##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 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
    
    34-0367600(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
 
  þ o
  þ o o
 o þ




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##### 



THE LUBRIZOL CORPORATION  Quarterly Report on Form 10-Q  Quarter Ended September 30, 2006
 Table of Contents
 Page NumberPART I. FINANCIAL INFORMATIONItem 1    Financial Statements (unaudited)
    
    
    3Consolidated Statements of Income
    
    
    3Consolidated Balance Sheets
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3    Quantitative and Qualitative Disclosures about Market Risk
    
    
    43Item 4    Controls and Procedures
    
    
    44PART II. OTHER INFORMATIONItem 1A  Risk Factors
    
    
    44Item 2     Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 6     Exhibits
    
    
    45Signatures
    
    
    46EX-10.1EX-31.1EX-31.2EX-32.1
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 THE LUBRIZOL CORPORATION
 
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions of dollars except per share data)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    1,029.9
    
    
    $
    898.9
    
    
    $
    3,053.2
    
    
    $
    2,688.5Royalties and other revenues
    
    
    1.1
    
    
    
    0.6
    
    
    
    3.0
    
    
    
    2.1Total revenues
    
    
    1,031.0
    
    
    
    899.5
    
    
    
    3,056.2
    
    
    
    2,690.6Cost of sales
    
    
    781.8
    
    
    
    669.2
    
    
    
    2,294.8
    
    
    
    1,982.3Selling and administrative expenses
    
    
    101.7
    
    
    
    87.6
    
    
    
    280.6
    
    
    
    259.7Research, testing and development expenses
    
    
    50.5
    
    
    
    48.1
    
    
    
    152.8
    
    
    
    145.8Amortization of intangible assets
    
    
    5.9
    
    
    
    5.8
    
    
    
    17.7
    
    
    
    17.6Restructuring and impairment charges
    
    
    2.7
    
    
    
    1.0
    
    
    
    6.3
    
    
    
    12.6Total costs and expenses
    
    
    942.6
    
    
    
    811.7
    
    
    
    2,752.2
    
    
    
    2,418.0Other income (expense)  net
    
    
    1.6
    
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    1.7Interest income
    
    
    7.6
    
    
    
    2.3
    
    
    
    13.5
    
    
    
    6.1Interest expense
    
    
    (25.0
    )
    
    
    (27.4
    )
    
    
    (75.0
    )
    
    
    (80.5
    )Income from continuing operations before
income taxes
    
    
    72.6
    
    
    
    63.2
    
    
    
    242.4
    
    
    
    199.9Provision for income taxes
    
    
    21.8
    
    
    
    20.5
    
    
    
    82.3
    
    
    
    66.8Income from continuing operations
    
    
    50.8
    
    
    
    42.7
    
    
    
    160.1
    
    
    
    133.1Discontinued operations  net of tax
    
    
    (0.5
    )
    
    
    5.9
    
    
    
    (73.6
    )
    
    
    24.1Net income
    
    $
    50.3
    
    
    $
    48.6
    
    
    $
    86.5
    
    
    $
    157.2Basic earnings (loss) per share:Continuing operations
    
    $
    0.74
    
    
    $
    0.63
    
    
    $
    2.33
    
    
    $
    1.96Discontinued operations
    
    
    (0.01
    )
    
    
    0.08
    
    
    
    (1.07
    )
    
    
    0.36Net income per share, basic
    
    $
    0.73
    
    
    $
    0.71
    
    
    $
    1.26
    
    
    $
    2.32Diluted earnings (loss) per share:Continuing operations
    
    $
    0.73
    
    
    $
    0.62
    
    
    $
    2.31
    
    
    $
    1.94Discontinued operations
    
    
    
    
    
    
    0.08
    
    
    
    (1.06
    )
    
    
    0.35Net income per share, diluted
    
    $
    0.73
    
    
    $
    0.70
    
    
    $
    1.25
    
    
    $
    2.29Dividends per share
    
    $
    0.26
    
    
    $
    0.26
    
    
    $
    0.78
    
    
    $
    0.78
 Amounts shown are unaudited.
 See accompanying notes to the financial statements.
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THE LUBRIZOL CORPORATION
 
  September 30,

    
    December 31,(in millions of dollars)
    
    2006

    
    2005ASSETSCash and short-term investments
    
    $
    559.7
    
    
    $
    262.4Receivables - net
    
    
    601.6
    
    
    
    585.6Inventories
    
    
    553.9
    
    
    
    586.0Other current assets
    
    
    85.2
    
    
    
    138.3Total current assets
    
    
    1,800.4
    
    
    
    1,572.3Property and equipment - at cost
    
    
    2,502.3
    
    
    
    2,621.5Less accumulated depreciation
    
    
    1,434.1
    
    
    
    1,437.1Property and equipment - net
    
    
    1,068.2
    
    
    
    1,184.4Goodwill
    
    
    1,068.1
    
    
    
    1,138.8Intangible assets - net
    
    
    374.8
    
    
    
    404.6Investments in non-consolidated companies
    
    
    7.9
    
    
    
    7.6Other assets
    
    
    55.4
    
    
    
    58.6TOTAL
    
    $
    4,374.8
    
    
    $
    4,366.3LIABILITIES AND SHAREHOLDERS EQUITYShort-term debt and current portion of long-term debt
    
    $
    12.4
    
    
    $
    7.9Accounts payable
    
    
    347.5
    
    
    
    372.2Accrued expenses and other current liabilities
    
    
    329.1
    
    
    
    284.8Total current liabilities
    
    
    689.0
    
    
    
    664.9Long-term debt
    
    
    1,560.2
    
    
    
    1,662.9Postretirement health-care obligations
    
    
    99.2
    
    
    
