    
    
    

    0.6
    
    
    

    
    
    
    
    

    
    0.6Total revenues
    
    
    

    984.1
    
    
    
    

    
    
    
    
    

    984.1Cost of sales
    
    
    

    738.4
    
    

    
    
    0.9
    

    
    
    
    739.3Selling and administrative expenses
    
    

    
    93.3
    

    
    
    
    
    

    
    
    

    93.3Research, testing and development expenses
    
    

    

    49.6
    
    
    

    
    
    
    
    

    
    49.6Amortization of intangible assets
    
    
    

    5.8
    
    

    
    
    
    
    
    

    
    5.8Restructuring and impairment charges
    
    
    

    1.8
    
    
    
    

    
    
    
    
    

    1.8Total costs and expenses
    
    
    

    888.9
    
    
    
    

    0.9
    
    
    

    
    889.8Other expense  net
    
    

    
    (1.5
    )
    
    
    

    
    

    
    

    
    (1.5
    )Interest income
    
    
    

    2.2
    
    
    
    

    
    
    
    
    

    2.2Interest expense
    
    

    
    (25.3
    )
    
    

    
    
    
    

    
    
    (25.3
    )Income from continuing operations before income taxes
    
    
    

    70.6
    
    
    

    
    (0.9
    )
    
    

    
    69.7Provision for income taxes
    
    

    

    24.7
    
    
    
    

    (0.3
    )
    
    
    

    24.4Income from continuing operations
    
    
    

    45.9
    
    
    

    
    (0.6
    )
    
    

    
    45.3Discontinued operations  net of tax
    
    

    

    (60.7
    )
    
    
    

    
    
    
    
    

    (60.7
    )Net loss
    

    
    $
    (14.8
    )
    

    

    $
    (0.6
    )
    

    

    $
    (15.4
    )Basic earnings (loss) per share:Continuing operations
    
    

    $
    0.67
    
    
    

    $
    (0.01
    )
    
    
    $
    0.66Discontinued operations
        
    
    (0.89
    )
    
    
    

    
    
        

    
    (0.89
    )Net loss per share, basic
    
    

    $
    (0.22
    )
    

    

    $
    (0.01
    )
    

    

    $
    (0.23
    )Diluted earnings (loss) per share:Continuing operations
    
    

    $
    0.66
    
    
    

    $
    (0.01
    )
    
    

    $
    0.65Discontinued operations
    
    

    
    (0.88
    )
    
    
    

    
    
    
    

    
    (0.88
    )Net loss per share, diluted
    
    

    $
    (0.22
    )
    

    

    $
    (0.01
    )
    
    

    $
    (0.23
    )
 -23-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Consolidated Balance Sheet
 March 31, 2007(as previously(In Millions of Dollars)
    


    reported)
    


    (adjustments)
    


    (as restated)ASSETSCash and short-term investments
    
    

    $
    582.8
    
    
    

    $
    
    
    

    
    $
    582.8Receivables
    
    

    

    625.5
    
    
    
    

    
    
    
    
    

    625.5Inventories
    
    
    

    573.0
    
    
    
    

    
    
    
    
    

    573.0Other current assets
    
    
    

    86.7
    
    
    
    

    
    
    

    
    
    86.7Total current assets
    
    
    
    1,868.0
    
    
    
    
    
    
    
    
    
    1,868.0Property and equipment  at cost
    
    
    
    2,580.3
    
    
    
    
    
    
    
    
    
    2,580.3Less accumulated depreciation
    
    
    
    1,496.5
    
    
    
    
    
    
    
    
    
    1,496.5Property and equipment  net
    
    
    
    1,083.8
    
    
    
    
    
    
    
    
    
    1,083.8Goodwill
    
    
    
    1,092.9
    
    
    
    
    
    
    
    
    
    1,092.9Intangible assets  net
    
    
    
    325.4
    
    
    
    
    
    
    
    
    
    325.4Investments in non-consolidated companies
    
    
    
    7.2
    
    
    
    
    
    
    
    
    
    7.2Other assets
    
    
    
    67.0
    
    
    
    
    4.7
    
    
    
    
    71.7TOTAL
    
    
    $
    4,444.3
    
    
    
    $
    4.7
    
    
    
    $
    4,449.0LIABILITIES AND SHAREHOLDERS EQUITYShort-term debt and current portion of long-term debt
    
    
    $
    6.1
    
    
    
    $
    
    
    
    
    $
    6.1Accounts payable
    
    
    