    102.6Noncurrent liabilities
    
    
    202.9
    
    
    
    204.0Deferred income taxes
    
    
    94.0
    
    
    
    113.7Total liabilities
    
    
    2,645.3
    
    
    
    2,748.1Minority interest in consolidated companies
    
    
    50.5
    
    
    
    51.0Contingencies 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 shares
    
    
    
    
    
    
    Outstanding - 68,654,061 shares as of September 30, 2006
after deducting 17,541,833 treasury shares,
68,043,241 shares as of December 31, 2005
after deducting 18,152,653 treasury shares
    
    
    692.1
    
    
    
    663.7Retained earnings
    
    
    1,049.1
    
    
    
    1,016.0Accumulated other comprehensive loss
    
    
    (62.2
    )
    
    
    (112.5
    )Total shareholders equity
    
    
    1,679.0
    
    
    
    1,567.2TOTAL
    
    $
    4,374.8
    
    
    $
    4,366.3
 Amounts shown are unaudited.
 See accompanying notes to the financial statements.
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THE
LUBRIZOL CORPORATION
 
  Nine MonthsEnded September 30,(in millions of dollars)
    
    2006
    
    
    2005CASH PROVIDED BY (USED FOR):OPERATING ACTIVITIESNet income
    
    $
    86.5
    
    
    $
    157.2Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    120.8
    
    
    
    135.6Deferred income taxes
    
    
    33.1
    
    
    
    (1.5
    )Deferred compensation
    
    
    12.9
    
    
    
    14.1Restructuring and impairment charges
    
    
    61.6
    
    
    
    11.1Loss (gain) from divestitures and sales of property
and equipment
    
    
    5.2
    
    
    
    (3.9
    )Change in current assets and liabilities, net of
acquisitions and divestitures:Receivables
    
    
    (45.0
    )
    
    
    (73.3
    )Inventories
    
    
    (28.8
    )
    
    
    (12.1
    )Accounts payable, accrued expenses and other
current liabilities
    
    
    (23.4
    )
    
    
    22.4Other current assets
    
    
    9.5
    
    
    
    11.5(87.7
    )
    
    
    (51.5
    )Change in noncurrent liabilities
    
    
    4.3
    
    
    
    11.0Other items  net
    
    
    8.4
    
    
    
    11.7Total operating activities
    
    
    245.1
    
    
    
    283.8INVESTING ACTIVITIESCapital expenditures
    
    
    (91.2
    )
    
    
    (91.5
    )Net proceeds from divestitures and sales of property
and equipment
    
    
    281.4
    
    
    
    17.2Other items  net
    
    
    (0.8
    )
    
    
    (0.2
    )Total investing activities
    
    
    189.4
    
    
    
    (74.5
    )FINANCING ACTIVITIESChanges in short-term debt, net
    
    
    4.5
    
    
    
    (4.9
    )Repayments of long-term debt
    
    
    (114.3
    )
    
    
    (475.2
    )Proceeds from the issuance of long-term debt
    
    
    
    
    
    
    213.8Dividends paid
    
    
    (53.3
    )
    
    
    (52.7
    )Proceeds from the exercise of stock options
    
    
    17.9
    
    
    
    37.4Total financing activities
    
    
    (145.2
    )
    
    
    (281.6
    )Effect of exchange rate changes on cash
    
    
    8.0
    
    
    
    (10.7
    )Net increase (decrease) in cash and short-term investments
    
    
    297.3
    
    
    
    (83.0
    )Cash and short-term investments at the beginning of period
    
    
    262.4
    
    
    
    335.9Cash and short-term investments at the end of period
    
    $
    559.7
    
    
    $
    252.9
 Amounts shown are unaudited.
 See accompanying notes to the financial statements.
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THE LUBRIZOL CORPORATION
 
 Notes to Consolidated Financial Statements

September 30, 2006
 1. Basis of Presentation
   2. Significant Accounting Policies
 Net Income Per Share
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions except per share data)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Income from continuing operations
    
    $
    50.8
    
    
    $
    42.7
    
    
    $
    160.1
    
    
    $
    133.1Denominator:Weighted-average common shares
outstanding
    
    
    68.7
    
    
    
    68.1
    
    
    
    68.6
    
    
    
    67.8Dilutive effect of stock options and
awards
    
    
    0.6
    
    
    
    0.9
    
    
    
    0.6
    
    
    
    0.8Denominator for income from continuing
operations per share, diluted
    
    
    69.3
    
    
    
    69.0
    
    
    
    69.2
    
    
    
    68.6Income from continuing operations
per share, basic
    
    $
    0.74
    
    
    $
    0.63
    
    
    $
    2.33
    
    
    $
    1.96Income from continuing operations
per share, diluted
    
    $
    0.73
    
    
    $
    0.62
    
    
    $
    2.31
    
    
    $
    1.94
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
 New Accounting Standards
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
  Use of Estimates
  Reclassifications
  3. Stock-Based Compensation
    -8-




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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
  Three Months Ended
    
    Nine Months Ended(in millions of dollars except per
share data)
    
    September 30, 2005
    
    September 30, 2005Reported net income
    
    
    $
    48.6
    
    
    
    
    $
    157.2Plus: stock-based employee compensation
(net of tax) included in net income
    
    
    
    1.6
    
    
    
    
    
    4.4Less: stock-based employee compensation
(net of tax) using the fair value method
    
    
    
    (1.6
    )
    
    
    
    
    (5.1
    )Pro forma net income
    
    
    $
    48.6
    
    
    
    
    $
    156.5Reported net income per share, basic
    
    
    $
    0.71
    
    
    
    
    $
    2.32Pro forma net income per share, basic
    
    
    $
    0.71
    
    
    
    
    $
    2.31Reported net income per share, diluted
    
    
    $
    0.70
    
    
    
    
    $
    2.29Pro forma net income per share, diluted
    
    
    $
    0.70
    
    
    
    
    $
    2.28
 Stock Incentive Plans
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
    Weighted-
    
    Weighted-Average
    

    AggregateShares
    
    Average
    
    Remaining Contractual
    

    Intrinsic Value(in thousands)
    
    Exercise Price

    
    Term (in years)
    

    (in millions)Outstanding at December 31, 2005
    
    
    4,283,917
    
    $
    
    32.35
    
    

    6.0
    
    $
    
    47.5Granted
    
    
    Exercised
    
    
    560,663
    
    
    
    30.89Forfeited
    
    
    5,338
    
    
    
    29.70Outstanding at September 30, 2006
    
    
    3,717,916
    
    $
    
    32.57
    
    

    5.5
    
    $
    
    39.3Exercisable at September 30, 2006
    
    
    3,152,214
    
    $
    
    31.33
    
    

    4.9
    
    $
    
    37.3
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
  Weighted-AverageShare
    

    Grant DateUnits
    

    Fair ValueNonvested at December 31, 2005
    
    
    58,689
    
    $
    
    29.01Granted
    
    
    12,777
    
    
    
    42.27Vested
    
    
    13,689
    
    
    
    39.45Forfeited
    
    
    Nonvested at September 30, 2006
    
    
    57,777
    
    $
    
    29.46
 Long-Term Incentive Plan
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
  ExpectedNumber of Units
    
    
    Stock Price onAward
    


    to be Issued
    
    
    Date of Grant2004  2006 (a)
    



    
    
    $ 30.652005  2007
    

240,790
    
    
    $ 40.362006  2008
    

154,060
    
    
    $ 43.05(a)  Per the terms of the agreement, payment of 169,069 units will be in cash, unless
changed to shares at the discretion of the organization and      compensation committee of the
board of directors.Performance-based stock awards as of September 30, 2006 and changes during the nine months ended
September 30, 2006 were as follows:Weighted-AverageShare
    
    
    Grant DateUnits
    
    
    Fair ValueNonvested at December 31, 2005
    
    
176,400

    
    
$ 40.36Granted
    
    
154,060

    
    
$ 43.05Performance increase
    
    
64,390
    
    

$ 40.36Vested
    
    
Forfeited
    
    
Nonvested at September 30, 2006
    
    
394,850
    
    
$ 41.41
 4. Divestitures
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements
September 30, 2006
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
 5. Inventories
  September 30,


    

    December 31,(in
millions of dollars)
    

    2006
    
    2005Finished products
    

    $
    303.8
    

    

    $
    319.6Products in process
    

    
    98.6
    

    

    
    86.9Raw materials
    

    
    125.8
    

    

    
    151.2Supplies and engine test parts
    

    
    25.7
    

    

    
    28.3Total inventory
    

    $
    553.9
    

    

    $
    586.0
 6. Goodwill and Intangible Assets
  September 30, 2006
    
    December 31, 2005Gross
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated

    
    Carrying
    
    Accumulated(in millions of dollars)
    
    Amount
    

    Amortization

    
    Amount
    
    AmortizationAmortized intangible assets:Customer lists
    
    $
    143.1
    
    
    $
    21.5
    
    
    $
    151.5
    
    
    $
    15.8Technology
    
    
    139.8
    
    
    
    42.4
    
    
    
    144.4
    
    
    
    35.6Trademarks
    
    
    19.9
    
    
    
    4.9
    
    
    
    24.5
    
    
    
    4.2Patents
    
    
    13.6
    
    
    
    3.7
    
    
    
    11.8
    
    
    
    2.5Landuse rights
    
    
    7.3
    
    
    
    1.1
    
    
    
    7.3
    
    
    
    1.0Noncompete agreements
    
    
    8.2
    
    
    
    6.7
    
    
    
    9.1
    
    
    
    5.9Other
    
    
    5.7
    
    
    
    0.8
    
    
    
    5.4
    
    
    
    0.7Total amortized intangible assets
    
    
    337.6
    
    
    
    81.1
    
    
    
    354.0
    
    
    
    65.7Nonamortized trademarks
    
    
    118.3
    
    
    
    
    
    
    
    116.3
    
    
    
    Total
    
    $
    455.9
    
    
    $
    81.1
    
    
    $
    470.3
    
    
    $
    65.7
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
  Lubricant
    

    
    Specialty(in millions of dollars)
    

    Additives
    

    
    Chemicals
    
    
    TotalBalance, January 1, 2006
    

    $
    95.8
    

    
    $
    1,043.0
    
    
    $
    1,138.8Goodwill impairment  discontinued
operations
    

    
    
    

    
    
    (61.0
    )
    
    
    (61.0
    )Goodwill of divestitures
    

    
    
    

    
    
    (26.6
    )
    
    
    (26.6
    )Translation and other adjustments
    

    
    1.4
    

    
    
    15.5
    
    
    
    16.9Balance, September 30, 2006
    

    $
    97.2
    

    
    $
    970.9
    
    
    $
    1,068.1
 st
 7. Comprehensive Income
  Three Months
    

    

    Nine MonthsEnded September 30,
    

    

    Ended September 30,(in millions of dollars)
    

    2006
    

    2005
    

    
    
    2006
    
    
    2005Net income
    

    $
    50.3
    
    
    $
    48.6
    

    

    $
    86.5
    
    
    $
    157.2Foreign currency translation adjustment
    

    
    10.6
    
    
    
    1.0
    

    

    
    49.2
    
    
    
    (106.1
    )Pension plan minimum liability
    

    
    
    
    
    
    
    

    

    
    (0.8
    )
    