    360.2
    
    
    
    
    
    
    
    
    
    360.2Accrued expenses and other current liabilities
    
    
    
    227.5
    
    
    
    
    2.2
    
    
    
    
    229.7Total current liabilities
    
    
    
    593.8
    
    
    
    
    2.2
    
    
    
    
    596.0Long-term debt
    
    
    
    1,507.1
    
    
    
    
    
    
    
    
    
    1,507.1Pension obligations
    
    
    
    206.7
    
    
    
    
    20.0
    
    
    
    
    226.7Other postretirement benefit obligations
    
    
    
    81.1
    
    
    
    
    11.9
    
    
    
    
    93.0Noncurrent liabilities
    
    
    
    135.4
    
    
    
    
    5.6
    
    
    
    
    141.0Deferred income taxes
    
    
    
    84.7
    
    
    
    
    (8.6
    )
    
    
    
    76.1Total liabilities
    
    
    
    2,608.8
    
    
    
    
    31.1
    
    
    
    
    2,639.9Minority interest in consolidated companies
    
        
    53.2
    
    
    
    
    (1.5
    )
    
    
    
    51.7Contingencies and commitmentsPreferred stock without par value  unissued
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common shares without par value
    
    
    
    728.5
    
    
    
    
    
    
    
    
    
    728.5Retained earnings
    
    
    
    1,094.2
    
    
    
    
    (16.7
    )
    
    
    
    1,077.5Accumulated other comprehensive loss
    
    
    
    (40.4
    )
    
    
    
    (8.2
    )
    
    
    
    (48.6
    )Total shareholders equity
    
    
    
    1,782.3
    
    
    
    
    (24.9
    )
    
    
    
    1,757.4TOTAL
    
    
    $
    4,444.3
    
    
    
    $
    4.7
    
    
    
    $
    4,449.0
 -24-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Consolidated Statement of Cash Flows
 Three Months EndedMarch 31, 2007(as previously(In Millions of Dollars)
    
    reported)
    
    (adjustments)
    
    (as restated)CASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income
    
    
    $
    71.6
    
    
    
    $
    (0.3
    )
    
    
    $
    71.3Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    
    39.2
    
    
    
    
    
    
    
    
    
    39.2Deferred income taxes
    
    
    
    10.7
    
    
    
    
    
    
    
    
    
    10.7Deferred compensation
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    8.0Gain from divestitures and sales of property and equipment
    
    
    
    (7.9
    )
    
    
    
    
    
    
    
    
    (7.9
    )Change in current assets and liabilities, net of acquisitions and
divestitures:Receivables
    
    
    
    (46.3
    )
    
    
    
    
    
    
    
    
    (46.3
    )Inventories
    
    
    
    18.8
    
    
    
    
    
    
    
    
    
    18.8Accounts payable, accrued expenses and other current liabilities
    
    
    
    16.7
    
    
    
    
    (0.2
    )
    
    
    
    16.5Other current assets
    
    
    
    (1.1
    )
    
    
    
    
    
    
    
    
    (1.1
    )(11.9
    )
    
    
    
    (0.2
    )
    
    
    
    (12.1
    )Change in noncurrent liabilities
    
    
    
    (9.0
    )
    
    
    
    0.5
    
    
    
    
    (8.5
    )Other items  net
    
    
    
    (2.7
    )
    
    
    
    
    
    
    
    
    (2.7
    )Total operating activities
    
    
    
    98.0
    
    
    
    
    
    
    
    
    
    98.0INVESTING ACTIVITIESCapital expenditures
    
    
    
    (31.9
    )
    
    
    

    
    
    
    
    
    (31.9
    )Acquisitions
    
    
    
    (15.7
    )
    
    
    
    
    
    
    
    
    (15.7
    )Net proceeds from divestitures and sales of property and equipment
    
    
    
    11.4
    
    
    
    
    
    
    
    
    
    11.4Other items  net
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    (0.1
    )Total investing activities
    
    
    
    (36.3
    )
    
    
    
    
    
    
    
    
    (36.3
    )FINANCING ACTIVITIESChanges in short-term debt  net
    
    
    
    2.4
    
    
    
    
    
    
    
    
    
    2.4Repayments of long-term debt
    
    
    
    (32.5
    )
    
    
    
    
    
    
    
    
    (32.5
    )Dividends paid
    
    
    
    (18.0
    )
    
    
    
    
    
    
    
    
    (18.0
    )Common shares purchased
    
    
    