    
    Unrealized (losses) gains  natural gas hedges
    

    
    0.2
    
    
    
    0.8
    

    

    
    (0.6
    )
    
    
    1.0Amortization of treasury rate locks
    

    
    0.9
    
    
    
    0.7
    

    

    
    2.5
    
    
    
    2.1Total comprehensive income
    

    $
    62.0
    
    
    $
    51.1
    

    

    $
    136.8
    
    
    $
    54.2
 8. Segment Reporting
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
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THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006  Three Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,(in millions of dollars)
    

    2006
    
    2005
    
    2006
    
    2005Revenues from external customers:Lubricant Additives
    
    
    $
    661.3
    
    
    
    $
    567.2
    
    
    
    $
    1,967.3
    
    
    
    $
    1,686.0Specialty Chemicals
    
    
    
    369.7
    
    
    
    
    332.3
    
    
    
    
    1,088.9
    
    
    
    
    1,004.6Total revenues
    
    
    $
    1,031.0
    
    
    
    $
    899.5
    
    
    
    $
    3,056.2
    
    
    
    $
    2,690.6Segment operating income:Lubricant Additives
    
    
    $
    71.6
    
    
    
    $
    67.3
    
    
    
    $
    236.0
    
    
    
    $
    218.2Specialty Chemicals
    
    
    
    42.5
    
    
    
    
    38.7
    
    
    
    
    135.4
    
    
    
    
    115.3Segment operating income
    
    
    
    114.1
    
    
    
    
    106.0
    
    
    
    
    371.4
    
    
    
    
    333.5Corporate expenses
    
    
    
    (22.0
    )
    
    
    
    (17.1
    )
    
    
    
    (56.2
    )
    
    
    
    (46.5
    )Corporate other income (expense)  net
    
    
    
    0.6
    
    
    
    
    0.4
    
    
    
    
    (5.0
    )
    
    
    
    (0.1
    )Restructuring and impairment charges
    
    
    
    (2.7
    )
    
    
    
    (1.0
    )
    
    
    
    (6.3
    )
    
    
    
    (12.6
    )Interest expense  net
    
    
    
    (17.4
    )
    
    
    
    (25.1
    )
    
    
    
    (61.5
    )
    
    
    
    (74.4
    )Income from continuing operations
before income taxes
    
    
    $
    72.6
    
    
    
    $
    63.2
    
    
    
    $
    242.4
    
    
    
    $
    199.9
  September 30,
    

    December 31,(in millions of dollars)
    

    2006
    


    2005Segment total assets:Lubricant Additives
    
    
    $
    1,401.8
    
    
    
    $
    1,319.1Specialty Chemicals
    
    
    
    2,225.9
    
    
    
    
    2,536.8Total segment assets
    
    
    
    3,627.7
    
    
    
    
    3,855.9Corporate assets
    
    
    
    747.1
    
    
    
    
    510.4Total consolidated assets
    
    
    $
    4,374.8
    
    
    
    $
    4,366.3
 -18-




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##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
 9. Pension and Postretirement Benefits
  Three Months
    

    Nine MonthsEnded September 30,
    
    Ended September 30,(in millions of dollars)
    

    2006

    

    2005

    

    2006

    

    2005Pension benefits:Service cost  benefits earned
during period
    
    
    $
    8.0
    
    
    
    $
    7.0
    
    
    
    $
    24.0
    
    
    
    $
    21.2Interest cost on projected
benefit obligation
    
    
    
    8.4
    
    
    
    
    7.8
    
    
    
    
    25.0
    
    
    
    
    23.8Expected return on plan assets
    
    
    
    (7.2
    )
    
    
    
    (6.7
    )
    
    
    
    (21.5
    )
    
    
    
    (20.3
    )Amortization of prior service costs
    
    
    
    0.5
    
    
    
    
    0.6
    
    
    
    
    1.4
    
    
    
    
    1.7Amortization of initial net asset
obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    0.1Settlement / curtailment loss
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    2.7
    
    
    
    
    Recognized net actuarial loss
    
    
    
    2.1
    
    
    
    
    1.3
    
    
    
    
    6.3
    
    
    
    
    3.9Net periodic benefit cost
    
    
    $
    12.2
    
    
    
    $
    10.0
    
    
    
    $
    38.0
    
    
    
    $
    30.4Other benefits:Service cost  benefits earned
during period
    
    
    $
    0.4
    
    
    
    $
    0.3
    
    
    
    $
    1.1
    
    
    
    $
    1.4Interest cost on projected
benefit obligation
    
    
    
    1.3
    
    
    
    
    1.3
    
    
    
    
    3.8
    
    
    
    
    4.5Amortization of prior service costs
    
    
    
    (2.1
    )
    
    
    
    (2.1
    )
    
    
    
    (6.2
    )
    
    
    
    (5.5
    )Curtailment gain
    
    
    
    (1.1
    )
    
    
    
    
    
    
    
    
    (1.1
    )
    
    
    
    Recognized net actuarial loss
    
    
    
    0.4
    
    
    
    
    0.5
    
    
    
    
    1.3
    
    
    
    
    1.6Net periodic benefit cost
    
    
    $
    (1.1
    )
    
    
    $
    
    
    
    
    $
    (1.1
    )
    
    
    $
    2.0
   -19-




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##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
 10. Restructuring and Impairment Charges
   RestructuringLiability

    

    and

    
    
    
    
    
    
    
    
    
    
    

    LiabilityJanuary 1,

    

    Impairment

    
    
    
    
    
    

    Non-Cash

    

    September 30,(in millions of dollars)
    

    2006

    

    Charges

    

    Cash Paid
    
    Adjustments
    
    2006Specialty Chemicals plant closures
and workforce reductions
    
    
    $
    2.5
    
    
    
    $
    1.7
    
    
    
    $
    (1.3
    )
    
    
    $
    (0.6
    )
    
    
    $
    2.3Bromborough, United Kingdom
closure
    
    
    
    2.3
    
    
    
    
    4.9
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    
    
    3.8Corporate / other workforce
reductions
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    0.1Noveon International restructuring
liabilities assumed
    
    
    
    1.3
    
    
    
    
    (0.3
    )
    
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    0.6$
    6.4
    
    
    
    $
    6.3
    
    
    
    $
    (5.3
    )
    
    
    $
    (0.6
    )
    
    
    $
    6.8
    -20-




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##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
 11. Debt
      -21-




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##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
 12. Shareholders Equity
  Shareholders EquityAccumulatedNumber of

    
    
    
    
    
    
    
    
    
    
    

    OtherShares
    
    Common
    
    Retained
    
    Comprehensive(in millions)
    

    Outstanding
    
    Shares
    
    Earnings
    
    (Loss) Income
    
    TotalBalance, January 1, 2006
    
    
    
    68.0
    
    
    
    $
    663.7
    
    
    
    $
    1,016.0
    
    
    
    $
    (112.5
    )
    
    
    $
    1,567.2Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    86.5
    
    
    
    
    
    
    
    
    
    86.5Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.3
    
    
    
    
    50.3Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136.8Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53.4
    )
    
    
    
    
    
    
    
    
    (53.4
    )Deferred stock compensation
    
    
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4Common shares  treasury:Shares issued upon exercise
of stock options and awards
    
    
    
    0.7
    
    
    
    
    27.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27.0Balance, September 30, 2006
    
    
    
    68.7
    
    
    
    $
    692.1
    
    
    
    $
    1,049.1
    
    
    
    $
    (62.2
    )
    
    
    $
    1,679.0
 13. Contingencies
  GENERAL
  ENVIRONMENTAL
  -22-




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##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
     GUARANTEES
   -23-




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##### Table of Contents



THE LUBRIZOL CORPORATION  Notes to Consolidated Financial Statements  September 30, 2006
   INDEMNIFICATIONS
  -24-




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##### 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 . 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 risk 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 .
 OVERVIEW
    ®
  -25-




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations (continued)
  RESULTS OF OPERATIONS
     -26-




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations (continued)
 Revenues
  Periods EndedSeptember 30,(in millions of dollars)
    

    2006
    
    2005
    
    $ Change
    
    % ChangeThree Months:Net sales
    
    
    $
    1,029.9
    
    
    
    $
    898.9
    
    
    
    $
    131.0
    
    
    
    
    15
    %Royalties and other revenues
    
    
    
    1.1
    
    
    
    
    0.6
    
    
    
    
    0.5
    
    
    
    
    83
    %Total revenues
    
    
    $
    1,031.0
    
    
    
    $
    899.5
    
    
    
    $
    131.5
    
    
    
    
    15
    %Nine Months:Net sales
    
    
    $
    3,053.2
    
    
    
    $
    2,688.5
    
    
    
    $
    364.7
    
    
    
    
    14
    %Royalties and other revenues
    
    
    
    3.0
    
    
    
    
    2.1
    
    
    
    
    0.9
    
    
    
    
    43
    %Total revenues
    
    
    $
    3,056.2
    
    
    
    $
    2,690.6
    
    
    
    $
    365.6
    
    
    
    
    14
    %
   3rd Quarter
    
    Year-to-Date2006
    
    2006Volume
    
    VolumeNorth America
    
    
    46
    %
    
    
    46
    %Europe
    
    
    27
    %
    
    
    27
    %Asia  Pacific / Middle East
    
    
    21
    %
    
    
    22
    %Latin America
    
    
    6
    %
    
    
    5
    %Total
    
    
    100
    %
    
    
    100
    %
 -27-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
  3rd Quarter
    
    Year-to-Date2006 vs. 2005
    
    2006 vs. 2005% Change
    
    % ChangeNorth America
    
    
    4
    %
    
    
    3
    %Europe
    
    
    (3
    %)
    
    
    (1
    %)Asia-Pacific / Middle East
    
    
    4
    %
    
    
    10
    %Latin America
    
    
    19
    %
    
    
    11
    %Total
    
    
    3
    %
    
    
    4
    %
  Costs and Expenses
  Periods EndedSeptember 30,(in millions of dollars)
    

    2006
    
    2005
    
    $ Change
    
    % ChangeThree Months:Cost of sales
    
    
    $
    781.8
    
    
    
    $
    669.2
    
    
    
    $
    112.6
    
    
    
    
    17
    %Selling and administrative expenses
    
    
    
    101.7
    
    
    
    
    87.6
    
    
    
    
    14.1
    
    
    
    
    16
    %Research, testing and development expenses
    
    
    
    50.5
    
    
    
    
    48.1
    
    
    
    
    2.4
    
    
    
    
    5
    %Amortization of intangible assets
    
    
    
    5.9
    
    
    
    
    5.8
    
    
    
    
    0.1
    
    
    
    
    2
    %Restructuring and impairment charges
    
    
    
    2.7
    
    
    
    
    1.0
    
    
    
    
    1.7
    
    
    
    
    *Total costs and expenses
    
    
    $
    942.6
    
    
    
    $
    811.7
    
    
    
    $
    130.9
    
    
    
    
    16
    %
 *
    
    Calculation not meaningful
 -28-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 Periods EndedSeptember 30,(in millions of dollars)
    

    2006
    
    2005
    
    $ Change
    
    % ChangeNine Months:Cost of sales
    
    
    $
    2,294.8
    
    
    
    $
    1,982.3
    
    
    
    $
    312.5
    
    
    