    (19.3
    )
    
    
    
    
    
    
    
    
    (19.3
    )Proceeds from the exercise of stock options
    
    
    
    11.7
    
    
    
    
    
    
    
    
    
    11.7Total financing activities
    
    
    
    (55.7
    )
    
    
    
    
    
    
    
    
    (55.7
    )Effect of exchange rate changes on cash
    
    
    
    1.1
    
    
    
    
    
    
    
    
    
    1.1Net increase in cash and short-term investments
    
    
    
    7.1
    
    
    
    
    
    
    
    
    
    7.1Cash and short-term investments at the beginning of period
    
    
    
    575.7
    
    
    
    
    
    
    
    
    
    575.7Cash and short-term investments at the end of period
    
    
    $
    582.8
    
    
    
    $
    
    
    
    
    $
    582.8
 -25-




---



##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  March 31, 2007
 Consolidated Statement of Cash Flows
 Three Months EndedMarch 31, 2006(as previously(In Millions of Dollars)
    
    reported)
    
    (adjustments)
    
    (as restated)CASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet loss
    
    
    $
    (14.8
    )
    
    
    $
    (0.6
    )
    
    

    $
    (15.4
    )Adjustments to reconcile net loss to cash
provided by operating activities:Depreciation and amortization
    
    
    

    42.9
    
    
    
    

    
    
    
    
    
    42.9Deferred income taxes
    
    
    

    8.1
    
    
    

    
    (0.2
    )
    
    

    
    7.9Deferred compensation
    
    

    
    3.8
    
    
    

    
    
    
    
    

    
    3.8Restructuring and impairment charges
    
    
    

    61.0
    
    
    
    

    
    
    
    
    

    61.0Loss from divestitures and sales of property and equipment
    
    
    

    0.9
    
    
    
    

    
    
    

    
    
    0.9Change in current assets and liabilities, net of acquisitions and divestitures:Receivables
    

    

    
    (38.1
    )
    
    

    

    
    
    


    

    
    (38.1
    )Inventories
    
    

    

    (13.2
    )
    
    

    
    
    
    
    

    
    (13.2
    )Accounts payable, accrued expenses and other current liabilities
    
    
    

    (32.0
    )
    
    
    

    0.8
    
    
    
    

    (31.2
    )Other current assets
    
    

    
    0.9
    
    
    

    
    
    
    
    

    
    0.9(82.4
    )
    
    

    
    0.8
    
    
    

    
    (81.6
    )Change in noncurrent liabilities
    
    
    

    4.1
    
    
    
    

    
    
    
    
    

    4.1Other items  net
    
    

    
    2.1
    
    
    
    

    
    
    
    
    

    2.1Total operating activities
    
    
    

    25.7
    
    
    
    

    
    
    
    
    

    25.7INVESTING ACTIVITIESCapital expenditures
    
    
    

    (30.3
    )
    
    
    

    
    
    
    
    
    (30.3
    )Net proceeds from divestitures and sales of property and equipment
    
    
    
    8.5
    
    
    
    
    
    
    
    
    
    8.5Total investing activities
    
    

    
    (21.8
    )
    
    
    

    
    
    
    
    

    (21.8
    )FINANCING ACTIVITIESChanges in short-term debt  net
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    0.3Repayments of long-term debt
    

    
    
    (23.7
    )
    
    

    
    
    
    
    

    
    (23.7
    )Dividends paid
    
    

    
    (17.7
    )
    

    
    
    
    
    
    

    
    (17.7
    )Proceeds from the exercise of stock options
    
    
    

    7.3
    
    
    

    
    
    
    
    

    
    7.3Total financing activities
    
    

    
    (33.8
    )
    
    

    
    
    
    

    

    
    (33.8
    )Effect of exchange rate changes on cash
    
    

    

    0.8
    
    
    
    

    
    
    
    
    

    0.8Net decrease in cash and short-term investments
    
    

    
    (29.1
    )
    
    

    
    
    
    

    
    
    (29.1
    )Cash and short-term investments at the beginning of period
    
    
    

    262.4
    
    
    
    

    
    
    

    
    
    262.4Cash and short-term investments at the end of period
    
    

    $
    233.3
    
    
    
    $

    
    
    
    