    
    16
    %Selling and administrative expenses
    
    
    
    280.6
    
    
    
    
    259.7
    
    
    
    
    20.9
    
    
    
    
    8
    %Research, testing and development expenses
    
    
    
    152.8
    
    
    
    
    145.8
    
    
    
    
    7.0
    
    
    
    
    5
    %Amortization of intangible assets
    
    
    
    17.7
    
    
    
    
    17.6
    
    
    
    
    0.1
    
    
    
    
    1
    %Restructuring and impairment charges
    
    
    
    6.3
    
    
    
    
    12.6
    
    
    
    
    (6.3
    )
    
    
    
    *Total costs and expenses
    
    
    $
    2,752.2
    
    
    
    $
    2,418.0
    
    
    
    $
    334.2
    
    
    
    
    14
    %
 *
    
    Calculation not meaningful
       -29-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
   Periods Ended September 30, 2006Asset
    

    

    Other Plant(in millions of dollars)
    

    Impairments
    

    

    Exit Costs
    

    

    Severance
    

    

    TotalThree Months:Specialty Chemicals plant closures
and workforce reductions
    

    $
    0.6
    

    

    $
    0.3
    

    

    $
    0.3
    

    

    $
    1.2Bromborough, UK closure
    

    
    
    

    

    
    1.2
    

    

    
    0.5
    

    

    
    1.7Noveon International restructuring
liabilities assumed
    

    
    
    

    

    
    
    

    

    
    (0.2
    )

    

    
    (0.2
    )$
    0.6
    

    

    $
    1.5
    

    

    $
    0.6
    

    

    $
    2.7Nine Months:Specialty Chemicals plant closures
and workforce reductions
    

    $
    0.6
    

    

    $
    0.3
    

    

    $
    0.8
    

    

    $
    1.7Bromborough, UK closure
    

    
    
    

    

    
    3.3
    

    

    
    1.6
    

    

    
    4.9Noveon International restructuring
liabilities assumed
    

    
    
    

    

    
    
    

    

    
    (0.3
    )

    

    
    (0.3
    )$
    0.6
    

    

    $
    3.6
    

    

    $
    2.1
    

    

    $
    6.3Periods Ended September 30, 2005Asset


    

    Other Plant(in millions of dollars)
    

    Impairments


    


Exit Costs


    

    Severance


    

    TotalThree Months:Specialty Chemicals plant closures
and workforce reductions
    

    $
    
    

    

    $
    
    

    

    $
    0.4
    

    

    $
    0.4Bromborough, UK closure
    

    
    
    

    

    
    
    

    

    
    0.8
    

    

    
    0.8Noveon International restructuring
liabilities assumed
    

    
    
    

    

    
    
    

    

    
    (0.2
    )

    

    
    (0.2
    )$
    
    

    

    $
    
    

    

    $
    1.0
    

    

    $
    1.0Nine Months:Specialty Chemicals plant closures
and workforce reductions
    

    $
    4.2
    

    

    $
    0.9
    

    

    $
    2.4
    

    

    $
    7.5Bromborough, UK closure
    

    
    0.7
    

    

    
    0.5
    

    

    
    3.0
    

    

    
    4.2Corporate / other workforce
reductions
    

    
    
    

    

    
    
    

    

    
    0.7
    

    

    
    0.7Noveon International restructuring
liabilities assumed
    

    
    
    

    

    
    
    

    

    
    0.2
    

    

    
    0.2$
    4.9
    

    

    $
    1.4
    

    

    $
    6.3
    

    

    $
    12.6
 -30-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
      Other Items and Net Income
  Three Months EndedSeptember 30,(in millions of dollars)
    
    2006
    
    2005
    
    $ Change
    
    % ChangeOther income (expense)  net
    
    $
    1.6
    
    
    $
    0.5
    
    
    $
    1.1
    
    
    
    *Interest expense  net
    
    
    17.4
    
    
    
    25.1
    
    
    
    (7.7
    )
    
    
    (31
    %)Income from continuing operations
before income taxes
    
    
    72.6
    
    
    
    63.2
    
    
    
    9.4
    
    
    
    15
    %Provision for income taxes
    
    
    21.8
    
    
    
    20.5
    
    
    
    1.3
    
    
    
    6
    %Income from continuing operations
    
    
    50.8
    
    
    
    42.7
    
    
    
    8.1
    
    
    
    19
    %Discontinued operations
    
    
    (0.5
    )
    
    
    5.9
    
    
    
    (6.4
    )
    
    
    *Net income
    
    
    50.3
    
    
    
    48.6
    
    
    
    1.7
    
    
    
    3
    %
 -31-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 Nine Months EndedSeptember 30,(in millions of dollars)
    
    2006
    
    2005
    
    $ Change
    
    % ChangeOther income (expense)  net
    
    $
    (0.1
    )
    
    $
    1.7
    
    
    $
    (1.8
    )
    
    
    *Interest expense  net
    
    
    61.5
    
    
    
    74.4
    
    
    
    (12.9
    )
    
    
    (17
    %)Income from continuing operations
before income taxes
    
    
    242.4
    
    
    
    199.9
    
    
    
    42.5
    
    
    
    21
    %Provision for income taxes
    
    
    82.3
    
    
    
    66.8
    
    
    
    15.5
    
    
    
    23
    %Income from continuing operations
    
    
    160.1
    
    
    
    133.1
    
    
    
    27.0
    
    
    
    20
    %Discontinued operations
    
    
    (73.6
    )
    
    
    24.1
    
    
    
    (97.7
    )
    
    
    *Net income
    
    
    86.5
    
    
    
    157.2
    
    
    
    (70.7
    )
    
    
    (45
    %)
 