    $
    233.3
 -26-




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  This Managements Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with the unaudited consolidated financial statements and the notes thereto
appearing elsewhere in this quarterly report on Form 10-Q/A. Historical results and percentage
relationships set forth in the consolidated financial statements, including trends that might
appear, should not be taken as indicative of future operations. The following discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from those discussed in such forward-looking statements as a result of various factors,
including those described under the section Cautionary Statements for Safe Harbor Purposes
included elsewhere in this quarterly report on Form 10-Q/A.
 RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
    -27-




---



##### Table of Contents



OVERVIEW
     ®
 RESULTS OF OPERATIONS
  -28-




---



##### Table of Contents



Revenues
  Three MonthsEnded March 31,2007
    
    
    2006
    
    
    $ Change

    
    % ChangeNet sales
    
    $
    1,075.8
    
    
    $
    983.5
    
    
    
    $ 92.3
    
    
    
    9%Royalties and other revenues
    
    
    0.9
    
    
    
    0.6
    
    
    
    0.3
    
    
    
    50%Total revenues
    
    $
    1,076.7
    
    
    $
    984.1
    
    
    
    $ 92.6
    
    
    
    9%
   1st Quarter

    
    1st Quarter2007

    
    2007 vs. 2006Volume

    
    % ChangeNorth America
    
    
    47
    %
    
    
    (3%)Europe
    
    
    27
    %
    
    
    1%Asia-Pacific / Middle East
    
    
    20
    %
    
    
    (1%)Latin America
    
    
    6
    %
    
    
    22%Total
    
    
    100
    %
    
    
    
  -29-




---



##### Table of Contents



Costs
and Expenses
  Three Months EndedMarch 31,2007

    
    2006

    
    $ Change

    
    % ChangeCost of sales
    
    
    $ 798.3
    
    
    
    $ 739.3
    
    
    
    $ 59.0
    
    
    
    8%Selling and administrative expenses
    
    
    102.3
    
    
    
    93.3
    
    
    
    9.0
    
    
    
    10%Research, testing and development expenses
    
    
    51.7
    
    
    
    49.6
    
    
    
    2.1
    
    
    
    4%Amortization of intangible assets
    
    
    6.0
    
    
    
    5.8
    
    
    
    0.2
    
    
    
    3%Restructuring and impairment (credits)
charges
    
    
    (2.4
    )
    
    
    1.8
    
    
    
    (4.2
    )
    
    
    *Total costs and expenses
    
    
    $ 955.9
    
    
    
    $ 889.8
    
    
    
    $ 66.1
    
    
    
    7%
        -30-




---



##### Table of Contents



Three Months Ended March 31, 2007AssetImpairments

    
    Other Plant(Gains)

    
    Exit Costs

    
    Severance

    
    TotalBromborough, U.K. plant closure and sale
    
    
    $
    (2.8
    )
    
    
    
    $
    
    
        
    
    
    $
    
    
    
    
    
    $
    (2.8
    )Lubrizol Advanced Materials plant closures
and workforce reductions
    
    
    
    
    
    
    
    

    
    0.2
    
    

    

    
    
    0.1
    

    
    

    
    
    0.3Other
    
    

    
    

    
    

    
    
    
    
    

    
    

    
    
    0.1

    
    
    

    
    
    0.1Total restructuring and impairment
(credits) charges
    
    

    $
    (2.8
    )
    

    
    
    $
    0.2
    
    
    

    
    $
    0.2

    
    

    
    
    $
    (2.4
    )
 Three Months Ended March 31, 2006Other PlantExit Costs

    
    Severance

    
    TotalBromborough, U.K. plant closure
    
    
    $
    0.9
    
    
   
    
    $
    0.6
    
    
    
    
    $
    1.5Lubrizol Advanced Materials plant closures
and workforce reductions
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    

    0.4Other
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    (0.1
    )Total restructuring and impairment charges
    
    
    $
    0.9
    
    
   
    
    $
    0.9
    
    
    
 
    $
    1.8
  OtherItems andNetIncome (Loss)
  Three Months EndedMarch 31,2007
    

    2006

    
    $ Change

    
    % ChangeOther income (expense)  net
    
    
    $
    5.7
    

    

    
    
    $
    (1.5
    )
    

    

    
    $
    7.2
    
    
    

    

    
    *Interest expense  net
    
    

    
    (17.1
    )
    

    

    
    
    (23.1
    )
    

    

    
    
    6.0
    
    

    

    
    
    (26
    %)Income from continuing operations
before income taxes
    
    

    
    109.4
    

    

    
    
    
    69.7
    

    

    
    
    
    39.7
    
    

    

    
    
    57
    %Provision for income taxes
    
    
    

    38.1
    
    

    

    
    
    24.4
    
    
    

    

    
    13.7
    
    
    

    

    
    56
    %Income from continuing operations
    
    
    

    71.3
    
    


    
    
    
    45.3
    
    
    
    

    

    26.0
    
    
    
    

    
    57
    %Discontinued operations
    
    
    

    
    
    

    

    
    
    (60.7
    )
    
    

    

    
    60.7
    
    
    
    
    


    *Net income (loss)
    
    
    

    71.3
    
    
    

    

    
    (15.4
    )
    
    

    

    
    86.7
    
    
    
    

    

    *
 
 *
    
    Calculation not meaningful   - 31 -




---



##### Table of Contents



SEGMENT ANALYSIS
   Three Months EndedMarch 31,2007
    
    2006Revenues:Lubrizol Additives
    
    
    
    65%
    
    
    
    
    
    64%Lubrizol Advanced Materials
    
    
    
    35%
    
    
    
    
    
    36%Segment
Operating Income:Lubrizol Additives
    
    
    
    69%
    
    
    
    
    
    62%Lubrizol Advanced Materials
    
    
    
    31%
    
    
    
    
    
    38%
  - 32 -




---



##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    
    2006
    
    

    
    $ ChangeRevenues:Lubrizol Additives
    
    
    
    $    696.0
    
        
    
    
    $ 627.5
    
        
    
    
    $ 68.5Lubrizol Advanced Materials
    
    
    
    380.7
    
        
    
    
    356.6
    
        
    
    
    24.1Total
    
    
    
    $ 1,076.7
    
    
        
    
    $ 984.1
    
        
    
    
    $ 92.6Gross
Profit:Lubrizol Additives
    
    
    
    $    167.5

    
        
    
    
    $ 140.1
    
        
    
    
    $ 27.4Lubrizol Advanced Materials
    
    
    
    110.0
    
    
        
    
    104.1
    
    
        
    
    5.9Total
    
    
    
    $    277.5
    
        
    
    
    $ 244.2
    
        
    
    
    $ 33.3Segment
Operating Income:Lubrizol Additives
    
    
    
    $    100.9
    
    
        
    
    $   73.5
    
    
        
    
    $ 27.4Lubrizol Advanced Materials
    
    
    
    45.4
    
    
    
        
    44.6
    
    
        
    
    0.8Total
    
    
    
    $    146.3
    
        
    
    
    $ 118.1
    
        
    
    
    $ 28.2
 Lubrizol Additives Segment
   1st Quarter
    
    
    1st Quarter2007
    
    
    2007 vs. 2006Volume
    
    
    
    % ChangeNorth America
    
    



    
    37
    %
           


    
    
    (1%)Europe
    
    
    
    31
    %
    
           
    
    Asia-Pacific / Middle East
    
    
    
    25
    %
    
           
    
    (5%)Latin America
    
    
    
    7
    %
    
    
    
    
    15%Total
    
    
    
    100
    %
    
    
    
    
    (1%)
  - 33 -




---



##### Table of Contents



lubrizol advanced materials Segment
   - 34 -




---



##### Table of Contents



1st Quarter
    

    1st Quarter2007
    

    2007 vs. 2006Volume

    
    % ChangeNorth America
    
    
    
    67
    %
            
    
    (4%
    )Europe
        
    
    18
    %
            
    
    7%Asia-Pacific / Middle East
        
    
    11
    %        
    
    
    24%Latin America
        
    
    4
    %
            
    
    57%Total
    
    
    
    100
    %
            
    
    2%
  ®
 ®
   - 35 -




---



##### Table of Contents



WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
  Three Months EndedMarch 31,2007

    
    2006Cash provided by (used for):Operating activities
    
    
    $
    98.0
    
            
    $
    25.7Investing activities
        
    
    (36.3
    )
            
    
    (21.8
    )Financing activities
        
    
    (55.7
    )
            
    
    (33.8
    )Effect of exchange-rate changes on cash
    
        
    1.1
    
            
    
    0.8Net increase (decrease) in cash and
short-term investments
        
    $
    7.1
            
    
    $
    (29.1
    )
 Operating Activities
   Investing Activities
  Financing Activities
  - 36 -




---



##### Table of Contents



Capitalization, Liquidity and Credit Facilities
      
  Contractual Cash Obligations
  -37-




---



##### Table of Contents




 NEW ACCOUNTING STANDARDS
       -38-




---



##### Table of Contents



CAUTIONARY STATEMENTS FOR SAFE HARBOR PURPOSES
   
    
    The cost, availability and quality of raw materials, especially petroleum-based products.
 