 *
    
    Calculation not meaningful
  
    -32-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
  SEGMENT ANALYSIS
   Three Months
    
    Nine MonthsEnded September 30, 2006
    
    Ended September 30, 20062006
    
    2005
    
    2006
    
    2005Revenues:Lubricant Additives
    
    
    64
    %
    
    
    63
    %
    
    
    64
    %
    
    
    63
    %Specialty Chemicals
    
    
    36
    %
    
    
    37
    %
    
    
    36
    %
    
    
    37
    %Segment Operating Income:Lubricant Additives
    
    
    63
    %
    
    
    63
    %
    
    
    64
    %
    
    
    65
    %Specialty Chemicals
    
    
    37
    %
    
    
    37
    %
    
    
    36
    %
    
    
    35
    %
 -33-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
  Periods EndedSeptember 30,(in millions of dollars)
    
    2006
    
    
    2005
    
    
    $ Change

    
    % ChangeRevenuesThree Months:Lubricant Additives
    
    $
    661.3
    
    
    $
    567.2
    
    
    $
    94.1
    
    
    
    17
    %Specialty Chemicals
    
    
    369.7
    
    
    
    332.3
    
    
    
    37.4
    
    
    
    11
    %Total
    
    $
    1,031.0
    
    
    $
    899.5
    
    
    $
    131.5
    
    
    
    15
    %Nine Months:Lubricant Additives
    
    $
    1,967.3
    
    
    $
    1,686.0
    
    
    $
    281.3
    
    
    
    17
    %Specialty Chemicals
    
    
    1,088.9
    
    
    
    1,004.6
    
    
    
    84.3
    
    
    
    8
    %Total
    
    $
    3,056.2
    
    
    $
    2,690.6
    
    
    $
    365.6
    
    
    
    14
    %Gross
ProfitThree Months:Lubricant Additives
    
    $
    140.7
    
    
    $
    132.4
    
    
    $
    8.3
    
    
    
    6
    %Specialty Chemicals
    
    
    107.4
    
    
    
    97.3
    
    
    
    10.1
    
    
    
    10
    %Total
    
    $
    248.1
    
    
    $
    229.7
    
    
    $
    18.4
    
    
    
    8
    %Nine Months:Lubricant Additives
    
    $
    441.5
    
    
    $
    410.6
    
    
    $
    30.9
    
    
    
    8
    %Specialty Chemicals
    
    
    316.9
    
    
    
    295.6
    
    
    
    21.3
    
    
    
    7
    %Total
    
    $
    758.4
    
    
    $
    706.2
    
    
    $
    52.2
    
    
    
    7
    %Segment
Operating IncomeThree Months:Lubricant Additives
    
    $
    71.6
    
    
    $
    67.3
    
    
    $
    4.3
    
    
    
    6
    %Specialty Chemicals
    
    
    42.5
    
    
    
    38.7
    
    
    
    3.8
    
    
    
    10
    %Total
    
    $
    114.1
    
    
    $
    106.0
    
    
    $
    8.1
    
    
    
    8
    %Nine Months:Lubricant Additives
    
    $
    236.0
    
    
    $
    218.2
    
    
    $
    17.8
    
    
    
    8
    %Specialty Chemicals
    
    
    135.4
    
    
    
    115.3
    
    
    
    20.1
    
    
    
    17
    %Total
    
    $
    371.4
    
    
    $
    333.5
    
    
    $
    37.9
    
    
    
    11
    %
 -34-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 Lubricant Additives Segment
   3rd Quarter
    
    Year-to-Date2006
    
    2006Volume
    
    VolumeNorth America
    
    
    39
    %
    
    
    38
    %Europe
    
    
    30
    %
    
    
    30
    %Asia-Pacific / Middle East
    
    
    24
    %
    
    
    26
    %Latin America
    
    
    7
    %
    
    
    6
    %Total
    
    
    100
    %
    
    
    100
    %
  3rd Quarter
    
    Year-to-Date2006 vs. 2005
    
    2006 vs. 2005% Change
    
    % ChangeNorth America
    
    
    5
    %
    
    
    3
    %Europe
    
    
    (4
    %)
    
    
    (2
    %)Asia-Pacific / Middle East
    
    
    
    
    
    
    7
    %Latin America
    
    
    11
    %
    
    
    8
    %Total
    
    
    1
    %
    
    
    3
    %
   -35-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
      Specialty Chemicals Segment
  -36-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
  3rd Quarter
    
    Year-to-Date2006 Volume
    
    2006 VolumeNorth America
    
    
    64
    %
    
    
    66
    %Europe
    
    
    17
    %
    
    
    18
    %Asia-Pacific / Middle East
    
    
    14
    %
    
    
    12
    %Latin America
    
    
    5
    %
    
    
    4
    %Total
    
    
    100
    %
    
    
    100
    %
  3rd Quarter
    
    Year-to-Date2006 vs. 2005
    
    2006 vs. 2005% Change
    
    % ChangeNorth America
    
    
    3
    %
    
    
    3
    %Europe
    
    
    5
    %
    
    
    3
    %Asia-Pacific / Middle East
    
    
    29
    %
    
    
    31
    %Latin America
    
    
    60
    %
    
    
    24
    %Total
    
    
    8
    %
    
    
    7
    %
 ® ®
  -37-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
      -38-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
  Nine Months Ended September 30,(in millions of dollars)
    

    2006
    

    

    2005
    

    


$ ChangeCash provided by (used for):Operating activities
    

    $

    245.1
    

    

    $

    283.8
    

    

    $

    (38.7
    )Investing activities
    

    
    189.4
    

    

    
    (74.5
    )

    

    
    263.9Financing activities
    

    
    (145.2
    )

    

    
    (281.6
    )

    

    
    136.4Effect of exchange-rate changes on cash
    

    
    8.0
    

    