    
    Our ability to sustain profitability of our products in a competitive environment.
 
    
    The demand for our products as influenced by factors such as the global economic
environment, longer-term technology developments and the success of our commercial development
programs.
 
    
    The risks of conducting business in foreign countries, including the effects of
fluctuations in currency exchange rates upon our consolidated results and political, social,
economic and regulatory factors.
 -39-




---



##### Table of Contents




    
    The extent to which we are successful in expanding our business in new and existing markets
and in identifying, understanding and managing the risks inherent in those markets.
 
    
    The effect of required principal and interest payments on our ability to fund capital
expenditures and acquisitions and to meet operating needs.
 
    
    Our ability to identify, complete and integrate acquisitions for profitable growth and
operating efficiencies.
 
    
    Our success at continuing to develop proprietary technology to meet or exceed new industry
performance standards and individual customer expectations.
 
    
    Our ability to implement a new common information systems platform primarily into our
Lubrizol Advanced Materials segment successfully, including the management of project costs,
its timely completion and realization of its benefits.
 
    
    Our ability to continue to reduce complexities and conversion costs and modify our cost
structure to maintain and enhance our competitiveness.
 
    
    Our success in retaining and growing the business that we have with our largest customers.
 
    
    The cost and availability of energy, especially natural gas and electricity.
 
    
    The effect of interest rate fluctuations on our net interest expense.
 
    
    The risk of transportation or weather-related disruptions to our Lubrizol Additives
production facilities located near the U.S. Gulf Coast.
 
    
    Significant changes in government regulations affecting environmental compliance.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
     -40-




---



##### Table of Contents



Item 4. Controls and Procedures
   -41-




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    On January 2, 2007, we issued 297 common shares 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 one former officer under a
deferred compensation plan for officers.On January 18, 2007, we issued 2,217 common shares in transactions exempt from
registration under the Securities Act of 1933 pursuant to Regulation S. We issued
the common shares to 20 employees of a wholly owned Canadian subsidiary of the
company under an employee benefit plan.On February 1, 2007, we issued 8,295 common shares in private placement transactions
exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of
that Act. We issued the common shares to one former officer and the spouse of a
deceased officer under a deferred compensation plan for officers.On March 1, 2007, we issued 9,651 common shares in private placement transactions
exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of
that Act. We issued the common shares to three current officers and two former
officers under a deferred compensation plan for officers and to one former director
under a deferred compensation plan for directors.
 -42-




---



##### Table of Contents



(c)
    
    The following table provides information regarding our purchases of Lubrizol
common shares during the quarter.
 Maximum NumberTotal Number
    
    (or Approximate Dollarof Shares (or Units)
    
    Value) of Shares (orTotal Number of
    
    Average Price
    
    Purchased as Part of
    
    Units) that May Yet beShares (or Units)
    
    Paid per Share
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Purchased1
    
    (or Unit)
    
    Plans or Programs2
    
    Plans or ProgramsMonth #1
(January 1, 2007 through
January 31, 2007)
    
    118 Shares
    
    $
    50.13
    
    
    0 Shares
    
    1,779,118 SharesMonth #2
(February 1, 2007
through
February 28, 2007)
    
    301,182 Shares
    
    $
    52.83
    
    
    265,000 Shares
    
    1,514,118 SharesMonth #3
(March 1, 2007 through
March 31, 2007)
    
    103,222 Shares
    
    $
    52.91
    
    
    101,000 Shares
    
    1,413,118 SharesTotal
    
    404,522 Shares
    
    
    
    
    
    366,000 Shares
    
    1,413,118 Shares
 1
 2
 
 Item 6. Exhibits
 31.1
    
    Rule 13a-14(a) Certification of the Chief Executive Officer, as created by
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Rule 13a-14(a) Certification of the Chief Financial Officer, as created by
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer of The
Lubrizol Corporation pursuant to 18 U.S.C. Section 1350, as created by Section 906 of
the Sarbanes-Oxley Act of 2002.
 -43-




---



##### Table of Contents



Signatures
  THE LUBRIZOL CORPORATION/s/ W. Scott EmerickW. Scott EmerickChief Accounting Officer and Duly AuthorizedSignatory of The Lubrizol Corporation
  -44-