    
    (10.7
    )

    

    
    18.7Net increase (decrease) in cash and
short-term investments
    

    $

    297.3
    

    

    $

    (83.0
    )

    


    $
    380.3
 Operating Activities
   Investing Activities
   Financing Activities
  -39-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
  Capitalization, Liquidity and Credit Facilities
      
  Contractual Cash Obligations
   -40-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 
 NEW ACCOUNTING STANDARDS
      -41-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
   CAUTIONARY STATEMENTS FOR SAFE HARBOR PURPOSES
   
    
    the cost, availability and quality of raw materials, including petroleum-based products;
 
    
    our ability to increase and maintain the prices of our products in a competitive environment;
 
    
    the effect of required principal and interest payments on our ability to fund capital expenditures and acquisitions and
to meet operating needs;
 
    
    the overall global economic environment and the overall demand for our products on a worldwide basis;
 
    
    technology developments that affect longer-term trends for our products;
 
    
    the extent to which we are successful in expanding our business in new and existing markets;
 
    
    our ability to identify, complete and integrate acquisitions for profitable growth and operating efficiencies;
 
    
    our success at continuing to develop proprietary technology to meet or exceed new industry performance standards and
individual customer expectations;
 
    
    our ability to implement the ERP system successfully, including the management of project costs, its timely completion
and realization of its benefits;
 -42-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 
    
    our ability to continue to reduce complexities and conversion costs and modify our cost structure to maintain and
enhance our competitiveness;
 
    
    our success in retaining and growing the business that we have with our largest customers;
 
    
    the cost and availability of energy, including natural gas and electricity;
 
    
    the effect of interest rate fluctuations on our interest expense;
 
    
    the effects of fluctuations in currency exchange rates upon our reported results from international operations,
together with non-currency risks of investing in and conducting significant operations in foreign countries, including
those relating to political, social, economic and regulatory factors;
 
    
    the extent to which we achieve market acceptance of our commercial development programs;
 
    
    significant changes in government regulations affecting environmental compliance; and
 
    
    our ability to identify, understand and manage risks inherent in new markets in which we choose to expand.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
     -43-




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Item 3.
Quantitative and Qualitative Disclosures about Market Risk (continued)
   
 Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
  -44-




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    On July 1, 2006, we issued 294 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 July 13, 2006, we issued 363 common shares in transactions exempt from
registration under the Securities Act of 1933 pursuant to Regulation S. We issued
the common shares to one employee of a wholly owned United Kingdom subsidiary of the
company under an employee benefit plan.On August 1, 2006, we issued 581 common shares in a transaction exempt from
registration under the Securities Act of 1933 pursuant to Regulation S. We issued
the common shares to one employee of a wholly owned United Kingdom subsidiary of the
company under an employee benefit plan.On September 1, 2006, we issued 197 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.(c)
    
    The following table provides information regarding the companys purchases of
its common shares during the third 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 Programs
    
    Plans or ProgramsMonth #1
(July 1, 2006 through
July 31, 2006)
    
    117 Shares
    
    $
    39.85
    
    
    
    N/A
    
    
    
    N/AMonth #2
(August 1, 2006 through
August 31, 2006)
    
    284 Shares
    
    $
    42.99
    
    
    
    N/A
    
    
    
    N/AMonth #3
(September 1, 2006
through
September 30, 2006)
    
    79 Shares
    
    $
    43.49
    
    
    
    N/A
    
    
    
    N/ATotal
    
    480 Shares
 
 1
    
    This column represents common shares that were purchased by the
company pursuant to:
 (a)
    
    our option plan, whereby participants exchange already
owned shares to us to pay for the exercise price of an option or whereby we
withhold shares upon the exercise of an option to pay the withholding taxes
on behalf of the employee.(b)
    
    our deferred compensation plans, whereby we withhold shares
upon a distribution to pay the withholding taxes on behalf of the employee.
 
 Item 6. Exhibits
 10.1
    
    The Lubrizol Corporation Financial Planning Program.10.2
    
    Named Executive Officer Salary Increases during 2006 (incorporated by reference
to The Lubrizol Corporations Current Reports on Form 8-K filed with the SEC on July
13, 2006 and September 29, 2006).
 -45-




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##### Table of Contents



Item 6. Exhibits (continued)
 10.3
    
    Amendment No. 2 to the Credit Agreement among The Lubrizol Corporation, the
banks, financial institutions and other institutional lenders who are parties to
the Credit Agreement dated as of August 24, 2004, as amended and restated as of
March 29, 2005, and as further amended as of August 23, 2005, and Citicorp North
America, Inc., as agent (incorporated by reference to Exhibit 10.1 to The Lubrizol
Corporations Current Report on Form 8-K filed with the SEC on September 22,
2006).10.4
    
    Letter Amendment dated as of September 20, 2006 among Lubrizol Holdings France
S.A.S. (formerly known as Noveon Holdings France S.A.S.) and Noveon Europe BVBA
(collectively, the Borrowers), The Lubrizol Corporation, the Lenders named therein,
ABN AMRO Bank N.V. as agent, to the Five Year Credit Agreement dated as of September
14, 2005 among the Borrowers, The Lubrizol Corporation, the Initial Lenders named
therein, AMB AMRO Bank N.V., Calyon, Citigroup Global Markets Inc. and Fortis Capital
Corp. (incorporated by reference to Exhibit 10.2 to The Lubrizol Corporations Current
Report on Form 8-K filed with the SEC on September 22, 2006).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.
 
 Signatures
  THE LUBRIZOL CORPORATION/s/ W. Scott EmerickW. Scott EmerickChief Accounting Officer and Duly Authorized
Signatory of The Lubrizol Corporation  -46-